Magnus/Mankowski, European Commentaries on Private International Law: Volume 2 Rome I Regulation - Commentary 9783504384814

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Preface The Rome I Regulation is by far the most prominent cornerstone of European conflict of laws rules. Its imminence could be easily ascertained by every practitioner even remotely concerned with cross-border work in Europe. However arcane private international law in general might appear to practitioners – the Rome I Regulation is a well-known and renowned instrument. It is heir to the Rome Convention which has proven its immeasurable and incomparable value for almost two decades. The European Court of Justice and the national courts of the Member States have produced an abundance and a treasure of judgments interpreting the Convention and now the Regulation. The effort of completing a truly pan-European commentary mirrors the pan-European nature of its fascinating object. This commentary for the first time assembles a team of very prominent and renowned authors from total Europe. The authors’ geographical provenience stretches from the Netherlands to Italy and Spain, and from Portugal and the United Kingdom to Germany. The time is definitely ripe to start such an enterprise. This commentary is the first full scale article-by-article commentary in English written by a pan-European team, to address the Rome I Regulation. It is truly European in nature and style. It provides thorough and succinct in-depth analysis of every single Article and offers most valuable guidance for lawyers, judges and academics throughout Europe. It is an indispensable working tool for all practitioners involved in this field of law. Everyone who has ever undertaken the venture to edit a multi-author work only too well knows about the absolute necessity of competent assistance. The editors thus are absolutely grateful and cannot remotely express the thanks and accolades due to our backing team at Hamburg in a proper fashion. Without them it would have been virtually impossible to complete this commentary. Naemi Czempiel, Helen Loose and Marie-Thérèse Montana with sheer and utter indefatigability undertook the burdensome task of compiling the index and the Table of Cases of decisions by the ECJ and national courts respectively. The list of Abbreviations was prepared by Professor Mankowski. Secretarial support was rendered by Helga Jakobi. Very special thanks are due to Sellier European Law Publishers (now part of the Otto Schmidt Group), Andreas Pittrich and Anna Rosch. Apart from being incredibly patient and well-minded they kept the faith in this project. Ulrich Magnus Peter Mankowski

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List of Authors Professor Dr. Andrea Bonomi Faculty of Law, Criminal Justice and Public Administration, University of Lausanne Professor Dr. Alfonso-Luis Calvo Caravaca Catedrático de Derecho International Privado, Universidad Carlos III de Madrid Professor Dr. Javier Carrascosa González Universidad de Murcia, Facultad de Derecho Professor Richard Fentiman Faculty of Law, University of Cambridge Professor Dr. Franco Ferrari Center for Transnational Litigation, Arbitration and Commercial Law New York University School of Law Professor Dr. Pietro Franzina Università degli Studi di Ferrara Professor Dr. Francisco Garcimartín Alférez Facultad de Derecho Universidad Autónoma de Madrid Professor Dr. Helmut Heiss Rechtswissenschaftliches Institut, Lehrstuhl für Privatrecht, Rechtsvergleichung und Internationales Privatrecht der Universität Zürich Professor Dr. Luís de Lima Pinheiro Faculdade de Direito da Universidade de Lisboa

Professor Dr. Ulrich Magnus Fakultät für Rechtswissenschaft, Seminar für ausländisches und internationales Privat- und Prozessrecht der Universität Hamburg Professor Dr. Peter Mankowski Fakultät für Rechtswissenschaft, Seminar für ausländisches und internationales Privat- und Prozessrecht der Universität Hamburg Professor Dr. Guillermo Palao Moreno Catedrático, Departamento de Derecho Internacional, Universitat de Valencia Professor Dr. Ilaria Queirolo Università degli Studi di Genova, Dipartimento di Scienze Politiche Professorin Dr. Bea Verschraegen Rechtswissenschaftliche Fakultät, Abteilung für Rechtsvergleichung, Einheitsrecht und Internationales Privatrecht der Universität Wien Michael Wilderspin Legal Adviser, European Commission Professor Dr. Mathijs H. ten Wolde Sectie Internationaal Privaatrecht Faculteit Rechtsgeleerdheid Rijksuniversiteit Groningen

Table of Contents Preface

v

List of Authors

vi

Official Reports

viii

List of Principal Works

x

Additional Bibliography

xii

List of Abbreviations

xiv

Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) Introduction Chapter I:

Scope

Chapter II: Uniform Rules

6 52 87

Chapter III: Other Provisions

799

Chapter IV: Final Provisions

884

Index

886

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Official Reports Amended Commission Proposal COM (2000) 689 final = Commission of the European Communities – Amended Proposal for a Council Regulation (EC) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, COM (2000) 689 final Commission Proposal COM (1999) 348 final = Commission of the European Communities – Proposal for a Council Regulation (EC) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, COM (1999) 348 final Commission Proposal Brussels Ibis Regulation COM (2010) 748/3 = Proposal for a Regulation of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, COM (2010) 748/3 Commission Report = Report from the Commission to the European Parliament, the Council and the Economic and Social Committee on the application of Council Regulation (EG) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, 21 April 2009, COM (2009) 174 final Draft Report Zwiefka = Draft Report on the Proposal for a Regulation of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), Committee on Legal Affairs, Rapporteur: Tadeusz Zwiefka, 28 June 2011, PR\869709.EN Green Paper = Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation, 2002, COM (2002) 654 final Heidelberg Report = Hess/Pfeiffer/Schlosser, The Brussels I Regulation 44/2001. Application and Enforcement in the EU (München 2008) Report Almeida Cruz/Desantes Real/Jenard = Almeida Cruz/Desantes Real//Jenard, Report on the accession of the Kingdom of Spain and the Portuguese Republic to the 1968 Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, OJ 1990 C 189/35 Report Evrigenis/Kerameus = Evrigenis/Kerameus, Report on the accession of the Hellenic Republic to the Community Convention on jurisdiction and enforcement of judgments in civil and commercial matters, OJ 1986 C 298/1

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Official Reports

Report Jenard = Jenard, Report on the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, OJ 1979 C 59/1 Report Jenard/Möller = Jenard/Möller, Report on the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters done at Lugano on 16 September 1988, OJ 1990 C 189/57 Report Pocar = Pocar, Report on the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters done at Lugano on 30 October 2007, OJ EU 2009 C 319/1 Report Schlosser = Schlosser, Report on the Convention on the Association of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland to the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters and to the protocol on its interpretation by the Court of Justice, OJ 1979 C 59/71 Report Zwiefka = Report on the implementation and review of Council Regulation (EG) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, Committee on Legal Affairs, Rapporteur: Tadeusz Zwiefka, 29 June 2010, A7-0219/2010 Revised Commission Proposal COM (1999) 348 final = Commission of the European Communities – Revised Proposal for a Council Regulation (EC) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, COM (2000) 689 final.

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List of Principal Works Referred to by Author or Editor Alone Beck’scher Online-Kommentar BGB (München 2014) (cited as: OK BGB) Bĕlohlávek, Rome Convention /Rome I Regulation (Huntington, NY 2010) Boschiero (a cura di), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (Torino 2009) Calliess, Rome Regulations (Alphen aan den Rijn 2011) Carrascosa González, La ley aplicable a los contratos internacionales: El Reglamento Roma I (Madrid 2009) Cashin Ritaine/Bonomi (éds.), Le nouveau règlement européen “Rome I” relatif à la loi applicable aux obligations contractuelles (Zürich 2008) Castellanos Ruiz, El Reglamento “Roma I” sobre la ley aplicable a los contratos internacionales y su aplicación por los tribunales españoles (Granada 2009) Cheshire/North/Fawcett, Private International Law (14th ed. Oxford 2008) (by Fawcett/ Carruthers) Corneloup/Joubert (dir.), Le règlement communautaire “Rome I” et le choix de loi dans les contrats internationales (Paris 2011) da Cruz Almeida, Convenção de Roma de 19 de junho de 1980 sobre a lei apilcável às obrigações contratuais (Lisboa 1999) Dicey/Morris, Conflict of Laws (15th ed. London 2012) (gen. ed.: Lawrence Collins) Erman, BGB (14th Köln 2014) Ferrari, Rome I Regulation (München 2014) Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger, Internationales Vertragsrecht (2nd ed. München 2012) Ferrari/Leible (eds.), Ein neues Internationales Vertragsrecht für Europa (Jena 2007) Ferrari/Leible (eds.), Rome I Regulation (München 2009) Franzina (a cura di), La legge applicabile ai contratti nella proposta di regolamento “Roma I” (Padova 2006) Fugardo Estivill, El Reglamento (CE) Número 593/2008 del Paralamento Europeo y del Consejo, de 17 de junio de 2008, sobre la ley aplicable a las obligaciónes contractuales (Roma I) (Madrid 2010) Gebauer/Wiedmann, Zivilrecht unter europäischem Einfluss (2nd ed. Stuttgart etc. 2010) Heiss/Czernich, EVÜ (Wien 1999)

x

List of Principal Works

juris PraxisKommentar zum BGB, vol. 6 (7th ed. Saarbrücken 2015) (cited as: jurisPK) Kassis, Le nouveau droit européen des contrats internationaux (Paris 1993) Kaye, The New Private International Law of Contract of the European Community (Abingdon, Oxon. 1993) Leible (ed.), Das Grünbuch zum Internationalen Vertragsrecht (München 2004) Leible, Rom I und Rom II: Neue Perspektiven im europäischen Kollisionsrecht (Bonn 2009) Magnus/Mankowski, Brussels I Regulation (2nd ed. München 2012) Magnus/Mankowski, Brussels Ibis Regulation (München 2015) McParland, The Rome I Regulation on the Law Applicable to Contractual Obligations (Oxford 2015) Münchener Kommentar zum BGB, vol. 10: RomI-VO; Rom II-VO; Artt. 1–24 EGBGB (6th ed. München 2015) Nomos Kommentar zum BGB, vol. 6: Rom-Verordnungen (Baden-Baden 2014) Plender/Wilderspin, The European Private International Law of Obligations (3rd ed. London 2015) Rauscher, Europäisches Zivilprozess- und Kollisionsrecht, Rom I-VO; Rom II-VO (München 2011) Reithmann/Martiny, Internationales Vertragsrecht (7th Köln 2010) Salerno/Franzina (a cura di), Regolamento CE n. 593/2008 del Parlamento europeo e del Consiglio del 17 giugno 2008 sulla legge applicabile alle obbligazioni contrattuali (“Roma I”), NLCC 2009, 521 Staudinger, BGB, Einleitung zur Rom I-VO; Artt. 1–10 Rom I-VO (Berlin 2011), Artt. 11–29 Rom I-VO; Artt. 46b; 46c EGBGB (Berlin 2011) Ubertazzi, Il regolamento Roma I sulla legge applicabile alle obbligazioni contrattuali (Milano 2008) Wenner, Internationales Vertragsrecht (3rd ed. Köln 2013)

For an Additional Bibliography listing articles which covered the Rome I Regulation in its entirety, particularly in its ascendancy or its infant years, please see the following pages.

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Additional Bibliography Albornoz, Une relecture de la Convention interaméricaine sur la loi applicable aux contrats internationaux à la lumière du règlement “Rome I”, Clunet 139 (2012), 5 Althammer, Grundsatzfragen des Internationalen Schuldvertragsrechts: Artt. 27 ff. EGBGB, der Kommissionsvorschlag für eine “Rom I”-Verordnung und der abschließende Verordnungstext im Überblick, JA 2008, 772 Ballarino, Dalla Convenzione di Roma del 1980 al regolamento Roma I, Riv. dir.int. 2009, 40 Ballarino, Il regolamento Roma I: Forza di legge, effetti, contenuto, Cuad. der. trans. 1 (1) (2009), 5 Bonomi, The Rome I Regulation on the Law Applicable to Contractual Obligations, YbPIL 10 (2008), 165 Catala/Néret, La “communautarisation” du droit des conflits de lois en matière d’obligations contractuelles: le Règlement (CE) du 17 juin 2008, dit Rome I, in: Études à la memoire de Fernand Charles Jeantet (2010), p. 65 Clausnitzer/Woopen, Internationale Vertragsgestaltung – Die neue EG-Verordnung für grenzüberschreitende Verträge (Rom I-VO), BB 2008, 1798 Corneloup, La loi applicable aux obligations contractuelles, JCP G 2008 Doctr. 205 = JCP G N° 44 29 Octobre 2008, p. 21 van Dongen/Wenting, Europa en internationale overeenkomsten. EVO wordt Rome I, NTBR 2009, 82 Francq, Le règlement “Rome I” sur la loi applicable aux obligations contractuelles – De quelques changements …, Clunet 136 (2009), 41 ead., Loi applicable aux obligations contractuelles (Matières civiles et commerciales), Rép. Dalloz dr. int. fasc. 190 (2013) Garcimartín Alférez, The Rome I Regulation: Much ado about nothing?, EuLF 2008, I-61 Kenfack, Le règlement CE n° 593/2008 du 17 juin 2008 sur la loi applicable aux obligations contractuelles, navire stable aux instruments efficaces de navigation?, Clunet 136 (2009), 3 Kuipers, EU Law and Private International Law – The Interrelationship in Contractual Obligations (Leiden 2012) Ballarino, Bridging the Gap – The Impact of EU Law on the Law Applicable to Contractual Obligations, RabelsZ 76 (2012), 562

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Additional Bibliography

Lagarde/Tenenbaum, De la convention de Rome au règlement Rome I, RCDIP 97 (2008), 727 Lando/Peter Arnt Nielsen, Rom I-forordningen, UfR 2008 B 234 Lando/Peter Arnt Nielsen, The Rome I Regulation, (2008) 45 CMLRev 1687 Leible/Matthias Lehmann, Die Verordnung über das auf vertragliche Schuldverhältnisse anzuwendende Recht (“Rom I”), RIW 2008, 528 de Lima Pinheiro, O novo Regulamento comunitário sobre a lei aplicável às obrigações contratuais (Roma I) – Uma introdução, ROA68 (2008), 575 Magnus, Die Rom I-Verordnung, IPRax 2010, 27 Magnus/Mankowski, The Green Paper on a Future Rome I Regulation – On the Road to a Renewed European Private International Law of Contracts, ZVglRWiss 103 (2004), 131 Mankowski, Der Vorschlag für die Rom I-Verordnung, IPRax 2006, 101 Mankowski, Die Rom I-Verordnung – Änderungen im europäischen IPR für Schuldverträge, IHR 2008, 133 Mankowski, Die Rom I-Verordnung – Das neue europäische IPR für Schuldverträge und seine Bedeutung insbesondere aus Schweizer Sicht, EuZ 2009, 2 Marella, The New (Rome I) European Regulation on the Law Applicable to Contractual Obligations: What Has Changed?, 19 (3) ICC Int. Ct. Arb. Bull. 87 (2008) Marquette, Le règlement “Rome I” sur la loi applicable aux obligations contractuelles, TBH 2009, 515 Martiny, Neuanfang im Europäischen Internationalen Vertragsrecht mit der Rom I-Verordnung, ZEuP 2010, 747 Max Planck Institute for Comparative and International Private Law, Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), RabelsZ 71 (2007), 225 Pfeiffer, Neues Internationales Vertragsrecht – Zur Rom I-Verordnung, EuZW 2008, 622 Pretelli, Il regolamento comunitario sulla legge applicabile alle obbligazioni contrattuali (Roma I), Europa e dir. priv. 2009, 1083 Solomon, The Private International Law of Contracts in Europe: Advances and Retreats, 82 Tul. L. Rev. 1709 (2008) Ansgar Staudinger/Steinrötter, Europäisches Internationales Privatrecht: Die Rom-Verordnungen, JA 2011, 241 Vlas, Alle contracten leiden naar Rome I, WPNR 6824 (2009), 1008 Volders, Nieuw verwijzingsrecht voor grensoverschrijdende overeenkomsten, RW 2009–2010, 642 van Wechem, Rome I: Verscholen ingewikkeldheden, MedNedVIR 136 (2008), 1 Wilderspin, The Rome I Regulation: Communitarization and Modernisation of the Rome Convention, ERA-Forum 2008, 259

xiii

List of Abbreviations AA AC Act. Dr. ADC AdvBl AEDIPr AfP Afr. J. Int. Comp. L. A-G A-G A-G AG AG AIDA AJ AJT AktG All ER All ER (Comm.) Am. Econ. Rev. Am. J. Comp. L. Am. J. Int’l. L. Am. L. & Econ. Rev. An. Der. Mar. Anh. Anm. Ann. Inst. dr. int. AnwBl AP App. App. Cogn. Psych. Arab L.Q. Arb. Int. ArbG Arm. Arr. Cass. Arr.Rb. Art. Aud. Prov. AVAG AWD

xiv

Ars Aequi The Law Reports, Appeal Cases Actualités de droit Anuario de Derecho Civil Advocatenblad Anuario Español de Derecho Internacional Privado Archiv für Presserecht African Journal of International and Comparative Law Advocate General (EU) Attorney-General (Commonwealth) Advocaat-Generaal (Netherlands) Amtsgericht Die Aktiengesellschaft Annali italiani del diritto d’autore, della cultura e dello spettacolo Actualités juridiques Allgemeen Juridisch Tijdschrift Aktiengesetz The All England Law Reports The All England Law Reports (Commercial Cases) American Economic Review American Journal of Comparative Law American Journal of International Law American Law and Economics Review Anuario de derecho maritimo Anhang Anmerkung Annales de l’Institute de droit international Anwaltsblatt Arbeitsrechtliche Praxis Corte di appello (or: d’appello) Applied Cognitive Psychology Arab Law Quarterly Arbitration International Arbeitsgericht Armenopoulos Arresten van het Hof van Cassatie Arrondissementsrechtbank Article Audiencia Provincial Anerkennungs- und Vollstreckungsausführungsgesetz Außenwirtschaftsdienst des Betriebsberaters

List of Abbreviations

BAG BAGE BayObLG BayObLGZ BayVBl BB B2B BBGS BC B2C BerDGesVR BerDGfIR Berkeley J. Int’l. L. BG BGB BGBl. BGE BGH BGH-Report BGHZ BKR Bl. BOE BR-Drs. Brooklyn J. Int’l. L. BT-Drs. Bull. civ. Bull. dr. banq. Bull. Joly Bourse B. U. L. Rev. Bus. & Leg. Prac. Bus. L.R. BYIL CA C. A. Cal. L. Rev. Cambridge L. J. Cambridge Yb. Eur. L. Cass. Cassaz. CB CCC

Bundesarbeitsgericht Amtliche Sammlung der Entscheidungen des Bundesarbeitsgerichts Bayerisches Oberstes Landesgericht Amtliche Sammlung der Entscheidungen des Bayerischen Obersten Landesgerichts in Zivilsachen Bayerisches Verwaltungsblatt Betriebs-Berater Business-to-Business Bülow/Böckstiegel/Geimer/Schütze, Internationaler Rechtsverkehr in Zivil- und Handelssachen (looseleaf München 1954-ongoing) Brussels Convention Business-to-Consumer Berichte der Deutschen Gesellschaft für Völkerrecht Berichte der Deutschen Gesellschaft für Internationales Recht Berkeley Journal of International Law Bundesgericht Bürgerliches Gesetzbuch Bundesgesetzblatt Entscheidungen des Schweizerischen Bundesgerichts – Amtliche Sammlung Bundesgerichtshof Schnelldienst zur Zivilrechtsprechung des Bundesgerichtshofs Amtliche Sammlung der Entscheidungen des Bundesgerichtshofs in Zivilsachen Zeitschrift für Bank- und Kapitalmarktrecht Blatt Bolétin Oficiál Español Deutscher Bundesrat – Drucksachen Brooklyn Journal of International Law Deutscher Bundestag – Drucksachen Bulletin des arrêts civiles Bulletin de droit et banque Bulletin Joly Bourse Boston University Law Review Business and Legal Practice Business Law Reports British Yearbook of International Law Cour d’appel Court of Appeal California Law Review Cambridge Law Journal Cambridge Yearbook of European Law Cour de Cassation Corte di Cassazione Convenio de Bruselas Contrats concurrence consommation

xv

List of Abbreviations

CDE cf. Ch. Ch. D. Chron. CID Cir. CISG Civ. Just. Q. C. J. cl. CLC Clunet C.M. L.Rev. Co. col. Col. J. Eur. L. Col. J. Trans. L. Col. Jur. Col. L. Rev. COM Colo. L. Rev. Columb. J. Eur. L. Columb. J. Trans. L. Columb. L. Rev. Cornell Int’l. L. J. Cornell L. Rev. Corr. giur. Cour sup. CPR CR Ct. Cuad. der. trans. Czech Yb. Int. L. D. DAVorm DB D.C. DEE Digest

Cahiers de droit européen confer [compare] Chapter Chancery Division Chronique Chronika Idiotikou Dikaiou US Court of Appeals for the Circuit United Nations Convention on the International Sale of Goods Civil Justice Quarterly Chief Justice clause Commercial Law Cases Journal du droit international, fondée par E. Clunet Common Market Law Review Company columna Columbia Journal of European Law Columbia Journal of Transnational Law Colectânea de Jurisprudência Columbia Law Review Document of the Commission Colorado Law Review Columbia Journal of European Law Columbia Journal of Transnational Law Columbia Law Review Cornell International Law Journal Cornell Law Review Corriere giuridico Cour superieure Rules of Civil Procedure Computer und Recht Court Cuadernos de derecho transnacional Czech Yearbook of International Law

Recueil Dalloz Sirey Der Amtsvormund Der Betrieb District of Columbia Dikaio Epicheirisseon kai Etairion Digest of case-law relating to the European Communities, Series D: Convention of 27 September 1968 DIN Deutsche Industrie-Norm Dir. comm. int. Diritto del commercio internazionale Dir. com. scambi int. Diritto comunitario e degli scambi internazionali Dir. e giur. Diritto e giurisprudenza Dir. ind. Diritto industriale Dir. mar. Diritto marittimo

xvi

List of Abbreviations

Dir. scambi int. Div. Act. DMF DNotZ Doc. Dir. Comp. D. R. Dr. & Patr. Dr. aff. Dr. soc. Dr. sociétés DStR Duke J. Comp. & Int’l. L. DVBl DWW DZWiR DZWIR ead. EBLR EBOR EC ECHR ECJ ECR ed. ed. éd. Edinburgh L. Rev. eds. éds. EF-Z EHRR EIPR EJCCL Ell. Dik. Emory Int’l. L. Rev. END ERCL ERPL et al. ETL ETS EuGVÜ EuLF Eur. J. L. & Econ. Eur. J. L. Reform

Diritto comunitario e degli scambi internazionali Divorce: actualité juridique, sociale et fiscale Droit maritime français Deutsche Notar-Zeitschrift Documentação e Direito Comparado (Boletim do Ministério da Justiça) European Commission of Human Rights Decisions & Reports Droit et Patrimoine Droit des affaires Droit social Droit des sociétés Deutsches Steuerrecht Duke Journal of Comparative and International Law Deutsches Verwaltungsblatt Deutsche Wohnungswirtschaft Deutsche Zeitschrift für Wirtschaftsrecht Deutsche Zeitschrift für Wirtschafts- und Insolvenzrecht eadem (the same, female) European Business Law Review European Business Organization Law Review European Community European Court on Human Rights European Court of Justice Reports of Judgments of the European Court of Justice edition Editor éditeur Edinburgh Law Review Editors éditeurs Zeitschrift für Ehe- und Familienrecht European Human Rights Reports European Intellectual Property Right European Journal of Commercial Contract Law Elleniki Dikaiossyni Emory International Law Review Epitheorissi Naftiliakou Dikaiou European Review of Contract Law European Review of Private Law et alii European Transport Law European Treaty Series Brussels Convention European Legal Forum European Journal of Law and Economics European Journal of Law Reform

xvii

List of Abbreviations

Eur. Lawyer Eur. L. Rev. Eur. L. Rptr. Europa e dir. priv. Europe Eur. Rev. Publ. L. EuZW EvBl EWCA EWHC EWiR EWS

The European Lawyer European Law Review European Law Reporter Europa e diritto privato Juris-Classeur Europe European Review of Public Law Europäische Zeitschrift für Wirtschaftsrecht Evidenzblatt England and Wales Court of Appeal England and Wales High Court Entscheidungen zum Wirtschaftsrecht Europäisches Wirtschafts- und Steuerrecht

F. 2d Fam. L. FamPra.ch FamRZ fasc. FCR F.D. FG FGPrax FLR fn. Foro it. FPR FS F.S.R. FuR

Federal Reporter, Second Series Family Law Die Praxis des Familienrechts Zeitschrift für das gesamte Familienrecht fascicule Family Court Reports Family Division Festgabe Praxis der freiwilligen Gerichtsbarkeit Family Law Reports footnote Foro italiano Familie Partnerschaft Recht Festschrift Fleet Street Reports Familie und Recht

GATS Ga. L. Rev. Gaz. Pal. Geb. gen. ed. gen. eds. Geo. L.J. Giur. it. Giur. mer. Giust. civ. GmbH GmbHG GmbHR GNotKG GPR GRUR GRUR Int.

General Agreement on Trade in Services Georgia Law Review Gazette du Palais Geburtstag (anniversary) general editor general editors Georgetown Law Journal Giurisprudenza italiana Giurisprudenza di merito Giustizia civile Gesellschaft mit beschränkter Haftung Gesetz betreffend die Gesellschaften mit beschränkter Haftung GmbH-Rundschau Gerichts- und Notarkostengesetz Zeitschrift für Gemeinschaftsprivatrecht Gewerblicher Rechtsschutz und Urheberrecht Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil

xviii

List of Abbreviations

GRUR-Prax

GS GWR

Gewerblicher Rechtsschutz und Urheberrecht Praxis im Immaterialgüter- und Wettbewerbsrecht Gewerblicher Rechtsschutz und Urheberrecht Rechtsprechungs-Report Gedächtnisschrift Gesellschafts- und Wirtschaftsrecht

HAVE H. C. HD HG HGB H. L. Hof Hof van Cass.

Haftpflicht- und Versicherungsrecht High Court Højesterets Domme (Denmark) or Högsta Domstolen (Sweden) Handelsgericht Handelsgesetzbuch House of Lords Gerechtshof (Netherlands) or Hof van Beroep (Belgium) Hof van Cassatie

ibid. ICC ICCLR ICJ ICLQ id. IGKK/IACPIL

ibidem International Chamber of Commerce International Company and Commercial Law Law International Court of Justice International and Comparative Law Quarterly Idem (the same, masculine; also plural) Interdisziplinäre Studien zur Komparatistik und zum Kollisionsrecht/Interdisciplinary Studies of Comparative and Private International Law Internationales Handelsrecht International Review of Industrial Property and Copyright Law International Legal Materials International Litigation Procedure Irish Law Reports Monthly Irish Law Times Incorporated Indiana Journal of Global Legal Studies

GRUR-RR

IHR IIC ILM I.L.Pr. ILRM ILT Inc. Indiana J. Global Leg. Stud. Indiana L. Rev. InsO InstGE Int. J. L. & Info. Tech. Int’l. Bus. Law. Int’l. Lawyer Int’l. Lis Int. Rev. L. & Econ. InVo IPR IPRax IPRE

Indiana Law Review Insolvenzordnung Entscheidungen der Instanzgerichte zum Geistigen Eigentum International Journal of Law and Information Technology The International Business Lawyer The International Lawyer International lis International Review of Law and Economics Insolvenz & Vollstreckung Internationales Privatrecht Praxis des Internationalen Privat- und Verfahrensrechts Entscheidungen zum Internationalen Privatrecht (Austria)

xix

List of Abbreviations

IPRspr. IR I. R.

Deutsche Rechtsprechung auf dem Gebiete des Internationalen Privatrechts Informations rapides Irish Reports

J. JA J. App. Soc. Psych. JBl JBL JbPraxSch J-Cl. JCP J. Empir. Leg. Stud. J. Finance J. Fin. Econ. JIBFL JIBLR JIML J. Int. Arb. J. Corp. L. J. Econ. Behav. & Org. J. L. & Com. J. L., Econ. & Org. J. Leg. Stud. JMLB JMLC J. Personality & Soc. Psych. J. Pol. Econ. JR J. Risk & Uncert. JT J. trib. J. trib. dr. eur. Jura JurisPR-ArbR JurisPR-ITR JurisPR-IWR JurisPR-ZivilR Jur. Rev. JutD JZ

Justice Juristische Arbeitsblätter Journal of Applied Social Psychology. Juristische Blätter Journal of Business Law Jahrbuch für die Praxis der Schiedsgerichtsbarkeit Juris-Classeur (répertoire) Juris-Classeur Périodique, La Sémaine Juridique Journal of Empirical Legal Studies Journal of Finance Journal of Financial Economics Journal of International Banking and Financial Law Journal of International Banking Law and Regulation Journal of International Maritime Law Journal of International Arbitration Journal of Corporate Law Journal of Economic Behavior and Organizations

KantonsG KG

Kantonsgericht Kammergericht

xx

Journal of Law and Commerce Journal of Law, Economics and Organization Journal of Legal Studies Jurisprudence de Mons, Liège et Bruxelles Journal of Maritime Law and Commerce Journal of Personality and Social Psychology Journal of Political Economy Juristische Rundschau Journal of Risk and Uncertainty Juridisk Tidskrift vid Stockholms Universitet Journal des tribunaux Journal des tribunaux de droit européen Juristische Ausbildung juris PraxisReport Arbeitsrecht juris PraxisReport IT-Recht juris PraxisReport Internationales Wirtschaftsrecht juris PraxisReport Zivilrecht Juridical Review Juridisch up to Date Juristenzeitung

List of Abbreviations

King’s Coll. L.J. K&R

King’s College Law Journal Kommunikation und Recht

LAG LAGE L. & Contemp. Prbls. LG LIEI lit. L. J. Lloyd’s IR Lloyd’s Rep. LLP LM

Landesarbeitsgericht Entscheidungen der Landesarbeitsgerichte Law and Contemporary Problems Landgericht (Germany), Landesgericht (Austria) Legal Issues of Economic Integration littera Lord Justice Lloyd’s Insurance Law Reports Lloyd’s Law Reports Limited Liability Partnership Lindenmaier, Fritz/Möhring, Philipp, Nachschlagewerk des Bundesgerichtshofs – Entscheidungen in Zivilsachen mit Leitsätzen, Sachverhalt und Gründen (München 1951 et seq.) Lloyd’s Maritime and Commercial Law Quarterly Lindenmaier/Möhring Kommentierte Rechtsprechung Lloyd’s Maritime Law Newsletter loco citato Law Quarterly Review Lloyd’s Reinsurance Law Reports Limited

LMCLQ LMK LMLN loc. cit. L. Q.Rev. LRLR Ltd. Maastricht J. Eur. & Comp. L. Mass. M. B. MDR Melbourne U. L. Rev. Mich. J. Int’l. L. MittBayNot MittPat MMR Mod. L. Rev. M.R. n. NB ncpc NGCC NILR NIPR NJ NJA NJOZ NJW

Maastricht Journal of European and Comparative Law Massimario Moniteur belge Monatsschrift für deutsches Recht Melbourne University Law Review Michigan Journal of International Law Mitteilungen für das Bayerische Notariat Mitteilungen der Deutschen Patentanwälte Multimedia und Recht Modern Law Review Master of the Rolls numero Nomiko Vima Nouveau Code de Procedure Civile Nuova giurisprudenza civile commentata Netherlands International Law Review Nederlands Internationaal Privaatrecht Nederlandse Jurisprudentie (Netherlands), Neue Justiz (Germany) Nytt Juridisk Arkiv Neue Juristische Online-Zeitschrift Neue Juristische Wochenschrift

xxi

List of Abbreviations

NJW-RR NLCC no. nr. n. r. Nr. NRt NTBR NTHR NTIR Nw. U. L. Rev. NVwZ nyr NZA NZA-RR NZBau NZG NZI

NJW-Rechtsprechungsreport Zivilrecht Le nuove leggi civili commentate number (English) or numéro (French) number not reported Nummer Norsk Retstidende Nederlands Tijdschrift voor Burgerlijk Recht Nederlands Tijdschrift voor Handelsrecht Nordisk Tidskrift for International Ret Northwestern University Law Review Neue Zeitschrift für Verwaltungsrecht not yet reported Neue Zeitschrift für Arbeitsrecht Neue Zeitschrift für Arbeitsrecht, Rechtsprechungs-Report Neue Zeitschrift für Baurecht Neue Zeitschrift für Gesellschaftsrecht Neue Zeitschrift für Insolvenz und Sanierung

ObG öAnwBl ÖBA ÖBl

Obergericht Österreichisches Anwaltsblatt Österreichisches Bank-Archiv Österreichische Blätter für gewerblichen Rechtsschutz und Urheberrecht Österreichische Juristenzeitung Österreichische Juristenzeitung – Leitsatz-Kartei Østre Landsrets Domme Østre Landsrets Kendelse Österreichischer Oberster Gerichtshof Court of Sessions, Outer House Official Journal of the European Community (or, since 2003, European Union) Oberlandesgericht OLG-Rechtsprechung Neue Länder Schnelldienst zur Zivilrechtsprechung der Oberlandesgerichte (regional editions) Rechtsprechung der Oberlandesgerichte in Zivilsachen opere citato Organization, Behavior and Human Decision

ÖJZ ÖJZ-LSK ØLD ØLK OGH O. H. OJ OLG OLG-NL OLG-Report OLGZ op. cit. Org. Behav. & Hum. Decision p. para. Pas. belge Pas. lux. PHI P&I PIL

xxii

pagina Paragraph Pasicrisie belge Pasicrisie luxembourgeoise Produkt-Haftpflicht International Protection and Indemnity Private International Law

List of Abbreviations

pp. Pres. Pret. Psych. Rev.

paginae (pages) President Pretore Psychological Review

QB Q.B.D. Q.C.

The Law Reports, Queen’s Bench Division Queen’s Bench Division Queen’s Counsel

RabelsZ Rb. RBDI Rb. Kh. RCDIP RdA RDAI RdC RDC RDIPP RdTW RdW Rec. Rec. des Cours REDI Rel. Rép. Rev. Arb. Med. Rev. Chil. Der. Rev. der. com. eur. Rev. dr. aff. int. Rev. dr. comm. belge Rev. dr. transp. Rev. not. belge Rev. dr. ULB Rev. Fac. Dir. Univ. Lisboa Rev. héll. dr. int. Rev. int. dr. écon. Rev. jur. comm. Rev. Lamy dr. aff. Rev. Scapel RGDC Riv. dir. ind. Riv. dir. int. Riv. dir. proc. Riv. not. RIW RJC

Rabels Zeitschrift für ausländisches und internationales Privatrecht Rechtbank Revue belge de droit international Rechtbank voor Koophandel Revue critique de droit international privé Recht der Arbeit (Germany) Revue des affaires internationales Recueil des Cours de l’Académie de Droit International de La Haye Revue des contrats Rivista di diritto internazionale privato e processuale Recht der Transportwirtschaft Recht der Wirtschaft (Austria) Recueil Recueil des Cours de l’Académie de Droit International de La Haye Revista Española de Derecho Internacional Tribunal da Relação Répertoire Revista de Arbitragem e Mediação Revista Chilena de Derecho Revista de derecho comunitario europeo Revue de droit des affaires internationales Revue de droit commercial belge Revue du droit de transport Revue du notariat belge Revue de droit de l’Université Libre de Bruxelles Revista da Faculdade de Direito da Universidade de Lisboa Revue héllenique de droit international Revue international de droit économique Revue de jurisprudence commerciale Revue Lamy droit des affaires Revue du droit maritime, fondée par Scapel Revue génerale du droit civil Rivista di diritto industriale Rivista di diritto internazionale Rivista di diritto processuale Rivista notarile Recht der Internationalen Wirtschaft Revista juridica de Cataluña

xxiii

List of Abbreviations

RLJ RRa r+s RSC Rt. RTD civ. RTD com. RTDE RTDF RTD fam. RvdW R. W. RWiss

Revista do Legislação e de Jurisprudência ReiseRecht aktuell Recht und Schaden Rules of the Supreme Court Retstidning Revue trimestrielle de droit civil Revue trimestrielle de droit commercial Revue trimestrielle de droit européen Revue trimestrielle de droit financier Revue trimestrielle de droit familial Rechtspraak van de Week Rechtskundig Weekblad Rechtswissenschaft (Journal)

S. C. SchiedsVZ sec. seq. sess. S. I. sic! SJZ SLT SLT (Sh Ct) SME So. Cal. L. Rev. somm. SPV S&S Stan. L. Rev. StAZ STJ sup. Sup. Ct. SvJT SZ SZIER

Supreme Court (United Kingdom or Ireland) Zeitschrift für Schiedsverfahren section sequens (if singular), sequentes (if plural) session Statutory Instrument Schweizerische Zeitschrift für Immaterialgüterrecht Schweizerische Juristen-Zeitung Scots Law Times Scots Law Times (Sheriff Court) Small or Medium Enterprise Southern California Law Review sommaires commentées Special Purpose Vehicle Schip en Schade Stanford Law Review Das Standesamt – Zeitschrift für das gesamte Standesamtswesen Supremo Tribunal de Justiçia superieur Supreme Court (USA) Svensk Juristtidning Sammlung in Zivilsachen (Austria) Schweizerische Zeitschrift für internationales und europäisches Recht Schweizerische Zeitschrift für Wirtschaftsrecht Schweizerische Zeitschrift für Zivilprozessrecht

SZW SZZP TBH TGI TranspR Trib. Trib. arr. Trib. civ.

xxiv

Tijdschrift voor Belgisch Handelsrecht/Revue de droit commercial belge Tribunal de grande instance Transportrecht Tribunale Tribunal d’arrondissement Tribunal civil

List of Abbreviations

Trib. comm. TS Trust L.J. Tulane J. Int’l. & Comp. L.

Tribunal de commerce Tribunal Supremo Trust Law Journal Tulane Journal of International and Comparative Law

TvA TVR

Tijdschrift voor Arbitrage Tijdschrift Vervoer en Recht

U. Chi. L. Rev. UCLA L. Rev. UfR U. Ill. L. Rev. U. Kan. L. Rev. UKSC UNIDROIT Unif. L. Rev. U. Penn. J. Int’l. Econ. L. US

University of Chicago Law Review University of California Los Angeles Law Review Ugeskrift for Retsvæsen University of Illinois Law Review University of Kansas Law Review United Kingdom Supreme Court International Institute for the Unification of Private Law Uniform Law Review University of Pennsylvania Journal of International Economic Law United States Reporter

v. Va. J. Int’l. L. Va. L. Rev. Vand. J. Transnat’l. L. V-C VersR VOB/B vol. VOL VuR VVG

versus Virginia Journal of International Law Virginia Law Review Vanderbilt Journal of Transnational Law

Vzngr.

Vice-Chancellor Versicherungsrecht Verdingungsordnung für Bauleistungen Part B volume Verdingungsordnung für Leistungen Verbraucher und Recht Versicherungsvertragsgesetz (German or Austrian Insurance Contracts Act) Voorzieningenrechter

Wash. U. L. Q. WBl WiB WiRO WLR WM WPNR WRP WuB

Washington University Law Quarterly Wirtschaftsrechtliche Blätter Wirtschaftsrechtliche Beratung Wirtschaft und Recht in Osteuropa The Weekly Law Reports Wertpapier-Mitteilungen Weekblad voor Privaatrecht, Notariaat en Registratie Wettbewerb in Recht und Praxis Entscheidungen zum Wirtschafts- und Bankrecht

Yale L.J. Yb. Eur. L.

Yale Law Journal Yearbook of European Law

xxv

List of Abbreviations

YbPiL

Yearbook for Private International Law

ZBB ZEuP ZEuS ZfJ ZfRV ZfS ZGE ZGR ZGS ZHR ZInsO ZIP ZLR ZPO ZR ZSR ZUM ZVglRWiss ZVR ZWeR ZZP ZZP Int. ZZZ

Zeitschrift für Bankrecht und Bankwirtschaft Zeitschrift für Europäisches Privatrecht Zeitschrift für Europäische Studien Zentralblatt für Jugendrecht Zeitschrift für Rechtsvergleichung Zeitschrift für Schadensrecht Zeitschrift für Geistiges Eigentum Zeitschrift für Unternehmens- und Gesellschaftsrecht Zeitschrift für das gesamte Schuldrecht Zeitschrift für das gesamte Handels- und Wirtschaftsrecht Zeitschrift für das gesamte Insolvenzrecht Zeitschrift für Wirtschaftsrecht und Insolvenzpraxis Zeitschrift für Lebensmittelrecht Zivilprozessordnung Blätter für Zürcherische Rechtsprechung Zeitschrift für schweizerisches Recht Zeitschrift für Urheber- und Medienrecht Zeitschrift für vergleichende Rechtswissenschaft Zeitschrift für Verkehrsrecht Zeitschrift für Wettbewerbsrecht (Journal for Competition Law) Zeitschrift für Zivilprozess Zeitschrift für Zivilprozess International Schweizerische Zeitschrift für Zivilprozess- und Zwangsvollstreckungsrecht

xxvi

Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 61(c) and the second indent of Article 67(5) thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the European Economic and Social Committee,1 Acting in accordance with the procedure laid down in Article 251 of the Treaty,2 Whereas: (1) The Community has set itself the objective of maintaining and developing an area of freedom, security and justice. For the progressive establishment of such an area, the Community is to adopt 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. (2) According to Article 65, point (b) of the Treaty, these measures are to include those promoting the compatibility of the rules applicable in the Member States concerning the conflict of laws and of jurisdiction. (3) The European Council meeting in Tampere on 15 and 16 October 1999 endorsed the principle of mutual recognition of judgments and other decisions of judicial authorities as the cornerstone of judicial cooperation in civil matters and invited the Council and the Commission to adopt a programme of measures to implement that principle. (4) On 30 November 2000 the Council adopted a joint Commission and Council programme of measures for implementation of the principle of mutual recognition of decisions in civil and commercial matters3. The programme identifies measures relating to the harmonisation of conflict-of-law rules as those facilitating the mutual recognition of judgments. (5) The Hague Programme4, adopted by the European Council on 5 November 2004, called for work to be pursued actively on the conflict-of-law rules regarding contractual obligations (Rome I). (6) The proper functioning of the internal market creates a need, in order to improve the predictability of the outcome of litigation, certainty as to the law applicable and the free movement of judgments, for the conflict-of-law rules in the Member States to designate the same national law irrespective of the country of the court in which an action is brought. (7) The substantive scope and the provisions of this Regulation should be consistent with Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters5 (Brussels I) and Regulation (EC)

1 2

3 4 5

OJ C 318, 23.12.2006, p. 56. Opinion of the European Parliament of 29 November 2007 (not yet published in the Official Journal) and Council Decision of 5 June 2008. OJ C 12, 15.1.2001, p. 1. OJ C 53, 3.3.2005, p. 1. OJ L 12, 16.1.2001, p. 1. Regulation as last amended by Regulation (EC) No 1791/2006 (OJ L 363, 20.12. 2006, p. 1).

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Recitals

(8)

(9)

(10)

(11) (12)

(13) (14)

(15)

(16)

(17)

(18)

6 7 8

2

Rome I Regulation

No. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II).6 Family relationships should cover parentage, marriage, affinity and collateral relatives. The reference in Article 1(2) to relationships having comparable effects to marriage and other family relationships should be interpreted in accordance with the law of the Member State in which the court is seised. Obligations under bills of exchange, cheques and promissory notes and other negotiable instruments should also cover bills of lading to the extent that the obligations under the bill of lading arise out of its negotiable character. Obligations arising out of dealings prior to the conclusion of the contract are covered by Article 12 of Regulation (EC) No. 864/2007. Such obligations should therefore be excluded from the scope of this Regulation. The parties’ freedom to choose the applicable law should be one of the cornerstones of the system of conflict-of-law rules in matters of contractual obligations. An agreement between the parties to confer on one or more courts or tribunals of a Member State exclusive jurisdiction to determine disputes under the contract should be one of the factors to be taken into account in determining whether a choice of law has been clearly demonstrated. This Regulation does not preclude parties from incorporating by reference into their contract a non-State body of law or an international convention. Should the Community adopt, in an appropriate legal instrument, rules of substantive contract law, including standard terms and conditions, such instrument may provide that the parties may choose to apply those rules. Where a choice of law is made and all other elements relevant to the situation are located in a country other than the country whose law has been chosen, the choice of law should not prejudice the application of provisions of the law of that country which cannot be derogated from by agreement. This rule should apply whether or not the choice of law was accompanied by a choice of court or tribunal. Whereas no substantial change is intended as compared with Article 3(3) of the 1980 Convention on the Law Applicable to Contractual Obligations7 (the Rome Convention), the wording of this Regulation is aligned as far as possible with Article 14 of Regulation (EC) No. 864/2007. To contribute to the general objective of this Regulation, legal certainty in the European judicial area, the conflict-of-law rules should be highly foreseeable. The courts should, however, retain a degree of discretion to determine the law that is most closely connected to the situation. As far as the applicable law in the absence of choice is concerned, the concept of ‘provision of services’ and ‘sale of goods’ should be interpreted in the same way as when applying Article 5 of Regulation (EC) No. 44/2001 in so far as sale of goods and provision of services are covered by that Regulation. Although franchise and distribution contracts are contracts for services, they are the subject of specific rules. As far as the applicable law in the absence of choice is concerned, multilateral systems should be those in which trading is conducted, such as regulated markets and multilateral trading facilities as referred to in Article 4 of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments,8 regardless of whether or not they rely on a central counterparty. OJ L 199, 31.7.2007, p. 40. OJ C 334, 30.12.2005, p. 1. J L 145, 30.4.2004, p. 1. Directive as last amended by Directive 2008/10/EC (OJ L 76, 19.3.2008, p. 33).

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Recitals

(19) Where there has been no choice of law, the applicable law should be determined in accordance with the rule specified for the particular type of contract. Where the contract cannot be categorised as being one of the specified types or where its elements fall within more than one of the specified types, it should be governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence. In the case of a contract consisting of a bundle of rights and obligations capable of being categorised as falling within more than one of the specified types of contract, the characteristic performance of the contract should be determined having regard to its centre of gravity. (20) Where the contract is manifestly more closely connected with a country other than that indicated in Article 4(1) or (2), an escape clause should provide that the law of that other country is to apply. In order to determine that country, account should be taken, inter alia, of whether the contract in question has a very close relationship with another contract or contracts. (21) In the absence of choice, where the applicable law cannot be determined either on the basis of the fact that the contract can be categorised as one of the specified types or as being the law of the country of habitual residence of the party required to effect the characteristic performance of the contract, the contract should be governed by the law of the country with which it is most closely connected. In order to determine that country, account should be taken, inter alia, of whether the contract in question has a very close relationship with another contract or contracts. (22) As regards the interpretation of contracts for the carriage of goods, no change in substance is intended with respect to Article 4(4), third sentence, of the Rome Convention. Consequently, single-voyage charter parties and other contracts the main purpose of which is the carriage of goods should be treated as contracts for the carriage of goods. For the purposes of this Regulation, the term ‘consignor’ should refer to any person who enters into a contract of carriage with the carrier and the term ‘the carrier’ should refer to the party to the contract who undertakes to carry the goods, whether or not he performs the carriage himself. (23) As regards contracts concluded with parties regarded as being weaker, those parties should be protected by conflict-of-law rules that are more favourable to their interests than the general rules. (24) With more specific reference to consumer contracts, the conflict-of-law rule should make it possible to cut the cost of settling disputes concerning what are commonly relatively small claims and to take account of the development of distance-selling techniques. Consistency with Regulation (EC) No. 44/2001 requires both that there be a reference to the concept of directed activity as a condition for applying the consumer protection rule and that the concept be interpreted harmoniously in Regulation (EC) No. 44/2001 and this Regulation, bearing in mind that a joint declaration by the Council and the Commission on Article 15 of Regulation (EC) No. 44/2001 states that ‘for Article 15(1)(c) to be applicable it is not sufficient for an undertaking to target its activities at the Member State of the consumer’s residence, or at a number of Member States including that Member State; a contract must also be concluded within the framework of its activities’. The declaration also states that ‘the mere fact that an Internet site is accessible is not sufficient for Article 15 to be applicable, although a factor will be that this Internet site solicits the conclusion of distance contracts and that a contract has actually been concluded at a distance, by whatever means. In this respect, the language or currency which a website uses does not constitute a relevant factor.’ (25) Consumers should be protected by such rules of the country of their habitual residence that cannot be derogated from by agreement, provided that the consumer contract has been concluded as a result of the professional pursuing his commercial or professional activities in that particular country. The same protection should be guaranteed if the professional, while not pursuing his commercial or professional activities in the country where the consumer has his

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Recitals

(26)

(27)

(28)

(29)

(30) (31)

9

Rome I Regulation

habitual residence, directs his activities by any means to that country or to several countries, including that country, and the contract is concluded as a result of such activities. For the purposes of this Regulation, financial services such as investment services and activities and ancillary services provided by a professional to a consumer, as referred to in sections A and B of Annex I to Directive 2004/39/EC, and contracts for the sale of units in collective investment undertakings, whether or not covered by Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS),9 should be subject to Article 6 of this Regulation. Consequently, when a reference is made to terms and conditions governing the issuance or offer to the public of transferable securities or to the subscription and redemption of units in collective investment undertakings, that reference should include all aspects binding the issuer or the offeror to the consumer, but should not include those aspects involving the provision of financial services. Various exceptions should be made to the general conflict-of-law rule for consumer contracts. Under one such exception the general rule should not apply to contracts relating to rights in rem in immovable property or tenancies of such property unless the contract relates to the right to use immovable property on a timeshare basis within the meaning of Directive 94/47/EC of the European Parliament and of the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis.10 It is important to ensure that rights and obligations which constitute a financial instrument are not covered by the general rule applicable to consumer contracts, as that could lead to different laws being applicable to each of the instruments issued, therefore changing their nature and preventing their fungible trading and offering. Likewise, whenever such instruments are issued or offered, the contractual relationship established between the issuer or the offeror and the consumer should not necessarily be subject to the mandatory application of the law of the country of habitual residence of the consumer, as there is a need to ensure uniformity in the terms and conditions of an issuance or an offer. The same rationale should apply with regard to the multilateral systems covered by Article 4(1)(h), in respect of which it should be ensured that the law of the country of habitual residence of the consumer will not interfere with the rules applicable to contracts concluded within those systems or with the operator of such systems. For the purposes of this Regulation, references to rights and obligations constituting the terms and conditions governing the issuance, offers to the public or public take-over bids of transferable securities and references to the subscription and redemption of units in collective investment undertakings should include the terms governing, inter alia, the allocation of securities or units, rights in the event of over-subscription, withdrawal rights and similar matters in the context of the offer as well as those matters referred to in Articles 10, 11, 12 and 13, thus ensuring that all relevant contractual aspects of an offer binding the issuer or the offeror to the consumer are governed by a single law. For the purposes of this Regulation, financial instruments and transferable securities are those instruments referred to in Article 4 of Directive 2004/39/EC. Nothing in this Regulation should prejudice the operation of a formal arrangement designated as a system under Article 2(a) of Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems.11

10

OJ L 375, 31.12.1985, p. 3. Directive as last amended by Directive 2008/18/EC of the European Parliament and of the Council (OJ L 76, 19.3.2008, p. 42). OJ L 280, 29.10.1994, p. 83.

4

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Rome I Regulation

Recitals

(32) Owing to the particular nature of contracts of carriage and insurance contracts, specific provisions should ensure an adequate level of protection of passengers and policy holders. Therefore, Article 6 should not apply in the context of those particular contracts. (33) Where an insurance contract not covering a large risk covers more than one risk, at least one of which is situated in a Member State and at least one of which is situated in a third country, the special rules on insurance contracts in this Regulation should apply only to the risk or risks situated in the relevant Member State or Member States. (34) The rule on individual employment contracts should not prejudice the application of the overriding mandatory provisions of the country to which a worker is posted in accordance with Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services.12 (35) Employees should not be deprived of the protection afforded to them by provisions which cannot be derogated from by agreement or which can only be derogated from to their benefit. (36) As regards individual employment contracts, work carried out in another country should be regarded as temporary if the employee is expected to resume working in the country of origin after carrying out his tasks abroad. The conclusion of a new contract of employment with the original employer or an employer belonging to the same group of companies as the original employer should not preclude the employee from being regarded as carrying out his work in another country temporarily. (37) Considerations of public interest justify giving the courts of the Member States the possibility, in exceptional circumstances, of applying exceptions based on public policy and overriding mandatory provisions. The concept of ‘overriding mandatory provisions’ should be distinguished from the expression ‘provisions which cannot be derogated from by agreement’ and should be construed more restrictively. (38) In the context of voluntary assignment, the term ‘relationship’ should make it clear that Article 14(1) also applies to the property aspects of an assignment, as between assignor and assignee, in legal orders where such aspects are treated separately from the aspects under the law of obligations. However, the term ‘relationship’ should not be understood as relating to any relationship that may exist between assignor and assignee. In particular, it should not cover preliminary questions as regards a voluntary assignment or a contractual subrogation. The term should be strictly limited to the aspects which are directly relevant to the voluntary assignment or contractual subrogation in question. (39) For the sake of legal certainty there should be a clear definition of habitual residence, in particular for companies and other bodies, corporate or unincorporated. Unlike Article 60(1) of Regulation (EC) No. 44/2001, which establishes three criteria, the conflict-of-law rule should proceed on the basis of a single criterion; otherwise, the parties would be unable to foresee the law applicable to their situation. (40) A situation where conflict-of-law rules are dispersed among several instruments and where there are differences between those rules should be avoided. This Regulation, however, should not exclude the possibility of inclusion of conflict-of-law rules relating to contractual obligations in provisions of Community law with regard to particular matters. This Regulation should not prejudice the application of other instruments laying down provisions designed to contribute to the proper functioning of the internal market in so far as they cannot be applied in conjunction with the law designated by the rules of this Regulation. The application of provisions of the applicable law designated by the rules of this Regulation should 11 12

OJ L 166, 11.6.1998, p. 45. OJ L 18, 21.1.1997, p. 1.

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Introduction

Rome I Regulation

not restrict the free movement of goods and services as regulated by Community instruments, such as Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce).13 (41) Respect for international commitments entered into by the Member States means that this Regulation should not affect international conventions to which one or more Member States are parties at the time when this Regulation is adopted. To make the rules more accessible, the Commission should publish the list of the relevant conventions in the Official Journal of the European Union on the basis of information supplied by the Member States. (42) The Commission will make a proposal to the European Parliament and to the Council concerning the procedures and conditions according to which Member States would be entitled to negotiate and conclude, on their own behalf, agreements with third countries in individual and exceptional cases, concerning sectoral matters and containing provisions on the law applicable to contractual obligations. (43) Since the objective of this Regulation cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale and effects of this Regulation, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary to attain its objective. (44) In accordance with Article 3 of the Protocol on the position of the United Kingdom and Ireland, annexed to the Treaty on European Union and to the Treaty establishing the European Community, Ireland has notified its wish to take part in the adoption and application of the present Regulation. (45) In accordance with Articles 1 and 2 of the Protocol on the position of the United Kingdom and Ireland, annexed to the Treaty on European Union and to the Treaty establishing the European Community, and without prejudice to Article 4 of the said Protocol, the United Kingdom is not taking part in the adoption of this Regulation and is not bound by it or subject to its application. (46) In accordance with Articles 1 and 2 of the Protocol on the position of Denmark, annexed to the Treaty on European Union and to the Treaty establishing the European Community, Denmark is not taking part in the adoption of this Regulation and is not bound by it or subject to its application, HAVE ADOPTED THIS REGULATION:

Introduction I. II.

13

6

Subject matter and purpose of the Rome I Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Legislative history of the Rome I Regulation 1. The first unification steps for a European international contract law . . 9 2. The Rome Convention of 1980 . . . . . . . . 11

III.

3. The preparation of the Rome I Regulation . . . . . . . . . . . . . . . . . . . . . . . 17 4. The Rome I Regulation . . . . . . . . . . . . . . . . . 19 The Rome I Regulation as Community law 1. Direct applicability . . . . . . . . . . . . . . . . . . . . . . 22 2. Precedence over national law . . . . . . . . . . . 24

OJ L 178, 17.7.2000, p. 1.

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Introduction 3. EU external competence . . . . . . . . . . . . . . . . 26 4. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 IV. The relationship between the Rome Convention and the Rome I Regulation 29 V. The relationship between the Rome I Regulation and other EU law instruments 1. The relationship between the Rome I and Rome II Regulation . . . . . . . . . . . . . . . . 32 2. The relationship between the Rome I Regulation and the Brussels Ibis Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 3. The relationship between the Rome I Regulation and other EU PIL Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 4. The relationship between the Rome I Regulation and special conflicts rules in Directives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 5. The relationship between the Rome I Regulation and EU Directives without a special conflicts provision . . . . . . . . . . . . 43 VI. The relationship between the Rome I Regulation and international treaties . . . . 45 VII. The scope of application of the Regulation 1. International element of the contractual relationship . . . . . . . . . . . . . . . . . 46 2. Personal scope of application . . . . . . . . . . 47 3. Territorial scope of the Regulation a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 b) United Kingdom and Republic of Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 c) Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 d) External territories . . . . . . . . . . . . . . . . . . . . . . . 57 aa) Finland: Åland Islands . . . . . . . . . . . . . . . . . . 58 bb) France: départements et régions d’outre mer and collectivités d’outre mer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 cc) The Netherlands: Aruba and the Netherlands Antilles . . . . . . . . . . . . . . . . . . . . . 60 dd) Portugal: Azores and Madeira . . . . . . . . . . 61 ee) Spain: Islands and exclaves . . . . . . . . . . . . . 62 ff) United Kingdom (i) Gibraltar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Introduction (ii) Channel Islands and Isle of Man . . . . . . . 64 (iii) Akrotiri and Dhekelia . . . . . . . . . . . . . . . . . . . 65 (iv) Extra-European dependencies . . . . . . . . . . 66 e) European micro-States . . . . . . . . . . . . . . . . . . 67 4. Substantive scope of the Rome I Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 5. Temporal scope of application . . . . . . . . . 69 VIII. Interpretation of the Regulation 1. In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 2. Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 3. Autonomous interpretation . . . . . . . . . . . . 78 4. The interpretation criteria . . . . . . . . . . . . . . 83 a) The wording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 b) The legislative history . . . . . . . . . . . . . . . . . . . 87 c) The systematic context . . . . . . . . . . . . . . . . . . 89 d) The purpose (teleological or purposive interpretation) . . . . . . . . . . . . . . . 93 e) The comparison . . . . . . . . . . . . . . . . . . . . . . . . . 95 f) Conformity with fundamental principles of Community law . . . . . . . . . . 96 g) Conformity with Human Rights . . . . . . . 97 IX. The reference procedure 1. In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 2. Requirements of the reference procedure under Art. 267 TFEU a) No interpretation of national law . . . . 102 b) Pending procedure . . . . . . . . . . . . . . . . . . . . 103 c) Court of last instance . . . . . . . . . . . . . . . . . . 107 d) Relevance for the original dispute . . . 111 e) Obligation to refer . . . . . . . . . . . . . . . . . . . . . 113 f) Formal requirements . . . . . . . . . . . . . . . . . . 117 3. The effects of decisions of the CJEU 119 X. Basic principles of the Regulation . . . . . . . 121 1. Party autonomy . . . . . . . . . . . . . . . . . . . . . . . . 122 2. Concept of characteristic performance 124 3. Protection of weaker parties . . . . . . . . . . 125 4. Recognition of internationally mandatory norms . . . . . . . . . . . . . . . . . . . . . 127 5. Principally one single law governing the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 XI. The “radiating effects” of the Rome I Regulation . . . . . . . . . . . . . . . . . . . . . . . . . 131

Bibliography Ballarino, Dalla convenzione di Roma del 1980 al Regolamento Roma I, Riv. dir. int. 2009, 40

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Basedow, Theorie der Rechtswahl oder Parteiautonomie als Grundlage des Interantionalen Privatrechts, RabelsZ 75 (2011) 32

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Introduction Basedow, The Law of Open Societies (2013) Bermann, Rome I: A Comparative View, in: Ferrari/ Leible (eds.), Rome I Regulation. The Law Applicable to Contractual Obligations in Europe (2009) 349 Bitter, Auslegungszusammenhang zwischen der Brüssel I-Verordnung und der künftigen Rom I-Verordnung, IPRax 2008, 96 Bitterich, Die Neuregelung des Internationalen Verbrauchervertragsrechts in Art. 29a EGBGB (2003) Boele-Woelki, When to say “Yes” and when to say “No” to the Parties’ Choice of the Applicable Law in International Contracts, in: FS Ingeborg Schwenzer (2011) 191 Bollée/Lemaire, Le règlement no. 593/2008 du 17 juin 2008 sur la loi applicable aux obligations contractuelles, dit “Rome I”, D. 2008, 21 55 Bonomi, The Rome I Regulation on the Law Applicable to Contractual Obligations. Some General Remarks, YBPIL 10 (2008) 165 Boschiero, La nuova disciplina comunitaria della legge applicablile ai contratti (Roma I) (2009) Bourel, in: L’influence des Communautés Européennes sur le droit international privé des États membres (Bruxelles 1981) 97 Brückner, Bindungswirkung an die Entscheidungen des EuGH im EuGVÜ und der Luganer Konvention, in: Hommelhoff/Jayme (eds.), Europäischer Binnenmarkt. Internationales Privatrecht und Rechtsangleichung (1995) 263 Christian Calliess/Ruffert, EUV/AEUV Kommentar des Vertrages über die Europäische Union und des Vertrages zur Gründung der Europäischen Gemeinschaften (4th ed. 2011) Cashin Ritaine/Bonomi (eds.), Le nouveau règlement européen “Rome I” relatif à la loi applicable auy obligations contractuelles (2008) Colombos, The International Law of the Sea (6th ed. 1967) Corneloup/Joubert (eds.), Le règlement communautaire “Rome I” et le choix de loi dans les contracts internationaux (2011) Crawford/Caruthers, Connection and Coherence between and among European Instruments in the Private International Law of Obligations, I.C.L.Q. 63 (2014) 1 von Danwitz, Der Einfluss des nationalen Rechts und der Rechtsprechung der Gerichte der Mitglied-

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Rome I Regulation staaten auf die Auslegung des Gemeinschaftsrechts, ZESAR 2008, 57 Dauses, Handbuch des EU-Wirtschaftsrechts (looseleaf) Dickinson, Territory in the Rome I and Rome II Regulations, (2013) LMCLQ 86 Diedrich, Rechtswahlfreiheit und Vertragsstatut – eine Zwischenbilanz angesichts der Rom I-Verordnung, RIW 2009, 378 Duintjer Tebbens, L’Interprétation Dynamique, par la Cour de Justice Européenne, de la Compétence en Matière Contractuelle (L’Article 5,1° de la Convention de Bruxelles de 1968), in: Contributions in Honour of Sauveplanne (1984) 65 Economides-Apostolidis, Brussels I in the European practice – How autonomous European concepts are developed by the ECJ, EuLF 2010, I-256 Fagerlund, in: Hannikainen (ed.), Autonomy and Demilitarisation in International Law (1997) Ferrari, I rapporti tra le convenzioni di diritto materiale uniforme in materia contrattuale e la necessita di un’interpretazione interconvenzionale, Riv. dir. int. priv. e proc. 2000, 669 Ferrari/Leible (eds.), Ein neues Internationales Vertragsrecht für Europa (2007) Ferrari/Leible (eds.), Rome I Regulation. The Law Applicable to Contractual Obligations in Europe (2009) Flessner, Interessenjurisprudenz im Internationalen Privatrecht (1990) Foyer, Clunet 103 (1976), 555 Francq, Le règlement “Rome I” sur la loi applicable aux obligations contractuelles, Clunet 2009, 56 Franzina (ed.), La legge applicabile ai contratti nella proposta di regolamento “Roma I” (2006) Freitag, Art. 9 Rom I-VO, Art. 16 Rom II-VO als Superkollisionsnormen des Internationalen Schuldrechts? – Gedanken zum Verhältnis zwischen internen und externen Lücken des EuIPR, IPRax 2016, 418 Katrin Friese, Die europäischen Mikrostaaten und ihre Integration in die Europäische Union: Andorra, Liechtenstein, Monaco, San Marino und Vatikanstadt auf dem Weg in die EU? (2011) Garcimartín Alférez, The Rome I Regulation: Much ado about nothing?, EuLF 2008, I-61 Gebauer/Wiedmann (eds.), Zivilrecht unter europäischem Einfluss (2010)

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Introduction Geimer/Schütze, Europäisches Zivilverfahrensrecht (3rd ed. 2010) Grabitz/Hilf/Nettesheim, Das Recht der Europäischen Union (looseleaf 1993-ongoing) von der Groeben/Schwarze, EUV/EGV, vol. IV (6th ed. 2004) von der Groeben/Schwarze/Hatje, Europäisches Unionsrecht, vol. 4 (7th ed. 2015) Haftel, Entre “Rome II” et “Bruxelles I”: l’interprétation communautaire uniforme du règlement “Rome I”, Clunet 137 (2010) 761 Hau, Positive Kompetenzkonflikte im Internationalen Zivilprozessrecht (1996) von Hein, Of Older Siblings and Distant Cousins: The Contribution of the Rome II Regulation to the Communitarisation of Private International Law, RabelsZ 73 (2009) 461 Hess, Methoden der Rechtsfindung im Europäischen Zivilprozessrecht, IPRax 2006, 355 Hess, Back to the Past: Brexit und das europäische internationale Privat- und Verfahrensrecht, IPRax 2016, 409 Iglesias Buhigues, in: Homenaje al professor Miaja de la Muela (1979) 1123 Juenger, The EEC Convention on the Law Applicable to Contractual Obligations – An American Perspective, in: North (ed.), Contract Conflicts (1982) 295 Junker, Internationales Arbeitsrecht in der geplanten Rom I-Verordnung, RIW 2006, 401 Kegel/Schurig, Internationales Privatrecht (9th ed. 2004) Kenfack, Le règlement (CE) no. 593/2008 du 17 juin 2008 sur la loi applicable aux obligations contractuelles (“Rome I”), Clunet 136 (2009) 3 Manuela Köck, Die einheitliche Auslegung von Rom I, – Rom II- und Brüssel I-Verordnung im europäischen Internationalen Privat- und Verfahrensrecht (2014) Koziol/Bydlinski/Bollenberger (eds.), ABGB. Kurzkommentar (4th ed. 2014) Kropholler, Internationales Einheitsrecht (1975) Kropholler, Die Auslegung von EG-Verordnungen zum Internationalen Privat- und Verfahrensrecht – eine Skizze, in: 75 Jahre Max-Planck-Institut für Privatrecht (2001) 583 Kropholler/von Hein, Europäisches Zivilprozessrecht (9th ed. 2011)

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Introduction Lagarde/Tenenbaum, De la Convention de Rome au règlement Rome I, Rev. Crit. dip 97 (2008) 727 Rainer Lagoni, Anwendbarkeit der Arbeitsschutzvorschriften und Zuständigkeiten der Arbeitsschutzbehörden auf Seeschiffen unter fremder Flagge (2009) Lando/von Hoffmann/Siehr (eds.), The European Private International Law of Obligations (Tübingen 1975) Lando/Nielsen, The Rome I Regulation, C.M.L.Rev. 45 (2008) 1687 Layton/Mercer, European Civil Practice (2nd ed. 2004) Leible (ed.), Das Grünbuch zum Internationalen Vertragsrecht. Beiträge zur Fortentwicklung des Europäischen Kollisionsrechts der vertraglichen Schuldverhältnisse (2004) Leible, Einführung, in: Leible (ed.), Das Grünbuch zum Internationalen Vertragsrecht. Beiträge zur Fortentwicklung des Europäischen Kollisionsrechts der vertraglichen Schuldverhältnisse (2004) 1 Leible, Rom I und Rom II: Neue Perspektiven im Europäischen Kollisionsrecht (2009) Leible/Lehmann, Die Verordnung über das auf vertragliche Schuldverhältnisse anzuwendende Recht (“Rom I”), RIW 2008, 528 Leible/Terhechte (eds.), Europäisches Rechtsschutzund Verfahrensrecht (2014) Leible/Unberath (eds.), Brauchen wir eine Rom 0-Verordnung? (2013) Lein, The new Rome I/Rome II/Brussels I-Synergy, YBPIL 10 (2008) 177 Lenaerts/Stapper, Die Entwicklung der Brüssel I-Verordnung im Dialog des Europäischen Gerichtshofs mit dem Gesetzgeber, RabelsZ 78 (2014) 252 W. Lorenz, Vertragsschluss und Parteiwille im internationalen Obligationenrecht (1957) Lüttringhaus, Übergreifende Begrifflichkeiten im europäischen Zivilverfahrens-und Kollisionsrecht, RabelsZ 77 (2013) 31 Magnus, Konventionsübergreifende Interpretation internationaler Staatsverträge privatrechtlichen Inhalts, in: FS 75 Jahre Max-Planck-Institut für Privatrecht (2001) 571 Magnus, Anmerkungen zum sachlichen Anwendungsbereich der Rom I-Verordnung, in: FS Kühne (2009) 779

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Introduction Magnus, Die Rom I-Verordnung, IPRax 2010, 27 Magnus, Rom I und der EuGH – für die Auslegung der Rom I-VO bereits relevante EuGH-Rechtsprechung, in: FS Coester-Waltjen (2015) 555 Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht (1995) Mankowski, Europäisches Internationales Privatund Prozessrecht im Lichte der ökonomischen Analyse, in: Claus Ott/Hans-Bernd Schäfer (eds.), Vereinheitlichung und Diversität des Zivilrechts in transnationalen Wirtschaftsräumen (2002) 118 Mankowski, Internationale Zuständigkeit und anwendbares Recht – Parallelen und Divergenzen, in: FS Heldrich (2005) 867 Mankowski, Die Rom I-Verordnung – Änderungen im europäischen IPR für Schuldverträge, IHR 2008, 133 Mankowski, Die Rom I-Verordnung – Das neue europäische IPR für Schuldverträge und seine Bedeutung insbesondere aus Schweizer Sicht, EuZ 2009, 2 Mankowski, Interessenpolitik und europäisches Kollisionsrecht: rechtspolitische Überlegungen zur Rom I- und Rom II-Verordnung (2011) di Marco, Legge applicablile alle obbligazioni non contrattuali: un tentativo d’armonizzazione in sede communitaria, in: Studi in memoria di Mario Giuliano (1989) 399 Martiny, Europäisches Internationales Vertragsrecht in Erwartung der Rom I-Verordnung, ZEuP 2008, 79 Martiny, Neuanfang im Europäischen Internationalen Vertragsrecht mit der Rom I-Verordnung, ZEuP 2010, 747 Martiny, Europäisches Internationales Schuldrecht – Kampf um Kohärenz und Weiterentwicklung, ZEuP 2013, 838 Max Planck Institute for comparative and private international law, Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), RabelsZ 71 (2007), 225 Nicholas, The New Rome I Regulation on the Law Applicable to Contractual Obligations: Relationships with International Conventions of UNCITRAL, the Hague Conference and UNIDROIT, in: Cashin Ritaine/Bonomi (eds.), Le nouveau règlement

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Rome I Regulation européen “Rome I” relatif à la loi applicable auy obligations contractuelles (2008) Nordmeier, Verordnung über das auf vertragliche Schuldverhältnisse anzuwendende Recht, in: Gebauer/Wiedmann (eds.), Zivilrecht unter europäischem Einfluss (2010) Núñez-Müller, Die Staatszugehörigkeit von Schiffen im Völkerrecht (1994) Oppermann/Classen/Nettesheim, Europarecht (7th ed. 2016) Pfeiffer, Neues Internationales Vertragsrecht – Zur Rom I-Verordnung, EuZW 2008, 622 Pocar, Some Remarks on the Relationship between the Rome I and Brussels I Regulations, in: Ferrari/ Leible (eds.), Rome I Regulation. The Law Applicable to Contractual Obligations in Europe (2009) 343 Reich/Micklitz, Europäisches Verbraucherrecht (4th ed. 2003) Reich/Nordhausen Scholes/Scholes, Understanding EU Internal Market Law (2015) Reinhart, Zur einheitlichen Auslegung vereinheitlichter IPR-Normen nach Art. 36 EGBGB, RIW 1994, 445 Rengeling/Gellermann/Middeke, Handbuch des Rechtsschutzes in der Europäischen Union (3rd ed. 2014) Riesenhuber (ed.), Europäische Methodenlehre (3rd ed. 2015) Riesenhuber, Die Auslegung, in: Riesenhuber (ed.), Europäische Methodenlehre (3rd ed. 2015) Rudolf, Europäisches Kollisionsrecht für vertragliche Schuldverhältnisse – Rom I-VO, ÖJZ 2011, 149 Giesela Rühl, Statut und Effizienz (2011) Giesela Rühl, Die rechtsaktübergreifende Auslegung im europäischen Internationalen Privatrecht, GPR 2013, 122 J. Sack, Europas Zwerge, EuZW 1997, 45 Schmidt-Parzefall, Die Auslegung des Parallelübereinkommens von Lugano (1995) Schwarze/Hatje, EU-Kommentar (3rd ed. 2012) Sonnenberger, Grenzen der Verweisung durch europäisches internationales Privatrecht, IPRax 2011, 325 Stapper, Europäische Mikrostaaten und autonome Territorien im Rahmen der EG (1999) Staudinger, Rechtsvereinheitlichung innerhalb Europas; Rom I und Rom II, AnwBl 2008, 8 Streinz, Der “effet utile” in der Rechtsprechung

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Introduction des Gerichtshofs der Europäischen Gemeinschaften, in: FS Ulrich Everling II (1995) 1491 Streinz (ed.), EUV/AEUV (2nd ed. 2012) Sturm, in: FS E. Wolff 637 Verdross/Simma, Universelles Völkerrecht (3rd ed. 1984) Vischer, Bemerkungen zum Verhältnis von internationaler Zuständigkeit und Kollisionsrecht, in: Mélanges Alfred E. von Overbeck (1990) 349 R. Wagner, Normenkonflikte zwischen den EG-Verordnungen Brüssel I, Rom I und Rom II und transportrechtlichen Rechtsinstrumenten, TranspR 2009, 103 Marc-Philippe Weller, Anknüpfungsprinzipien im Europäischen Kollisionsrecht: Abschied von der “klassischen” IPR-Dogmatik?, IPRax 2011, 429 Wilderspin, Le Règlement Rome I: la communautarisation et la modernisation de la Convention de

Rome, in: Cashin Ritaine/Bonomi (eds.), Le nouveau règlement européen ‘Rome I’ relatif à la loi applicable aux obligations contractuelles (2008) 11 Würdinger, Das Prinzip der Einheit der Schuldrechtsverordnungen im Europäischen Internationalen Privat- und Verfahrensrecht: eine methodologische Untersuchung über die praktische Konkordanz zwischen Brüssel I-VO, Rom I-VO und Rom II-VO, RabelsZ 75 (2011) 102 Wurmnest, Maritime Employment Contracts in the Conflict of Laws, in: Basedow/Magnus/Wolfrum (eds.), The Hamburg Lectures on Martime Affairs 2009 & 2010 (2012) Zoll, The Draft Common Frame of Reference as an Instrument of the Autonomous Qualification in the Context of the Rome I Regulation, in: Ferrari/Leible (eds.), Rome I Regulation. The Law Applicable to Contractual Obligations in Europe (2009) 17.

I. Subject matter and purpose of the Rome I Regulation The Rome I Regulation (or: the Regulation or Rome I) contains the general private inter- 1 national law (PIL) rules for international contracts. It unifies these rules for all EU Member States except Denmark.1 Besides the Regulation, only few special EU conflicts rules for contracts exist – primarily concerning international consumer contracts (see thereon the comment on Art. 23 and infra note 39 et seq.). It must be further noted that the Regulation excludes certain types of contracts from its scope mainly because these contracts are more closely linked to other fields than contract law as, for instance, contracts concerning family or succession matters, company matters, negotiable instruments etc., and even certain aspects of agency contracts are excluded (see Art. 1 and the comment thereon). They follow the conflicts rules of these other fields or, as for agency contracts, their own (so far national) private international law rules. The Rome I Regulation is one of the measures which shall contribute to the “progressive 2 establishment” of a European area of freedom, security and justice (Recital (1) and (16)) which the Treaty of Amsterdam (1997) set in motion and which entitled the EU to unify the 1

However, in Denmark the Rome Convention of 1980 is still in force (as for this reason also in all other EU Member States). Since the Rome Convention, the predecessor of the Regulation, deviates only slightly from the latter the contractual conflict-of-law rules are almost identical in Denmark and the other EU countries; see further infra note 54 et seq. Whether the United Kingdom, once the so-called Brexit has become effective, will maintain the Rome I Regulation as its national PIL for contractual obligations remains to be seen in the future. Unaffected by the Brexit, the United Kingdom would at least remain to be bound by the Rome Convention which, for the relation to Denmark, is still in effect in all its former Member States unless they withdraw their ratification; differently Hess, IPRax 2016, 417 (“no revival of the Rome Convention”) however, the latter is still alive, see Contracts (Applicable Law) Act 1990 with later amendments).

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conflict-of-law rules of the Member States (see now Art. 81 (2) (c) TFEU). There are further general objectives which Rome I shares with other Regulations concerning the development of a European area of justice, in particular the Rome II Regulation and the Brussels Ibis Regulation. They all share the same general aims, namely, as Recital (6) of the Rome I Regulation expresses: “to improve the predictability of the outcome of litigation, certainty as to the law applicable and the free movement of judgments, for the conflict-of-law rules in the Member States to designate the same national law irrespective of the country of the court in which an action is brought.” And Recital 16 further requires highly foreseeable conflictof-law rules though allowing for “a degree of discretion to determine the law that is most closely connected to the situation.” 3 The Rome I Regulation pursues these general aims for the field of contractual relationships

for which it is the core instrument of unifying and europeanising private international law within the EU. Only few Directives contain certain special conflicts rules which prevail over Rome I. The more specific aims of Rome I for the field of international contract law, also enshrined in its Recitals, are essentially four:2 (1) to ensure the parties’ freedom to choose the applicable law “as one of the cornerstones of the system of conflict-of-law rules in matters of contractual obligations” (Recital (11) and Art. 3); party autonomy is the starting point and overarching principle; the parties generally know best which law serves their interests; if they negotiate on equal footing and agree validly on the applicable law there is no reason to correct their choice; (2) in the absence of such choice to apply the most closely connected law which the Regulation generally defines as the law at the seat of the party effecting the characteristic performance (Art. 4 and Recitals (16) and (19)); (3) to protect certain parties who are “regarded as being weaker”, in particular consumers and employees, by more favourable conflicts rules (Recitals (23) and (35), Art. 6 and 8) or, as for insured persons and passengers, by a restriction of the laws that can be chosen, respectively applied (Art. 5 and 7); (4) to preserve the indispensable application of a minimum of essential norms in order to safeguard the public policy of the forum state and such overriding mandatory rules which a state, also primarily the forum state, regards as absolutely crucial for its internal order (Recital (37) and Art. 9 and 21). 4 Rome I, like Rome II, further tries to avoid additional incentives for unjustified one-sided

forum shopping.3 Uniform conflict-of-law rules throughout the EU lead – certainly not only in theory – to the same applicable law and make it much less important where in the EU an action is brought. They provide certainty with respect to which law applies and thus improve the predictability of the final outcome of litigation. International interpretational and decisional harmony – in the EU ensured by the CJEU – further adds to legal certainty and reduces incentives for forum shopping.4 The foreseeability of solutions reduces the costs of dispute resolution and allows better contract planning.5 This is a sound economic rationale which Recital (6) clearly supports.6 If one thinks for a moment of a situation without uni2 3

4 5

12

As to the fundamental principles of the Regulation see infra note 121 et seq. See only Explanatory Memorandum, COM (2003) 427 final p. 3; Calvo Caravaca/Carrascosa González 64–65; von Hein, in: Rauscher Rom I-VO Einl. note 1; von Hein RabelsZ 73 (2009) 461, 466–467. Calliess, in: Callies, Introduction Rome Regulations note 14. Explanatory Memorandum, COM (2003) 427 final p. 5.

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form conflict-of-law rules, plaintiffs could, by the choice of a suitable court from the menu of general or special jurisdictions under Brussels Ibis, influence which substantive law applies, and thus engage in undesirable ex post-opportunism.7 Forum shopping would then also include law shopping.8 For potential defendants a strong incentive would arise to file a negative declaratory action (where the applicable law of procedure so allows). Competing actions in different fora would be furthered, and being the first claimant would be of decisive importance for the applicable law. The ill-reputed ‘run to the courthouse’, not uncommon under the Brussels I Regulation and not fully avoided by the Brussels Ibis Regulation, would be further supported. As far as possible conflicts law should avoid it. European international procedural law generally allows for a limited forum shopping, 5 though; for reasons of procedural justice it is regarded as justified: parties may generally choose the competent forum by agreement;9 for specific reasons and situations plaintiffs are granted a one-sided choice between different fora.10 However, beyond these limits one-sided forum shopping is regarded as unjustified because it subjects defendants to another than their ‘natural’ forum. Avoidance of forum shopping has therefore been one of the aims of the harmonisation of private international law in Europe from the very beginning of the harmonisation efforts. It motivated, among other purposes, already the creation of the Rome Convention,11 the “grandfather” of European private international law. Uniform conflicts rules considerably reduce the importance of the possibility even of the ‘justified’ forum shopping that the Brussels Ibis Regulation allows. A system of harmonised conflicts rules is thus generally the necessary corollary to uniform rules on jurisdiction and on the free movement of judgments.12 Insofar, the Rome I and II Regulations complement the Brussels (and the Lugano) regime. “Without uniform conflicts rules for accompanying them the Brussels Ibis regime would threaten to become plaintiff’s paradise and defendant’s doom.”13 Insofar as uniform private international law introduces the option to choose the applicable 6 law (as Art. 3 Rome I Regulation does) it grants the parties an instrument for contingency planning and reduces uncertainty even further.14 Legal certainty is enhanced by a guarantee of choice of law, which ought to be uniformly applied in all Member States. Recital (11) Rome I Regulation emphasises this.15 Party autonomy is a doctrine of convenience and

6 7 8

9 10 11

12 13 14

15

See also Recital (6) Rome II Regulation; thereon von Hein RabelsZ 73 (2009), 461, 466. Calliess, in: Callies, Introduction Rome Regulations note 13. Vischer, Mélanges Alfred E. von Overbeck (Fribourg 1990) 349, 350; Hau, Positive Kompetenzkonflikte im Internationalen Zivilprozessrecht (1996) 31–32. See Art. 25 Brussels I Regulation. See in particular Art. 7 Brussels I Regulation. Report Giuliano/Lagarde, OJ EEC 1980 C 282/5; Commission’s Comment on the Draft Convention on the law applicable to contractual obligations (17 March 1980), OJ 1980 C 94/39. Calliess, in: Callies, Introduction Rome Regulations note 12. See Mankowski, in: Magnus/Mankowski, Introduction to Rome II Regulation note 3. Mankowski, in: Claus Ott/Hans-Bernd Schäfer (eds.), Vereinheitlichung und Diversität des Zivilrechts in transnationalen Wirtschaftsräumen (2002), p. 118, 124–126; Mankowski RabelsZ 74 (2010), 182, 190; see also McConnaughay, 39 Columb. J. Trans. L. 595, 611 (2001). Likewise Mankowski RabelsZ 74 (2010), 182; von Hein, in: Callies, Art. 14 Rome II Regulation note 2; Boele-Woelki, in: FS Ingeborg Schwenzer (2011), p. 191.

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efficiency.16 If PIL aims at fostering private interests, prevalence for party autonomy is the natural consequence.17 Even in the realm of non-contractual obligations (see Art. 14 Rome II), party autonomy might still foster solutions suiting the parties whilst conforming with market structures, albeit to a more limited extent than in the realm of contracts.18 7 Under an institutional analysis, two wider perspectives emerge from Recitals (1) and (6) of

the Rome I Regulation:19 first, a normative, human rights based rationale which is implied by the reference to establishing an area of freedom, security and justice in Recital (1); this area intends to safeguard the basic rights of its citizens; secondly, a more functional or utilitarian rationale which is reflected by the reference to the proper functioning of the internal market in Recital (6); this aims at the promotion of economy and economic wealth. Both perspectives converge in the EU engaging in the creation of effective instruments for the enforcement of rights and obligations in civil and commercial matters with a cross-border element.20 The harmonisation and unification of private international law is a fundamental pillar in this process. 8 To a certain extent, the unification of the private international law of contractual obligations

removes obstacles to the main freedoms primary EU law provides for: the free movement of persons, the freedom of establishment and the free transfer of productive resources within the EU. The fact that the same law will govern cross-border transactions promotes trust and secures that persons and resources can cross inner-EU borders more easily.21 II. Legislative history of the Rome I Regulation 1. The first unification steps for a European international contract law 9 The European unification of international contract law developed in several steps. The

beginning22 dates back to 1967. During the final negotiations of the Brussels Convention of 1968 the Benelux States asked the Commission to organize a collaborative project between the Member States on the private international law of all kinds of obligations.23 The underlying idea was to accompany the Brussels Convention with a sister convention on the applicable law of obligations. The Commission set up a Working Group charged with inquiring and considering possibilities of developing a common PIL of obligations for the Member States of the then EEC. The opening meeting took place from 26–28 February 16

17

18 19 20 21 22

23

14

Werner Lorenz, Vertragsschluss und Parteiwille im internationalen Obligationenrecht (1957) p. 154; Junker IPRax 1993, 1, 2 et seq.; Diedrich RIW 2009, 378, 379; Marc-Philippe Weller IPRax 2011, 429, 433. Flessner, Interessenjurisprudenz im Internationalen Privatrecht (1990) p. 99; supported by Diedrich RIW 2009, 378, 379. Rühl, Statut und Effizienz (2011) 600–601. Calliess, in: Callies, Introduction Rome Regulations note 2. Calliess, in: Callies, Introduction Rome Regulations note 2. Calvo Caravaca/Carrascosa González p. 65. See Dickinson paras. 1.44–1.96 who, though describing “The road to Rome II”, details the first steps which were identical for what later became Rome I and Rome II, with an additional chronology at pp. A5–764 to A5–770. By a letter dated 8 September 1967 and written by the permanent representative of Belgium to the EEC, Joseph Van der Meulen; see Report Jenard, OJ EEC 1979 C 59/3.

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1969.24 After setting an agenda the Working Group got a continuing mandate from the Committee of Permanent Representatives in October 1970. The Working Group prepared a Draft of a Convention on the Law Applicable to Obliga- 10 tions25 of June 1972 which proposed uniform conflicts rules both for contractual and extracontractual obligations for the six Member States of the then EEC. The Draft was accompanied by a Report26 and discussed in particular27 on the occasion of a symposium in Copenhagen of April 29 and 30, 1974.28 By then the EEC had no competence to directly unify the conflict-of-law rules by way of Regulations. Thus, the instrument of a convention between the Member States – like the Brussels Convention of 1968 – had to be chosen. However, after the accession of Denmark, Great Britain and Ireland to the EEC in 1973 the work progress slowed down. In particular, the harmonisation of the conflicts rules for extracontractual obligations raised difficulties and led to a split of the work that then concentrated on the harmonisation of international contract law. 2. The Rome Convention of 1980 The fruit of these efforts was the Rome Convention on the Law applicable to Contractual 11 Obligations. It was concluded on 19 June 1980 and entered into force on 1 April 1991 and continuously thereafter in the EU Member States.29 Though no Community law in its strict sense the Rome Convention is Community related law and was opened only for the then EC Member States. It is also the predecessor and in most respects the 100 %-model of the Rome I Regulation. Although the Convention as a whole worked quite well it had some shortcomings. One was the unhappy situation that each Member State had to ratify the newest version of 12 the Rome Convention which it was given after each accession of a new EU Member State.30 Since some were slow this led to an uneven status of ratifications and rather caused disharmony instead of uniformity. In particular, the two Protocols which granted the CJEU jurisdiction to interpret the Rome Convention for securing a uniform understanding came into force only as late as 2004. A further weakness was the much too casuistic conflicts provision on consumer contracts 13 24

25 26 27

28

29

30

See Minutes of the meeting experts 26–28 February 1969, Report Giuliano/Lagarde, OJ EEC 1980 C 282/ 4, in particular the opening address by the Commission’s representative, T. Vogelaar. Doc. XIV/398/72; also published in: RabelsZ 38 (1974), 211. See also SEK (72) 4429. Report Giuliano/Lagarde/van Sasse van Ysselt, Doc. XIV/408/72. See also Foyer, Clunet 103 (1976), 555; Iglesias Buhigues, in: Homenaje al professor Miaja de la Muele (1979), p. 1123; Bourel, in: L’influence des Communautés Européennes sur le droit internacional privé des États membres (Bruxelles 1981), p. 97; di Marco, in: Studi in memoria di Mario Giuliano (1989), p. 399. See the conference volume Lando/von Hoffmann/Siehr (eds.), The European Private International Law of Obligations (Tübingen 1975). Belgium, Denmark, Germany and Luxembourg had incorporated the Rome Convention into their internal law already at an earlier date. Each accession of a new member of the Community required the adaptation of the Rome Convention and the ratification of the new version by all ‘old’ Member States and the new member.

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Rome I Regulation

which left unfortunate gaps: Art. 5 Rome Convention merely covered consumer sales and services contracts and their financing if the professional acted in the country of the consumer or brought the latter over the border (“coffee tours”). Other contract types, e.g., credit contracts as such, rent and lease contracts etc., were not covered. The situation was further complicated by a number of consumer Directives which contained special conflict-of-law rules and regularly prevailed over the Rome Convention. In this respect, the state of affairs was far from being satisfactory. 14 Another problematic complex was the Convention’s Regulation of overriding mandatory

provisions: Art. 7 Rome Convention defined the requirements for the recognition of internationally mandatory norms in rather vague terms. Moreover, the Convention allowed for a reservation against Art. 7. Again, this impaired the uniformity which the Convention aimed at. 15 Finally, on certain questions of interpretation the court practice in the Convention States

was not uniform: who was the characteristically performing party of franchise and distribution contracts was decided differently; the escape clause of Art. 4 (5) sent. 2 Rome Convention was applied in some Member States in a narrower and in others in a wider sense; the scope of the Article on assignments was defined differently. 16 On the other hand, apart from these shortcomings, the Rome Convention proved to be a

practical set of conflict-of-law rules which in most international contract cases was easy to apply. 3. The preparation of the Rome I Regulation 17 As already mentioned, the Treaty of Amsterdam (1997) extended the Community’s com-

petence in respect of conflict-of-law rules. What was Art. 61 (c) TEC and after the Treaty of Lisbon now is Art. 81 (2) (c) TFEU allows the Community to enact measures which ensure the compatibility of the conflict-of-law rules of the Member States. This is regarded as a sufficient competence basis for the enactment of Regulations on the applicable law.31 In order to overcome the practical difficulties raised by the instrument of conventions among the Member States (see supra note 12), the decision was easy to replace the Rome Convention by a Regulation – after the model of the Brussels Convention which also was replaced by the Brussels I and now Brussels Ibis Regulation. However, Denmark, Ireland and the United Kingdom expressed their position not to be bound by the measures for the establishment of an area of freedom, security and justice. Yet, in protocols Ireland and the United Kingdom reserved at least the right to opt in for such measures (and finally opted in), whereas Denmark did not make such a reservation. 18 On several occasions the Council requested a uniform Regulation of the conflicts rules for

contractual obligations: first in the Vienna Action Program of 3 December 1998,32 then by decisions at the Council meeting in Tampere of 15 and 16 October 1999, by the Action

31

32

16

See Leible, in: Leible 5 et seq.; Martiny, in: MünchKomm Vor Art. 1 Rom I-VO note 15; Wilderspin, in: Cashin Ritaine/Bonomi 13 et seq. OJ EC 1999 No. C 19, p. 1.

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Program of 30 November 200033 and finally by the Hague Program of 5 November 2004.34 In reaction, the Commission published a Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation35 in 2003. It proposed the transformation of the Rome Convention into a Community instrument and discussed which provisions of the Convention needed reform. The Greenbook initiated a broad discussion process among the Member States. By the end of 2005 the Commission presented a Proposal for a Regulation on the Law applicable to Contractual obligations.36 Although the Proposal adopted essential features of the Rome Convention it contained many remarkable deviations. The most decisive were the following ones: the parties’ choice of sets of principles (like the UNIDROIT Principles on International Commercial Contracts etc.) should be accepted as the choice of a full legal system ousting the mandatory norms of the objectively applicable law; with respect to the objective determination of the applicable law, a list of conflicts rules for specific contracts was included without any escape clause and with the deletion of a dépeçage ordered by the judge; the inclusion of conflicts rules for agency contracts and for contracts on immaterial property rights; the extension of consumer protection to actually all consumer contracts if the professional was active at the consumer’s habitual residence or directed its activities to that place as well as the exclusion of the parties’ choice of law for consumer contracts. 4. The Rome I Regulation The majority of the innovations in the Commission’s Proposal met with – partially hot – 19 critique.37 On most disputed aspects the final text of Rome I returned to the original Rome Convention. Even the new provisions on contracts of carriage (Art. 5) and on insurance contracts (Art. 7) which the Proposal did not yet contain added no entirely new rules but developed the existing provisions38 to separate Articles. In sum, the Rome I Regulation is an act of evolution, not of revolution.39 The negotiations on the envisaged Rome I Regulation were partially complicated, in par- 20 ticular due to the wishes of the United Kingdom which – it was still the time before the financial crisis of 2008 and following years – wanted to protect its financial scenery and threatened not to exercise its “opt in” option. Art. 4 (1) (h) and Art. 6 (4) (d) and (e) and Recitals 18, 26, 28 – 31 give evidence of the influence of these considerations. Also, that 33 34 35 36 37

38

39

OJ EC 2001 No. C 12, p. 1. OJ EC 2005 No. C 53, p. 1. COM (2002) 654 final. COM (2005) 650 final. See in particular the contributions in Ferrari/Leible (eds.), Ein neues Internationales Vertragsrecht für Europa (2007) and in Franzina (ed.), La legge applicabile ai contratti nella proposta di regolamento “Roma I” (2006); further Max Planck Institute, Comments, RabelsZ 71 (2007) 225 et seq. The applicable law for contracts for the carriage of goods was specifically regulated in Art. 4 (4) Rome Convention and for insurance contracts partly in Art. 1 (3) and (4) Rome Convention and mainly in the second Non Life Insurance Directive (88/357/EEC) and the (consolidated) Life Assurance Directive (2002/83/EEC), both with later amendments. In this sense: von Hein, in: Rauscher Einl Rom I-VO note 20; Lando/Nielsen C.M.L.Rev. 45 (2008) 1688; Leible/Lehmann RIW 2008, 529; Magnus IPRax 2010, 27; Mankowski IHR 2008, 133; Rudolf ÖJZ 2011, 157.

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Rome I Regulation

overriding mandatory provisions only of the forum or at the place of performance can find attention (Art. 9), was the acceptance of a British wish.40 21 The final text of the Rome I Regulation was concluded on 17 June 2008 and published in the

Official Journal of 4 July 2008. According to its Art. 29 sent. 1 Regulation 593/2008/EC of the European Parliament and the Council on the Law applicable to Contractual Obligations (Rome I)41 entered into force on 24 July 2008. However, this date has relevance only for the duty of the Member States under Art. 26 to inform the Commission of existing conventions or their denunciation. With respect to contracts the Regulation is applicable only if they are concluded on or after 17 December 2009.42 III. The Rome I Regulation as Community law 1. Direct applicability 22 The Rome I Regulation is part of the Community law. It constitutes secondary EU law. In

contrast to Directives every Regulation is directly applicable and needs no further implementation into national law (Art. 288 subpara. 2 TFEU). As far as the Rome I Regulation reaches, all Member States (except Denmark) are now immediately bound by it and have to apply it without any modification. This is also true for states which – as Croatia in 2013 – joined or will join the EU after the Rome I Regulation entered into force. From the date of the accession of those countries their courts have to apply the Regulation (in Croatia from 1 January 2013). 23 When the British Brexit will become effective the fate of Rome I in the UK will depend on the

agreements between the EU and the UK. Generally, EU Regulations will automatically lose their binding effect after the exit of a Member State. 2. Precedence over national law 24 The Regulation takes automatic precedence over any deviating national law of its Member

States (Denmark being no member of Rome I is, however, bound by the very similar Rome Convention; see thereto infra note 55). Contradicting statutory or judge-made conflicts rules of national law must no longer be applied. The Member States are also no longer competent to enact conflicts provisions in the field of the Rome I Regulation (and other EU PIL Regulations). They are not allowed to maintain deviating statutory conflicts rules.43 Also, any modification or amendment of the Rome I rules must be made on the EU level. 25 Only, where the Rome I Regulation still leaves gaps as, for instance, for agency contracts

(Art. 1 (2) (g)), the national legislator may become active. Further, to the extent to which Art. 9 Rome I respects overriding mandatory provisions, national law can still prevail over 40

41 42 43

18

See thereto Francq Clunet 2009, 56; von Hein, in: Rauscher Einl Rom I-VO note 19; Lando/Nielsen C.M.L. Rev. 45 (2008) 1721; Mankowski IHR 2008, 148 et seq.; Martiny ZEuP 2008, 107. OJ EU 2008 No. L 177, p. 6. See Art. 28 and Art. 29 sent. 2 Rome I Regulation. Therefore, e.g., Germany had to abolish its national conflicts rules for international contracts which were an almost entire incorporation of the provisions of the Rome Convention.

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the conflicts rules of the Regulation. However, such national overriding provisions must comply with the requirements of Art. 9 and with other directly applicable and mandatory Community law.44 3. EU external competence Where the EU possesses an internal competence it possesses as well an implied external 26 competence as far as necessary for the effective use of the internal competence.45 This implied power of the EU concerns in particular the conclusion of treaties with third states on matters for which an internal competence exists. If the EU has made use of its internal competence its implied external competence to conclude respective treaties may become even an exclusive competence.46 With respect to the Rome I Regulation the Member States are now no longer entitled to 27 conclude, or accede to, international treaties which concern matters regulated in Rome I without the authorisation of the EU. A separate Regulation provides for a special procedure of the negotiation and conclusion of such treaties in the field of Rome I and Rome II.47 Further to the relationship between the Rome I Regulation and international treaties see infra note 45 and the comment on Art. 25. 4. Interpretation As part of the Community law the Rome I Regulation is subject to the specific interpretation 28 method of Community law instruments (see thereto infra note 71 et seq.). IV. The relationship between the Rome Convention and the Rome I Regulation According to its Art. 24 (1) the Rome I Regulation replaces the Rome Convention of 1980; 29 44

45

46 47

See CJEU 17. October 2013 – C-184/12 – United Antwerp Maritime Agencies (Unamar) BV. /. Navigation Maritime Bulgare. See Art. 3 (2) TFEU; further Commission of the European Communities v. Council of the European Communities (AETR) (Case 22/70), [1971] ECR 263, 275 para. 28; Cornelis Kramer (Joined Cases 3, 4 & 6/76), [1976] ECR 1279, 1311 paras. 30–33; Draft Agreement establishing a European laying-up fund for inland waterway vessels (Opinion 1/76), [1977] ECR 741, 756 para. 5; Convention No. 170 of the International Labour Organization concerning safety in the use of chemicals at work (Opinion 2/91), [1993] ECR I-1061, I-1079 para. 18; Competence of the Union to conclude international agreements concerning services and the protection of intellectual property, (Opinion 1/94) [1994] ECR I-5267, I-5411 para. 76, I-5413 para. 82 et seq., I-5416 para. 95; Competence of the Union or one of its institutions to participate in the Third Revised Decision of the OECD on national treatment (Opinion 2/92), [1995] ECR I-521, I-559 paras. 31–33; Accession by the Union to the European Convention for the Protection of Human Rights and Fundamental Freedoms (Opinion 2/94), [1996] ECR I-1759, I-1787 paras. 25–27; Cartagena Protocol (Opinion 2/00), [2001] ECR I-9713, I-9764 para. 45; Commission of the European Communities v. Kingdom of Denmark (Open Skies) (Case C-467/98), [2002] ECR I-9519, I-9556 para. 82. See Oppermann/Classen/Nettesheim, Europarecht (7. Aufl 2016) § 30 note 21. Regulation 662/2009/EC establishing a procedure for the negotiation and conclusion of agreements between Member States and third countries on particular matters concerning the law applicable to contractual and non-contractual obligations (OJ EU 2009 No. L 200, p. 25).

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Rome I Regulation

under this provision the Rome Convention remains however applicable to territories of the EU Member States to which the Rome I Regulation does not apply pursuant to (now) Art. 349, 355 TFEU.48 The Rome Convention therefore did not automatically loose its binding force by the entry into force of the Rome I Regulation but remains in force in all states that ratified it unless they renounce it. Therefore, the Rome I Regulation caused no need to renounce the Rome Convention, just on the contrary. Its existence is still necessary for those territories which are not covered by the Regulation as secondary EU law. Maintaining the Rome Convention is further necessary for holding Denmark bound by this Convention; otherwise Denmark would be the sense- and useless single Contracting State of the Rome Convention. Therefore, none of the Contracting States of the Rome Convention which comprise all EU Member States has thus far renounced it. The Convention is still in force in all EU States49 and exists side by side with the Rome I Regulation although applicable in only few situations. 30 Once Britain after the Brexit vote effectively leaves the EU, all EU Regulations including

Rome I will probably lose their binding force in Britain. However, the British ratification of the Rome Convention which is no EU law though close to Community law will remain unaffected unless Britain decides to renounce it.50 This remains to be seen. In the future, the Rome Convention which in so many respects is identical or very similar to the Rome I Regulation may still prove as a vehicle for European unity in international contract law. 31 It is more or less self-understanding that decisions of the CJEU which interpret provisions of

the Rome Convention have to be taken into account for the interpretation of the Rome I Regulation. Since the CJEU became competent to interpret the Rome Convention only in 2004 and since the courts of the Contracting States were merely entitled, but not obliged to refer doubtful questions of interpretation to the CJEU thus far (2016) only few CJEU decisions on the Rome Convention exist.51 Two decisions concern whether and when a charterparty,52 respectively a contract for the organisation of a carriage of goods53 is a contract of carriage; three concern problems of international employment law, in particular where the habitual place of employment is to be located,54 and one decision deals with the problem of overriding mandatory provisions.55 In general, these decisions can be followed 48 49

50 51

52 53 54

20

See further infra the comment on Art. 24. Even Germany that had incorporated the Rome Convention into its national law (Art. 27–37 EGBGB old version) has not denounced the ratification of the Convention although it deleted the incorporated provisions. See also fn. 1. CJEU 6 October 2009 – C-133/08 – Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV, MIC Operations BV; CJEU 15 March 2011 – C-29/10 – Heiko Koelzsch . /. Großherzogtum Luxemburg; CJEU 15 December 2011 – C-384/10 – Jan Voogsgeerd . /. Navimer SA; CJEU 12 September 2013 – C-64/12 – Anton Schlecker, im Namen der Firma Anton Schlecker . /. Melitta Josefa Boedeker; CJEU 17 October 2013 – C-184/12 – United Antwerp Maritime Agencies (Unamar) BV . /. Navigation Maritime Bulgare; CJEU 23 October 2014 – C-305/13 – Haeger & Schmidt GmbH . /. Mutuelles du Mans assurances IARD (MMA IARD) u.a.; see thereto Magnus, in: FS Coester-Waltjen (2015) 555 et seq. CJEU 6 October 2009 – C-133/08 – Intercontainer Interfrigo (ICF). CJEU 23 October 2014 – C-305/13 – Haeger & Schmidt. CJEU 15 March 2011 – C-29/10 – Koelzsch; CJEU 15 December 2011 – C-384/10 – Voogsgeerd; CJEU 12 September 2013 – C-64/12 – Schlecker.

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where the text of the Rome I Regulation is identical with that of the Rome Convention. Nonetheless, this is no blind order. It should always be reconsidered whether the solution and its arguments are still convincing. V. The relationship between the Rome I Regulation and other EU law instruments 1. The relationship between the Rome I and Rome II Regulation The Regulation 864/2007/EC of 11 July of the European Parliament and the Council on the 32 Law applicable to Extra-contractual Obligations (“Rome II”)56 is, after a decade-long development,57 the second fruit of the European unification of the conflicts rules for obligations.58 It has a particularly close relationship with the Rome I Regulation. Together, Rome I and Rome II form the European private international law on obligations and constitute an almost comprehensive codification for this field of law. Only few additional conflicts rules encounter in a number of Directives (see thereto infra note 39 et seq.) and only few issues concerning obligations have been expressly excluded. All obligations, which do not qualify as contractual and are not part of separate fields of law like family or succession law, fall under Rome II.59 However, Rome II refers in turn to Rome I if the extra-contractual obligation is closely linked to a contract.60 Nonetheless, both Regulations are in principle independent of each other; both have their separate scope of application. Together with the Brussels I(bis) Regulation the two Rome Regulations form a specifically 33 close interpretation trias. Their scope and their provisions “should be consistent” as Recital (7) of both Rome Regulations formulates whereas neither the Recitals of the Brussels I Regulation nor of the Brussels Ibis Regulation contain a parallel expression. Nonetheless, there is wide consensus that identical terms and provisions of the three instruments should be understood and interpreted in the same sense unless the purpose of the respective provision requires otherwise61 (as to the method of interpretation see further infra note 71 et seq.). Insofar it must always be taken into account that Rome I and II pursue the aim of identifying the law that is most apt to apply to a contractual or extra-contractual situation while Brussels Ibis aims at reaching procedural justice. Whereas the – at least objectively – applicable law can usually only be one specific legal system, international procedural law frequently offers access to several courts among which the plaintiff may choose.62 55 56 57 58 59

60 61

62

CJEU 17 October 2013 – C-184/12 – Unamar. OJ EU 2007 No. L 199, p. 40. See Editorial Comment, Sometimes it takes thirty years and even more […], (2007) 44 C. M. L. Rev. 1567. See also supra note 9 et seq. Differently Freitag IPRax 2016, 426. His proposal to apply the most closely connected law, is however the underlying general principle of Rome II (as well as of Rome I). See Art. 4 (3) sent. 2, Art. 5 (2) sent. 2, Art. 10 (1), Art. 11 (1) and Art. 12 (1) Rome II Regulation. See A-K Bitter IPRax 2008, 96 et seq.; Crawford/Caruthers I.C.L.Q 63 (2014) 7 et seq.; Haftel, Clunet 137 (2010), 761; von Hein, in: Rauscher Einl Rom I-VO note 21; Manuela Köck, Die einheitliche Auslegung von Rom I-, Rom II- und Brüssel I-Verordnung im europäischen Internationalen Privat- und Verfahrensrecht (2014); Lein Yb. PIL 10 (2008) 177 et seq.; Lüttringhaus RabelsZ 77 (2013) 32 et seq.; Pocar, in: Ferrari/Leible (eds.), The Rome I Regulation (2009) 343 et seq.; Rühl GPR 2013, 122 et seq.; Würdinger RabelsZ 75 (2011) 102 et seq. See also supra note 5.

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Rome I Regulation

34 Where the one Rome Regulation contains a rule that is lacking in the other – as for instance

on voluntary assignment or set-off which encounter only in Art. 14 and 17 Rome I Regulation – the explicit rule should be taken to fill any gap in the other Regulation. The same holds true where the one Regulation is more explicit than the other as for example Art. 3 Rome I Regulation in comparison to Art. 14 Rome II Regulation with respect to the parties’ choice of law.63 Then, the interpretation of the less explicit provision should take account of, and profit from, the more explicit provision and its interpretation. 35 The Rome I and II Regulation both contain a number of almost or fully identical provisions

on general aspects of private international law which could form the basis of a general part of a European PIL code. In particular, the definition of the habitual residence64 and the provisions on the exclusion of renvoi65 and on the ordre public66 could find their place in such a “Rome Zero Regulation” which assembles the general conflicts rules.67 2. The relationship between the Rome I Regulation and the Brussels Ibis Regulation 36 The Brussels Ibis Regulation does not only belong to the specific interpretation trias which

Recital (7) of the Rome I and Rome II Regulation requires (see supra note 25). In certain respects the predecessor of the Brussels Ibis Regulation has been the model for formulations and concepts of the Rome I Regulation: Recital (17) Rome I expressly provides that the concepts of “provision of services” and “sale of goods” in Rome I should be interpreted in the same way as in (now) Art. 7 Brussels Ibis Regulation. Furthermore, Recital (24) Rome I also refers to the Brussels I (bis) Regulation and its concept of “directed activity” of the professional in case of consumer contracts “and that the concept be interpreted harmoniously” in both Regulations, in particular as the text of Art. 6 Rome I was aligned with the respective Brussels I(bis) formulation. 37 The interpretation of the Rome I Regulation has also to take notice of the case law of the

CJEU under the Brussels Convention, the Brussels I and the Brussels Ibis Regulation on problems which arise alike under Rome I and the Brussels regime. This concerns in particular the interpretation of the notion of civil and commercial matters in contrast to public law matters,68 the distinction between contract and tort,69 between sales and services,70 or between services and leases/licences.71 The authoritative weight of these decisions is con63

64 65 66 67 68

69

70 71

22

Contrary to Art. 3 Rome I Art. 14 Rome II neither mentions the time for the parties’ choice of law nor the possibility of dépeçage nor the law applicable to the consent of the parties. Art. 19 Rome I Regulation and Art. 23 Rome II Regulation. Art. 20 Rome I Regulation and Art. 24 Rome II Regulation. Art. 21 Rome I Regulation and Art. 26 Rome II Regulation. See thereon the contributions in Leible/Unberath (eds.), Brauchen wir eine Rom 0-Verordnung? (2013). See, e.g., CJEU 19 July 2012 – C-154/11 – Ahmed Mahamdia . /. Demokratische Volksrepublik Algerien (dismissal of driver of Algerian embassy in Berlin). See in particular CJEU 20 January 2005 – C-27/02 – Petra Engler . /. Janus Versand GmbH para. 51 (contract if obligation was accepted voluntarily); see also CJEU 17 September 2002 – C-334/00 – Fonderie Officine Meccaniche Tacconi SpA . /. Heinrich Wagner Sinto Maschinenfabrik GmbH (HWS) (culpa in contrahendo qualified as extra-contractual). See CJEU – C-381/08 – Car Trim. CJEU – C-533/07 – Falco Privatstiftung und Rabitsch ./. Weller-Lindhorst.

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Introduction

siderable. Nonetheless is it necessary always to examine whether the essence of the decision under the Brussels regime fits with the purposes the Rome I Regulation pursues. 3. The relationship between the Rome I Regulation and other EU PIL Regulations There are further EU Regulations which deal with private international law, namely on 38 succession, maintenance, and, as a result of an Enhanced Cooperation between certain Member States only, the Rome III Regulation and the recent Regulations on matrimonial and partnership property. Also, the Brussels IIbis Regulation belongs hereto. Together with Rome I and II and Brussels Ibis they constitute the European PIL in a wide sense. However, the relationship between Rome I and the further Regulations is less intense than that with Rome II and Brussels Ibis which are expressly intended to form an interpretation trias with Rome I. There are only few provisions which are identical or rather close between Rome I and some or all of the further Regulations, for instance on public policy. Their interpretation should be also identical and can mutually profit from case law under each of them. The same is true for the interpretation of the terms used in Art. 1 (2) (b) and (c) Rome I Regulation or for the definition of habitual residence of a private person acting outside the course of any business and thus falling outside of Art. 19 (1) subpara. 2 Rome I Regulation. For the latter, the definition and yardstick developed in international family law72 should be applied. 4. The relationship between the Rome I Regulation and special conflicts rules in Directives Although it was another of the aims during the preparations of the Rome I Regulation to 39 abolish the confusing side-by-side existence of general conflicts norms in the central PIL instrument and special conflicts rules in a number of EU Directives, the drafters did not achieve this aim. True, the situation was amended with respect to the conflicts rules on insurance contracts which are now mainly assembled in Art. 7 Rome I.73 However, there is still a number of special conflicts rules on consumer contracts in EU Directives which according to Art. 23 Rome I prevail over the Regulation. The irritating and unnecessary co-existence of general (Art. 6 Rome I) and special rules on the same issue thus continues. With respect to the special rules Art. 6 Rome I gives the wrong impression of general applicability. That the drafters were aware of this shortcoming is evidenced by Art. 27 Rome I which obliges the Commission to present until 17 June 2013 a review study that evaluates “the coherence of Community law in the field of consumer protection.” It must be criticised that still (2016) no such review study has been published. The special conflicts rules in Directives are the following: Art. 6 (2) Standard Contract Terms 40 Directive, Art. 12 (2) Distance sales Directive, Art. 7 (3) Consumer Sales Directive, Art. 12 (new) Timesharing Directive, Art. 12 (2) Distance Financial Services Directive and Art. 22 (4) Consumer Credit Directive. As Directives these provisions are not directly applicable but require their implementation by all EU Member States. The implemented rules then enjoy priority over Art. 6 Rome I Regulation (see further infra the comment on Art. 23). The conflicts rules of the Directives generally provide that the mandatory standard of 41 72 73

See Briggs para. 8.17. See in detail the comment on Art. 7.

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Rome I Regulation

protection afforded by the respective Directive cannot be ousted by the choice of another law if the situation has a sufficiently strong link to the EU or EEA. Since the Directives primarily protect individual interests of private persons it is inadmissible to apply in addition Art. 9 Rome I Regulation which intends to secure public interests. However, if exceptionally a specific (implemented) Directive provision mainly serves public interests its qualification as overriding mandatory provision in the sense of Art. 9 Rome I is not excluded.74 42 It was disputed whether or not Art. 3 (2) E-commerce Directive – the country of origin

principle – constituted a conflict-of-laws rule. The CJEU held that the provision is no conflicts rule and requires no implementation in form of a conflicts rule.75 Some argue that the Member States may nonetheless introduce a special conflicts rule for the field of ecommerce in the sense that the law of the country of origin applies, because the Directive and the CJEU judgment at least allow the introduction of such a conflicts rule.76 However, the Rome I Regulation prohibits that the Member States enact further conflicts rules in the area covered by Rome I unless the Community expressly allows such enactments.77 The E-commerce Directive does not provide for a respective allowance and the decision of the CJEU in eDate Advertising GmbH v. X cannot be read as interpreting such an allowance into the text of the Directive. 5. The relationship between the Rome I Regulation and EU Directives without a special conflicts provision

43 Under the Rome Convention it was partly advanced that EU Directives – particularly on

consumer protection – generally contained an implicit conflicts rule. It was argued that Directives provide inherently that their mandatory rules cannot be derogated from by the parties’ choice of law (provided that there was a close link with the EU or EEA area) even if the respective Directive does not contain an express conflicts provision.78 The reason given for this view was an analogy to the existing conflicts rules in a number of Directives. Without this analogy, an imbalance and contradiction of policy considerations between Directives with and without conflicts rule would arise. Under the Rome I Regulation this position is untenable for several reasons: (1) Art. 23 Rome I requires “provisions of Community law which, in relation to particular matters, lay down conflict-of-law rules relating to contractual obligations.” To allow for implicit conflicts rules would be inconsistent with this wording because an implicit rule is hardly a provision of Community law which lays down a conflictof-law rule. (2) The drafters of the Rome I Regulation were aware of the problem. Nonetheless, they did not provide that all mandatory (consumer-protective) Directive provisions could not be derogated from by choice of law if there was a close EU connection. Instead, the drafters were content with Art. 3 (4) Rome I which requires an exclusive connection with the EU and is not satisfied by a close connection. (3) The EU legislator refrained from including a conflicts provision in all those, in particular new, Directives where such a provision is still 74 75

76 77 78

24

In this sense also Freitag, in: Reithmann/Martiny note 5.20 et seq. eDate Advertising GmbH v. X, CJEU 25 October 2011, C-509/09 and C-161/10; in the same sense BGH NJW 2012, 2197 (the Court had referred the question to the CJEU). See OGH ZfRV 2012, 226; von Hein, in: Rauscher Einl Rom I-VO note 26. In this sense already Sonnenberger IPRax 2011, 329. See for instance Bitterich 463 et seq. (with further references); Reich/Micklitz, Europäisches Verbraucherrecht note 12.18 et seq.

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Introduction

missing. For instance, the Directive on consumer rights79 of 2011 does not contain a conflicts provision.80 (4) There is no remaining gap of protection which urgently needs to be filled. Art. 3 (3) and (4), Art. 6 and Art. 9 Rome I provide sufficient precaution that a choice of law cannot too easily displace mandatory law that aims at the protection of one party. (5) Finally, the review clause of Art. 27 (1) (b) Rome I shows the drafters’ intention to modify the present state concerning consumer protection if need be. All these reasons militate strongly against unwritten though implied conflicts rules in EU Directives. Therefore, implemented mandatory provisions of such EU Directives that do not contain an express conflicts rule can only be applied against a chosen third law if the case is an exclusively internal or inner-EU situation (Art. 3 (3) and (4)) or if the implemented provision in question is exceptionally an overriding mandatory provision in the sense of Art. 9 (then irrespective whether the third law was chosen or is objectively applicable). The Ingmar81 and the Unamar82 decision of the CJEU do not undermine the above-men- 44 tioned solution but lend strong support to it. In the Ingmar case the CJEU held that the mandatory provisions of the Commercial Agents Directive83 on compensation for unjustified dismissal (as implemented in the UK) were applicable despite the fact the parties – a British agent and its Californian principal – had chosen Californian law for their agency contract. The Court referred to the close link of the case with the EU area, to the protection the Directive affords to agents in the EU and that the Directive intends the protection of the freedom of establishment and of undistorted competition among agents in the EU.84 Since the concrete agency contract was concluded before the Rome Convention entered into force the CJEU did neither mention the Convention nor its provision on overriding mandatory provisions. However, in Unamar, this time under the Rome Convention, the Court made clear that implemented provisions of Directives may exceptionally constitute overriding mandatory provisions also in the sense of Art. 9 Rom I, even if the national legislator extends the scope of the Directive to areas to which it originally does not apply (and if the Directive does not provide for maximum harmonisation). Unamar was an inner-EU case concerning an agency contract where the parties had chosen Bulgarian law and Bulgaria had implemented the Commercial Agents Directive correctly. However, Belgium whose courts were seised had extended the scope of the Directive to the involved kind of agency relationship which the Directive as such did not cover. The plaintiff agent relied on this Belgian extension. The CJEU held that such an extension can fall under Art. 7 Rome Convention/Art. 9 Rome I Regulation if the national legislator enacted the extension “in order to protect an interest judged to be essential by the Member State concerned.”85

79 80

81 82

83 84 85

Directive 2011/83/EU, OJ 2011 No. L 304, p. 64. Art. 25 (1) of the Directive declares the rights under the Directive indispensable only if the law of a Member State applies to the contract. Ingmar GB Ltd. v. Eaton Leonard Technologies Inc., [2000] ECR I-9305 (C-381/98). United Antwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare, ECLI:EU:C:2013:663 (C-184/12). Directive 86/653/EEC of 18 December 1986 (OJ EC No. L 382, p. 17). See Ingmar GB Ltd. v. Eaton Leonard Technologies Inc., [2000] ECR I-9305 (C-381/98) paras. 21 et seq. United Antwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare, ECLI:EU:C:2013:663 (C-184/12) para. 50.

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Rome I Regulation

VI. The relationship between the Rome I Regulation and international treaties 45 The relationship of the Rome I Regulation to international treaties is dealt with by its Art. 25.

The Regulation distinguishes between treaties to which exclusively EU Member States are parties and those to which also third states are parties. The latter treaties prevail over the Rome I Regulation, the former do not. These two priority rules apply merely to international treaties which existed at the time when the Rome I Regulation was adopted (17 June 2008) and which lay down conflict-of-law rules relating to contractual obligations. After the adoption of the Regulation the Member States lost their competence to enter into new international treaties on matters regulated in Rome I without the authorisation of the EU.86 VII. The scope of application of the Regulation 1. International element of the contractual relationship 46 The Rome I Regulation “shall apply, in situations involving a conflict of laws” (Art. 1 (1)

sent. 1). In addition, Recital (1) requires “a cross-border impact”. The contractual relationship must therefore be linked with the law of more than one state.87 Without this international element, that means to entirely internal contract cases the Regulation does not apply because they do not raise the question which of more than one law is applicable. However, the international element need not be strong. As Art. 3 (3) allows to infer, the choice of a foreign law for an otherwise entirely internal situation suffices to give the contract the required international character.88 The same effect can have a choice of jurisdiction agreement if it indicates a choice of law (for the necessary internationality see further the comment on Art. 1). 2. Personal scope of application

47 The personal scope of the Regulation as such is wide and does not make any specific

personal capacities a condition for the applicability of the instrument. It is neither necessary that one or both parties have their habitual residence in the EU nor need they possess the nationality of a Member State. Nor requires the Regulation one or both parties to be merchants, professionals or the like although under single provisions of Rome I one party must, for instance, be a professional and the other a consumer (Art. 6), one an employer and the other an employee (Art. 7) etc. 3. Territorial scope of the Regulation a) In general 48 The territorial scope of application of the Regulation corresponds to that of EU law in

general. Subject to the exceptions provided for by Art. 52 TEU (ex Art. 299 EC Treaty) the Regulation applies in the territory of all 27 present Member States bound by the Regu-

86 87

88

26

See supra note 26 et seq. See von Hein, in: Rauscher Art. 1 Rom I-VO note 21; Magnus, in: FS Kühne 790; Ringe, in: jurisPK Art. 1 Rom I-VO note 19. See Recital (12) Rome I Regulation.

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lation. This follows from Art. 52 TEU (ex Art. 299 (1) EC Treaty) for the Member States listed by that provision (all except Denmark). The preliminary issue whether a certain place belongs to the territory89 of a Member State is 49 not determined by the Regulation or the TFEU but by the principles of public international law.90 Therefore, whether the continental shelf before the coast line of a Member State still belongs to the territory of this state must be decided in conformity with the respective international treaties and, in their absence, with general principles of public international law.91 The same applies to the Exclusive Economic Zone.92 Theoretically, even though ships cannot be regarded as territoires ou îles flottants93 and are no territory in the strict sense,94 they may be attributed to their respective flag state via Art. 87 (1) (a) UN Convention on the Law of the Sea.95 However, certain Extra-European territories of certain Member States are not subjected to the Rome I Regulation (see infra notes 57 et seq.). A special case is posed by the so-called Cyprus Problem. As is well known, the Northern part 50 of Cyprus is under Turkish power and declared itself an independent Turkish Republic of Northern Cyprus though it has not been recognised by any EU Member State under international law. Howsoever, the Government of the Republic of Cyprus does not exercise effective control in these areas. This is reflected in Art. 1 (1) of Protocol No. 10 of the Treaty of Accession of the Republic of Cyprus which reads: “The application of the acquis shall be suspended in those areas of the Republic of Cyprus in which the Government of the Republic of Cyprus does not exercise effective control.” This has to be interpreted restrictively, though, insofar as courts sitting in the Government-controlled area have to apply the Rome I Regulation regardless where the substrate of the lawsuit ought to be located.96 89

90 91

92 93

94

95

96

On the notion of territory in the context of the Rome I and Rome II Regulations comprehensively Dickinson, [2013] LMCLQ 86. See Herbert Weber v. Universal Ogden Services Ltd. (Case C-37/00) [2002] ECR I-2013. Herbert Weber v. Universal Ogden Services Ltd. (Case C-37/00) [2002] ECR I-2013 (cook working on an oil drilling platform on the continental shelf in front of the Dutch coast = habitual place of employment under Art. 5(1) Brussels Convention in the Netherlands). Dickinson, [2013] LMCLQ 86, 126. But to this avail S.S. “Lotus” C.P.J. Séries A (1927), 4, 25 (CPIJ); RGSt 23, 266, 267; BAGE 26, 242, 252– 253; BSGE 39, 276, 278; BSGE 64, 145, 149; BFHE 111, 416; BFHH/NV 1988, 298, 299. See only Chung Chi Cheung v. The King [1939] AC 169, 167 (P.C., per Lord Atkin); Old Dominion Steamship Co. v. Primus Gilmore 207 US 398, 403–404 = 28 S.Ct. 133, 134 (1907, per Holmes J.); Cunard Steamship Co. Ltd. v. Mellon 262 US 100, 123 = 43 S.Ct. 504, 507 (1907; per van Devanter J.); Colombos, The International Law of the Sea (6th ed. 1967) § 307; Verdross/Simma, Universelles Völkerrecht (3rd ed. 1984) § 1206; Núñez-Müller, Die Staatszugehörigkeit von Schiffen im Völkerrecht (1994) pp. 83–84; Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht (1995) pp. 472–474; Rainer Lagoni, Anwendbarkeit der Arbeitsschutzvorschriften und Zuständigkeiten der Arbeitsschutzbehörden auf Seeschiffen unter fremder Flagge (2009) pp. 26–27. See only Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht (1995) pp. 477– 481; Junker RIW 2006, 401, 405; Max Planck Institute for comparative and private international law RabelsZ 71 (2007), 225, 296; Wurmnest, in: Basedow/Magnus/Wolfrum (eds.), The Hamburg Lectures on Martime Affairs 2009 & 2010 (Heidelberg etc. 2012), p. 113, 127; Dickinson, [2013] LMCLQ 86, 127–128. Meletis Apostolides v. David Charles Orams and Linda Elizabeth Orams (Case C-420/07), [2009] ECR I-3571 paras. 37–38; Dickinson, [2013] LMCLQ 86, 89–90, 107.

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Rome I Regulation

51 The Rome I Regulation is directly applicable without any additional considerations being

necessary in: Austria; Belgium; Bulgaria; the Czech Republic; Croatia; Estonia; Germany; Hungary; Italy; Latvia; Lithuania; Luxembourg; Malta; the Netherlands; Poland; Romania; Slovakia; Slovenia; Spain; Sweden; Cyprus97 and the mainland territories of Finland, France, the Netherlands, and Portugal. b) United Kingdom and Republic of Ireland 52 The United Kingdom (until the Brexit becomes effective) and the Republic of Ireland

reserved themselves a special position with regard to the Schengen chapter of the Treaty of Amsterdam (1997) which entitled the EU, among other issues, to unify PIL. This position has been laid down in the Protocol on the Position of the United Kingdom and the Republic of Ireland (now Protocol No. 21 to the TFEU). Each of the two countries generally stays out of legislative measures based on now Arts. 67 – 89 TFEU, but has the opportunity to opt-in with regard to specific measures of secondary legislation. More specifically, there are two different rights to opt-in: the first relates to participating in the negotiations, the second to the final result. 53 Whereas the Republic of Ireland had notified its wish to take part in the adoption and

application of the Rome I Regulation,98 the United Kingdom first did not take part99 but reversed its position, influenced quite strongly the final text100 and became a Member State of the Rome I Regulation. Presently, the Regulation is directly applicable in both countries (to the likely situation after the Brexit becomes effective see supra note 30 and fn. 1). c) Denmark 54 Denmark is not a Member State of the Regulation although she is a Member State of the EU.

Denmark abstained completely from the communitarisation of the measures under Title V of Part III of the TFEU, Art. 67 et seq. (ex Title IVof Part III of the EC Treaty, Arts. 61 et seq.). Contrary to the United Kingdom and Ireland Denmark did not reserve the possibility of an opt-in. This was laid down in the Protocol on the Position of Denmark (now Protocol No. 22 to the TFEU) in the version in force in 2007. Art. 1 of the Protocol states that Denmark does not participate in such measures and Art. 2 provides that such EU measures are “not applicable nor binding” for Denmark. This position of Denmark is expressly reiterated by Recital (46) of the Rome I Regulation. The other Member States will apply the Regulation even in relation to Denmark as if Denmark were a third country. However, for Art. 3 (4) and Art. 7 Rome I, the other Member States regard Denmark as Regulation Member.101 55 It must be noted that Denmark is a Contracting State of the Rome Convention, still, which,

also for this reason, remained in force in the other EU Member States though for most situations replaced by the Rome I Regulation (see further the comment on Art. 24). Because of the great similarity between the Convention and the Regulation, Denmark’s abstention from Rome I will generally cause no great differences or difficulties.

97 98 99 100 101

28

With the qualifying remarks in the preceding note. See Recital (44) Rome I Regulation. See still Recital (45) Rome I Regulation. See supra note 20. See Art. 1 (4) Rome I Regulation.

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Denmark is the motherland of the Faeroe Islands. However, Art. 355 (5) (a) TFEU excludes 56 the application of EU law to the Faeroe Islands. Since Denmark is no Member State of the Rome I Regulation anyway, the Rome I Regulation is also not applicable to the Faeroe Islands. Instead, the Rome Convention still applies. d) External territories In general the Regulation applies to the entire territory of the respective Member State and 57 also in those autonomous parts in Europe for whose external relations a Member State is responsible (Art. 355 TFEU). However, to some of the EU Member States there belong separate territories mainly located outside Europe, for whose international relations the Member State is also responsible; in certain cases the Regulation applies even there. This depends on whether or not the territorial unit is listed in Annex II to the TFEU to which Art. 355 (2) TFEU refers. Overseas territories listed there are not governed by EU law in its entirety but by the special association system provided for by Part IV of the TFEU (Arts. 198–204). The Rome I Regulation does not apply in those listed territories. aa) Finland: Åland Islands The Åland Islands, part of Finland, are subject to EU law pursuant to Art. 355 (4) TFEU but 58 for some provisions as contained in Protocol 2 to the Act of Accession of Austria, Finland and Sweden to the then EC.102 Accordingly, courts on the Åland Islands have to apply the Rome I Regulation.103 bb) France: départements et régions d’outre mer and collectivités d’outre mer According to Art. 355 (1) TFEU, EU Law and thus the Regulation applies to the French 59 overseas departments (départements et régions d’outre mer), too. These departments comprise Guadeloupe, French Guiana, Martinique, Réunion, Saint-Barthélemy and Saint-Martin but not the French overseas territories (collectivités d’outre mer), namely New Caledonia, French Polynesia, Mayotte, the Wassis and Futuna Islands, St. Pierre and Miquelon, the French Southern Antarctic territories. These territories fall under the regime of Art. 355 (2) TFEU in conjunction with Annex II of the Treaty; they are governed by the specific association rules of Part IV of the Treaty, Arts. 198–204 TFEU. Instead of the Regulation still the Rome Convention applies there.104 cc) The Netherlands: Aruba and the Netherlands Antilles Pursuant to Art. 355 (2) subpara. 1 in conjunction with Annex II TFEU, Aruba and the 60 Netherlands Antilles are not subject to Union legislation but to the special association system of Arts. 198–204 TFEU. For this reason the Regulation is not in force for Aruba and the Netherlands Antilles.105 Instead, the Rome Convention is still in force, there.

102

103 104

105

In detail Fagerlund, in: Hannikainen (ed.), Autonomy and Demilitarisation in International Law (1997), p. 13. von Hein, in: Rauscher, Art. 24 Rom I-VO note 5. See Kropholler/von Hein Einl. EuGVO note 25; Layton/Mercer para. 11.066 (both with respect to the Brussels I Regulation). See Kropholler/von Hein Einl. EuGVO note 26. But cf. Hof Amsterdam NIPR 2000 Nr. 264 p. 424 with regard to the Brussels Convention where different auspices prevail.

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Rome I Regulation

dd) Portugal: Azores and Madeira 61 The Regulation is directly applicable in Portugal and, due to the express provision of Art. 355

(1) TFEU EC Treaty, also on the Azores and Madeira.106 The proviso in Art. 355 (1) TFEU (ex Art. 299 (2) EC Treaty) that specific measures may be applied to the Azores and Madeira does not affect the applicability of the Rome I Regulation there.107 ee) Spain: Islands and exclaves 62 The Regulation is applicable in Spain, in Gibraltar (however, Gibraltar being under British

rule)108 and also on the Canary Islands109 which belong to Spain (Art. 355 (1) TFEU). The same is true for the Spanish exclaves Ceuta and Melilla in Morocco.110 ff) United Kingdom (i) Gibraltar 63 According to Art. 355 (3) TFEU, the provisions of the Treaties and consequentially any EU

law including the Rome I Regulation apply to those European territories for whose external relations a Member State is responsible. The only instance this relates to at present is Gibraltar111 (whereas historically the respective rule in the original EEC Treaty related to the Saarland and whilst Art. 33 (3) TFEU applies to Gibraltar only with the modifications sanctioned by Art. 28 of the 1985 Accession Act112). The United Kingdom is taken to be the Member State “responsible” for Gibraltar, and arrangements have been put into place to facilitate this in the context of the TFEU, without prejudice to the respective positions of the United Kingdom and Spain on the issue of sovereignty in relation to Gibraltar.113 (ii) Channel Islands and Isle of Man 64 Of greater relevance is Art. 355 (5) (c) TFEU: EU law applies only to a limited extent to the

Channel Islands (Jersey, Guernsey, Alderney and Sark) and the Isle of Man. The limited extent does neither comprise the Brussels Ibis Regulation114 nor the Rome I or II Regulation.115 106

115

Plender/Wilderspin para. 1–087. See also Kropholler/von Hein Einl. note 27; Layton/Mercer para. 11.069 (both with respect to the Brussels I Regulation). See the Accord of 18 October 2000 between Spain and the United Kingdom (OJ 2001 C 13/1 and BOE 2001, 2508); see further Calvo Caravaca/Carrascosa González 67; Kropholler/von Hein Einl. note 29; Layton/Mercer para. 11.070. After the Brexit becomes effective the Rome I Regulation will probably be no longer applicable in Gibraltar. Plender/Wilderspin para. 1–087. Calvo Caravaca/Carrascosa González 67; Kropholler/von Hein Einl. note 28. See Parliamentary Question No. 655/85 with answer by Jacques Delors, OJ EEC 1985 C 341/8–9; Ministry of Justice, Should the UK Opt In? (January 2009) http://www.justice.gov.uk/consultations/docs/rome-iconsultation-govt-response.pdf; Schmalenbach, in: Christian Calliess/Ruffert, EUV/AEUV, Art. 355 AEUV note 9; Kokott, in: Streinz, EUV/AEUV, Art. 355 AEUV note 7; Dickinson, [2013] LMCLQ 86, 89. Meinhard Schröder, in: von der Groeben/Schwarze, EUV/EGV, vol. IV, Art. 299 EGV note 32. Dickinson, [2013] LMCLQ 86, 89. See BGH NJW 1995, 264; OLG Zweibrücken NJOZ 2011, 1940 = IPRspr 2010 No. 204 p. 514; Balthasar IPRax 2007, 475. Plender/Wilderspin para. 1–087; see also von Hein, in: Rauscher, Art. 24 Rom I-VO note 10.

30

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107

108

109 110 111

112 113 114

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(iii) Akrotiri and Dhekelia In principle, Art. 355 (5) (b) TFEU excludes the application of EU law to the United King- 65 dom Sovereign Base Areas of Akrotiri and Dhekelia on Cyprus reflecting some remnants from the time when Cyprus was British, and the struggles of the Cypriot fight for independence.116 The relevance for the Rome I Regulation is marginal if any but it is not in force there.117 (iv) Extra-European dependencies The United Kingdom still possesses further dependencies outside Europe, in particular in 66 the Indian Ocean, the Caribbean and elsewhere. According to Art. 355 (2) TFEU neither EU law nor the Rome I Regulation do apply there. e) European micro-States The European micro-States on the territory of Member States, i.e. the Vatican State, San 67 Marino, Monaco, and Andorra, do not fall under Art. 355 (3) TFEU.118 But though France is partly responsible for the external relations of Monaco neither EU law as such nor the Regulation applies in Monaco which in this respect is independent.119 Also Andorra120 whose formal head of state still is the French president jointly with the Spanish Bishop of Seu d’Urgel lies outside the territorial scope of the Regulation. San Marino has an own responsibility for its external relations in the sense of Art. 355 (3) TFEU although San Marino is under the protective friendship of Italy.121 4. Substantive scope of the Rome I Regulation The substantive scope of the Regulation is limited to civil and commercial matters by virtue 68 of Art. 1 (1). Within these limits the specific exceptions listed in Art. 1 (2) establish further substantive restrictions (see the comment on Art. 1). 5. Temporal scope of application Art. 29 sent. 1 provides that the Rome I Regulation “shall enter into force on the 20th day 69 following its publication in the Official Journal of the European Union.” This was June 24, 116

117

118

119 120

121

See Protocol No. 3 of the Treaty of Accession of [i.a.] the Republic of Cyprus on the Sovereign Base Areas of the United Kingdom of Great Britain and Northern Ireland in Cyprus. Plender/Wilderspin para. 1–087; see also von Hein, in: Rauscher, Art. 24 Rom I-VO note 10; Brödermann/ Wegen, in: Prütting/Wegen/Weinreich, Art. 24 Rom I-VO note 3. Meinhard Schröder, in: von der Groeben/Schwarze, EUV/EGV, vol. IV, Art. 299 EGV notes 33–36; Jaeckel, in: Grabitz/Hilf/Nettesheim, Das Recht der Europäischen Union (looseleaf 1993-ongoing) Art. 355 AEUV note 15 (August 2011); Kokott, in: Streinz, EUV/AEUV, Art. 355 AEUV note 8 and in detail Sack EuZW 1997, 45; Stapper, Europäische Mikrostaaten und autonome Territorien im Rahmen der EG (1999); Katrin Friese, Die europäischen Mikrostaaten und ihre Integration in die Europäische Union: Andorra, Liechtenstein, Monaco, San Marino und Vatikanstadt auf dem Weg in die EU? (2011). See also Cass. RCDIP 1999, 759 with note Ancel. Andorra is de facto independent since 1993 only and was until that time governed by France and the Bishop of Seu d’Urgel. But both remain Andorra’s head of state. See Kropholler/von Hein Einl. note 22; Layton/Mercer para. 11.067 (both with respect to the Brussels I Regulation).

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Rome I Regulation

2008. On this date the Regulation entered into force in all EU Member States except Denmark and Croatia which joined the EU only later (on 1 January 2013). In Croatia the Regulation is only applicable as from that date. 70 However, Art. 29 sent. 2 Rome I provides: The Regulation “shall apply from 17 December

2009 except for Art. 26 which shall apply from 17 June 2009.” This must be further aligned with Art. 28 on “Application in time” which originally ordered: “This Regulation shall apply to contracts concluded after 17 December 2009.” but was corrected into: “contracts concluded as from 17 December 2009”.122 In accordance with the CJEU-judgment in Homawoo123 on the parallel issues of entry into force and application under the Rome II Regulation it should be clear that the Rome I Regulation applies to all contracts which were concluded on or after 17 December 2009. The earlier entry into force does not affect private contract parties but merely the Member States which had to inform the Commission of their existing international conventions with conflicts rules for contractual obligations until 17 June 2009 (see Art. 26). VIII. Interpretation of the Regulation 1. In general 71 The Regulation is Community law and, in principle, has to be interpreted according to the

specific interpretation method of Community law.124 However, there are some specifics concerning the interpretation of the Regulation. 72 The Regulation’s predecessor – the Rome Convention – was an international treaty, though

rather closely related to Community law. It had to be interpreted mainly according to the principles enshrined in the Vienna Convention on the Law of Treaties of 1969, and was so interpreted by national courts over a time span of around 25 years.125 Also the CJEU rendered some judgments interpreting the Rome Convention.126 It was the intention of the lawgivers of the Rome I Regulation that the transformation of the Convention into a Regulation should not lead to a disruption between the old and the new law but that there should be continuity as far as possible.127 The Regulation can and should therefore be interpreted in line with the Rome Convention.128 The case law under the Rome Convention, in particular the ECJ decisions but also the accompanying Giuliano/Lagarde report to the Convention

122 123 124

125

126 127 128

32

OJ EU 2009 No. L 309, p. 87. Deo Antoine Homawoo v. GMF Assurances SA (Case C-412/10), [2011] ECR I-11603 para. 33. As to these methods see; e.g., Reich, in: Reich/Nordhausen Scholes/Scholes, Understanding EU Internal Market Law (2015) 39 et seq.; Riesenhuber, in: Riesenhuber (ed.), Europäische Methodenlehre (3rd ed. 2015) 199 et seq. The Convention entered into force in 1991. If the earlier incorporation of the Rome Convention into national law is counted as well (the first was Denmark in 1984, see IPRax 1985, 113) the time span is even longer. See supra note 31 and fn. 51; in detail Magnus, in: FS Coester-Waltjen (2015) 555 et seq. See Recitals 15 and 22 Rome I Regulation which emphasize the continuity with the Rome Convention. Also Bitter IPRax 2008, 96 ff; Musger, in: Koziol/Bydlinski/Bollenberger (eds.), ABGB Vor Art. 1 Rom I-VO Rn 3.

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remain valid.129 Only where the Regulation deliberately deviates from the wording of the Rome Convention has one to be cautious to rely on former material. A further specific characteristic is the already mentioned interpretation trias of Rome I, 73 Rome II and Brussels Ibis which is particularly close.130 Similar or identical provisions with similar or identical purposes131 in these instruments must be interpreted in largely the same sense. Thus, a specific circle of EU instruments is more relevant for the interpretation of Rome I than other EU instruments. Another specific characteristic is the aim to interpret the EU enactments on international 74 law also in an international spirit that allows their acceptance in the international community and takes account of similar or identical terms in other international instruments such as the CISG etc.132 The Vienna Convention on the Law of Treaties of 23 May 1969 can no longer be directly 75 applied to the interpretation of the Regulation, since the Regulation is no international treaty but Community law. But since the Vienna Convention was and still is relevant for the interpretation of the Rome Convention (which still retains a residual scope of application)133 the Vienna Convention has at least indirect relevance for the interpretation also of the Regulation. Anyhow, the Vienna Convention codifies in its Artt. 31–33 well known and internationally recognised principles of interpretation of international instruments which can be taken into account in any event. 2. Qualification The terms and formulations which the Regulation uses in order to define the scope of each 76 single conflicts rule must be interpreted and applied in a European-autonomous manner (see thereto the following notes). There is no other way to achieve a uniform understanding and application of the Regulation. For, the definition of many core terms varies considerably among the Member States. This is, for instance, true for the delimitation between civil law and public law matters or for the contractual or non-contractual qualification of the culpa in contrahendo or for the definition of who is an employee. Therefore, except where specifically so ordered, neither the lex fori nor the lex causae nor a combination of both is called to decide the qualification issue. For the European-autonomous qualification the existing primary and secondary EU law has 77 to be observed. Certain support may be also derived from the Draft Common Frame of 129

130 131 132

133

See Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV, MIC Operations BV (C-133/08) ECLI:EU:C:2009:617 paras. 23, 27, 43, 58 et seq. (the CJEU refers several times to the Giuliano/Lagarde Report to the Rome Convention). See Recital (7) and supra note 33. Briggs para. 8.16; Mankowski, in: FS Heldrich (2005) 867. See Car Trim GmbH v. KeySafety Systems Srl (C-381/08) ECLI:EU:C:2010:90 paras. 36 et seq. (relying on the CISG and the UN Limitation Convention though in the context of Art. 5 (1) Brussels I Regulation); see thereto Magnus, in: FS Coester-Waltjen (2015) 555 et seq. (556 et seq.); for further dicussion see infra note 90. See supra note 29 et seq.

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Reference (DCFR); although that instrument has been laid to rest the DCFR represents a common European basis and understanding of central concepts that are helpful for the qualification issue.134 3. Autonomous interpretation 78 Under the Rome Convention – as well as under the Brussels Convention – the CJEU pre-

ferred an autonomous interpretation of these legislative instruments. That meant two different aspects: First, questions of doubt were principally to be answered without redress to a specific national law but from an insofar autonomous, to some extent supra-national viewpoint. The ECJ reiterated on various occasions that “that criterion [sc. where the employee ‘habitually carries out his work’] must be interpreted autonomously, in the sense that the meaning and scope of that referential rule cannot be established on the basis of the law of the court seised, but must be established according to consistent and independent criteria in order to guarantee the full effectiveness of the Rome Convention in view of the purposes which it pursues”135 and – in the Brussels context – “[i]t is settled law that, as far as possible, the Court of Justice will interpret the terms of the Convention autonomously so as to ensure that it is fully effective […].”136 79 Secondly, the construction of terms and the gap-filling of the Convention was to be inferred

from the Convention itself generally also without any redress to other national legislative instruments137 or in the words of the CJEU (though in the analogous situation under the Brussels Convention): “[…] the concepts used in the Convention, which may have a different content depending on the national law of the Contracting States, must be interpreted independently, by reference principally to the system and objectives of the Convention […]”138 When the Brussels Convention was transformed into the Brussels I Regulation the CJEU’s standard formulation remained the same: “(T)he provisions of the Regulation […] must be interpreted independently, by reference to its scheme and purpose”.139 ‘By way 134

139

Cautiously in the same direction Zoll, in: Ferrari/Leible (eds.), Rome I Regulation 20 et seq. Heiko Koelzsch v. État du Grand-Duché de Luxembourg (C-29/10) ECLI:EU:C:2011:151 para. 32; referred to in Haeger & Schmidt GmbH v. Mutuelles du Mans assurances IARD (MMA IARD) and others (C-305/ 13) ECLI:EU:C:2014: 2320 para. 25. Mulox IBC Ltd. v. Hendrick Geels, (Case C-125/92) (1993) ECR I-4075, I-4102 para. 10; repeated in Petrus Wilhelmus Rutten v. Cross Medical Ltd., (Case C-383/95) (1997) ECR I-57, I-74 para. 12 and Jackie Farrell v. James Long, (Case C-295/95) (1997) ECR I-1683, I-1704 para. 12. See the cited formulation in Heiko Koelzsch v. État du Grand-Duché de Luxembourg (C-29/10) ECLI:EU: C:2011:151 para. 32 (which expressly refers “by way of analogy” to case law under the Brussels Convention, namely, Mulox IBC Ltd. v. Hendrick Geels, (Case C-125/92) (1993) ECR I-4075, I-4102 para. 10 and 16). Further examples under the Brussels Convention are Arcado SPRL v. Haviland SA, (Case 9/87) (1988) ECR 1539, 1554 para. 10; Anastasios Kalfelis v. Bankhaus Schröder Münchmeyer Hengst and Co. and others, (Case 189/87) (1988) ECR 5565, 5584 para. 15. Shearson Lehman Hutton v. TVB Treuhandgesellschaft für Vermögensverwaltung und Beteiligungen mbH, (Case C-89/91) (1993) ECR I-139, I-186 para. 13; repeated in Francesco Benincasa v. Dentalkit Srl., (Case C-269/95) (1997) ECR I-3767, I-3794 para. 12. See CJEU, for instance, in: Reisch Montage, (C-103/05) (2006) ECR I-6827 para. 29; Draka NK Cables a.

34

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136

137

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of analogy’140 it can be safely assumed that the CJEU will follow the same path for the interpretation of the Rome I Regulation and stay at its principally autonomous interpretation.141 The reason behind the autonomous interpretation is to secure that parties should be able to deduce from nothing else than the respective text itself which law shall apply. This is to further legal certainty and transparency. A further reason is that the terms and formulations used by the Rome Convention and now by the Rome I Regulation should be understood and applied in a uniform way in all Member States so that parties can rely on the same meaning in all Member States. After the transformation of the Rome Convention into the Rome I Regulation the autono- 80 mous interpretation without redress to a specific national law but with reference to the Community law as a whole appears even more apt than under the Convention since the Regulation is formally part of the – secondary – Community law with the CJEU also being the final instance for its interpretation. The cited reasons advanced in favour of an autonomous interpretation apply equally if not stronger to the Regulation. Therefore, the transformation of the Rome Convention into a Regulation does not virtually change the method of autonomous interpretation. It only strengthens the approach to follow principally an autonomous European interpretation of the Regulation. However, as pointed out supra (note 33, 73) the drafters of the Regulation emphazised that the European-autonomous interpretation should take primary recourse to specific Community enactments, namely with preference to Rome II and Brussels Ibis, forming with Rome I the already mentioned interpretation trias.142 A further characteristic of the autonomous method is the extensive, if not excessive redress to the CJEU’s own precedents which is by far the Court’s most often used source. This does not mean, however, that any redress to national law is now excluded. Where the Regulation so orders (in particular for family relations in Art. 1 (2) (b) and (c)143 and for the ordre public of the forum in Art. 21) the applicable national law has still to be determined and applied.144 But this remains the exception. The autonomous interpretation does not exclude the use of the material on which the 81 Regulation is based. In the first line these are the Recitals to the Regulation. They have not the same weight as the text of the instrument itself but are a useful means for its interpretation. Further helpful sources are the Green Paper and the Draft Proposal of the Commission145 as well as the Rome Convention including its Preamble (except where the text of the Regulation deliberately deviates from the Rome Convention). As already indicated, also the Giuliano/Lagarde Report to the Rome Convention is a useful aid for the interpretation of the Regulation.146 Moreover, all decisions of the CJEU on the Rome Con-

140 141

142 143 144 145

o., (C-167/08) (2009) ECR I-3477 para. 19; Zuid-Chemie, (C-189/08) (2009) ECR I-6917 para. 17; Gothaer Allgemeine Versicherung AG v. Samskip GmbH, (C-456/11) (2013) ECR nyr. para. 25; Kainz v. Pantherwerke AG, (C-45/13) ECLI:EU:C:2014:7 para. 19. See Heiko Koelzsch v. État du Grand-Duché de Luxembourg (C-29/10) ECLI:EU:C:2011:151 para. 32. In the same sense see von Hein, in: Rauscher Einl Rom I-VO note 54; Lüttringhaus, in: Ferrari Art. 1 note 4; Magnus, in: Staudinger Einl zur Rom I-VO note 59; Musger, in: Koziol/Bydlinski/Bollenberger, ABGB Vor Art. 1 Rom I-VO Rn 3. See Recital (7) Rome I and Rome II Regulation. See Recital (8) Rome I Regulation. Also von Hein, in: Rauscher Einl Rom I-VO note 55. See supra note 18.

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vention and on comparable issues under Rome II and the Brussels regime continue to remain meaningful.147 82 The autonomous interpretation of the Regulation should also allow the taking into account

of such other international instruments and their interpretation which concern same basic questions also to be solved in the Regulation and/or require decisions on fundamental civil or commercial concepts like contract, tort, consumer, causation etc. The reason for such a broad inter-instrumental approach of interpretation is to avoid that for each international instrument separate and specific concepts for these basic terms develop which inevitably would lead to confusing inconsistencies.148 A further reason is that these other international instruments are in force in many if not in all EU Member States. They therefore form in a wide sense part of the acquis communautaire as well as of an international acquis. Insofar in the first line the CISG and the case law and doctrine under this Convention should be taken into account for the interpretation of corresponding terms in the Regulation149 but also, for instance, the Ottawa Convention on International Factoring, the CMR, the Warsaw and the Montreal Convention on air carriage. 4. The interpretation criteria 83 The Regulation has to be interpreted according to the criteria required for Community law.

They are in principle the classical tools of verbal, historic, systematic and purposive interpretation known to probably all legal systems but given different weight by different national laws.150 However, under Community law they have some specifics. Moreover, the comparative interpretation, the general conformity with Community law as such, the conformity with Human Rights have to be taken into account, too. All these tools have now to be applied to the interpretation of the Regulation. 84 The interpretation method as used by the European Court of Justice has also to be followed

by the national courts when applying the Regulation. 85 Among the different interpretation criteria there is no strict hierarchy. The courts have

discretion although they must avoid any arbitrary use of the interpretation tools. However, 146

147

148

149

150

36

See the references to this report in Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV, MIC Operations BV (C-133/08) ECLI:EU:C:2009:617 paras. 23, 27, 43, 58 et seq. See Heiko Koelzsch v. État du Grand-Duché de Luxembourg (C-29/10) ECLI:EU:C:2011:151 para. 45: “According to the Court’s case-law, cited in paragraph 39 of the present judgment [sc. citing judgments under the Brussels regime], which remains relevant to the analysis of Article 6 (2) of the Rome Convention […].” See Ferrari, Riv. dir. int. 2000, 669 et seq.; Hess IPRax 2006, 355; Lüttringhaus RabelsZ 77 (2013) 31 et seq.; Magnus, in: FS 75 Jahre Max-Planck-Institut für Privatrecht (2001), p. 571, 579 et seq.; McParland, paras. 3.32–3.33; Rühl GPR 2013, 122 et seq.; Würdinger RabelsZ 75 (2011) 102 et seq. As the CJEU has done in Car Trim GmbH v. KeySafety Systems Srl (C-381/08) ECLI:EU:C:2010:90 paras. 36 et seq. See, e.g., Falco Privatstiftung, Thomas Rabitsch v. Gisela Weller-Lindhorst, (Case C-533/07) (2009) ECR I-3327 paras. 19 et seq.; also Artt. 31–33 Vienna Convention on the Law of Treaties of 1969 uses them; generally on the interpretation of uniform law still the classical work of Kropholler, Internationales Einheitsrecht (1975).

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in case of doubt the reasonable purpose of the provision should finally govern the interpretation. This is the welcome approach of the CJEU151 shared by legal doctrine.152 a) The wording The wording of the provision in question is always the starting point.153 True in general for 86 the interpretation of legal texts this is also true for Community law. The verbal interpretation tries to reveal the sense of the wording of a text as it would normally be understood. Where the wording is unambiguous and clear, legal certainty and a uniform application of the Regulation generally require keeping to the wording.154 Without compelling reasons national courts must not implement an interpretation contrary to the express wording.155 Like generally with international law instruments which intend to unify previously differing national views the wording has a rather strong weight which it might not have under specific national traditions.156 Thus, the text of the Regulation should be first given its plain meaning and it should be understood in this sense. But since there is no single Community language and since the versions in the different national languages, which all have the same weight,157 may vary, the court or other interpreter should consult not only the version in the home language but also other language versions. Sometimes doubts can be removed by this procedure.158 On the other hand, a comparison of different language versions can sometimes 151

152

153

154 155

156

157

158

See, for instance, Heiko Koelzsch v. État du Grand-Duché de Luxembourg (C-29/10) ECLI:EU:C:2011:151 paras. 32 et seq.; A. de Bloos SPRL v. Société en commandite par actions Bouyer, (Case 14/76) (1976) ECR 1497, 1508 paras. 9/12; Jozef de Wolf v. Harry Cox BV, (Case 42/76) (1976) ECR 1759, 1767 paras. 9/10; Effer SpA v. Hans-Joachim Kantner, (Case 38/81) (1982) ECR 825, 834 paras. 5 et seq.; Gubisch Maschinenfabrik KG v. Giulio Palumbo, (Case 144/86) (1987) ECR 4861, 4874 paras. 8 et seq.; Société financière et industrielle du Peloux (SFIP) v. Axa Belgium, (Case C-112/03) (2005) ECR I-3707, paras. 28, 36. As to the specific doctrine of “effet utile” see infra note 94. von Hein, in: Rauscher Einl Rom I-VO note 62; in the same sense for the Brussels Ibis Regulation: Hausmann, in: Simons/Hausmann, Einleitung note 48; Kropholler/von Hein Einl. note 42, 46; Layton/ Mercer para. 11.032; Ansgar Staudinger, in: Rauscher Einl. Brüssel I-VO note 40. See, e.g., Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV, MIC Operations BV (C-133/08) ECLI:EU:C:2009:617 paras. 33, 43; also TNT Express Nederland BV v. Axa Versicherung AG, (C-533/08) (2010) ECR I-4107 paras. 44 et seq.; von Hein, in: Rauscher Einl Rom I-VO note 57; generally Reich, in: Reich/Nordhausen Scholes/Scholes, Understanding EU Internal Market Law (2015) 40. See also McParland note 3.24. Hauptzollamt Neubrandenburg v. Leszek Labis and Sagpol SC Transport Miedzynarowy i Spedycja (Joined Cases C-310/98 and C-406/98), [2000] ECR I-1797 para. 32. See thereto Kropholler, Internationales Einheitsrecht p. 263 et seq.; Kropholler, in: 75 Jahre Max-PlanckInstitut für Privatrecht (2001) 583, 590 et seq. See Art. 5 Council Regulation No. 1 of 15 April 1958 determining the language to be used by the European Economic Community, OJ EEC 17 (6 October 1958), 385/58, as amended by Council Regulation (EC) 920/2005 of 13 June 2005 amending Regulation No 1 of 15 April 1958 determining the language to be used by the European Economic Community and Regulation No 1 of 15 April 1958 determining the language to be used by the European Atomic Energy Community and introducing temporary derogation measures from those Regulations, OJ EC 2005 L 156/3; Marianne Koschniske v. Raad van Arbeid (Case 9/ 79), [1979] ECR 2717 para. 6; CILFIT v. Ministero della Sanità, (Case 283/81) [1982] ECR 3415 para. 18; The Queen v. Commissioners of Customs and Excise, ex parte Emu Tabac (Case C-296/95), [1998] ECR I-1605 para. 36. Thus far, there appears to be no example under the Rome Convention nor under the Rome I Regulation;

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cast doubts on a provision.159 They must then be removed by other instruments of interpretation, in particular by a purposive interpretation.160 “The different language versions of a Community text must be given a uniform interpretation and hence in the case of divergence between the versions the provision in question must be interpreted by reference to the purpose and general scheme of the rules of which it forms a part.”161 b) The legislative history 87 For the Rome I Regulation the legislative history plays no insignificant role among the usual

interpretation tools. The historic interpretation tries to reveal the intention of the historic lawgiver. For the Regulation the Recitals162 as well as the Green Paper163 and the Draft Proposal prepared by the Commission164 deliver helpful explanations. But also the Rome Convention, its Preamble and the Giuliano/Lagarde Report on the Convention can still be used, at least where the wording of the respective provision remained unchanged.165 It has, however, rightly been pointed out that with the increasing time distance the intentions of the lawgivers lose in importance.166 88 A special kind of historic interpretation is the CJEU’s method to give the own precedents the

greatest weight in interpreting the respective instrument. The Court always tries to establish an undisturbed continuity of its case law unless the legislator clearly interferes.167 c) The systematic context 89 The systematic interpretation tries to infer the meaning of a provision from the surrounding

159

160

161 162

163 164 165

166

167

38

however, see under the Brussels regime, for instance, A. de Bloos SPRL v. Société en commandite par actions Bouyer, (Case 14/76) (1976) ECR 1497, 1508 paras. 9/12 (doubts under Art. 5 no. 1 [now Art. 7 (1) Brussels Ibis] as to whether the place of performance of the disputed obligation or of any obligation was decisive were removed by the consultation of the German and the Italian version); with scepticism Hess IPRax 2006, 353 et seq. See the English decisions with respect to Art. 16 no. 2 Brussels Convention: Newtherapeutics v. Katz (1991) 2 All E. R. 151, 163 et seq. (Ch. D.); Grupo Torras v. Al-Sabah (1995) 1 Lloyd’s Rep. 374, 401 et seq. (Q. B.). In the same sense von Hein, in: Rauscher Einl Rom I-VO note 57 and for the Brussels regime: Hausmann, in: Simons/Hausmann, Einleitung note 52; Kropholler/von Hein Einl. note 43. Pierre Bouchereau, (Case 30/77) ECLI:EU:C:1977:172 paras. 13/14. For the recognition of the Recitals see, under the Brussels I Regulation, TNT Express Nederland BV v. Axa Versicherung AG, (C-533/08) (2010) ECR I-4107 para. 49. COM (2002) 654 final. See COM (2005) 650 final. The CJEU made extensive use of the Preamble of the Rome Convention and the Giuliano/Lagarde Report for the interpretation of the Convention in Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV, MIC Operations BV (C-133/08) ECLI:EU:C:2009:617 paras. 23, 27, 43, 58, 59. Kropholler/von Hein Einl. note 45; von Hein, in: Rauscher Einl Rom I-VO note 61 rightly points also to the dynamic evolution of Community law which can make it inappropriate to resort to the intentions at the time when the respective instrument was enacted; for further discussion see Hess IPRax 2006, 354 et seq.; generally Reich, in: Reich/Nordhausen Scholes/Scholes, Understanding EU Internal Market Law (2015) 41. As to the interaction between Court and EU legislator with many examples see Lenaerts/Stapper RabelsZ 78 (2014) 252 et seq.

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system of rules and provisions either within the same legislative act or even from other neighbouring regulations.168 The Rome I Regulation constitutes a system of its own from which conclusions can be drawn for the understanding of its single provisions or terms.169 Since as yet there are no CJEU decisions on the Rome I Regulation only examples of a systematic interpretation of the Rome Convention or of the Brussels regime exist which indicate how the Court usually proceeds.170 The CJEU has drawn conclusions from different paragraphs of a provision and from other provisions of the same instrument171 but also from other legislative acts of Community law if they contain general definitions or rules which should be applied in the same sense wherever they are used in Community law. For instance, for the contractual qualification of the compensation claim of a commercial agent against its principal the CJEU relied on the respective qualification in the Directive on commercial agents.172 However, under an overall perspective the Court has been rather reluctant to resort to other instruments of Community law.173 As already outlined174 other international instruments like the CISG, the CMR etc. and their 90 interpretation by the courts and by legal doctrine can and should also be taken into account as far as these instruments use identical terms and concepts which pursue same purposes. For instance, it should be decided under all these instruments including the Rome I Regulation in the same way whether and when consumer protecting provisions can be invoked where goods are partly used for private purposes and partly for professional purposes (dual use goods).175 The systematic interpretation is particularly helpful where a general rule with certain ex- 91 ceptions exists. In case of doubt, the general rule can and should be understood in a wide sense whereas the exception must be interpreted restrictively.176 For instance, the European 168

169 170

171 172 173 174 175 176

Generally on the systematic-contextual interpretation of EU law Reich, in: Reich/Nordhausen-Scholes/ Scholes (eds.), Understanding EU Internal Market Law (2015) 44 et seq. In the same sense von Hein, in: Rauscher Einl Rom I-VO note 58. See for an example of systematic interpretation under the Rome Convention: Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV, MIC Operations BV (C-133/08) ECLI:EU:C:2009:617 paras. 53 et seq. where the Court examines the relationship between Art. 4 (2)–(4) and Art. 4 (5) Rome Convention; for examples under the Brussels regime see, e.g.: Siegfried Zelger v. Sebastiano Salinitri, (Case 56/79) (1980) ECR 89, where the ECJ held that agreements on the place of performance need not meet the form of jurisdiction agreements because then still the Brussels Convention (now the Regulation) systematically distinguishes between both kinds of agreements; but as to the different solution for agreements on the place of performance which pursue merely procedural purposes see Mainschiffahrts-Genossenschaft eG (MSG) v. Les Gravières Rhénanes SARL, (Case C-106/95) (1997) ECR I-911, I-943 et seq. paras. 31–35; confirmed by GIE Groupe Concorde v. Master of the Vessel “Suhadiwarno Panjan”, (Case C-440/97) (1999) ECR I-6307, I-6351 et seq. para. 28. See the cases cited in the preceding fn. Arcado SPRL v. Haviland SA, (Case 9/87) (1988) ECR 1539. See in particular, Kainz v. Pantherwerke AG, (C-45/13) ECLI:EU:C:2014:7 para. 20 et seq. Supra notes 74. See thereto Johann Gruber v. BayWa AG, (Case C-464/01) (2005) ECR I-439. See for instance ÖFAB, Östergötlands Fastigheter AB v. Frank Koot and Ervergreen Investments BV (C-147/12) ECLI:EU:C:2013:490 paras. 30 et seq.; Kainz v. Pantherwerke AG, (C-45/13) ECLI:EU: C:2014:7 paras. 21 et seq.

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Court of Justice held on many occasions that the consumer protective provisions (in particular within the Brussels regime) constitute exceptions from the general rules and therefore must be interpreted restrictively.177 92 The systematic or contextual interpretation also allows drawing conclusions for the inter-

pretation of the Regulation and even filling its gaps by way of analogy. The analogy can be drawn to other provisions of the Regulation itself but also to other instruments belonging to those listed above as far as they deal with the same problem which is relevant under the Regulation.178 d) The purpose (teleological or purposive interpretation) 93 The purposive or teleological interpretation tries to reveal the purpose of a provision and

then interprets the provision in the light of that purpose. This method has been frequently applied by the CJEU and the purposive approach is often decisive.179 Nonetheless the wording of the respective provision and the principle of legal certainty restrict too free a purposive interpretation.180 To reveal the purpose of a provision again the Recitals of the Regulation,181 the Draft Proposal prepared by the Commission, the Giuliano/Lagarde Report to the Rome Convention are useful aids. The purposive interpretation runs however always the danger that the interpreter infers a purpose from the respective provision which is influenced by the own national perspective. In the CJEU this danger is practically excluded by the composition of the Court where judges of all Member States safeguard that all national views are represented and taken into account. National courts when applying the Regulation do not have this advantage. They have to be careful not to import into the interpretation of the Regulation purposes and transplants from the own national law. 94 A specific aspect of the purposive interpretation under Community law is the “effet utile”

doctrine which the CJEU applies to all fields of Community law.182 The Court used this tool 177

178 179

180

181 182

40

See the preceding fn. (paras. 31 and 22 respectively: “[…] those rules of special jurisdiction must be interpreted restrictively and cannot give rise to an interpretation going beyond the cases expressly envisaged by the Regulation […]”). In the same sense Ansgar Staudinger, in: Rauscher Einl. Brüssel I-VO note 37. See, for instance, in interpreting the Rome Convention: Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV, MIC Operations BV (C-133/08) ECLI:EU:C:2009:617 paras. 23, 34, 44, 57 et seq.; A. de Bloos SPRL v. Société en commandite par actions Bouyer, (Case 14/76) (1976) ECR 1497, 1508 paras. 9/12; Jozef de Wolf v. Harry Cox BV, (Case 42/76) (1976) ECR 1759, 1767 paras. 9/10; Effer SpA v. HansJoachim Kantner, (Case 38/81) (1982) ECR 825, 834 paras. 5 et seq.; Gubisch Maschinenfabrik KG v. Giulio Palumbo, (Case 144/86) (1987) ECR 4861, 4874 paras. 8 et seq.; Société financière et industrielle du Peloux (SFIP) v. Axa Belgium, (Case C-112/03) (2005) ECR I-3707 paras. 28, 36; see also Plender/Wilderspin para. 1–094. An example of a purposive interpretation and effet utile is the famous decision in Francovich et al. v. Italian Republic (C-6 and 9/90) ECLI:EU:C:1991:428 para. 33 where the Court developed state liability for breach of EU law; another is Fiona Shevill v. Presse Alliance SA, (Case C-68/93) (1995) ECR I-415 where the CJEU limited the jurisdiction under the old Art. 5 (3) at the locus delicti to the damage suffered there. See only McParland para. 3.55. See for instance in general Jean Noel Royer, (Case 48/75) (1976) ECR 497; with respect to the Brussels Convention Ferdinand M. J. J. Duijnstee v. Lodewijk Goderbauer, (Case 288/82) (1983) ECR 3663, 3674 et

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even for the interpretation of the Rome Convention “in order to guarantee the full effectiveness”183 although that Convention is no Community law in its strict sense. The “effet utile” doctrine requires to interpret a provision in a sense that its purpose is effectively achieved and that the general aim of Community law to integrate the national systems in a single area of freedom, security and justice is as effectively as possible supported; this leads to a “dynamic” interpretation of Community law.184 The interpreter has to choose that interpretation which serves the integration goal and the goal of full effectiveness of the respective norm best. e) The comparison The comparative method supports the interpretation of a provision by comparing it with 95 solutions taken from national legal systems. On several occasions the CJEU used this method openly: partly by referring to general principles underlying the national laws of all or most Member States,185 partly by identifying divergences between the national laws and drawing conclusions from this fact.186 In particular, national courts when applying the Regulation should in case of doubt, and where a decision of the CJEU is still lacking, consult whether and how other Member State courts have decided the relevant question.187 Also legal doctrine should be consulted.188 Comparative material has no binding force. It can only become influential by its persuasive authority when its reasoning and arguments are con-

183

184

185

186

187

188

seq. para. 13; further to the “effet utile” doctrine Streinz, in: FS Ulrich Everling II (1995) 1491 et seq.; Reich, in: Reich/Nordhausen-Scholes/Scholes, Understanding EU Internal Market Law (2015) 45 et seq. See Heiko Koelzsch v. État du Grand-Duché de Luxembourg (C-29/10) ECLI:EU:C:2011:151 para. 32; referred to in Haeger & Schmidt GmbH v. Mutuelles du Mans assurances IARD (MMA IARD) and others (C-305/13) ECLI:EU:C:2014: 2320 para. 25. Thereto Duintjer Tebbens, in: Contributions in Honour of Sauveplanne 65 et seq.; Kropholler/von Hein Einl. note 47; Ansgar Staudinger, in: Rauscher Einl. Brüssel I-VO note 40. See for instance, mainly in the context of the Brussels regime, LTU Lufttransportunternehmen GmbH & Co. KG v. Eurocontrol, (Case 29/76) (1976) ECR 1541, 1550 para. 3; Henri Gourdain v. Franz Nadler, (Case 133/78) (1979) ECR 733, 743 para. 3; Netherlands State v. Reinhold Rüffer, (Case 814/79) (1980) ECR 3807, 3819 paras. 7 et seq.; Criminal proceedings against Siegfried Ewald Rinkau, (Case 157/80) (1981) ECR 1391, 1400 para. 11; Ferdinand M. J. J. Duijnstee v. Lodewijk Goderbauer, (Case 288/82) (1983) 3663, 3675 et seq. para. 17; Volker Sonntag v. Hans Waidmann, (Case C-172/91) (1993) ECR I-1963, 1996 para. 18; Gemeente Steenbergen v. Luc Baten, (Case C-271/00) (2002) ECR I-10489, 10519 para. 28; for a discussion see Hess IPRax 2006, 352 et seq.; see also Economides-Apostolidis, EuLF 2010, I-256 et seq. From these divergences the CJEU has rather often inferred that an independent/autonomous interpretation should be adopted: Handelswekerij G. J. Bier B. V. v. Mines de Potasse d’Alsace S. A., (Case 21/76) (1976) ECR 1735, 1747 paras. 20/23; Industrial Diamond Supplies v. Luigi Riva, (Case 43/77) (1977) ECR 2175, 2187 et seq. paras. 22/27; Ferdinand M. J. J. Duijnstee v. Lodewijk Goderbauer, (Case 288/82) (1983) 3663, 3675 et seq. para. 17; Gubisch Maschinenfabrik KG v. Giulio Palumbo, (Case 144/86) (1987) ECR 4861; on few occasions the Court has inferred that the applicable national law should decide: Industrie Tessili Italiana Como v. Dunlop AG, (Case 12/76) (1976) ECR 1473; Siegfried Zelger v. Sebastiano Salinitri (No. 2), (Case 129/83) (1984) ECR 2397, 2407 paras. 10 et seq. See von Hein, in: Rauscher Einl Rom I-VO note 66; in the same sense for the Brussels regime Layton/ Mercer para. 11.037. Also von Hein, in: Rauscher Einl Rom I-VO note 66; Reinhart RIW 1994, 445 et seq. (for the Rome Convention).

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vincing. Comparison which will probably always selective due to restraints in language skills and time is a tool to enrich and support arguments. The method cannot decide alone which solution should be adopted. f) Conformity with fundamental principles of Community law 96 Apart from the Regulation’s interpretation within the context of other EU law instruments,

in particular Rome II and Brussels Ibis, Rome I has always to be interpreted in conformity with the fundamental principles of Community law, specifically with higher ranking Community law. Therefore the fundamental principles of the TEU and the TFEU have to be observed such as the principle of non-discrimination (Art. 18 TFEU)189 or the freedom of movement of persons, goods, services and capital (Art. 26 (2) TFEU). Moreover, the interpretation of the Regulation cannot transgress the limits of the competences granted to the Community in the field of private international law by Artt. 67 et seq., 81 (2) (c) TFEU.190 g) Conformity with Human Rights 97 The interpretation of the Regulation has finally to conform to the standards of the European

Convention for the Protection of Human Rights and Fundamental Freedoms of 4 November 1950191 which the EU is obliged to observe (see Art. 6 (2) TEU) and which is more or less taken over by the EU Charter on Fundamental Rights. Also the CJEU has already referred to the European Convention on Human Rights although in respect of fundamental procedural rights.192 IX. The reference procedure 1. In general 98 Without a central and finally competent court a uniform understanding and application of a

legal instrument in different jurisdictions can hardly be achieved, let alone upheld over a longer period of time. The uniform interpretation and application of the Regulation is safeguarded by the European Court of Justice. The CJEU is competent to finally and solely decide all questions concerning the interpretation of the Regulation by a preliminary ruling which is binding on the parties of the original dispute.

189

192

As to this principle no discrimination according to nationality is allowed among the Member States; thus far no case law on the non-discrimination principle with respect to the matters covered by the Regulation exists since the Rome Convention did not directly fall under Art. 12 EC Treaty; but as to the principle in general see Phil Collins v. Imtrat Handelsgesellschaft mbH and Patricia Im- und Export Verwaltungsgesellschaft mbH and Leif Emanuel Kraul v. Emi Electrola GmbH, (Joined Cases C-92/92 & 392/92) (1993) ECR I-5145; Anthony Hubbard (Testamentvollstrecker) v. Peter Hamburger, (Case C-20/92) (1993) ECR I-3777; Data Delecta Aktiebolag and Ronny Forsberg v. MSL Dynamics Ltd., (Case C-43/95) (1996) ECR I-4661; Stephen Austin Saldanha and MTS Securities Corporation v. Hiross Holding AG, (Case C-122/96) (1997) ECR I-5325. See also Ansgar Staudinger, in: Rauscher Einl. Brüssel I-VO note 41. In this sense for the Brussels Ibis Regulation Geimer/Schütze Einl. A. 1 note 155 et seq.; Kropholler/von Hein Einl. note 50; Ansgar Staudinger, in: Rauscher Einl. Brüssel I-VO note 42; generally for EU law Reich, in: Reich/Nordhausen Scholes/Scholes, Understanding EU Internal Market Law (2015) 49. In Dieter Krombach v. André Bamberski, (Case C-7/98) (2000) ECR I-1935, I-1966 para. 27.

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The CJEU’s competence follows directly from Art. 267 TFEU (ex Art. 234 EC Treaty). A 99 separate protocol granting the CJEU this competence – as still under the Rome Convention of 1980193 – is now unnecessary. General EU law provides for a special reference procedure to the CJEU; the Court then renders in the form of a preliminary ruling a final decision on the referred interpretation issue: under Art. 267 TFEU any national court may and any national court of last instance must refer questions of interpretation of EU law to the CJEU if the question is relevant for the decision of the dispute, if the question is still undecided by the CJEU and if the answer is not clear beyond reasonable doubt.194 Today it is a mere historic reminiscence that, prior to the Treaty of Lisbon (in force since 1 100 December 2009), the former EC Treaty restricted considerably the admissibility of the reference procedure with respect to all legislative measures taken under Art. 65 EC Treaty (now Art. 81 TFEU). This Article was – together with Art. 61 (c) and Art. 67 (5) EC Treaty – still the competence basis when the Rome I Regulation was promulgated.195 Art. 68 EC Treaty provided that only the courts of last instance were entitled but not obliged to refer interpretation questions to the CJEU. Fortunately, Art. 68 EC Treaty was not retained in the Treaty of Lisbon. Now, Art. 267 TFEU operates without any restriction in the field relevant for the Rome I Regulation. Although the Rome I Regulation was still enacted under the reign of Art. 68 EC Treaty, the 101 Regulation became applicable only on 17 December 2009 after the Treaty of Lisbon had already entered into force on 1 December 2009. Therefore, the former Art. 68 EC Treaty is not applicable to references under the Rome I Regulation.196 2. Requirements of the reference procedure under Art. 267 TFEU a) No interpretation of national law According to Art. 267 TFEU the reference procedure concerns exclusively the interpretation 102 of EU law. Questions of national law even if disguised in the reference question cannot be referred.197 Theoretically, the question whether an expression of the Regulation is to be interpreted autonomously or refers to national law can itself be referred to the CJEU.198 193

194 195 196 197

198

Two Protocols on the Interpretation of the Rome Convention by the European Court of Justice of 19 December 1988. CILFIT v. Ministero della Sanità, (Case 283/81) [1982] ECR 3415. See the Introduction to the Recitals and Recital 3 Rome I Regulation. Also von Hein, in: Rauscher Einl Rom I-VO note 38. The Queen v. Vera Ann Saunders (Case 175/78), [1979] ECR 1129, 1135; Hans Moser v. Land BadenWürttemberg (Case 180/83), [1984] ECR 2539; Criminal Proceedings against Lucas Asjes and others (Joined Cases 209 to 213/84), [1986] ECR 1457; Kleinwort Benson Ltd. v. Glasgow City Council (Case C-346/93), [1995] ECR I-615; Daniele Annibaldi v. Sindaco del Comune di Guidonia and Presidente Regione Lazio (Case C-309/96), [1997] ECR I-7493 para. 13; Graham J. Wilson v. Ordre des avocats de barreau de Luxembourg (Case C-506/04), [2006] ECR 8613 para. 34; Liga Portuguesa and Bwin International Ltd. v. Departamento de Jogos de Santa Casa da Misericórdia de Lisboa (Case C-42/07), [2009] ECR I-7633 para. 37; but see also BIAO v. Finanzamt für Großunternehmen Hamburg (Case C-306/99), [2003] ECR I-1. An example is Industrie Tessili Italiana v. Dunlop AG, (Case 12/76) [1976] ECR 1473 concerning the question whether the place of performance is to be determined autonomously or by redress to the

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Whether a certain rule of national law is reconcilable with the Regulation is no admissible question;199 however, the CJEU finds regularly ways to interpret the relevant rules of EU law that enable the referring court to decide whether its national law conforms to EU law.200 To this avail the CJEU often interprets the referred questions.201 b) Pending procedure 103 An admissible referral further requires that the interpretation issue arises during a pending

proceeding. The proceeding must have been formally begun and must not have been already ended, by judgment or settlement, before the referring court. The nature of the proceedings – contentious or non-contentious – and also the nature of the court or tribunal is irrelevant. Even in proceedings on preliminary measures, including protective measures, a referral is, more in theory than in practice, admissible. 104 The court or tribunal which refers the issue to the CJEU must, however, have acted in the

original dispute in its judicial capacity. Where it acted merely in an administrative capacity, for instance as a mere registry, it is neither entitled nor obliged to refer.202 105 Arbitration courts are not regarded as courts in the sense meant by Art. 267 TFEU. The

provision is construed as relating only to state courts. According to the case law of the European Court of Justice tribunals of non-compulsory arbitration operating on an exclusively contractual basis are not entitled to referrals to the CJEU.203 106 The referring court must examine ex officio whether the solution of the concrete case

depends on questions of EU law. It does not suffice that the national court refers because a party requested a referral.204

199

200

201

202 203

44

applicable national law and deciding that question in the latter sense. But this stems from the earliest phase of interpreting the Brussels Convention in the mid-1970s when the then ECJ had not set strict course towards autonomous interpretation as the rule yet. See only Costa v. ENEL (Case 6/64), [1964] ECR 1253, 1268; Ruth Hünermund v. Landesapotherkammer Baden-Württemberg (Case C-292/92), [1993] ECR I-6787 para. 8. See only Ministère public luxembourgeoise v. Madelien Muller (Case 10/71), [1971] ECR 723, 729; Pigs Marketing Board v. Raymond Redmond (Case 83/78), [1978] ECR 2347; Criminal proceedings against André Gauchard (Case 20/87), [1987] ECR 4879 para. 7; Kalliope Schöning-Kougebetopoulou v. Freie und Hansestadt Hamburg (Case C-15/96), [1998] ECR I-47 para. 9; Meletis Apostolides v. David Charles Orams and Linda Elizabeth Orams (Case C-420/07), [2009] ECR I-3571 para. 61. See e.g. SARL Albatros v. Société des pétroles et des combustibles liquids (Sopéco) (Case 20/64), [1965] ECR 46; Deutsche Grammophon GmbH v. Metro-SB-Großmärkte GmbH & Co. KG (Case 78/70), [1971] ECR 483 para. 3; Gerhard Köbler v. Republik Österreich (Case C-224/01), [2003] ECR I-10239 para. 60. HSB-Wohnbau GmbH (Case C-86/00), [2001] ECR I-5353. “Nordsee” Deutsche Hochseefischerei GmbH v. Reederei Mond Hochseefischerei AG & Co. KG and Reederei Friedrich Busse Hochseefischerei Nordstern AG & Co. KG (Case 102/81), [1982] ECR 1095, 1110 et seq. para. 12; Guy Denuit and Betty Cordenier v. Transporient Mosaïque Voyages et Culture SA (Case C-125/04), [2005] ECR I-923, I-932 et seq. paras. 13–16; Merck Canada Inc. v. Accord Healthcare Ltd. (Case C-555/13), ECLI:EU:C:2014:92 para. 17; Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta SA v. Autoridade Tributária e Aduaneira (Case C-377/13), ECLI:EU:C: 2014:1754 paras. 27–34.

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c) Court of last instance Contrary to the former Art. 68 (1) EC Treaty, under Art. 267 TFEU any court of a Member 107 State is entitled to refer questions of interpretation either of EU law for a preliminary ruling, and the courts of last instance play a special role insofar as they are obliged to refer. The court or tribunal which is obliged to refer the issue to the CJEU must be a court against 108 whose decision no further remedy is available. This is almost unanimously understood in the sense that it is necessary but also sufficient that in the concrete case no ordinary judicial remedy would be given when the referring court renders its final decision.205 It is not necessary that there would be generally – in abstracto – no judicial remedy against a decision of the referring court. The national law prescribes which ordinary remedies lie. In any case the highest national courts in civil matters are obliged to refer to the CJEU.206 It 109 does not matter that their decisions may be subject to attack by an eventual remedy to the constitutional court of the country for such remedy would not be an ordinary, regular judicial remedy, but only an extraordinary remedy.207 But even lower courts can make a reference insofar as national law provides that there is no judicial remedy against their decision in the concrete case be it that the sum is not reached which is needed to entitle to appeal, be it otherwise. Where the first instance is at the same time the last instance this court is obliged to a reference to the CJEU.208 Where it is the court’s discretion to permit a remedy to a higher instance the first court 110 remains nonetheless a court of last instance if there is no judicial remedy because the court refuses permission.209 Where the court on the contrary either permits the remedy or where its refusal can be attacked by an ordinary remedy then the court is not a court of last instance.210 d) Relevance for the original dispute A reference for a preliminary ruling of the CJEU is inadmissible where the interpretation 111 issue has no bearing on the outcome of the original dispute before the referring court. The referring court must consider that a decision on the referred question is necessary to enable it to give judgment (Art. 267 TFEU). The CJEU is neither competent nor obliged (nor willing) to answer mere hypothetical questions concerning the interpretation of the Regu-

204

205

206

207

208

209 210

Karpenstein, in: Leible/Terhechte (eds.), Europäisches Rechtsschutz- und Verfahrensrecht (2014) § 8 note 38. See only Kenny Roland Lyckeskog (Case C-99/00), [2002] ECR I-4839 para. 15; Intermodal Transports (Case C-495/03), [2005] ECR I-8151 para. 30; Wegener, in: Christian Callies/Ruffert Art. 267 AEUV note 27; Gaitanides, in: von der Groeben/Schwarze/Hatje Art. 267 AEUV note 62 with further references. For instance in England the Supreme Court, in France the Cour de Cassation, in the Netherlands the Hoge Raad, in Austria the Oberster Gerichtshof, in Germany the Bundesgerichtshof. Dauses, in: Dauses P.II note 95; Schwarze, in: Schwarze/Hatje Art. 267 AEUV note 44; Gaitanides, in: von der Groeben/Schwarze/Hatje Art. 267 AEUV note 63. Danmarks Rederiforening v. LO Landsorganisationen i Sverige, (Case C-18/02) [2004] ECR I-1417, para. 17. See only Geimer/Schütze Einl. A.1 note 162 with further references. See also Kenny Roland Lyckeskog (Case C-99/00), [2002] ECR I-4839 para. 16.

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lation nor does the Court render legal opinions on such issues.211 References to that effect are thus inadmissible. The referring court must therefore explain in its referral why the answer to the interpretation issue is decisive for the final judgment.212 The interpretation issue is for instance irrelevant where all possible interpretations lead to the same result213 or where a party is already precluded to raise the interpretation issue.214 112 It is the referring court’s discretion to regard an interpretation issue as doubtful. Only if the

issue is clear beyond reasonable doubt a referral becomes inadmissible (acte clair doctrine).215 But the CJEU accepted even a reference on the matter whether under an EU Regulation sheep’s wool had to be regarded as a product gained from animals.216 It is for the national court to assess the relevance of questions to be possibly referred, for the original dispute since only the national court sitting has full knowledge of facts, files, and parties’ submissions.217 e) Obligation to refer 113 Where the mentioned requirements are met the court of last instance is not only entitled but

also obliged to refer the interpretation issue to the CJEU, pursuant to Art. 267 (3) TFEU. Without such obligation of the national courts of last instance the CJEU could not effectively fulfil its function to unify the interpretation of EU law including the Regulation. It is however only the national court which can make a reference to the CJEU. The parties may urge the court to do so but they themselves are not entitled to a referral and they have no remedy under EU law if the national court refuses a reference (though under national law a remedy may lie).218 114 Only in exceptional circumstances is the national court not obliged to refer an interpretation

issue. One such situation is where the CJEU has already decided that issue.219 But even if a CJEU ruling already exists a court is nonetheless entitled to a reference. It can be expected that in such a case the referring court explains in detail why it considers the previous decision of the CJEU as unsatisfactory. 115 There is also no obligation to refer and, as mentioned above, a reference becomes inad211

212 213 214 215 216 217

218 219

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See Pasquale Foglia v. Mariella Novello (Case 244/80), [1981] ECR 3045 para. 18; Krystyna GmurzynskaBscher v. Oberfinanzdirektion Köln (Case C-231/89), [1990] ECR I-4003 para. 23; Wienand Meilicke v. ADV/ORGA AG (Case C-83/91), [1992] ECR I-4919 para. 25; Konatinos Adeneler v. Ellinikos Organismos Galaktos (Case C-212/04), [2006] ECR I-6057 paras. 42–43; Manuel Acereda Herrera v. Servicio Cántabro de Salud (Case C-466/04), [2006] ECR I-5341 paras. 48–49. Gantner Electronic GmbH v. Baasch Exploitatie Maatschappij BV, (Case C-111/01) [2003] ECR I-4207. See BGH IPRax 2003, 346, 349. Kropholler/von Hein Einl. note 35. CILFIT v. Ministero della Sanità, (Case 283/81) [1982] ECR 3415. See CILFIT v. Ministero della Sanità, (Case 283/81) [1982] ECR 3415. See only Pasquale Foglia v. Mariella Novello (Case 244/80), [1981] ECR 3045 para. 19; Eurico Italia Srl v. Ente Nazionale Risi (Joined Cases C-332/92, C-333/92 and C-335/92), [1994] ECR I-711 para. 17; Julia Schnorbus v. Land Hessen (Case C-79/99), [2000] ECR I-10997 para. 22. See Geimer/Schütze Einl. A.1 note 164; Kropholler/von Hein Einl. note 36. Da Costa en Schaake NV v. Netherlands Inland Revenue Administration (Joined Cases 28 to 30/62) [1963] ECR 63 et seq.; CILFIT v. Ministero della Sanità (Case 283/81) [1982] ECR 3415 para. 15.

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missible if the interpretation issue is an acte clair, clear beyond reasonable doubt.220 However courts should be cautious to consider interpretation issues as so clear. Courts of other jurisdictions and in particular the CJEU might take another view on the interpretation.221 In order to support the CJEU’s function to unify the interpretation of the Regulation national courts should rather refer than avoid referrals. For good reasons the CJEU has narrowed down the limits to the exception of acte clair. Sometimes the effort which a national court has to take in order to reason why something is clear222 betrays the result reached.223 Yet, an issue which originally was not acte clair, might have been clarified by subsequent 116 CJEU case law so that it became an acte éclairé not allowing a referral anymore.224 f) Formal requirements In its referral the court must formulate concrete questions which the CJEU is asked to 117 answer. The referring court must further give a survey of the facts and of the legal background of the dispute – the facts must therefore already have been established225 – and it must explain why the interpretation issue is relevant for its decision.226 Art. 94 Rules of Procedure of the CJEU outlines the prerequisites which a referral needs to fulfil in order to be admissible and admitted. In addition, the CJEU has issued very helpful “Recommendations to national courts and tribunals in relation to the initiation of preliminary ruling procedures”.227 They outline the specifications which should be met. In cases of particular urgency the national courts may apply for the special urgent procedure 118 provided for in Art. 107 Rules of Procedure of the CJEU.228 According to para. (1) of this provision the national court “shall set out, in its request, the matters of fact and law which establish the urgency and justify the application of that exceptional procedure and shall, insofar as possible, indicate the answer it proposes to the questions referred.” 220

221

222 223 224 225

226

227

228

CILFIT v. Ministero della Sanità, (Case 283/81) [1982] ECR 3415 para. 15; Gaston Schul Douane-expediteur BV v. Minister van Landbouw, Natuur and Voedselkwaliteit (Case C-461/03), [2005] ECR I-10513 para. 16. See CILFIT v. Ministero della Sanità, (Case 283/81) [1982] ECR 3415 paras. 16–19; Intermodal Transports BV v. Staatssecratris van Financiën (Case C-495/03), [2005] ECR I-8151 para. 39. E.g. BGH EuZW 2013, 184 – Sportwetten. Karpenstein, in: Leible/Terhechte § 8 note 62. Reich, in: Reich/Nordhausen Scholes/Scholes 40. Wienand Meilicke v. ADV/ORGA AG (Case C-83/91), [1992] ECR I-4871 para. 26; Gantner Electronic GmbH v. Baasch Exploitatie Maatschappij BV, (Case C-111/01) [2003] ECR I-4207, paras. 35 et seq. Telemarsicabruzzo SpA v. Circostel (Joined Cases C-320/90 to C-322/90), [1993] ECR I-393; Pretore di Genova v. Giorgio Domingo Banchero (Case C-157/92), [1993] ECR I-1085; Monin Automobiles –maison du deux-roues (Case C-386/92), [1993] ECR I-2049; Criminal proceedings against Claude Laguillaumie (Case C-116/00), [2000] ECR I-4979 paras. 14 et seq.; Gantner Electronic GmbH v. Baasch Exploitatie Maatschappij BV, (Case C-111/01) [2003] ECR I-4207; Lucien De Graaf and Gudula Daniels v. Belgische Staat (Case C-436/05), [2006] ECR I-106 para. 10; Otmar Greser v. Bundesagentur für Arbeit (Case C-438/06), [2007] ECR I-69 para. 8; Eurodomus srl v. Comune di Bolzano (Case C-166/06), [2007] ECR I-90 para. 11. Recommendations to national courts and tribunals in relation to the initiation of preliminary ruling procedures, OJ EU 2002 C 338/1. See OJ EU 2008 L 24/39.

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3. The effects of decisions of the CJEU 119 The preliminary ruling of the CJEU decides the interpretation issue with binding effect for

the court and the parties of the referred dispute.229 The decision of the CJEU has an inter partes effect only230 and becomes res judicata once the judgment is issued.231 But the ruling is neither a final decision of the original dispute nor has it a binding effect on other parties or other disputes.232 It closes an intermediate stage, and it is for the courts of the State from which the reference came, to finally decide the case as to substance. Even the referring court can refer the same issue in another dispute again to the CJEU233 or asked the CJEU for an (authentic) interpretation of its previous ruling.234 120 Nonetheless, once the CJEU has decided on an interpretation issue this decision has a wide

factual effect and is regularly followed by the national courts of the Member States. It enjoys appreciation as a precedent of the highest order.235 In principle, interpretative judgments apply retroactively ex tunc236 save for an express limitation to an effect ex nunc.237 X. Basic principles of the Regulation 121 The fundamental principles of the Rome I Regulation can be traced back to few core maxims

already underlying the Rome Convention. They are the following: the principle of party 229

230 231 232

233

234

235

236

237

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Milch-, Fett- und Eierkontor GmbH v. Hauptzollamt Saarbrücken (Case 29/68), [1969] ECR 165 para. 3; Luigi Benedetti v. Munar F.lli s.a.s. (Case 52/76), [1977] ECR 163, 183 paras. 26–27; Fazenda Pública v. Câmara Municipal da Porto (Case C-446/98), [2000] ECR I-11435 paras. 49–50; Fastenrath, JA 1986, 284; Nachbaur, JZ 1992, 354; Middeke, in: Rengeling/Gellermann/Middeke § 10 note 102. See only Karpenstein, in: Leible/Terhechte § 8 note 112. Art. 91 Rules of procedure of the CJEU, OJ EU 2012 No. L 265, p. 1 et seq. Geimer/Schütze Einl. A.1 note 174; Kropholler/von Hein Einl. note 38; Schmidt-Parzefall 35 et seq.; Ansgar Staudinger, in: Rauscher Einl. Brüssel I-VO note 62; for a wider binding effect however Brückner, in: Hommelhoff/Jayme (eds.), Europäischer Binnenmarkt. IPR und Rechtsangleichung (1995) 267 et seq. See Da Costa en Schaake NV v. Netherlands Inland Revenue Administration, (Joined Cases 28 to 30/62) [1963] ECR 63. Wünsche Handelsgesellschaft GmbH & Co. KG v. Bundesrepublik Deutschland (Case 69/85), [1986] ECR 947 para. 15; von Danwitz, ZESAR 2008, 57, 63. Pechstein, EU-Prozessrecht (4th ed. 2011) para. 868; Middeke, in: Rengeling/Gellermann/Middeke § 10 note 104; Karpenstein, in: Leible/Terhechte § 8 notes 113–114; Gaitanides, in: von der Groeben/ Schwarze/Hatje Art. 267 AEUV note 93; Reich, in: Reich/Nordhausen Scholes/Scholes 50 et seq. Amministrazione delle finanze dello Stato v. Denkavit Italiana srl (Case 61/79), [1980] ECR 1205 para. 15; Ministero delle Finanze v. In.Co.GE’90.srl and others (joined Cases C-10/97 to C-22/97), [1998] ECR I-6307 para. 23; The Queen, ex parte Danny Bidar v. London Borough of Ealing and Secretary of State for Education and Skills (Case C-209/03), [2005] I-2119 para. 69; Wienand Meilicke, Heidi Christa Weyde and Marina Stöffler v. Finanzamt Bonn-Innenstadt (Case C-292/04), [2007] I-1835 para. 34. See only Gabrielle Defrenne v. Société anonyme belge de navigation aérienne Sabena (Case 43/75), [1976] ECR 455 para. 74; Bruno Barra v. Beglischer Staad and City of Liège (Case 309/85), [1988] ECR 355 para. 13; The Queen, ex parte Danny Bidar v. London Borough of Ealing and Secretary of State for Education and Skills (Case C-209/03), [2005] I-2119 para. 67 with further references; Wienand Meilicke, Heidi Christa Weyde and Marina Stöffler v. Finanzamt Bonn-Innenstadt (Case C-292/04), [2007] I-1835 paras. 36–37.

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autonomy as primary connecting element; as default rule the application of the law at the seat of the party that renders the characteristic performance; special conflicts rules for the protection of weaker parties; the prevalence of crucial mandatory norms of the involved states; the maxim that principally one single law governs the contract. These principles are the cornerstones of a differentiated, nonetheless transparent system for the determination of the law applicable to international contractual obligations. Since the principles do not establish hard and fast rules but allow for limited exceptions, they guarantee on the one hand sufficient legal certainty and foreseeability of the results to which they usually lead. On the other hand do they offer the necessary flexibility to avoid an unjust solution in the concrete case at hand. 1. Party autonomy The idea to allow parties the choice of the law that should govern their contract appears to 122 have a tradition since different territories with different law exist. Initial approaches in that direction are said to be found already in Ptolemaic Egypt.238 An early medieval example of an express law selection clause is contained in the marriage settlement between the famous Castilian knight Rodrigo Díaz de Vivar (“El Cid”) and the Princess of Leon of 1074.239 Nonetheless, the parties’ free choice of the applicable law and the parties’ subjective will as connecting factor are still not undisputed. For some, this concept is still a stopgap solution (‘Verlegenheitslösung’) mainly because the state withdraws from the task to regulate this issue leaving it to the parties.240 Indeed, some states restrict the freedom to choose the applicable law entirely or partially. For instance, Brazilian statutory law does still not provide that the parties may choose the applicable contract law.241 Swiss law excludes a subjective choice of law for consumer contracts.242 The internationally clearly prevailing view favours the principal possibility of the parties’ choice of law as corollary to the general autonomy of persons in private law.243 The Rome I Regulation follows the European tradition to fully recognise the freedom of the 123 parties to select the applicable contract law but to limit this freedom where otherwise one party could easily misuse it. 2. Concept of characteristic performance Already the Rome Convention contained the general principle that, in the absence of a 124 subjective choice, the law at the place shall apply where the party that effects the characteristic performance has its place of business or its habitual residence.244 However, the Convention provided also for quite a number of exceptions. The Rome I Regulation follows the same approach. Its Art. 4 (1) and (2) are mainly based on the principle that the law at the seat 238 239 240 241 242 243

244

See Sturm, in: FS E. Wolff 637 et seq. See thereto Juenger, in: North (ed.), Contract Conflicts (1982) 295 et seq. Kegel/Schurig, IPR § 18 I 1 c. See Art. 9 Lei de Introduçâo ao Código Civil of 4 September 1942 in the version of 2010. Art. 120 (2) Swiss Federal Act on Private International Law of 18 December 1987. See with in depth discussion Basedow RabelsZ 75 (2011) 32 et seq.; Basedow, The Law of Open Societies (2013) 164 et seq. Art. 4 (2) Rome Convention.

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of the characteristically performing party applies. However, like under the Rome Convention this principle does not apply always. For a considerable number of contract types other connecting factors are more important and therefore preferred: namely for consumer, employment, insurance, and transport contracts but also for contracts on immovables and contracts at stock exchanges. Even if the seat or another element is the actually relevant connecting factor, the Regulation prescribes the application of another law if there is a manifestly closer connection to this other law (Art. 4 (3) Rome I). With its prime connecting factors the Regulation strengthens the requirement of legal certainty and foreseeability; the applicable law is regularly easy to determine and thus to foresee. However, the exception of the closer connection with another law provides sufficient flexibility to link the case with a law that is evidently closer to the contract. That the connection must be manifestly closer, safeguards that the exception is not lightly applied. 3. Protection of weaker parties 125 Like the Rome Convention also the Rome I Regulation pursues the aim to protect weaker

parties even by conflicts rules (Art. 5 – 7 Rome I). For this purpose the Regulation modifies the conflicts rules on the subjective and the objective determination of the applicable law. This is limited to areas where one party is regularly in a weaker position than the other party. This is usually the case with consumers and insured persons in respect of the necessary information and business routine. It is also the case in respect of employees who depend on their employers and to a certain extent also in respect of passengers who have to rely on the safety of the means of transport. In comparison to the Rome Convention the Rome I Regulation extended the protection of weaker parties. However, the extension is moderate. Rome I introduced for the first time a special protective regime for transport contracts of passengers although this protection is of limited effect.245 The protection of consumers is more effective under Rome I than under the Convention since in principle the Regulation now covers all kinds of consumer contracts (although quite a number of exceptions survived).246 It is a particular improvement that the protection becomes available where the business directs its activities to the consumer’s country.247

126 It is a specifity of European PIL on consumer protection that certain EU Directives extend

the protection rendered by the Regulation slightly further thereby unnecessarily complicating the situation. 4. Recognition of internationally mandatory norms 127 It is not only European but global PIL tradition that the forum is entitled to apply certain

unalienable fundamental norms of the own law irrespective of any applicable foreign law. Central policies of the own state can be maintained and enforced even against a deviating other law. The Rome I Regulation allows the application of such overriding mandatory provisions of the forum and also of the place of performance which are regarded as crucial for safeguarding of this state’s public interests (Art. 9 Rome I). Then, the actually applicable law can be overturned. Also – primary or secondary – EU law, even implemented Directives 245 246 247

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See further the comment on Art. 5 Rome I Regulation. See further the comment on Art. 6 Rome I Regulation. Art. 6 (1) (b) Rome I Regulation.

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can contain such overriding mandatory provisions which displace the otherwise applicable law if the case has a sufficient link to the EU and the involved Member State. An example of an overriding mandatory EU provision is the compensation claim of commercial agents for unjustified dismissal which the – implemented – Commercial Agents Directive provides for.248 A similar function of safeguarding public interests of the forum fulfils the ordre public 128 provision of Art. 21 Rome I Regulation. It allows to disregard foreign rules which are entirely inconsistent with the public order of the forum. 5. Principally one single law governing the contract In principle, under the Rome I Regulation, contracts are governed by one single law which 129 applies to all questions of contract law (Art. 10 and 12 Rome I). It is most desirable for reasons of inner consistency and easier application that the rules of only one legal system are applied. Yet, some exceptions are admitted. First, the parties may split their contract into – reasonable – parts for which different laws are applicable (dépeçage, Art. 3 (1) sent. 3 Rome I). The judge is, however, no longer entitled to split the objectively applicable law. Furthermore, the Regulation provides for some special rules which lead to a kind of statutory 130 dépeçage since provisions of different laws must be applied together. The applicable contract law must be merged, as the case may be, with: (1) eventual overriding mandatory provisions of the forum or at the place of performance (Art. 9 Rome I); (2) in purely domestic cases all mandatory internal law (Art. 3 (3) Rom I); (3) in purely EU-internal cases with all mandatory EU law (Art. 3 (4) Rome I); (4) in respect of the manner of performance and resulting steps the law at the place of performance (Art. 12 (2) Rome I); (5) with respect to lack of consent the law at the habitual residence of the relevant party (Art. 10 (2) Rome I). It is the central aim of these special rules to enforce essential postulates of an intensely involved legal system against the law that otherwise governs the contract. It is the task of the courts to find the right balance between the observance of the actually governing contract law and the respect of such national law that deserves priority. XI. The “radiating effects” of the Rome I Regulation The Rome I Regulation has certain “radiating effects” in two directions, namely an inner-EU 131 effect and an extra-EU effect. The inner-EU effect is due to the following: The Regulation obliges to define and interpret legal institutes such as matrimonial property, maintenance obligations, wills, succession in a uniform way (this is true as well for the Rome II and III Regulations, the Succession Regulation, the Brussels Ibis and IIbis Regulations etc.). In the long run this will have a reflexive impact on the domestic law of the Member States where the meaning of these legal institutes must be aligned with that required for international cases. An example is the institute of culpa of contrahendo which Rome I and II qualify as non-contractual obligation. German domestic law will be aligned to this qualification.

248

See thereto Ingmar GB Ltd. v. Eaton Leonard Technologies Inc., [2000] ECR I-9305 (C-381/98); United Antwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare, ECLI:EU:C:2013:663 (C-184/ 12).

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Rome I and the other international EU law instruments thus contribute considerably to the indirect harmonisation of the private law of the Member States. 132 The extra-EU effect of the Regulation consists of the fact that its conflicts rules considerably

influenced the contract part of new codifications of private international law in other parts of the world, for instance in Argentine, China, Japan, Turkey and elsewhere.249

Chapter I: Scope Article 1: Material scope 1. This Regulation shall apply, in situations involving a conflict of laws, to contractual obligations in civil and commercial matters. It shall not apply, in particular, to revenue, customs or administrative matters. 2. The following shall be excluded from the scope of this Regulation: (a) questions involving the status or legal capacity of natural persons, without prejudice to Article 13; (b) obligations arising out of family relationships and relationships deemed by the law applicable to such relationships to have comparable effects, including maintenance obligations; (c) obligations arising out of matrimonial property regimes, property regimes of relationships deemed by the law applicable to such relationships to have comparable effects to marriage, and wills and succession; (d) obligations arising under bills of exchange, cheques and promissory notes and other negotiable instruments to the extent that the obligations under such other negotiable instruments arise out of their negotiable character; (e) arbitration agreements and agreements on the choice of court; (f) questions governed by the law of companies and other bodies, corporate or unincorporated, such as the creation, by registration or otherwise, legal capacity, internal organisation or winding-up of companies and other bodies, corporate or unincorporated, and the personal liability of officers and members as such for the obligations of the company or body; (g) the question whether an agent is able to bind a principal, or an organ to bind a company or other body corporate or unincorporated, in relation to a third party; (h) the constitution of trusts and the relationship between settlors, trustees and beneficiaries; (i) obligations arising out of dealings prior to the conclusion of a contract; (j) insurance contracts arising out of operations carried out by organisations other than undertakings referred to in Article 2 of Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance1 the object of which is to provide benefits for employed or self-employed persons belonging to an undertaking or group of undertakings, or to a trade or group of trades, in the event of death or survival or of discontinuance or curtailment of activity, or of sickness related to work or accidents at work. 249

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See the PIL statutes of Japan of 21 June 2006, of Turkey of 27 November 2007, of China of 28 October 2010 and the PIL provisions in the new Civil Code of Argentine of 2014; for a comparison with US law see Bermann, in: Ferrari/Leible (eds.), Rome I Regulation (2009) 349 et seq. OJ L 345, 19.12.2002, p. 1. Directive as last amended by Directive 2008/19/EC (OJ L 76, 19.3.2008, p. 44).

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3. This Regulation shall not apply to evidence and procedure, without prejudice to Article 18. 4. In this Regulation, the term ‘Member State’ shall mean Member States to which this Regulation applies. However, in Article 3(4) and Article 7 the term shall mean all the Member States. Bibliography Aguilar Grieder, Desafíos y tendencias en el actual Derecho Internacional Privado europeo de los contratos, CDT (2012), 23–48 Albornoz, Une relecture de la Convention interaméricaine sur la loi applicable aux contrats internationaux á la lumière du règlement Rome I, Clunet (2012), 4–40 Alpa, Le contrat individuel et sa définition, RIDC (1988), 327–350 Alpa/Bessone, La convenzione di Roma sulla legge applicabile in materia di obbligazioni. Aspetti civilistici, Giurisprudenza italiana (1983), 107–125 Ancel, Les contrats de distribution et la nouvelle donne du réglement Rome I, RCDIP (2008), 561–579 Ancel, La prestation caractéristique du contrat, (Paris, 2002) Baldi, Sull’art. 5.1 della Convenzione di Bruxelles, Foro Padano, (1987), 219–224 Balladore Pallieri, L’autonomia dei contraenti nel diritto internazionale privato, Diritto internazionale, (1963), 153–178 Ballarino, Il Regolamento Roma I: forza di legge, effetti, contenuto, CDT, (2009), 5–18 Ballarino, Dalla Convenzione di Roma del 1980 al regolamento Roma I, RDI, (2009), 40–64 Baratta, Sull’adattamento del diritto interno alla Convenzione di Roma del 1980, RDI, (1993), 118–130 Baratta, Il collegamento più stretto nel Diritto internazionale privato dei contratti, (Milano, 1991) Basedow/Wurmnest, Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I), RabelsZ (2007), 225–344 Batiffol, Les conflits de lois en matière de contrats, (Paris, 1938) Behrens, Gesamtschuldnerausgleich und sonstige Regressansprüche im europäischen Kollisionsrecht nach der Rom I-, Rom II- und EG-Unterhaltsverordnung (Hamburg, 2013)

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Article 1 Calvo Caravaca/Carrascosa González (Dir.), Curso de contratación internacional (Madrid, 2007), 2nd ed. Canedo Arrillaga, Notas breves sobre la sentencia del TJUE (Sala Cuarta) de 25 febrero 2010 (Car Trim: asunto C-381/08): los contratos de compraventa y los contratos de prestación de servicios en el Reglamento 44/2001, CDT (2011) 263–269 Carbone, Il ‘contratto senza legge’ e la convenzione di Roma del 1980, (RDIPP), 1983, 279–287 Carbone, L’autonomia privata nel diritto internazionale privato delle obbligazioni, DCSI, (1982), 15–38; Carbone/Luzzatto, Il contratto internazionale, (Torino, 1994) Carbone/Luzzatto, I contratti del commercio internazionale, in: Tratatto di Diritto privato, (Torino, 1984), 113–177 Carrascosa González, La Ley aplicable a los contratos internacionales: el Reglamento Roma I (Madrid, 2009) Carrascosa González, El contrato internacional (fraccionamiento versus unidad) (Madrid, 1992) Carrascosa González, Elección múltiple y elección parcial de la Ley aplicable al contrato internacional, Anales de Derecho de Murcia, (2000), 7–40 Carrascosa González, Contratos internacionales, prestación característica y la teoría de la Stream-OfCommerce, in: Calvo Caravaca/Blanco-Morales Limones, Globalización y Derecho (Madrid, 2003), 87–119 Carrillo Pozo, El contrato internacional, la prestación característica (Bolonia, 1994) Carrillo Pozo, Rigor mortis (La ley aplicable al contrato a falta de elección en los trabajos de reforma del Convenio de Roma de 1980), in: Hacia un derecho conflictual europeo: realizaciones y perspectivas. Verso un diritto internazionale privato europeo: risultati e prospettive (Sevilla, 2008), 11–41 Carrillo Pozo, La ley aplicable al contrato en defecto de elección: un análisis a través de la jurisprudencia, Poder Judicial, (2004), 11–46 Castellanos Ruiz, El reglamento Roma I sobre la ley aplicable a los contratos internacionales y su aplicación por los tribunales españoles (Granada, 2009) Castellanos Ruíz, El Convenio de Roma de 1980 ante los tribunales españoles, Balance de 15 años de vigencia, in: La Unión Europea ante el Derecho de la Globalización (Madrid, 2008), 121–188

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Rome I Regulation Castellanos Ruiz, El valor de los Incoterms para precisar el juez del lugar de entrega, CDT (2012), 93– 122 Castellanos Ruiz, Compraventa internacional, in: Calvo Caravaca/Carrascosa González (Dirs), Curso de contratación internacional, 2ª ed. (Madrid, 2006), 191–306 Castellanos Ruiz, Competencia judicial internacional sobre venta internacional: art. 5.1 del Reglamento 44/ 2001, in: AA.VV., Estudios sobre contratación internacional (Madrid, 2006) 105–150 Cavers, The Common Market’s Draft Conflicts Convention on Obligations, Some Preventive Law Aspects, Southern California Law Review, (1975), 603–623 Cebrián Salvat, Competencia judicial internacional en defecto de pacto en los contratos de distribución europeos: el contrato de distribución como contrato de prestación de servicios en el reglamento Roma I, CDT (2013) 125–138 Cebrián Salvat, Agencia comercial, leyes de policía y derecho internacional privado europeo, CDT, (2014), 357–366 Coco, I divieti di trasferimento ai sensi degli articoli 6 e 7 del Tratatto sul commercio delle armi, RDI, (2013), n.4, 1221–1243 Consiglio nazionale del notariato, La Convenzione di Roma sulla legge applicabile alle obbligazioni contrattuali (Milano, 1983) Collins, Contractual Obligations. The EEC Preliminary Draft Convention on Private International Law, ICLQ (1976), 35–57 Corneloup/Joubert, Le règlement communautaire Rome I et le choix de loi dans les contrats internationaux: actes du Colloque des 9 et 10 septembre 2010, Dijon (Paris, 2011) Crespi Reghizzi, “Contratto” e “illecito”: la qualificazione delle obbligazioni nel diritto internazionale privato dell’Unione europea, RDIPP, (2012), 317–340 Curti Gialdino, La volonté des parties en droit international privé, RCADI, (1972), 743–914 De Götzen, La licenza d’uso di diritti di proprietà intellettuale nel regolamento Bruxelles I: il caso Falco, RDIPP (2010) 383–406 Delaume, What’s an International Contract? An American and Gallic Dilemma, ICLQ, (1979), 258–279

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Chapter I: Scope Delaume, Transnational Contracts. Applicable Law and Settlement of Disputes, (New York, 1986) Delaume, The European Convention on the Law Applicable to Contractual Obligations, Why a Convention?, Virginia Journal of International Law, (1981), 105–121 De Nova, Quando un contratto è internazionale?, RDIPP, (1978), 665–689 De Nova, Wann ist ein Vertrag international?, in: Konflikt und Ordnung. Festschrift für Murad Ferid zum 70. Geburtstag (München, 1978), 307–323 De Nova, Obbligazioni (Diritto internazionale privato), in: Enciclopedia del diritto (Milano, 1979), 456–500 Diamond, Conflict of Laws in the EEC, Current Legal Problems, (1979), 155–177 Di Blase, La giurisdizione competente in materia di compravendita e di prestazione di servizi nel Regolamento Bruxelles I, Europa e Diritto Privato (2011) 459–479 Draetta, Il diritto dei contratti internazionali (Padova, 1984) Droz, Delendum est forum contractus?, (vingt ans apres les arréts De Bloos et TessiIi interprétant l’article 5, de la Convention de Bruxelles du 27 septembre 1968), Recueil Dalloz, (1997) 135 Dubiel, Der Erfüllungsortbegriff des Vertragsgerichtsstands im deutschen, europäischen und internationalen Zivilprozessrecht, (Frankfurt am Main, 2010) Fallon, Un ‘Restatement’ européen du droit des conflits de lois en matière de contrats, la Convention de Rome du 19 juin 1980 sur la loi applicable aux obligations contractuelles, Assuntos Europeus, (1984), 155–181 Ferrari, Internationales Vertragsrecht: Rom I-VO, CISG, CMR, FactÜ. Kommentar, 2nd ed. (München, 2012) Ferrari, Quelques remarques sur le droit applicable aux obligations contractuelles en l’absence de choix des parties (art. 4 du règlement Rome I), RCDIP (2009), 460–482 Ferrari (ed.), Rome I Regulation: Pocket Commentary (Munich, 2014) Ferrari/Leible (Hrsg.), Ein neues Internationales Vertragsrecht für Europa (Jena, 2007) Ferrari/Leible (eds.), Rome I Regulation: the law

applicable to contractual obligations in Europe (München, 2009) Fischer, Verkehrsschutz im internationalen Vertragsrecht (Köln, Berlin, Bonn, München, 1990) Firsching, Übereinkommen über das auf vertragliche Schuldverhältnisse anzuwendende Recht, IPRax, (1981), 37–43 Flessner, Die internationale Forderungsabtretung nach der Rom I-Verordnung, IPRax, (2009), 35–43 Fontaine, Drafting international contracts: An analysis of contract clauses (New York, 2006) Francq, Le Règlement ‘Rome I’ sur la loi applicable aux obligations contractuelles, Clunet (2009), 40–69 Franzina (ed.), La legge applicabile ai contratti nella proposta di regolamento Roma I – Atti della giornata di studi – Rovigo, 31 marzo 2006 (Padova, 2006) Franzina, Struttura e funzionamento del foro europeo della materia contrattuale alla luce delle sentenze Car Trim e Wood Floor della Corte di Giustizia, RDIPP (2010) 657–684 Franzina, Obbligazioni di non fare e obbligazioni eseguibili in piú luoghi nella convenzione di Bruxelles del 1968 e nel Regolamento 44/2001, RDIPP (2002) 391–406 Franzina, La giurisdizione in materia contrattuale (l’art. 5 n.1 del regolamento n.44/2001/CE nella prospettiva della armonia delle decisioni (Padova, 2006) Franzina/De Franceschi, Jurisdiction over sales contracts under the Brussels I regulation: the relevance of standard trade terms, Internationales Handelsrecht. Zeitschrift für das Recht des internationalen Warenkaufs und Warenvertriebs, (2012) 133–176 Frigessi di Rattalma, Le prime esperienze giurisprudenziali sulla convenzione di Roma del 19 giugno 1980, RDIPP, (1992), 819–854 Frignani, Il contratto internazionale, in: Trattato di diritto commerciale e diritto pubblico dell’economia, (Milán, 1990) Garcimartín Alférez, El Reglamento ‘Roma I’ sobre ley aplicable a las obligaciones contractuales: Cuánto ha cambiado el Convenio de Roma de 1980?, Diario La Ley (2008), online version Gaudemet-Tallon, Compétence et exécution des jugements en Europe. Règlement n.44/2001, Conventions de Bruxelles et de Lugano, LGDJ, 4th ed. (Paris, 2010) 127–163

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Article 1 Gaudemet-Tallon, Le nouveau droit international privé européen des contrats (Commentaire de la Convention CEE nº 80/934 sur la loi applicable aux obligations contractuelles, ouverte à la signature à Rome le 19 juin 1980), RTDE (1981), 215–285 Giardina, La Convenzione comunitaria sulla legge applicabile alle obbligazioni contrattuali e l’ordinamento italiano, RDI, (1981), 795–820 Guardans i Cambó, Contrato internacional y derecho imperativo extranjero (Pamplona, 1993) Günther, Die Anwendbarkeit ausländischer Eingriffsnormen im Lichte der Rom I- und Rom II-Verordnungen (Saarbrücken, 2011) Haftel, Entre ‘Rome II’ et ‘Bruxelles I’: l’interprétation communautaire uniforme du règlement ‘Rome I’, Clunet (2010), 761–788 Hearn, Contratti commerciali internazionali (Milano, 1987–1991) Hernández Rodríguez, El Derecho aplicable al contrato en ausencia de elección por las partes: el asunto Intercontainer Interfrigo y su repercusión en el Reglamento Roma I, CDT (2011), 302–315 Hernández Rodríguez, El contrato de transporte aéreo de pasajeros: algunas consideraciones sobre competencia judicial internacional y Derecho aplicable, CDT (2011) 179–194 Heuzé, De la compétence du principe d’origine en matière contractuelle ou l’anti droit européen, in: Le droit international privé: esprit et méthodes. Mélanges en l’honneur de P. Lagarde (Paris, 2005), 393– 416 Heuzé, De quelques infirmités congénitales du droit uniforme: l’exemple de l’article 5.1 de la convention de Bruxelles du 27 septembre 1968, RCDIP (2000) 595 Hübner, Das Kollisionsrecht nach Rom I – ein Sonderweg für Versicherungsverträge, EuZW, (2006), 449–450 Jacquet, Le contrat international, (Paris, 1992) Jacquet, Principe d’autonomie et contrats internationaux (Paris, 1983) Jacquet, Retour sur la règle de conflit de lois en matière de contrats, Clunet (1991), 679–689 Jaffey, The English Proper Law Doctrine and the EEC Convention, ICLQ, (1984), 531–560 Jayme/Kohler, L’interdiction des règles de conflit contenues dans le droit dérivé de la communauté

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Rome I Regulation européenne et des conventions de Bruxelles et de Rome, RCDIP (1995), 1–40 Jayme/Forlati Picchio, Giurisdizione e legge applicabile ai contratti nella CEE (Padova, 1990) Juenger, The European Convention on the Law Applicable to Contractual Obligations, Some Critical Observations, Virginia Journal of International Law, (1981), 123–141 Junker, Die einheitliche europäische Auslegung nach dem EG-Schuldvertragsübereinkommen, RabelsZ, (1991), 674–696 Kassis, Le nouveau droit européen des contrats internationaux (Paris, 1993) Kaye, The new Private International Law of Contract of the European Community (Dartmouth, 1993) Kenfack, Le Règlement (CE) nº593/2008 du 17 juin 2008 sur la loi applicable aux obligations contractuelles (Rome I), navire stable aux instruments efficaces de navigation?, Clunet, (2009), 2–39 Lagarde, Le nouveau droit international privé des contrats aprés l’entrée en vigueur de la Convention de Rome du 19 juin 1980, RCDIP (1991), 287–340 Lagarde, Remarques sur la proposition de règlement sur la loi applicable aux obligations contractuelles (Rome I), RCDIP, (2006), 331–349 Lagarde, The European Convention on the Law Applicable to Contractual Obligations, An Apologia, Virginia Journal of International Law, (1981), 91–104 Lagarde, The EEC Convention on the law applicable to contractual obligations, CMLR, (1987), 159–178 Lagarde/Tenenbaum, De la convention de Rome au règlement Rome I, RCDIP (2008), 727–780 Lalive, Sur une notion de contrat international, in: Multum Non Multa. Festschrift für Kurt Lipstein aus Anlass seines 70. Geburtstages, (Heidelberg, Karlsruhe, 1980), 135–155 Lando, International situations and ‘situations involving a choice between the laws of different legal systems’, in: Lipstein (ed.), Harmonisation of Private International Law by the EEC (London, 1978), 15–24 Lando, The Conflicts of Laws of Contracts. General Principles, RCADI, (1984), 225–448 Lando, New American Choice of Law Principles and the European Conflict of Laws of Contracts, AJCL (1982), 19–36 Leclerc, Le contrat cadre en droit international privé, Travaux CFDIPrivé, (2004), 3–25

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Chapter I: Scope Leible, La importancia de la autonomía conflictual para el futuro del derecho de los contratos internacionales, CDT (2011), 214–233 Leible, La propuesta para un reglamento ‘Roma I’, Anuario español de Derecho internacional privado, (2006), 541–568 Leible/Lehmann, Die Verordnung über das auf vertragliche Schuldverhältnisse anzuwendende Recht (“Rom I”), RIW, (2008), 528–544 Leible/Lehmann, Die neue EG-Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht (‘Rom II’), RIW, (2007), 721–735 Lima Pinheiro, Estudos de Direito Internacional Privado. Vol. II. Contratos, Obrigaçôes Extracontratuais, Insolvência, Operaçôes Bancárias, Operaçôes sobre Instrumentos Financeiros e Reconhecimento de Decisôes Estrangeiras, (2009) Lopes Pegna, Il rilievo del collegamento più stretto dalla convenzione di Roma alla proposta di regolamento Roma I, Rivista di Diritto internazionale (2006), 756–782 Lorente Martínez, Protección de los derechos sobre bienes inmateriales ofertados en Internet’, CDT (2014), 379–386 Lüttringhaus, Das internationale Privatrecht der culpa in contrahendo nach den EG-Verordnungen “Rom I” und “Rom II”, RIW, (2008), 193–200 Luzzatto, L’entrata in vigore della convenzione di Roma e il nuovo diritto internazionale privato di contratti, (DCI), 1991, 259–262 Macaluso, Distribuzione di contenuti digitali in rete, DCI (2010) 821–842 Magnus/Mankowski, The Green Paper on a Future Rome I Regulation – On the Road to a Renewed European Private International Law of Contracts, Zeitschrift für Vergleichende Rechtswissenschaft, (2004), 131–189 Malatesta, Considerazione sull’ambito di applicazione della Convenzione di Roma del 1980, il caso dei titoli di credito, RDIPP (1992), 887–905 Malatesta, La legge applicabile ai contratti di cooperazione tra imprese secondo la Convenzione di Roma, in: Sacerdoti/Frigo, La convenzione di Roma sul diritto applicabile ai contratti internazionali, 2nd ed. (Milano, 1994), 169–180 Mandery, Party Autonomy in Contractual and NonContractual Obligations. A European and AngloCommon Law perspective on the freedom of choice

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Article 1 applicabile alle obbligazioni contrattuali, (Milano, 1983) 189–210 Mosconi, Le norme relative alla capacitá dei contraenti della Convenzione CEE sulla legge applicabile alle obbligazioni contrattuali, DCSI (1983), 1–15 Möll, Kollidierende Rechtswahlklauseln in Allgemeinen Geschäftsbedingungen im internationalen Vertragsrecht (Frankfurt am Main, Berlin, Bern, Wien, Lang, 2012) Morel-Maroger, Note to ‘Cour Cass. France 8 March 2011’, Clunet, (2011), 579–589 Morse, The EEC Convention on the Law applicable to Contractual Obligations, European Yearbook of International Law, (1983), 107–171 Muir-Watt, Peut-on sauver le for européen du contrat?, Revue générale des procédures (1998) 371 Nielsen/Lando, The Rome I Regulation, CMLR, (2008), 1687–1725 North, Reform (but not revolution), RCADI, (1990), 152–205 North, The EEC Convention on the Law applicable to Contractual Obligations, Journal of Business Law, (1980), 382–388 Orlando, Il problema internazionalprivatistico nell’ordinamento comunitario europeo. Le obbligazioni contrattuali (Milano, 1981) Ortiz Vidal, Ley aplicable a los contratos internacionales y eficiencia conflictual, (Granada, 2014) Piroddi, Incoterms e luogo di consegna dei beni nel regolamento Bruxelles I, RDIPP (2011) 939–970 Plender/Wilderspin, The European private international law of obligations, 3rd ed., (London, 2009) Pocar, Le droit des obligations dans le nouveau droit international privé italien, RCDIP (1996), 41–65 Poillot-Peruzzetto, Le règlement Rome I du 17 juin 2007 sur la loi applicable aux obligations contractuelles, Répertoire Dalloz de Droit communautaire, Cahiers de l’actualité, (2008), 3–11 Quiñones Escámez, Ley aplicable a los contratos internacionales en la Propuesta de Reglamento Roma I de 15.12.2005, Indret (www.indret.com) Rauscher (Hrsg.), Rom I-VO, Rom II-VO (München, 2011) Re, La corte di giustizia e l’art. 4 della convenzione di Roma: il caso ICF, RDIPP (2010), 407–492 Reiher, Der Vertragsbegriff im europäischen Internationalen Privatrecht: ein Beitrag zur Abgrenzung

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Rome I Regulation der Verordnungen Rom I und Rom II (Baden-Baden, 2010) Renner/Hesselbarth, Unternehmensverträge und die Rom I-Verordnung, IPRax, (2014), 117–124 Reithmann/Martiny, (Hrsg.), Internationales Vertragsrecht – Das internationale Privatrecht der Schuldverträge, 7th ed. (Köln, 2010) Remiro Brotóns, Reglas de conflicto y normas materiales de Derecho internacional privado, Temis Symbolae García Arias, (1973/1974), 605–646 Rigaux, Examen de quelques questions laissées ouvertes par la convention de Rome sur la loi applicable aux obligations contractuelles, Cahiers de droit européen, (1988), 306–321 Rodríguez Benot, La exclusión de las obligaciones derivadas del Derecho de familia y sucesiones del ámbito material de aplicación del Reglamento Roma I, CDT, (2009), 112–130 Rodríguez Rodrigo, Contratos de agencia: aplicación del artículo 5.1 del Reglamento 44/2001 a la obligación contractual de no competencia, in: Nueva Lex Mercatoria y contratos internacionales (Bogotá, 2006), 497–522 Ross Williams, The EEC Convention on the Law Applicable to Contractual Obligations, ICLQ, (1986), 1–31 Sacerdoti/Frigo, La convenzione di Roma sul diritto applicabile ai contratti internazionali, 2nd ed. (Milano, 1994) Salerno, L’incidenza del diritto applicabile nell’accertamento del forum destinatae solutionis, RDIPP (1995), 76–121 Salerno, La nozione autonoma del titolo di giurisdizione in materia di vendita, RDIPP (2008) 381–394 Salerno/Franzina, Commentario al Regolamento CE n.593/2008 del Parlamento europeo e del Consiglio del 17 giugno 2008 sulla legge applicabile alle obbligazioni contrattuali (Roma I), in: Le nuove Leggi civili commentate (Padova, 2009) Schnitzer, Les contrats internationaux en droit international privé suisse, RCADI (1968), 541–636 Sinagra, Natura e contenuto della internazionalità dei contratti, in: Etudes en l’honneur de Roberto Ago, (Milano, 1987), 349–382 Sujecki, Bestimmung des zuständigen Gerichts gem. Art. 5 Nr. 1 lit. b EuGVO bei mehreren Erfüllungsorten in einem Mitgliedstaat, EWS (2007), 398–402 Tatarano, La capacità, in: Consiglio nazionale del

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Chapter I: Scope notariato, La Convenzione di Roma sulla legge applicabile alle obbligazioni contrattuali (Milano, 1983) 211–218 Ubertazzi, Il regolamento Roma I sulla legge applicabile alle obbligazioni contrattuali (Milano, 2008) Urlaub, Einseitig verpflichtende Rechtsgeschäfte im internationalen Privatrecht: eine Untersuchung zum Vertragsbegriff der Rom I-Verordnung (Hamburg, 2010) Villani, L’azione comunitaria in materia di diritto internazionale privato, Rivista di diritto europeo, (1981), 373–393 Villani, Aspetti problematici della prestazione caratteristica, RDIPP, (1993), 513–540 Virgós Soriano, Obligaciones contractuales, in: González Campos, Derecho internacional privado, parte especial, 6ª ed. (Madrid, 1995), 143–208 Virgós Soriano, El Convenio de Roma de 19 junio 1980 sobre ley aplicable a las obligaciones contractuales, in: Tratado de Derecho Comunitario Europeo (Madrid, 1986), 753–825 Virgós Soriano, La interpretación del Convenio de Roma de 1980 sobre Ley aplicable a las obligaciones contractuales y el TJCE, Noticias CEE (1990), 83–94 Virgós Soriano, La ley aplicable a los contratos internacionales: la regla de los vínculos más estrechos y la presunción basada en la prestación característica del contrato, in: Estudios Menéndez (Madrid, 1996), 5289–5309 Virgós Soriano/Garcimartín Alférez, Estado de origen v. Estado de destino, InDret Revista para el análisis del Derecho, www.indret.com, (2004), 1–20 Vischer, The Antagonism between Legal Security and the Search of Justice in the Field of Contracts, RCADI, (1974), 1–70

I. II. III.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contractual obligations in civil and commercial matters . . . . . . . . . . . . . . . . . . . . . . . . . . . Obligations of contractual nature . . . . . . . . . . . 1. Obligations excluded from the Rome I Regulation because of their noncontractual character . . . . . . . . . . . . . . . . . . . . . 2. Contractual obligations excluded from Rome I Regulation because subject to

Vischer, The concept of the Characteristic Performance Reviewed, in: Liber amicorum G.A.L. Droz (The Hague, 1996), 499–520 Vitta, La convenzione CEE sulle obbligazioni contrattuali e l’ordinamento italiano, RDIPP, (1981), 837–852 von der Seipen, Akzessorische Anknüpfung und engste Verbindung im Kollisionsrecht der komplexen Vertragsverhältnisse (Heidelberg, 1989) Wagner, Der Grundsatz der Rechtswahl und das mangels Rechtswahl anwendbare Recht (Rom I-Verordnung). Ein Bericht über die Entstehungsgeschichte und den Inhalt der Artikel 3 und 4 Rom I-Verordnung, IPRax, (2008), 377–386 Weintraub, How to Choose Law for Contracts and How Not to, The EEC Convention, Texas International Law Journal, (1982), 155–167 Wengler, Immunité legislative des contrats internationaux, RCDIP (1971), 637–601 Wenner, Internationales Vertragsrecht, 3rd ed. (Köln, 2013) Würdinger, Das Prinzip der Einheit der Schuldrechtsverordnungen im Europäischen Internationalen Privat- und Verfahrensrecht, Eine methodologische Untersuchung über die praktische Konkordanz zwischen Brüssel I-VO, Rom I-VO und Rom II-VO, RabelsZ, (2011), 102–126 Zimmer, Ausländisches Wirtschaftsrecht vor deutschen Zivilgerichten. Zur Unterscheidung zwischen einer normativen Berücksichtigung fremder zwingender Normen und einer blossen Beachtung ihrer tatsächlichen Folgen, IPRax, (1993), 65–69 Zonca, Convenzione di Roma e diritto delle società, in: Sacerdoti/Frigo, La convenzione di Roma sul diritto applicabile ai contratti internazionali, 2nd ed. (Milano, 1994), 201–218.

1 2 5 IV. 7 V. VI.

specific legal rules in the field of economic rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3. Contractual obligations excluded from Rome I Regulation because created in the context of Family Law . . . . . . . . . . . . . . 19 Contractual obligations in situations involving a conflict of laws . . . . . . . . . . . . . . . . 24 Member States to the Rome I Regulation 28 Typical and atypical contracts under Rome I Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . 32

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I. Introduction 1 The Rome I Regulation is meant to determine the law applicable to “contractual obligations”

but only “in international cases” or “in situations involving a conflict of laws” (Art. 1.1 Rome I Regulation). Therefore, from the point of view of its material scope, the Rome I Regulation applies only if the following three conditions concur.2 Firstly: There must be “contractual obligations”. Secondly: There must be contractual obligations “in civil and commercial matters”. Thirdly: those contractual obligations in civil and commercial matters must arise in the context of “situations involving a conflict of laws”. Even though the Rome I Regulation designates the law applicable to “contractual obligations”, its provisions specify the law applicable to a “contract”, i.e. “contract by contract”.3 As a general rule, in the Rome I Regulation scenario, every contract, and not every contractual obligation, has its own applicable law.4 II. Contractual obligations in civil and commercial matters

2 The meaning of the legal category “contractual obligations” should be established autono-

mously, i.e. in the context of the Rome I Regulation, as it has been correctly pointed out.5 This requires a remarkable systematic legal effort by legal experts since the Rome I Regulation is silent on this point.6 3 The Rome I Regulation determines the applicable law exclusively to the obligations arising

from “contracts”, except for those expressly excluded by Art. 1.2 Rome I Regulation.7 Hence, the Rome I Regulation applies to obligations arising from civil, commercial and labour contracts, as well as to oral and written contracts and to contracts expressly regulated by substantive law or lacking a specific legal regulation.8

2

3

4 5

6

7

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Ballarino, Il Regolamento Roma I: forza di legge, effetti, contenuto, CDT, (2009), 5–18; Ballarino, Dalla Convenzione di Roma del 1980 al regolamento Roma I, RDI, (2009), 40–64. Alpa, Le contrat individuel et sa définition, RIDC (1988), 327–350; Alpa/Bessone, La convenzione di Roma sulla legge applicabile in materia di obbligazioni. Aspetti civilistici, Giurisprudenza italiana (1983), 107–125; Calvo Caravaca/Carrascosa González, Obligaciones contractuales, in: Calvo Caravaca/Carrascosa González, Derecho internacional privado II, 15th ed., (Granada, 2014), 718–921. Leclerc, Le contrat cadre en droit international privé, Travaux CFDIPrivé, (2004), 3–25. Malatesta, La legge applicabile ai contratti di cooperazione tra imprese secondo la Convenzione di Roma, in: Sacerdoti/Frigo, La convenzione di Roma sul diritto applicabile ai contratti internazionali, 2nd ed., (Milano, 1994), 169–180; Junker, Die einheitliche europäische Auslegung nach dem EG-Schuldvertragsübereinkommen, RabelsZ, (1991), 674–696. Salerno/Franzina, Commentario al Regolamento CE n.593/2008 del Parlamento europeo e del Consiglio del 17 giugno 2008 sulla legge applicabile alle obbligazioni contrattuali (Roma I), in: Le nuove Leggi civili commentate, (Padova, 2009). Under the Rome Convention 1980, see: Rigaux, Examen de quelques questions laissées ouvertes par la convention de Rome sur la loi applicable aux obligations contractuelles, Cahiers de droit européen, (1988), 306–321; Ross Williams, The EEC Convention on the Law Applicable to Contractual Obligations, ICLQ, (1986), 1–31. Franzina, Obbligazioni di non fare e obbligazioni eseguibili in piú luoghi nella convenzione di Bruxelles del 1968 e nel Regolamento 44/2001, RDIPP (2002) 391–406. Official Report Giuliano/Lagarde, OJ 11 December 1992 C 327, 10.

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The Rome I Regulation only applies to contracts subject to private law, i.e. contracts cele- 4 brated between individuals and private entities.9 It also covers contracts celebrated by public bodies that act without using their powers as Public Authorities (= exorbitant legal powers/ public powers).10 Contracts in which one party is a public body acting jure imperium, i.e. a public body operating with its sovereign powers, are excluded from the Rome I Regulation.11 For this reason, Art. 1.1 in fine Rome I Reg indicates that the Regulation “shall not apply, in particular, to revenue, customs or administrative matters”.12 This is only an example of matters of Public Law excluded from the Rome I Regulation.13 If the State or a Public Body enters into a contract without exercising its powers as Public Authority, that will be a “private contract” or a contract subject to Private Law.14 The Law governing that contract will be specified by the Rome I Regulation.15 The concept of “civil or commercial matters” (= matters of Private Law) should be kept the same as in Regulation 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.16 Recital (7) of the Rome I Regulation must be kept in mind: “(7) The substantive scope and the provisions of this Regulation should be consistent with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) and Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II)”.17 The Rome I Regulation applies irrespective of the nature of the court or tribunal seized.18

9

10

11 12

13 14

15 16

17

18

Cebrián Salvat, Agencia comercial, leyes de policía y derecho internacional privado europeo, CDT, (2014), 357–366; Coco, I divieti di trasferimento ai sensi degli articoli 6 e 7 del Tratatto sul commercio delle armi, RDI, (2013), n.4, 1221–1243. Garcimartín Alférez, El Reglamento ‘Roma I’ sobre ley aplicable a las obligaciones contractuales: ¿Cuánto ha cambiado el Convenio de Roma de 1980?, Diario La Ley (2008), online version. Jaffey, The English Proper Law Doctrine and the EEC Convention, ICLQ, (1984), 531–560. Maultzsch, Choice of Law and ius cogens in Conflict of Laws for Contractual Obligations – Rechtswahl und ius cogens im Internationalen Schuldvertragsrecht, RabelsZ, (2011), 60–101. Guardans i Cambó, Contrato internacional y derecho imperativo extranjero, (Pamplona, 1993), 111. Junker, Die einheitliche europäische Auslegung nach dem EG-Schuldvertragsübereinkommen, RabelsZ, (1991), 674–696. Lagarde/Tenenbaum, De la convention de Rome au règlement Rome I, RCDIP (2008), 727–780, 733. Würdinger, Das Prinzip der Einheit der Schuldrechtsverordnungen im Europäischen Internationalen Privat- und Verfahrensrecht, Eine methodologische Untersuchung über die praktische Konkordanz zwischen Brüssel I-VO, Rom I-VO und Rom II-VO, RabelsZ, (2011), 102–126. Haftel, Entre ‘Rome II’ et ‘Bruxelles I’: l’interprétation communautaire uniforme du règlement ‘Rome I’, Clunet (2010), 761–788; Virgós Soriano, La interpretación del Convenio de Roma de 1980 sobre Ley aplicable a las obligaciones contractuales y el TJCE, Noticias CEE (1990), 83–94. Lüttringhaus, Art. 1, in: Ferrari (ed.), Rome I Regulation: Pocket Commentary, (Munich, 2014), 39.

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III. Obligations of contractual nature 5 A “contractual obligation” may be defined as that obligation which arises from a commit-

ment freely assumed by one party towards another party, i.e. a free agreement between two individuals.19 In fact, the ECJ declared, under the Brussels I Regulation, that contractual obligations are those “freely assumed by one party towards another” (ECJ March 22, 1983, Peters; June 17, 1992, Handte, C-26/91, n. 15; September 17, 2002, Tacconi, n. 23, 24, 27; February 5, 2004, Frahuil, n. 24, 27 October 1998, Réunion, n. 17, 20; January 2005 Engler, n. 51; March 14, 2013, C-19/11, Česká spořitelna, as v. Gerald Feichter, n. 47).20 Again, the concept of “contractual obligation” should be the same as in Regulation 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, as Recital (7) of the Rome I Regulation points out.21 Hence, an autonomous and inter-European definition of the concepts used by this Regulation becomes necessary in order to achieve a uniform set of concepts and definitions valid for all the legal instruments of European private international law.22 This would enhance legal certainty and legal predictability in the EU.23 6 Consistent with the foregoing statements, there is a “contractual” obligation when one may

identify an obligation freely assumed by one party towards another, even if that other party is unknown or is not involved in an agreement or covenant with another individual. A contractual obligation exists, for the purposes of Art. 1 Rome I Reg, even when there is no contract at all between the parties. Many obligations may be considered as “contractual” and will be covered by the Rome I Regulation, which will determine the law applicable to those obligations.24 Let us provide some general examples: (a) Obligations arising from valid contracts as well as null and non-existent contracts; (b) Obligations arising from one party’s 19

20

21

22

23

24

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Salerno, L’incidenza del diritto applicabile nell’accertamento del forum destinatae solutionis, RDIPP (1995), 76–121; Salerno, La nozione autonoma del titolo di giurisdizione in materia di vendita, RDIPP (2008) 381–394; Salerno/Franzina, Commentario al Regolamento CE n.593/2008 del Parlamento europeo e del Consiglio del 17 giugno 2008 sulla legge applicabile alle obbligazioni contrattuali (Roma I), in: Le nuove Leggi civili commentate, (Padova, 2009). Baldi, Sull’art. 5.1 della Convenzione di Bruxelles, Foro Padano, 1987, 219–224; Berlioz, La notion de fourniture de services au sens de l’article 5–1 b) du Règlement Bruxelles I, Clunet (2008) 675–717. Lorente Martínez, Protección de los derechos sobre bienes inmateriales ofertados en Internet’, CDT (2014), 379–386; Lüttringhaus, Das internationale Privatrecht der culpa in contrahendo nach den EG-Verordnungen “Rom I” und “Rom II”, RIW, (2008), 193–200. Droz, Delendum est forum contractus?, (vingt ans après les arréts De Bloos et TessiIi interprétant l’article 5, de la Convention de Bruxelles du 27 septembre 1968), Recueil Dalloz, (1997) 135; Di Blase, La giurisdizione competente in materia di compravendita e di prestazione di servizi nel Regolamento Bruxelles I, Europa e Diritto Privato (2011, 2) 459–479. Franzina, Struttura e funzionamento del foro europeo della materia contrattuale alla luce delle sentenze Car Trim e Wood Floor della Corte di Giustizia, RDIPP (2010) 657–684; Franzina, La giurisdizione in materia contrattuale (l’art. 5 n.1 del regolamento n.44/2001/CE nella prospettiva della armonia delle decisioni, (Padova, 2006); Muir-Watt, Peut-on sauver le for européen du contrat?, Revue générale des procédures (1998) 371; Sujecki, Bestimmung des zuständigen Gerichts gem. Art. 5 Nr. 1 lit. b EuGVO bei mehreren Erfüllungsorten in einem Mitgliedstaat, EWS (2007), 398–402. Mandery, Party Autonomy in Contractual and Non-Contractual Obligations. A European and AngloCommon Law perspective on the freedom of choice of law in the Rome I Regulation on the law applicable

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will, that is, obligations arising from unilateral acts including offer to the public (an einen Vertragsvorschlag unbestimmten Personenkreis oder Publikumsofferte), as well as promise of payment and recognition of debt, obligations arising from donations, obligations contained in bills of lading, the so-called Prize Notifications25 among others.26 In the ECJ’s opinion, contractual matters exist even if there is no “contract”, “deal”, “commitment” or “agreement” between two parties. A contractual obligation exists, for the purposes of Art. 1 Rome I Reg, if a person freely assumes his responsibility towards another; (c) Obligations concerning the private aspects of collective bargain agreements; (d) Obligations arising from pre-contractual agreements or other contractual documents drafted in order to enter into futures contracts; (e) Obligations arising from negotiable instruments.27, 28 The ECJ considers that those obligations are of “contractual nature” because they contain obligations that have been freely assumed by a person towards another although no contract has been concluded or the other party has not accepted the obligation of the former; (f) Obligatio Naturalis. Indeed, these obligations arise from a person’s will. Let us provide an example again. When economic assistance is provided by a seductive person in favour of a seduced person, a “natural obligation” is created by the free will of a person (the seductive person) to help another (the seduced person), as is the case with some legal systems, such as the Spanish one. Hence, such obligations are to be considered “contractual” and the law applicable to those obligations should be determined in accordance with Rome I Regulation.29 1. Obligations excluded from the Rome I Regulation because of their non-contractual character The Rome I Regulation does not apply to extra-contractual obligations.30 Thus, some non- 7 contractual obligations are excluded from the Rome I Regulation, among others, the following ones31: a) Obligations arising out of damage. Obligations arising out of tort are subject to Regulation Rome II (Law applicable to extra-contractual obligations). b) Third party claims. For instance, the legal relationship between manufacturer and the individual who purchased merchandises from an intermediary is not “contractual”. Nor are the disputes between a consumer association and a professional or a manufacturer,

25

26

27

28 29

30

31

to contractual obligations and the Rome II Regulation on the law applicable to non-contractual obligations, (Frankfurt am Main, 2014). Renate Ilsinger v. Martin Dreschers, acting as administrator in the insolvency of Schlank & Schick GmbH (Case C-180/06), [2009] ECR I-3961. Bianca, La responsabilità, (Milano, 1994), 129–131; Barel/Armellini, Diritto internazionale privato: tutto il programma d’esame con domande e risposte commentate, 7th ed., (Milano, 2012), 214–215. Magnus/Mankowski, The Green Paper on a Future Rome I Regulation – On the Road to a Renewed European Private International Law of Contracts, Zeitschrift für Vergleichende Rechtswissenschaft, (2004), 131–189. Česká spořitelna, as Gerald vs Feichter (Case C-19/11), ECLI:EU:C:2013:165 para. 47. Calvo Caravaca/Carrascosa González, Obligaciones contractuales, in: Calvo Caravaca/Carrascosa González, Derecho internacional privado II, 15th ed., (Granada, 2014), 718–921. Lorente Martínez, Protección de los derechos sobre bienes inmateriales ofertados en Internet’, CDT (2014), 379–386. Crespi Reghizzi, “Contratto” e “illecito”: la qualificazione delle obbligazioni nel diritto internazionale privato dell’Unione europea, RDIPP, (2012), 317–340.

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since the association for the protection of consumers and the manufacturer are not bound by a contractual relationship (ECJ October 1, 2002, Henkel). Direct claims against third parties, such as the direct action against the insurer of the liable person (action directe), are excluded from Art. 7.1 Brussels I Regulation Recast and must be considered as “extra-contractual” (see: Art. 18 Rome II Regulation). c) Pre-contractual liability. In these cases, there are no “obligations freely assumed by one party towards another” and therefore, the claims based on culpa in contrahendo are excluded from the term “contractual” (ECJ 17 September 2002, Tacconi, as. C-334/00). This view has been reaffirmed by the Rome II Regulation (law applicable to extra-contractual obligations), which includes culpa contrahendo in its material scope (Art. 1.2. in fine Rome II Regulation.) and by the Rome I Regulation itself (law applicable to contractual obligations), whose Art. 1.2.i) excludes liability for culpa in contrahendo from its material scope. d) Forced Contract/Obligation to contract. In the case of forced contracts (= concluded in application of compulsory rules), there is no actual obligation “freely assumed” by the parties and thus, obligations that may result from these legal relationships are not “contractual”. Nevertheless, the issue of “obligation to contract” is rather controversial. There are some legal experts who advocate in favour of the application of the Rome I Regulation while others oppose this view.32 2. Contractual obligations excluded from Rome I Regulation because subject to specific legal rules in the field of economic rights 8 The Rome I Regulation does not intend to interfere in the existing legal Regulation of some

matters in the field of economic rights. Therefore, Art. 1.2 Rome I Reg excludes from the material scope of the Regulation different issues which are governed by other legal instruments. The fact that those issues may affect economic rights and have a contractual nature is irrelevant. 9 (a) Obligations arising under bills of exchange, cheques and promissory notes and other

negotiable instruments to the extent that the obligations under such other negotiable instruments arise out of their negotiable character (Art. 1.2.d and Recital 9 Rome I Regulation). In each Member State, the law applicable to these obligations is determined by their own national rules of conflict of laws. However, the contracts that are concluded as the basis for the emission of these documents are included in the material scope of the Rome I Regulation.33 The law applicable to these contracts is determined by the Rome I Regulation. Let us provide an example. The law governing a sale of goods agreement that has to be paid by a “cheque” is determined by the conflict of laws rules of the Rome I Regulation although the legal status of the “cheque” is not governed by this law because it is excluded from the Rome I Regulation. The rights deriving from bills of exchange, cheques, promissory notes, money orders, banknotes, bills of lading, bonds and other negotiable instruments are governed by the law applicable to such titles in accordance with the national conflict of laws rules, and not by the law determined by the Rome I Regulation. The concept of “negotia32

33

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Mankowski, Art. 5.1, in: Mankowski/Magnus (eds.), Commentary on Brussels I Regulation (München, 2012) 2nd ed., 77–167, para. 40. Malatesta, Considerazione sull’ambito di applicazione della Convenzione di Roma del 1980, il caso dei titoli di credito, RDIPP (1992), 887–905.

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bility” seems to be wider than the “transferability”. A negotiable instrument is an instrument that contains a promise of payment. From that point of view, these instruments are often sued as a “store of value” in themselves. These instruments may be used as a means of payment. Differences between “negotiable” and “transferable” come from English Law. Hence, according to English Law, the holder of a negotiable instrument can obtain the payment even if he is not the legal owner of the negotiable instrument. He obtains the rights derived from the instrument “free of any defects”. On the contrary, the holder of a transferable instrument is only entitled to get the payment if he proves to be the legal owner of this instrument. In accordance with that, if they were created as “negotiable”, those bonds and debentures may also be considered as “negotiable instruments”. (b) Arbitration agreements and agreements on the choice of court (Art. 1.2. e Rome I Regu- 10 lation). These agreements are in fact contracts for the purpose of selecting a court or arbitral body before which the parties choose to litigate. Through these agreements the parties may agree that any dispute between them will be resolved, exclusively or concurrently, before the state courts or arbitral bodies selected in that “agreement”. Arbitration agreements and agreements on the choice of court are undoubtedly “contracts” despite being very closely connected to procedural law and also to substantive law. These agreements (= “Arbitration agreements and agreements on the choice of court”) are 11 subject to specific provisions contained in Regulation 44/2001 (Arts. 25–26 Brussels I Regulation Recast, as well as to Art. II of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 1958), Arts. 1 and 5 European Convention on International Commercial Arbitration, done at Geneva on April 21, 1961 and other international conventions governing international arbitration and jurisdiction. Some Member States also have rules governing certain choice of court agreements. For instance, in the case of Spain, Art. 22 LOPJ should be considered. Nevertheless, these PIL rules governing choice of court and submission to arbitration are neither exhaustive nor complete. There are relevant gaps. Indeed, many of these international legal instruments mentioned above do not regulate the law applicable to the consent of the parties to submit a suit to a particular state court or arbitration. They even do not contemplate the law applicable to the legal capacity of the parties to agree on the competent state court. However, the new wording of Art. 25 of Brussels I Regulation Recast declares that the substantive validity of the choice of court agreement is to be governed by the law of the Member State that the parties have chosen, including its conflict-of-law rules. The question has been controversial in doctrine.34 The problem is “where” these provisions have to be determined. The majority of the Member 34

See, before the entry into force of Art. 25 Brussels Ibis Regulation, among others: Magnus/Mankowski, The Green Paper on a Future Rome I Regulation – On the Road to a Renewed European Private International Law of Contracts, Zeitschrift für Vergleichende Rechtswissenschaft, (2004), 131–189, especially, 146, quoting Judgment 15 December 1986 by the German Bundesgerichtshof. Same perspective may be seen in Fallon, La dérogation volontaire à la compétence internationale, Revue critique de jurisprudence belge, (2003), 71–308; McClean & Beevers, Morris, The Conflict Of Laws, 6th ed., (London, 2005), 176–177; Garau Sobrino, Acuerdos internacionales de elección de foro, (Madrid, 2008), 197–202; Radicati di Brozolo/Salerno, Verso un nuovo diritto internazionale privato dei contratti in Europa, in: Franzina (ed.), La legge applicabile ai contratti nella proposta di regolamento Roma I – Atti della giornata di studi – Rovigo, 31 marzo 2006, (Padova, 2006), 1–8; Nielsen/Lando, The Rome I Regulation, CMLR, (2008), 1687–1725.

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States do not have any rules dealing with the substance of these arbitration and choice of court agreements. Before the entry into force of the Rome I Regulation, some courts of the Member States opted for a “by analogy” application of the Rome Convention of 1980 to these issues. This view ensures that the law governing the contract is the same as the law governing these arbitration and court clauses. In fact, the exclusion of these agreements from the material scope of application of the Rome I Regulation seems to affect only the procedural aspects of the agreement, which are governed by the Brussels I Regulation recast or other international or national rules of the Member States. Therefore, the substance of these agreements, e.g. the consent of the parties should not be excluded from the Rome I Regulation. In other words, the exclusion made by Art. 1 Rome Regulation would only give preference to the specific rules governing these agreements but not the substance of these agreements, not covered by those instruments. Other experts, on the contrary, suggest that the Rome I Regulation accepts, conversely, those gaps. Accordingly, the national rules of PIL of every Member State apply. Hence, in order to specify the “Applicable Law” to those aspects not covered by international legal instruments dealing with choice of court agreements and arbitration clauses, national PIL applies. As it has been said before, the new wording of Art. 25 of Brussels I Regulation Recast declares that the substantive validity of the choice of court agreement is to be governed by the law of the Member State that the parties have chosen, including its conflict-of-law rules. In accordance with this, the legal provisions dealing with the substance of these agreements which are in force in the Member State whose courts have been chosen apply. In the case that this Member State lack these specific provisions, their general rules dealing with the substance of contracts should be applicable. 12 Agreements between the parties and the arbitrators are covered by the Rome I Regulation as

long as they are contracts for the provision of services.35 The law applicable to the contract, in the case of arbitrators seated in the territory of the Member States, is not necessarily determined by the Rome I Regulation. In fact, the primary conflict of law rule is that included in the Geneva Convention 1961. Art. 25.1 of the Rome I Regulation confirms this conclusion.36 Anyway, the conflict of law rule contained in the Geneva Convention 1961 may lead, in some cases, to the application of Rome I Regulation. In fact, according to Art. VII.1 of this convention, the court may deem that the most appropriated conflict rule to be applied to a specific case is the set of conflict of laws rules contained in the Rome I Regulation. In the case that the Geneva Convention is not applicable, arbitrators are not linked by the Rome I Regulation, but are subject to the national conflict of laws rules dealing with arbitration. 13 (c) Questions governed by the law of companies and other bodies, corporate or unincorpo-

rated, such as the creation, by registration or otherwise, legal capacity, internal organisation or winding-up of companies and other bodies, corporate or unincorporated, and the personal liability of officers and members as such for the obligations of the company or body (Art. 1.2. f 35 36

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Lüttringhaus, Art. 1, in: Ferrari (ed.), Rome I Regulation: Pocket Commentary, (Munich, 2014), 52–53. There is quite some controversy in that matter, see e.g. Yüksel, (2011) 7 JPrIL 149; Mankowski, RIW 2011, 30; Hausmann, FS Bernd von Hoffmann (2011), p. 971; Schilf, RIW 2013, 678.

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Rome I Regulation). The company law matters are governed by the law designated by the national conflict of law rules of each Member State. As one may remember, there is not a body of uniform European Union law rules on corporate law matters. However, the wide list of issues excluded by Art. 1.2 c Rome I Regulation with regard to company law is not exhaustive.37 The strong discrepancies between the laws of the Member States in corporate matters explain the wide extent of this exclusion.38 Preliminary contracts whose sole purpose is the creation of commitments among shareholders in order to incorporate the company or a legal person are covered by the Rome I Regulation because they do not directly affect the “constitution of the legal entity”.39 On the contrary, contracts concluded in order to acquire a company are clearly covered by the Rome I Regulation. Finally, one might remember that the so-called “control contracts” within a group of corporations fall into the material scope of application of the Rome I Regulation.40 (d) The question whether an agent is able to bind a principal, or an organ to bind a company 14 or other body corporate or unincorporated, in relation to a third part (Art. 1.2.g Rome I Reg). The issue whether an intermediary is able to bind a principal to third parties is subject, in each Member State, to the law designated by its national conflict of law rules regarding “voluntary representation”. Nevertheless, the contract signed by a representative of a party with a third party is governed by the law designated by the Rome I Regulation. The contract signed by the principal and a representative is also governed by the law designated by the Rome I Regulation. (e) The constitution of trusts and the relationship between settlors, trustees and beneficiaries 15 (Art. 1.2 h Rome I Reg). For these purposes, the origin of the trust is not relevant. It may have a contractual origin, may have been created by inheritance or have a different origin. The exclusion made by Art. 1.2. h Rome I Reg is complete. The concept of “trust” in the Rome I Regulation is clearly the English concept of the institution.41 The trust-like institutions that have been adopted in some states of continental Europe are usually contractual in nature and therefore, they are covered by the material scope of Rome I Regulation. Nevertheless, in the case that these Continental trust-like institutions follow the English scheme of trust – trust in the English sense –, this exclusion should operate. Note that the Hague Convention of 1 July 1985 on law applicable to the trust and its recognition is in force only in a few Member States of the UE. (f) Obligations arising out of dealings prior to the conclusion of a contract (Art. 1.2. i Rome I 16 Reg). These obligations are subject to the law designated by the Rome II Regulation [Law applicable to extra-contractual obligations], which includes culpa in contrahendo in its 37

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Malatesta, La legge applicabile ai contratti di cooperazione tra imprese secondo la Convenzione di Roma, in: Sacerdoti/Frigo, La convenzione di Roma sul diritto applicabile ai contratti internazionali, 2nd ed., (Milano, 1994), 169–180. Kaye, The new Private International Law of Contract of the European Community, (Dartmouth, 1993), 121–127. Zonca, Convenzione di Roma e diritto delle società, in: Sacerdoti/Frigo, La convenzione di Roma sul diritto applicabile ai contratti internazionali, 2nd ed., (Milano, 1994), 201–218. Renner/Hesselbarth, Unternehmensverträge und die Rom I-Verordnung, IPRax, (2014), 117–124. Kaye, The new Private International Law of Contract of the European Community, (Aldershot, 1993), 131–133.

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material scope (Art. 12 in fine and Recitals 29–30 Rome II Regulation and Recital 10 Rome I Regulation).42 The Rome I Regulation also excludes from its material scope the case where a contract has been signed to regulate the formation of an international agreement in which the parties have chosen, or not, the law regulating this preliminary contract. Liability for breaking such pre-agreement contract is not “contractual” and is governed by Art. 12 Rome II Reg, although there is a “contract on negotiating another contract.” As noted by the doctrine, there are various types of facts giving rise to the so-called culpa in contrahendo: (a) Liability by deception or concealment of information during the negotiation of a contract or an agreement; (b) Liability in respect of damage suffered by a subject during the process of negotiating a contract; (c) Liability in respect of damage arising from the invalidity of the contract in the event that one party is responsible for such invalidity; (d) Liability arising from cases in which a party refuses to proceed with the execution of the contract, by refusing, for example, to notarize a private instrument; (e) Liability arising from the unreasonable breakdown of negotiations of a contract or agreement; (f) Liability arising from the disclosure of confidential information obtained during the negotiation of a contract. The exclusion of these “pre-contractual obligations” from the material scope of the Rome I Regulation can be explained by two simple reasons: (a) Firstly, the French rule. The Rome II Regulation embraces the “French Rule” on damage rather than the “German Rule”, thus, it applies to all obligations of non-contractual nature. In other words, the Rome II Regulation contains an “open catalogue of extra-contractual obligations”. In doing so, it adopts a system derived from the French Code Napoléon, 1804 while rejecting the “German Rule”, under which only a closed catalogue of facts are considered as giving rise to extra-contractual liability (tort cases). Under German Law, culpa in contrahendo is not included as one of the facts giving rise to extra-contractual responsibility (BGB § 823.1), therefore, liability for culpa in contrahendo (Verschulden bei der Vertragsanbahnung) can under no circumstances be considered as “extra-contractual”. To fill the gap, the German courts include a “secondary connection” in order to allow the application of the law governing “contractual” liability to the culpa in contrahendo liability; (b) Secondly, the English rule. The Rome II Regulation was also very sensitive to the English doctrine, which follows the “Freedom Not to Contract” rule. Under this rule, the parties are not legally bound until the contract has been formally concluded so that no “contractual” responsibilities can be claimed before the conclusion of the contract. In those cases, only civil liability deriving from a breach of the general duty to Bargain in Good Faith may be claimed because this conduct might be considered as a Blameworthy Conduct punishable by a tort action. In conclusion, for both reasons above, the law governing culpa in contrahendo must be determined by the conflict rules in Rome II Regulation that govern extra-contractual obligations rather than the rules in Rome I Regulation that relate to contractual obligations. For the purposes of determining the scope of these two Rome Regulations, the fact that the law applicable to culpa in contrahendo may be the same law governing the contract in question (Article 12 Rome II Reg) is irrelevant. Therefore, the responsibility arising out of culpa in contrahendo cannot be governed by the same Law which governs the contract by “analogy” or with a “secondary connection”, as some legal experts have correctly pointed out in the Spanish doctrine.43 42

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Lüttringhaus, Das internationale Privatrecht der culpa in contrahendo nach den EG-Verordnungen “Rom I” und “Rom II”, RIW, (2008), 193–200. See: Amores Conradi, “Obligaciones extracontractuales”, in: González Campos, Derecho internacional privado, parte especial, 6th ed. (Madrid, 1995), 209–241, esp. p. 224 in fine. Nevertheless, see: Leible/

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(g) Insurance contracts arising out of operations carried out by organisations other than 17 undertakings referred to in Article 2 of Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance (14) the object of which is to provide benefits for employed or self-employed persons belonging to an undertaking or group of undertakings, or to a trade or group of trades, in the event of death or survival or of discontinuance or curtailment of activity, or of sickness related to work or accidents at work (Art. 1.2. j Rome I Regulation). See comment on Art. 7 Rome I Regulation. The Rome I Regulation is not applicable to evidence and procedure, without prejudice to 18 Article 18. Such exclusion means that the covenants and agreements made by the parties during a judicial proceeding are not governed by the laws designated by the Rome I Regulation. Such agreements, for instance, agreements on proven facts or on the proof of foreign law, allowed by the law of several Member States, are subject to the Lex Fori (Lex Fori Regit Processum) (in Spain, see Art. 3 LEC). The proof of foreign law is not covered by the Rome I Regulation. 3. Contractual obligations excluded from Rome I Regulation because created in the context of Family Law Although derived from contracts, these obligations should be governed by the law regulating 19 family relations in which they are inserted. This approach promotes coherence of the legal Regulation of family relations. Specifically, the following contractual obligations in the field of family law are excluded from the Rome I Regulation. (a) Questions involving the status or legal capacity of natural persons, without prejudice to 20 Article 13 (Art. 1.2.d and Recital 9 Rome I Reg). This exclusion is important because it confirms that the Law governing contractual capacity is fixed in each Member State in accordance with its own national rules of conflict of laws. The law governing the legal capacity of natural persons regarding contractual obligations will also be applicable to the capacity of natural persons with regard to extra-contractual obligations.44 In Spain, for instance, according to Art. 9.1 of the Spanish Civil Code, the law regulating the legal capacity of natural persons is their own national law.45 One might never forget Art. 13 Rome I Regulation. This provision follows the “national interest doctrine”, which affects the Regu-

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Lehmann, Die Verordnung über das auf vertragliche Schuldverhältnisse anzuwendende Recht (“Rom I”), RIW, (2008), 528–544; Leible/Lehmann, Die neue EG-Verordnung über das auf ausservertragliche Schuldverhältnisse anzuwende Recht (‘Rom II’), RIW, (2007), 721–735; Leible, La propuesta para un reglamento ‘Roma I’, Anuario español de Derecho internacional privado, (2006), 541–568. Mosconi, La legge regolatrice della capacità delle persone fisiche, dalle proposte di P.S. Mancini alla prassi convenzionale, in: Etudes en l’honneur de Roberto Ago, IV, (Milano, 1987), 187–225; Mosconi, Le norme relative alla capacità dei contraenti nella Convenzione CEE sulla legge applicabile alle obbligazioni contrattuali, in: Consiglio nazionale del notariato, La Convenzione di Roma sulla legge applicabile alle obbligazioni contrattuali, (Milano, 1983) 189–210; Mosconi, Le norme relative alla capacitá dei contraenti della Convenzione CEE sulla legge applicabile alle obbligazioni contrattuali, DCSI (1983), 1–15; Tatarano, La capacità, in: Consiglio nazionale del notariato, La Convenzione di Roma sulla legge applicabile alle obbligazioni contrattuali, (Milano, 1983) 211–218. Rodríguez Benot, La exclusión de las obligaciones derivadas del Derecho de familia y sucesiones del ámbito material de aplicación del Reglamento Roma I, CDT, (2009), 112–130.

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lation of legal capacity in the field of contracts (see: Commentary on Art. 13).46 Still, even if a Civil Law legal expert may find it strange, this exclusion is more than appropriate since legal capacity to contract has traditionally been considered as a “contractual matter” under the Common Law legal systems. This exclusion has been confirmed by the ECJ Case C-386/12, Siegfried János Schneider. The ECJ states that the ‘legal capacity of natural persons’, as it is a matter of “status or legal capacity of natural persons”, is not covered by the Bruxelles I Regulation recast (Article 1(2)(a) of Regulation No 44/2001). Seen the consistency between this Regulation and the Rome I Regulation, this matter has to be excluded from the Rome I Regulation.47 21 (b) Obligations arising out of family relationships and relationships deemed by the law ap-

plicable to such relationships to have comparable effects, including maintenance obligations (Art. 1.2. b Rome I Regulation). The concept of “family relationships” is a “Rome I Regulation concept”.48 As indicated by the Recital number 8 of the Rome I Regulation, this concept should cover “parentage, marriage, affinity and collateral relatives”. E.g. the concept of “marriage” must be defined by the Lex Fori. In the case of Member States such as the Netherlands, Belgium, Spain, France and many others, this concept covers same-sex marriages, which are “real marriages” under those laws, without any difference with a marriage between a man and a woman. In the case that a Member State does not consider a same-sex marriage as “marriage” under its laws, it is obvious that the agreement made between the natural persons linked by this legal union cannot be deemed as a “marriage contract” or a contract between the spouses. Art. 13 Rome III Regulation supports this view. Furthermore, the definition of “relationships having comparable effects to marriage and other family relationships” Art. 1.2.b Rome I Regulation) should be left to the national laws of the Member State in which the court is seized. This is a matter of extreme legal, social and political sensitivity.49 Therefore, if a case before the courts of a Member State arises, that state will define the concept of “relationships having comparable effects to marriage and other family relationships” in accordance with its own national law (Lex Materialis Fori). The recognition of these “relationships with comparable effects to family relationships” as “registered partnerships” between persons of the same or opposite sex is a very controversial issue in the European context. Indeed, in some Member States, such as Italy, these “registered partnerships” do not even exist from a legal point of view or they produce very few legal effects, while in other states there are laws that practically consider a “registered partnership” as a “marriage” (Scandinavian countries, Germany). This fact explains why the European legislator has not intended to define these relationships with a compulsory 46

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Calvo Caravaca, La técnica normativa de la doctrina del interés nacional, Revista española de Derecho internacional, (1978–1979), 111–137; Calvo Caravaca, La ley aplicable a los contratos internacionales (el Convenio de Roma de 19 de junio de 1980), Derecho de los negocios, (1994), 1–29. Recital (7) of the Rome I Regulation: “The substantive scope and the provisions of this Regulation should be consistent with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) and Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II)”. Behrens, Gesamtschuldnerausgleich und sonstige Regressansprüche im europäischen Kollisionsrecht nach der Rom I-, Rom II- und EG-Unterhaltsverordnung, (Hamburg, 2013). Rodríguez Benot, La exclusión de las obligaciones derivadas del Derecho de familia y sucesiones del ámbito material de aplicación del Reglamento Roma I, CDT, (2009), 112–130.

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European definition. In any case, given that, under the Lex Fori, these legal relations are considered “similar to marriage”, the obligations between the parties arising out of this union are to be excluded from the Rome I Regulation even if they have a contractual nature. Consequently, one must distinguish between “legal unions with analogous effects to marriage” and “other legal unions” (P. Lagarde).50 Firstly, “legal unions with analogous effects to marriage” may be of contractual nature or not. Only unions of contractual nature are to be covered by the Rome I Regulation. Secondly, other legal unions not having analogous effects to marriage are completely excluded from the Rome I Regulation. However, this situation leads to uncertainty in some cases. For instance, it is not clear whether the French PaCS and the Belgian and Luxembourgian partnership cohabitation, having a clear contractual nature, produce “comparable effects to marriage” or not.51 Moreover, civil unions contained in Icelandic, Danish, English, German, Norwegian, and Swedish Law, among others, produce effects similar to those produced by “marriage”. Therefore, the law applicable to these legal institutions is not determined by the conflict rules contained in the Rome I Regulation.52 Insofar as certain contractual civil unions of contractual nature are not covered by the regulation, it can be argued that this result is not really satisfying. In fact, these legal institutions are often very closely linked with their “being registered”. Hence, it has been suggested that the best solution is to submit this kind of civil unions to the registration laws of each State, that is, the law applied to the creation of civil unions. By doing so, the law applicable to the creation of civil unions should be the same that governs the obligations between the partners. The Rome I Regulation alters this approach in an unconvincing way as its application to these “contractual” legal unions can sometimes lead to consider that a “contractual civil union” is null or non-existent while it is valid under the Law of the State where it was registered.53 On the other hand, private contracts creating voluntary obligations on alimony or voluntary maintenance obligations are covered by the Rome I Regulation. On the contrary, maintenance obligations directly created by law are excluded from the Rome I Regulation and are covered by the conflict rules of The Hague Protocol of 23 November 2007 (Law Applicable to Maintenance Obligations). (c) Obligations arising out of matrimonial property regimes, property regimes of relationships 22 deemed by the law applicable to such relationships to have comparable effects to marriage, and wills and succession. The obligations arising out of matrimonial property regimes and similar are governed by the national conflict of laws rules of each Member State up to this date. 50

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Lagarde, Remarques sur la proposition de règlement sur la loi applicable aux obligations contractuelles (Rome I), RCDIP, (2006), 331–349, 333. Lagarde/Tenenbaum, De la convention de Rome au règlement Rome I, RCDIP (2008), 727–780, 734. Iceland: Act n. 87, 12 June 1996 (partnership). United Kingdom: Civil Partnership Act 2004 (Royal Assent of 18 November 2004 Published on 25 November 2004); Denmark: Act on registered union n. 372, 7 June 1989, modified by Act n. 360, 2 June 1999; Norway: Act n.40, 30 April 1993 (registered partnership); Sweden: Act 23 June 1994; Germany: Gesetz zur Beendigung der Diskriminierung gleichgeschlechtlicher Gemeinschaften: Lebenspartnerschaften, 16 February 2001, modified by Gesetz über die Eingetragene Lebenspartnerschaft (Lebenspartnerschaftsgesetz – LPartG), 31 December 2004. Lagarde, Remarques sur la proposition de règlement sur la loi applicable aux obligations contractuelles (Rome I), RCDIP, (2006), 331–349, 333–334.

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This exclusion also covers property regimes created by private conventions between the parties and the private agreements made in order to distribute common property in the event of divorce. For instance, in Spain, Art. 9.1-2-3-8 of the Spanish civil code has to be considered. The situation may change in view of future legal European instruments designating the applicable law to these matrimonial issues. 23 With regard to succession law, the obligations arising out of wills and succession are covered

by the Regulation (EU) 650/2012 of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession. The socalled “gifts inter vivos”, in which the present is transferred only after the death of the donor, are contractual by nature and covered by the Rome I Regulation. On the contrary, the gifts governed by the law of succession are excluded from the Rome I Regulation. It is the case of the § 2301 German BGB (“Schenkungen von Todes wegen”), as it has been clearly pointed out by some legal experts.54 Art. 23.2 Regulation (EU) 650/2012 of 4 July 2012 provides a list of matters covered by this Regulation and solves problems of characterization with regard to contractual obligations. IV. Contractual obligations in situations involving a conflict of laws 24 The Rome I Regulation applies to contractual obligations but only in those “situations

involving a conflict of laws”. The Regulation, however, does not define the concept of “situations involving a conflict of laws”.55 Most legal scholars think that a “conflict of laws” arises when there is a reasonable doubt about the state law applicable to a contract.56 The use of the expression “situations involving a conflict of laws” shows the intention of the European legislator to hold a broad concept of “internationality” of the contractual situation.57 As a consequence, the European legislator has chosen not to specify the requirement of “internationality” by using expressions of narrower scope found in other international conventions, such as “international situation” or “situations with an international character”. While there is some kind of general consensus/agreement on “what a situation with an interna54 55

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Lüttringhaus, Art. 1, in: Ferrari (ed.), Rome I Regulation: Pocket Commentary, (Munich, 2014), 47. Carrascosa González, El contrato internacional (fraccionamiento versus unidad), (Madrid, 1992); Carrascosa González, Elección múltiple y elección parcial de la Ley aplicable al contrato internacional, Anales de Derecho de Murcia, (2000), 7–40. Delaume, What’s an International Contract? An American and Gallic Dilemma, ICLQ, (1979), 258–279; Lagarde, Le nouveau droit international privé des contrats aprés l’entrée en vigueur de la Convention de Rome du 19 juin 1980, RCDIP (1991), 287–340; Lalive, Sur une notion de contrat international, in: Multum Non Multa. Festschrift für Kurt Lipstein aus Anlass seines 70. Geburtstages, (Heidelberg, Karlsruhe, 1980), 135–155; Lando, International situations and ‘situations involving a choice between the laws of different legal systems’, in: Lipstein (ed.), Harmonisation of Private International Law by the EEC, (London, 1978), 15–24; De Nova, Quando un contratto è internazionale?, RDIPP, (1978), 665–689; De Nova, Wann ist ein Vertrag international?, in: Konflikt und Ordnung. Festschrift für Murad Ferid zum 70. Geburtstag, (München, 1978), 307–323; Sinagra, Natura e contenuto della internazionalità dei contratti, in: Etudes en l’honneur de Roberto Ago, (Milano, 1987), 349–382. Franzina, Struttura e funzionamento del foro europeo della materia contrattuale alla luce delle sentenze Car Trim e Wood Floor della Corte di Giustizia, RDIPP (2010) 657–684; Francq, Le Règlement ‘Rome I’ sur la loi applicable aux obligations contractuelles, Clunet (2009), 40–69.

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tional character” is, there are many discrepancies on what is to be considered a “situation involving a conflict of laws”, due to the fact that the Rome I Regulation does not give any indication on how to interpret this point. It is certainly difficult to draw a clear separation line between “international” contracts and domestic contracts.58 Legal scholars still wonder when a contractual situation involves a “conflict of laws” or, in other words, when a contract is “international”.59 Two major interpretations have been proposed. (a) The effects theory. According to this first interpretation, the contractual situation involves 25 a “conflict of laws” when “international effects” arise from that situation. The “international repercussions” or “cross-border implications” of the contract generate a doubt as to the law which should govern the contract. In such a case, the situation involves a “conflict of laws” and the Rome I Regulation applies. A contract is international when it produces effects on international trade (= “le contrat qui met en jeu les intérêts du commerce international”).60 Several comments on this thesis should be made. 1º) This theory is based on the term “conflict of laws” used in Art. 1 Rome I Reg Indeed, the supporters of this theory claim that a contract whose effects are felt only in one country poses no “conflict of laws”. Only a contract that affects several countries is covered by the Rome I Regulation as long as it refers to a situation involving a “conflict of laws”. Only in the case of a contract having a cross-border or an international impact do the different laws of the several States enter into a “conflict”. In other words, the contract is “international” if it causes an “international impact”. Whether or not the contract presents “foreign elements” is irrelevant. What is relevant is that the contract produces “effects connected with other countries”. To summarize, the contract is “international” when it presents cross-border implications. This theory comes from the French doctrine on international arbitration61 (see: Art. 1504 of the French Code de procédure civile: “Est international l’arbitrage qui met en cause des intérêts du commerce international”). Art. 81 of the Treaty on the Functioning of the European Union can be used as a support for this theory, as this provision declares that “[t]he Union shall develop judicial cooperation in civil matters having crossborder implications”. 2º) The following is an example of how this theory works. A Madrid-based company acquires from a company based in Murcia, Spain, a cargo of cotton with the intention to resell the cargo to a third company based in St. Petersburg, Russia. The contract has no “foreign elements” but it is undeniable that the contract appears to be “connected to international trade” as the cotton will be subsequently exported to Russia. The contract has an impact on other countries and on international trade. For this reason, it should be considered as “international” and the Rome I Regulation should apply to the contract. Consequently, the contracting parties, seller and buyer, are entitled to choose the law applicable to their 58

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Kassis, Le nouveau droit européen des contrats internationaux, (Paris, 1993), 15–153, 93–104; Audit/ d’Avout, Droit international privé, 7th ed., (Paris, 2013), 656–657. Kenfack, Le Règlement (CE) nº593/2008 du 17 juin 2008 sur la loi applicable aux obligations contractuelles (Rome I), navire stable aux instruments efficaces de navigation?, Clunet, (2009), 2–39. Holleaux/Foyer/de Geouffré de Lapradelle, Droit international privé, (Paris, 1987), 591, quoting Judgment French cour de cassation of 19th February 1930 and 27th January 1931. Fouchard, L’État face aux usages du commerce international, Travaux CFDIP, 1973–1975, (Paris, 1977), 71–91.

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contract by resorting to Art. 3.1 Rome I Regulation. Here is another useful example. A retired Englishman living permanently in Malaga, Spain, purchases immovable property in that city from a Spanish company. This contract is not “international” because, despite containing “foreign elements”, it does not produce any effects connected with other countries or an impact on international trade. Hence, this contract cannot cause a “conflict of laws”. Accordingly, the parties may not choose the state law applicable to this contract under Art. 3 Rome I Regulation since this Regulation does not apply. 26 (b) The foreign element theory. This theory suggests that a situation involves a conflict of

laws when it presents “foreign elements” whatever those elements may be and irrespective of their nature, intensity or relevance.62 Any “foreign element” in the contract renders it “international”. It is not possible to provide a closed, exhaustive list of “foreign elements” as some legal scholars tried many years ago, notably R. de Nova.63 The simple presence of a “foreign element” in the contract raises the question of which law should govern the contract. In such a case, the situation involves a “conflict of laws” and the Rome I Regulation applies. With regard to this theory, different remarks could be made.64

1º) This theory is based on the wording of Art. 3 Rome I Regulation as a heuristic tool to outline the meaning of the term “conflict of laws” used by Art. 1.1 Rome I Regulation.65 Indeed, this provision indicates that the contractors are allowed to choose a foreign law as the law applicable to their contract. However, if, at the time of the choice of law, all the objective elements of the situation are connected with a country other than the one whose law has been chosen, the choice of law made by the parties shall not prejudice the application of the mandatory rules of the law of that other country with which the contract is fully and objectively connected. As a consequence, the Rome I Regulation distinguishes three levels: (a) If a contract contains “elements” objectively connected with different countries, the Regulation allows the parties to choose the law applicable to their contract because that is an “international” contract and the situation involves a “conflict of laws” (Article 3.3 Rome I Regulation a contrario sensu); (b) If all the objective elements of the contract are connected with a single country but the parties have chosen a foreign law as the law of the contract, the Rome I Regulation applies because a foreign element already exists, which is precisely the choice of law made by the parties (Article 3.3 Rome I Regulation). However, the Rome I 62

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Delaume, What’s an International Contract? An American and Gallic Dilemma, ICLQ, (1979), 258–279; Delaume, Transnational Contracts. Applicable Law and Settlement of Disputes, (New York, 1986); Delaume, The European Convention on the Law Applicable to Contractual Obligations, Why a Convention?, Virginia Journal of International Law, (1981), 105–121; Lagarde, Le nouveau droit international privé des contrats aprés l’entrée en vigueur de la Convention de Rome du 19 juin 1980, RCDIP (1991), 287–340. De Nova, Obbligazioni (Diritto internazionale privato), in: Enciclopedia del diritto, (Milano, 1979), 456– 500; De Nova, Quando un contratto è internazionale?, RDIPP, (1978), 665–689; De Nova, Wann ist ein Vertrag international?, in: Konflikt und Ordnung. Festschrift für Murad Ferid zum 70. Geburtstag, (München, 1978), 307–323. Basedow/Wurmnest, Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I), RabelsZ (2007), 225–344. Sinagra, Natura e contenuto della internazionalità dei contratti, in: Etudes en l’honneur de Roberto Ago, (Milano, 1987), 349–382.

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Regulation limits the effects of the above mentioned choice of law in order to prevent an international “evasion of the law” or “abuse of process” (fraude à la loi); (c) If all the objective elements of the contract are connected with a single country and no choice of foreign law has been made, the situation does not then involve a “conflict of laws”, the contract is not “international” and the Rome I Regulation does not apply. In such a case, the fact that the contract may have an impact on other countries or may produce some effects on the international trade is irrelevant (Article 3.3 Rome I Regulation a contrario sensu). 2º) Here is an example of this theory: A company based in Valencia, Spain, sells a number of television sets to a company based in Madrid, Spain. The acquiring company intends to resell the television sets to a third company which has its headquarters in Singapore. As the first contract has no “foreign objective elements”, the parties may not choose Japanese Law as the only state law governing the contract. In fact, according to Art. 3.3 Rome I Regulation, the mandatory provisions of Spanish law apply. Since the choice of Japanese law made by the parties introduces a “foreign element”, the contract will be governed by Japanese law. Nevertheless, that choice in favour of Japanese law has only limited effects because, at any rate, the mandatory provisions of Spanish law are applicable to the contract. Here is another example: a retired Swedish man living permanently in Almeria, Spain, acquires a valuable painting in an art gallery in that city. This contract is “international” because it contains “foreign elements” (the nationality of the buyer). However, this contract produces no legal effects or impact on other countries or on international trade. By all means, under Art. 3 Rome I Regulation, the parties may choose the state law applicable to this contract because, the contract being “international”, the Rome I Regulation applies and the Spanish mandatory rules will not necessarily apply to this contract. It seems clear that the theory of the foreign element should be preferred for both theoretical 27 and practical reasons. However, several remarks should be made. 1º) As seen above, Art. 3.3 Rome I Reg 3.3 uses the expression “all other elements relevant to the situation”. Therefore, the foreign element theory seems stronger than the “effects theory” because the former is directly bound to the wording of the Rome I Regulation provision, Art. 3.3. On the contrary, the “effects theory” is based on a doctrinal interpretation of the term “conflict of laws” used in Art. 1 Rome I Regulation Consequently, the Rome I Regulation is applicable in situations involving a conflict of laws, that is, any situation including elements connected to different countries, one of which might be the choice by the parties of a single foreign law. 2º) The Rome I Regulation determines the state law applicable to contracts containing “foreign elements”. There are several types of these contracts66: (a) Objectively international contracts, i.e. contracts whose objective elements are associated with different states. For instance, the lease of industrial machinery by a German company to a Spanish company; (b) Relatively international contracts, i.e. contracts in which all elements are connected to a single country but are raised before the court of another country (see: Recital 15 Rome I Regulation).67 Let us provide an example: a contract of sale of immovable property located in 66 67

Mayer/Heuzé, Droit international privé, 11th ed. (Paris 2014), 514–519. Recital 15 Rome I Regulation: “Where a choice of law is made and all other elements relevant to the situation are located in a country other than the country whose law has been chosen, the choice of law

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France between two individuals, both of French nationality and habitually resident in France, raises a dispute before a Spanish court; (c) Contracts in which the only foreign element is the “choice of a foreign law” made by the parties. Although the Rome I Regulation is applicable here, there is a specific “international anti-evasion of the law provision” in Art. 3.3 and 3.4 Rome I Regulation of international law. Let us provide an example. A sale of goods agreement, the goods being manufactured and located in Spain at the time of the contract made between two Spanish companies who, however, have chosen Dutch law as the law of the contract. 3º) In the field of contracts, the prevalence of the foreign element theory has important implications regarding party autonomy in the conflict of laws: (a) If the contract contains objective foreign elements, the parties may freely choose the state law that will govern the contract (Article 3.3 Rome I Regulation a sensu contrario);68 (b) If the contract does not have any foreign elements but produces “international effects”, that is, an impact on international trade, the parties may choose the law that will govern the contract.69 In this case, however, the chosen law applies to the contract “in a limited manner” because the mandatory rules of the country with which the contract is objectively connected remain of mandatory application (Article 3.3 Rome I Regulation).70 V. Member States to the Rome I Regulation 28 The Rome I Regulation does not contain a list of states to which the Regulation applies.71

However, it can be held that the Rome I Regulation is directly applicable to all Member States except Denmark. Consequently, all courts and public authorities of the Member States acting in those Member States are obliged to implement the Rome I Regulation. The term

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should not prejudice the application of provisions of the law of that country which cannot be derogated from by agreement. This rule should apply whether or not the choice of law was accompanied by a choice of court or tribunal. Whereas no substantial change is intended as compared with Article 3(3) of the 1980 Convention on the Law Applicable to Contractual Obligations (1) (the Rome Convention), the wording of this Regulation is aligned as far as possible with Article 14 of Regulation (EC) No 864/2007.” Mankowski, Interessenpolitik und europäisches Kollisionsrecht: rechtspolitische Überlegungen zur Rom I- und zur Rom II-Verordnung, (Baden-Baden, 2011); Wengler, Immunité legislative des contrats internationaux, RCDIP (1971), 637–601. Calvo Caravaca/Carrascosa González, Obligaciones contractuales, in: Calvo Caravaca/Carrascosa González, Derecho internacional privado II, 15th ed., (Granada, 2014), 718–921; Batiffol, Les conflits de lois en matière de contrats, (Paris, 1938), 80 et seq.; Bennett, The Draft Convention on the Law Applicable to Contractual Obligations, CMLR (1980), 269–277; Wagner, Der Grundsatz der Rechtswahl und das mangels Rechtswahl anwendbare Recht (Rom I-Verordnung). Ein Bericht über die Entstehungsgeschichte und den Inhalt der Artikel 3 und 4 Rom I-Verordnung, IPRax, (2008), 377–386. Cebrián Salvat, Agencia comercial, leyes de policía y derecho internacional privado europeo, CDT, (2014), 357–366; Francq, Le Règlement ‘Rome I’ sur la loi applicable aux obligations contractuelles, Clunet (2009), 40–69. Under the Rome Convention, see: Kassis, Le nouveau droit européen des contrats internationaux, (Paris, 1993); Baratta, Il collegamento più stretto nel Diritto internazionale privato dei contratti, (Milano, 1991); Weintraub, How to Choose Law for Contracts and How Not to, The EEC Convention, Texas International Law Journal, (1982), 155–167. Calvo Caravaca, El Reglamento Roma I sobre la ley aplicable a las obligaciones contractuales: cuestiones escogidas, CDT, (2009), 52–133.

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“Member State” covers all EU Member States except Denmark. Each Member State defines, in application of public international law, what the “territory” of such State is. With regard to the territories to which the Rome I Regulation applies, Art. 355 of the Treaty 29 on the Functioning of the European Union should be considered (former Art. 299 Treaty of the European Community). This provision states that EU regulations do not apply to certain non-European territories depending on Member States, such as France, the UK, the Netherlands and Denmark. The Rome I Regulation also applies to the UK. Although the UK did not take part in the adoption of the Rome I Regulation and was not bound by the Rome I Regulation when it entered into force (see: Recital 45 Rome I Regulation), this country later exercised its right to opt-in and became a Member State to this Regulation (Decision 2009/ 26/EC of the Commission of 22 December 2008). Public authorities of the States to which the Rome I Regulation applies are required to apply 30 this Regulation. In addition, Art. 1.4 Rome I Regulation indicates that the term “Member State”, which appears frequently in the text of the Regulation, means “Member States to which this Regulation applies”. Hence, this provision excludes Denmark as a Member State to the Regulation. In Denmark, the Convention on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980 applies.72 Art. 1.4 Rome I Reg states that “ … in Article 3(4) and Article 7 the term [‘Member State’] shall 31 mean all the Member States”. This statement implies two consequences: (a) When the parties have chosen the law of a third State as the Lex Contractus, but all other “relevant aspects to the situation” are located, at the time of the choice of law, either in Denmark or in several Member States one of which is Denmark, “the parties’ choice of applicable law other than that of a Member State shall not prejudice the application of provisions of Community law, where appropriate as implemented in the Member State of the forum, which cannot be derogated from by agreement”; (b) With regard to insurance contracts, Art. 7 Rome I Regulation applies to all insurance contracts not covering a “great risk” provided that the contract covers risks situated in the territories of the Member States, including Denmark. VI. Typical and atypical contracts under Rome I Regulation A “typical contract” might be defined as a contract having a specific regulation in the law. An 32 “atypical contract” might be defined as a contract that lacks regulation in the law even if the law allows the parties to conclude such a contract. Both typical and atypical contracts fall within the material scope of application of the Rome I Regulation (Art. 1 Rome I Reg).73 The rules of private international law contained in the Rome I Regulation dealing with the 33 determination of the law applicable to international contracts (= the “conflict rules”) cover a particular kind of contracts which may be called “typical contracts under a conflict of laws perspective”, that is, they are contracts expressly governed by a conflict rule.74

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Official Journal L 266 09/10/1980. Carbone/Luzzatto, I contratti del commercio internazionale, in: Trattato di Diritto privato, (Torino, 1984), 113–177. Carbone, Il ‘contratto senza legge’ e la convenzione di Roma del 1980, (RDIPP), 1983, 279–287.

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34 As a matter of fact, under the Rome I Regulation, there are no “completely atypical con-

tracts”, as in this Regulation it is always possible to find a conflict rule to determine the applicable law regulating any international contract.75 35 There are, though, different degrees of atypicality under a conflict of law view in the Rome I

Regulation76: (a) The contracts expressly referred to by Art. 4.1 Rome I Reg can be considered “the most typical contracts” from a conflict of laws perspective. For instance, Art. 4.1 Rome I Reg specifically contemplates the “distribution contract” (Article 4.1.e), the “contract for the sale of goods” (Article 4.1.a., the “contract for the provision of services” (Art. 4.1.b), the “franchise contract” (Art. 4.1.d RR I Regulation), and so on;77 (b) Contracts not included in Art. 4.1 Rome I Reg but covered by Art. 4.2 Rome I Reg (= contracts not listed in paragraph 1 of Art. 4 that have a characteristic performance and contracts whose elements would be covered by more than one of points (a) to (h) of paragraph 1, Art. 4 Rome I Regulation).78 From a conflict of laws perspective, these two types of contracts can be considered as “fairly typical contracts” because the conflict rule contemplates them from a broad legal perspective;79 (c) Contracts not covered either by Art. 4.1 or Art. 4.2 RR I Regulation, i.e. contracts without a characteristic performance.80 These contracts are “the least typical contracts” because the conflict rule contemplates them only generically.81 In fact, Article 4.4 deals with contracts in which the “law applicable cannot be determined under paragraphs 1 or 2 [of Art. 4]”.82 It follows that the Rome I Regulation has created its own 75

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Carrascosa González, La Ley aplicable a los contratos internacionales: el Reglamento Roma I, (Madrid, 2009), 33 et seq. Calvo Caravaca/Carrascosa González, Obligaciones contractuales, in: Calvo Caravaca/Carrascosa González, Derecho internacional privado II, 15th ed., (Granada, 2014), 718–921. Cebrián Salvat, Competencia judicial internacional en defecto de pacto en los contratos de distribución europeos: el contrato de distribución como contrato de prestación de servicios en el reglamento Roma I, CDT (2013) 125–138; Macaluso, Distribuzione di contenuti digitali in rete, DCI (2010) 821–842; Ancel, Les contrats de distribution et la nouvelle donne du réglement Rome I, RCDIP (2008), 561–579. Vischer, The concept of the Characteristic Performance Reviewed, in: Liber amicorum G.A.L. Droz, (The Hague, 1996), 499–520; Ancel, La prestation caractéristique du contrat, (Paris, 2002); Schnitzer, Les contrats internationaux en droit international privé suisse, RCADI (1968), 541–636. Carrascosa González, Contratos internacionales, prestación característica y la teoría de la Stream-OfCommerce, in: Calvo Caravaca/Blanco-Morales Limones, Globalización y Derecho, (Madrid, 2003), 87– 119. Carrillo Pozo, El contrato internacional, la prestación característica, (Bolonia, 1994); Carrillo Pozo, Rigor mortis (La ley aplicable al contrato a falta de elección en los trabajos de reforma del Convenio de Roma de 1980), in: Hacia un derecho conflictual europeo: realizaciones y perspectivas. Verso un diritto internazionale privato europeo: risultati e prospettive, (Sevilla, 2008), 11–41; Carrillo Pozo, La ley aplicable al contrato en defecto de elección: un análisis a través de la jurisprudencia, Poder Judicial, (2004), 11–46; Ancel, La prestation caractéristique du contrat, (Paris, 2002). Ferrari, Quelques remarques sur le droit applicable aux obligations contractuelles en l’absence de choix des parties (art.4 du règlement Rome I), RCDIP (2009), 460–482. Re, La corte di giustizia e l’art. 4 della convenzione di Roma: il caso ICF, RDIPP (2010), 407–492; Lopes Pegna, Il rilievo del collegamento più stretto dalla convenzione di Roma alla proposta di regolamento Roma I, Rivista di Diritto internazionale (2006), 756–782; Remiro Brotóns, Reglas de conflicto y normas materiales de Derecho internacional privado, Temis Symbolae García Arias, (1973/1974), 605–646; Mengozzi, Norme di applicazione necesaria e progetto di convenzione CEE sulla legge applicabile alle

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“catalogue of typical international contracts” only for conflict of laws purposes, i.e. the typification of contracts is intended to determine the applicable law.83 The Rome I Regulation establishes its own application to any international contract.84 36 Whether or not such contracts are materially typical or atypical (= covered and regulated or not by any substantive state law) has no relevance. A contract might be “typical” from a conflict of laws perspective, although to a different degree as it has been shown, but “materially atypical”, i.e. the conflict rule expressly contemplates the contract and leads to a specific applicable state law, but such state law does not have a substantive specific regulation of the contract. This is the case of the contract “on demand guarantee” or “guarantee on first demand”. Such a contract is clearly covered by Art. 4.1.b Rome I as a case of “contract for the provision of services” but it lacks a substantive specific regulation in the vast majority of state legal systems.85 The majority of international contracts are atypical from a substantive point of view.86 This 37 means that, once the substantive law applicable to the contract has been designated by the conflict rules of the Rome I Regulation, those contracts do not have a specific legal regulation.87 That is the case with joint venture agreements, leasing contracts or comfort letters. Despite being contracts widely used in international contract practice, they are all atypical under the Spanish substantive law and the law of most states of the world.88 Hence, frequently, the law applicable to this kind of contracts does not expressly specify the rights and obligations of the parties.89 The following are examples of contracts lacking substantive regulation: (a) Hybrid contracts. 38 Companies create a “hybrid contract” containing elements taken from different contracts which are regulated by the substantive law of a State or States.90 The objective of the parties is, actually, to adapt a particular type of domestic contract to the specificity of international trade;91 (b) Atypical contracts created for the international trade. Companies often create ex novo new types of contract non-existing in the domestic laws of any state.92 International

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obbligazioni contrattuali (La Conflict of Laws Revolution attraversa l’oceano), Archivio giuridico F. Serafini (1979), 3–41. Junker, Die einheitliche europäische Auslegung nach dem EG-Schuldvertragsübereinkommen, RabelsZ, (1991), 674–696; Nielsen/Lando, The Rome I Regulation, CMLR, (2008), 1687–1725. Aguilar Grieder, Desafíos y tendencias en el actual Derecho Internacional Privado europeo de los contratos, CDT (2012) 23–48. Villani, Aspetti problematici della prestazione caratteristica, RDIPP, (1993), 513–540. Frignani, Il contratto internazionale, in: Trattato di diritto commerciale e diritto pubblico dell’economia, (Milán, 1990), 3; Carbone/Luzzatto, I contratti del commercio internazionale, in: Trattato di Diritto privato, (Torino, 1984), 113–177. Albornoz, Une relecture de la Convention interaméricaine sur la loi applicable aux contrats internationaux á la lumière du règlement Rome I, Clunet (2012), 4–40. Fontaine, Drafting international contracts: An analysis of contract clauses, (New York, 2006), 11 et seq. Draetta, Il diritto dei contratti internazionali, (Padova, 1984), 31. Bonell, Le regole oggettive del commercio internazionale, (Milano, 1976). Poillot-Peruzzetto, Le règlement Rome I du 17 juin 2007 sur la loi applicable aux obligations contractuelles, Répertoire Dalloz de Droit communautaire, Cahiers de l’actualité, (2008), 3–11. Franzina/De Franceschi, Jurisdiction over sales contracts under the Brussels I regulation: the relevance of

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trade requires certain types of contracts that do not make sense in the context of purely internal commerce.93 Companies are then forced to create such contracts.94 This is the case of joint-venture contracts, contracts for oil exploration, construction contracts, turn-key contracts and so on.95 These contracts are created in the context of international practice and are specifically designed to meet the needs of international trade. Such contracts do not exist in national legislation because they are not needed in domestic trade.96 39 There are at least three reasons that explain why the lack of substantive Regulation of many

international contracts is so frequent: (a) In international trade, contractors want to achieve financial objectives proper of international trade.97 These financial purposes are different from those pursued by purely domestic contracts.98 Indeed, in an international scenario, it might be suitable to capture the entire national market, to offer new products in a country, to draw trade alliances with local companies in order to get a good position in a specific domestic market, to create a “stream of commerce” from one country to another, and so on.99 The contracts specifically envisaged and regulated in the Civil Codes and Special Acts in the Civil Law State legal systems pursue “domestic goals”, which are very different from the interests of international trade. Therefore, such contracts are useless to companies that play in the international arena; (b) The influence of the American contractual practice. Many types of international contracts have originated in the American court practice: Leasing, Comfort Letter, Time-Sharing, Consulting, Factoring etc. Under the law of the United States of America, the distinction between typical and atypical contracts is meaningless.100 With few exceptions regulated by Statutes, all contracts are created as atypical contracts.101 They are the direct result of American contractual practice. The major role of

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standard trade terms, IHR 2012, 133–176; Frignani, Il contratto internazionale, in: Trattato di diritto commerciale e diritto pubblico dell’economia (1990). Jacquet, Le contrat international (Paris, 1992); Jacquet, Principe de d’autonomie et contrats internationaux (Paris, 1983); Jacquet, Retour sur la règle de conflit de lois en matière de contrats, Clunet (1991), 679–689. Calvo Caravaca, La Convención de Viena de 1980 sobre venta internacional: algunos problemas de aplicación, in: Estudios de Derecho bancario y bursátil. Homenaje a E.Verdera y Tuells, (Madrid, 1994), 381–413. Calvo Caravaca/Carrascosa González, Contrato internacional, nueva Lex Mercatoria y Principios Unidroit sobre los contratos comerciales internacionales, in: Estudios Jurídicos en homenaje al Profesor Luis Díez-Picazo, (Madrid, 2003), 1539–1567; Carbone/Luzzatto, Il contratto internazionale, (Torino, 1994); Carrascosa González, La Ley aplicable a los contratos internacionales: el Reglamento Roma I, (Madrid, 2009), 33 et seq. Ortiz Vidal, Ley aplicable a los contratos internacionales y eficiencia conflictual, (Granada, 2014), 90 et seq.; Piroddi, Incoterms e luogo di consegna dei beni nel regolamento Bruxelles I, RDIPP (2011) 939–970. Mankowski, Dépeçage unter der Rom-IVO, Festschrift für Ulrich Spellenberg, (München, 2010), 261– 281. Lalive, Sur une notion de contrat international, in: Multum Non Multa. Festschrift für Kurt Lipstein aus Anlass seines 70. Geburtstages, (Heidelberg, Karlsruhe, 1980), 135–155. Rodríguez Rodrigo, Contratos de agencia: aplicación del artículo 5.1 del Reglamento 44/2001 a la obligación contractual de no competencia, in: Nueva Lex Mercatoria y contratos internacionales (Bogotá, 2006), 497–522. Lando, New American Choice of Law Principles and the European Conflict of Laws of Contracts, AJCL (1982), 19–36.

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US companies in international trade has introduced these atypical contracts, unknown in Civil Law legal systems, the main characters of international contract law in the world;102 (c) The same contract may have a completely different substantive Regulation in different countries.103 For example, the concept and the legal substantive Regulation of “custodian agreement” held in Italian law greatly diverge from the Bailment held in English law, even though both contracts have the same economic purpose.104 This fact drives companies to design international contracts which do not correspond to the concept and Regulation of a specific contract in a given state substantive law.105 With this practice, no specific national contract can be imposed on the other party. The determination of the specific legal rules applicable to international contracts lacking a 40 substantive Regulation once the particular state law governing the contract has been determined is a question related to the content of the Lex Contractus.106 The Lex Contractus should allow the creation of “hybrid contracts” and “contracts lacking a substantive regulation”. This can be achieved on the basis of domestic party autonomy, i.e. the law entitles the parties to freely provide, within certain limits, the substantive Regulation of their contract (see, for Italy, Art. 1322 Italian Civil Code and for Spain, Art. 1255 Spanish Civil Code).107 If substantive party autonomy is accepted by the Lex Contractus, this law will specify the way to provide atypical contracts with a legal regulation.108 There exist two main 101

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Carbone, L’autonomia privata nel diritto internazionale privato delle obbligazioni, DCSI, (1982), 15–38; Collins, Contractual Obligations. The EEC Preliminary Draft Convention on Private International Law, ICLQ (1976), 35–57. Curti Gialdino, La volonté des parties en droit international privé, RCADI, (1972), 743–914; De Götzen, La licenza d’uso di diritti di proprietà intellettuale nel regolamento Bruxelles I: il caso Falco, RDIPP (2010) 383–406. Diamond, Conflict of Laws in the EEC, Current Legal Problems, (1979), 155–177. Frignani, Il contratto internazionale, in: Trattato di diritto commerciale e diritto pubblico dell’economia, (Milán, 1990), 3; Carbone/Luzzatto, I contratti del commercio internazionale, in: Trattato di Diritto privato, (Torino, 1984), 113–177. Juenger, The European Convention on the Law Applicable to Contractual Obligations, Some Critical Observations, Virginia Journal of International Law, (1981), 123–141. Gaudemet-Tallon, Le nouveau droit international privé européen des contrats (Commentaire de la Convention CEE nº 80/934 sur la loi applicable aux obligations contractuelles, ouverte à la signature à Rome le 19 juin 1980), RTDE (1981), 215–285; Franzina, Obbligazioni di non fare e obbligazioni eseguibili in piú luoghi nella convenzione di Bruxelles del 1968 e nel Regolamento 44/2001, RDIPP (2002) 391–406; Guardans i Cambó, Contrato internacional y derecho imperativo extranjero, (Pamplona, 1993), 323 et seq.; Hearn, Contratti commerciali internazionali, (Milano, 1987–1991), 31 et seq. Calvo Caravaca/Carrascosa González, Obligaciones contractuales, in: Calvo Caravaca/Carrascosa González, Derecho internacional privado II, 15th ed., (Granada, 2014), 718–921; Balladore Pallieri, L’autonomia dei contraenti nel diritto internazionale privato, Diritto internazionale, (1963), 153–178; Castellanos Ruiz, El valor de los Incoterms para precisar el juez del lugar de entrega, CDT (2012), 93–122; Corneloup/Joubert, Le règlement communautaire Rome I et le choix de loi dans les contrats internationaux: actes du Colloque des 9 et 10 septembre 2010, Dijon (Paris, 2011); Hübner, Das Kollisionsrecht nach Rom I – ein Sonderweg für Versicherungsverträge, EuZW, (2006), 449–450; Jaffey, The English Proper Law Doctrine and the EEC Convention, ICLQ, (1984), 531–560. Leible, La importancia de la autonomía conflictual para el futuro del derecho de los contratos internacionales, CDT (2011), 214–233; Leible, La propuesta para un reglamento ‘Roma I’, Anuario español de

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theories on the issue. On the one hand, the “combination theory” holds that whenever a contract contains elements taken from different kinds of typical contracts, each element should be governed by the legal rules applying to the typical contract from which it was extracted. On the other hand, the “absorption theory” holds that the atypical contract should be governed entirely by the legal discipline provided to regulate the “dominant typical contract”, i.e. the typical contract that has more elements in the framework of the contract lacking a specific legal substantive regulation. Article 2: Universal application Any law specified by this Regulation shall be applied whether or not it is the law of a Member State.

Bibliography Alpa/Bessone, La convenzione di Roma sulla legge applicabile in materia di obbligazioni. Aspetti civilistici, Giurisprudenza italiana (1983), 107–125 Ballarino, Il Regolamento Roma I: forza di legge, effetti, contenuto, CDT, (2009), 5–18 Ballarino, Dalla Convenzione di Roma del 1980 al regolamento Roma I, RDI, (2009), 40–64 Basedow/Wurmnest, Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I), RabelsZ (2007), 225–344; Behrens, Gesamtschuldnerausgleich und sonstige Regressansprüche im europäischen Kollisionsrecht nach der Rom I-, Rom II- und EG-Unterhaltsverordnung (Hamburg, 2013) Berlingieri et al., Verso una disciplina comunitaria della legge applicabile ai contratti, XV Tavola rotonda di diritto comunitario (Padova, 1983) Calliess, Rome Regulations: Commentary on the European rules of the conflict of laws (Alphen aan den Rijn, 2011) Calvo Caravaca, El Reglamento Roma I sobre la ley aplicable a las obligaciones contractuales: cuestiones escogidas, CDT, (2009), 52–133 Calvo Caravaca/Carrascosa González, Obligaciones

contractuales, in Derecho internacional privado II, 15th ed. (Granada, 2014), 718–921 Calvo Caravaca/Carrascosa González (Dir.), Curso de contratación internacional (Madrid, 2007), 2nd ed. Carbone/Luzzatto, Il contratto internazionale, (Torino, 1994) Carrascosa González, La Ley aplicable a los contratos internacionales: el Reglamento Roma I (Madrid, 2009) Castellanos Ruiz, El reglamento Roma I sobre la ley aplicable a los contratos internacionales y su aplicación por los tribunales españoles (Granada, 2009) Castellanos Ruíz, El Convenio de Roma de 1980 ante los tribunales españoles, Balance de 15 años de vigencia, in: La Unión Europea ante el Derecho de la Globalización (Madrid, 2008), 121–188 Cebrián Salvat, Agencia comercial, leyes de policía y derecho internacional privado europeo, CDT, (2014), 357–366 Consiglio nazionale del notariato, La Convenzione di Roma sulla legge applicabile alle obbligazioni contrattuali (Milano, 1983) Corneloup/Joubert, Le règlement communautaire Rome I et le choix de loi dans les contrats internationaux: actes du Colloque des 9 et 10 septembre 2010, Dijon (Paris, 2011)

Derecho internacional privado, (2006), 541–568; Leible/Lehmann, Die Verordnung über das auf vertragliche Schuldverhältnisse anzuwendende Recht (“Rom I”), RIW, (2008), 528–544; Leible/Lehmann, Die neue EG-Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht (‘Rom II’), RIW, (2007), 721–735.

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Chapter I: Scope De Nova, Obbligazioni (Diritto internazionale privato), in: Enciclopedia del diritto (Milano, 1979), 456–500 Ferrari, Internationales Vertragsrecht: Rom I-VO, CISG, CMR, FactÜ. Kommentar, 2nd ed. (München, 2012) Ferrari/Leible (eds.), Rome I Regulation: the law applicable to contractual obligations in Europe (München, 2009) Fischer, Verkehrsschutz im internationalen Vertragsrecht, (Köln, Berlin, Bonn, München, 1990) Francq, Le Règlement ‘Rome I’ sur la loi applicable aux obligations contractuelles, Clunet (2009), 40–69 Franzina (ed.), La legge applicabile ai contratti nella proposta di regolamento Roma I – Atti della giornata di studi – Rovigo, 31 marzo 2006 (Padova, 2006) Garcimartín Alférez, El Reglamento ‘Roma I’ sobre ley aplicable a las obligaciones contractuales: ¿Cuánto ha cambiado el Convenio de Roma de 1980?, Diario La Ley (2008), online version Gaudemet-Tallon, Le nouveau droit international privé européen des contrats (Commentaire de la Convention CEE nº 80/934 sur la loi applicable aux obligations contractuelles, ouverte à la signature à Rome le 19 juin 1980), RTDE (1981), 215–285 Günther, Die Anwendbarkeit ausländischer Eingriffsnormen im Lichte der Rom I- und Rom II-Verordnungen (Saarbrücken, 2011) Haftel, Entre ‘Rome II’ et ‘Bruxelles I’: l’interprétation communautaire uniforme du règlement ‘Rome I’, Clunet (2010), 761–788 Hübner, Das Kollisionsrecht nach Rom I – ein Sonderweg für Versicherungsverträge, EuZW, (2006), 449–450 Kassis, Le nouveau droit européen des contrats internationaux (Paris, 1993) Kaye, The new Private International Law of Contract of the European Community (Dartmouth, 1993) Kenfack, Le Règlement (CE) nº593/2008 du 17 juin 2008 sur la loi applicable aux obligations contractuelles (Rome I), navire stable aux instruments efficaces de navigation?, Clunet, (2009), 2–39 Lagarde, Remarques sur la proposition de règlement sur la loi applicable aux obligations contractuelles (Rome I), RCDIP, (2006), 331–349 Lagarde/Tenenbaum, De la convention de Rome au règlement Rome I, RCDIP (2008), 727–780 Luzzatto, L’entrata in vigore della convenzione di

Roma e il nuovo diritto internazionale privato di contratti, (DCI), 1991, 259–262 Magnus/Mankowski, The Green Paper on a Future Rome I Regulation – On the Road to a Renewed European Private International Law of Contracts, Zeitschrift für Vergleichende Rechtswissenschaft, (2004), 131–189 Malatesta, Considerazione sull’ambito di applicazione della Convenzione di Roma del 1980, il caso dei titoli di credito, RDIPP (1992), 887–905 Mankowski, Dépeçage unter der Rom I-VO, Festschrift für Ulrich Spellenberg (München, 2010), 261–281 Mankowski, Interessenpolitik und europäisches Kollisionsrecht: rechtspolitische Überlegungen zur Rom I- und zur Rom II-Verordnung, (Baden-Baden, 2011) Maultzsch, Choice of Law and ius cogens in Conflict of Laws for Contractual Obligations – Rechtswahl und ius cogens im Internationalen Schuldvertragsrecht, RabelsZ, (2011), 60–101 Max Planck-Institut für ausländisches und internationales Privatrecht, Comments on the European Commission’s Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernization, RabelsZ, (2004), 1–118 and (www.mpidipr.de) Morse, The EEC Convention on the Law applicable to Contractual Obligations, European Yearbook of International Law, (1983), 107–171 Nielsen/Lando, The Rome I Regulation, CMLR, (2008), 1687–1725 North, Reform (but not revolution), RCADI, (1990), 152–205 Plender/Wilderspin, The European private international law of obligations, 3rd ed. (London, 2009) Poillot-Peruzzetto, Le règlement Rome I du 17 juin 2007 sur la loi applicable aux obligations contractuelles, Répertoire Dalloz de Droit communautaire, Cahiers de l’actualité, (2008), 3–11 Rauscher (Hrsg.), Rom I-VO, Rom II-VO (München, 2016) Renner/Hesselbarth, Unternehmensverträge und die Rom I-Verordnung, IPRax, (2014), 117–124 Reithmann/Martiny, (Hrsg.), Internationales Vertragsrecht – Das internationale Privatrecht der Schuldverträge, 7th ed. (Köln, 2010)

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Article 2 Rigaux, Examen de quelques questions laissees ouvertes par la convention de Rome sur la loi applicable aux obligations contractuelles, Cahiers de droit européen, (1988), 306–321 Sacerdoti/Frigo, La convenzione di Roma sul diritto applicabile ai contratti internazionali, 2nd ed. (Milano, 1994) Ubertazzi, Il regolamento Roma I sulla legge applicabile alle obbligazioni contrattuali (Milano, 2008) Villani, L’azione comunitaria in materia di diritto internazionale privato, Rivista di diritto europeo, (1981), 373–393 Virgós Soriano, Obligaciones contractuales, in: González Campos, Derecho internacional privado, parte especial, 6ª ed. (Madrid, 1995), 143–208

Rome I Regulation Virgós Soriano, La interpretación del Convenio de Roma de 1980 sobre Ley aplicable a las obligaciones contractuales y el TJCE, Noticias CEE (1990), 83–94 Virgós Soriano/Garcimartín Alférez, Estado de origen v. Estado de destino, InDret Revista para el análisis del Derecho, www.indret.com, (2004), 1–20 Vitta, La convenzione CEE sulle obbligazioni contrattuali e l’ordinamento italiano, RDIPP, (1981), 837–852 Wenner, Internationales Vertragsrecht, 3rd ed. (Köln, 2013).

I. Regulation Rome I as an “erga omnes” legal instrument 1 Regulation Rome I has a universal (erga omnes) nature. This “universal application”, as it is

defined in the very title of Art. 2, means different things.1 2 (1) Regulation Rome I applies irrespective of the habitual residence, de facto residence or

nationality of any of the parties. Moreover, it applies irrespective of any other circumstances affecting the contract, such as the place of execution of the contract, the place of celebration of the contract, etc.2 3 (2) Regulation Rome I also applies irrespective of the State Law designated by the Regula1

2

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Ballarino, Il Regolamento Roma I: forza di legge, effetti, contenuto, CDT, (2009), 5–18; Ballarino, Dalla Convenzione di Roma del 1980 al regolamento Roma I, RDI, (2009), 40–64; Francq, Le Règlement ‘Rome I’ sur la loi applicable aux obligations contractuelles, Clunet (2009), 40–69; Calvo Caravaca/ Carrascosa González, Obligaciones contractuales, in: Calvo Caravaca/Carrascosa González, Derecho internacional privado II, 15th ed., (Granada, 2014), 718–921; Carrascosa González, La Ley aplicable a los contratos internacionales: el Reglamento Roma I, (Madrid, 2009), 22 et seq. Under the Rome Convention 1980, see, among many others: Bonomi, Il nuovo diritto internazionale privato dei contratti, la convenzione di Roma del 19 giugno 1980 è entrata in vigore, Banca, Borsa, titoli de credito (1992), 36–50; Fallon, Un ‘Restatement’ européen du droit des conflits de lois en matière de contrats, la Convention de Rome du 19 juin 1980 sur la loi applicable aux obligations contractuelles, Assuntos Europeus, (1984), 155–181; Frigessi di Rattalma, Le prime esperienze giurisprudenziali sulla convenzione di Roma del 19 giugno 1980, RDIPP, (1992), 819–854; Gaudemet-Tallon, Le nouveau droit international privé européen des contrats (Commentaire de la Convention CEE nº 80/934 sur la loi applicable aux obligations contractuelles, ouverte à la signature à Rome le 19 juin 1980), RTDE (1981), 215–285; Giardina, La Convenzione comunitaria sulla legge applicabile alle obbligazioni contrattuali e l’ordinamento italiano, RDI, (1981), 795–820; Juenger, The European Convention on the Law Applicable to Contractual Obligations, Some Critical Observations, Virginia Journal of International Law, (1981), 123–141. Junker, Die einheitliche europäische Auslegung nach dem EG-Schuldvertragsübereinkommen, RabelsZ, (1991), 674–696.

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tion. Indeed, Regulation Rome I is applied even though the Law governing the contract specified by this Regulation is not the Law of a Member State. Hence, Regulation Rome I becomes an erga omnes legal instrument, an instrument endowed with “universal application”. This universal nature has been affirmed by a large number of judicial decisions in the Member States, as some legal experts have explained.3 As a consequence of the universal application of the Rome I Regulation (Art. 2 RR I Regu- 4 lation), in the case of a contract under the scope of the Rome I Regulation, the Private International Law rules of the Member States are never applicable.4 For instance, in the case of Spain, it means that the conflict rules contained in the Civil Code (i.e. Art. 10. 5 Spanish Civil Code) are “inapplicable” because they have been displaced by the Rome I Regulation.5 This is due to the combination of the universal application of the Rome I Regulation and the primacy of the Rome I Regulation over the national law of the Member States.6 As it has been pointed out by the ECJ, in the event of a collision, European law prevails over the national law of the Member States (see: ECJ 15th July 1964, Costa v. ENEL, ECJ 14th December 1971, Politi, ECJ 13th July, 1972, Commission v. Italy, ECJ 9th March, 1978, 106/77, Simmenthal)7. Several Constitutional courts of the Member States, such as the Spanish Tribunal Constitucional, have reaffirmed this perspective (see: “Declaration” of 13 December 2004)8 Nevertheless, the national conflict of Laws rules of any of the Member States regulating 5 contractual obligations may still be applicable to a few different cases: (1) In the event of internal or regional conflict of laws in the field of contracts which are not 6 3

4

5

6

7 8

Castellanos Ruiz, El reglamento Roma I sobre la ley aplicable a los contratos internacionales y su aplicación por los tribunales españoles, (Granada, 2009); Castellanos Ruíz, El Convenio de Roma de 1980 ante los tribunales españoles, Balance de 15 años de vigencia, in: La Unión Europea ante el Derecho de la Globalización (Madrid, 2008), 121–188; Calvo Caravaca/Carrascosa González, Obligaciones contractuales, in: Calvo Caravaca/Carrascosa González, Derecho internacional privado II, 15th ed., (Granada, 2014), 718–921. Same result under the Rome Convention 1980. See: Kassis, Le nouveau droit européen des contrats internationaux, (Paris, 1993); Kaye, The new Private International Law of Contract of the European Community, (Dartmouth, 1993); Lagarde, Le nouveau droit international privé des contrats aprés l’entrée en vigueur de la Convention de Rome du 19 juin 1980, RCDIP (1991), 287–340; Luzzatto, L’entrata in vigore della convenzione di Roma e il nuovo diritto internazionale privato di contratti, (DCI), 1991, 259–262. among others. Calvo Caravaca/Carrascosa González, Obligaciones contractuales, in: Calvo Caravaca/Carrascosa González, Derecho internacional privado II, 15th ed., (Granada, 2014), 718–921; Virgós Soriano, Obligaciones contractuales, in: González Campos, Derecho internacional privado, parte especial, 6ª ed. (Madrid, 1995), 143–208; Virgós Soriano, El Convenio de Roma de 19 junio 1980 sobre ley aplicable a las obligaciones contractuales, in: Tratado de Derecho Comunitario Europeo, (Madrid, 1986), 753–825; Garcimartín Alférez, El Reglamento ‘Roma I’ sobre ley aplicable a las obligaciones contractuales: ¿Cuánto ha cambiado el Convenio de Roma de 1980?, Diario La Ley (2008), online version. Gaudemet-Tallon, Le nouveau droit international privé européen des contrats (Commentaire de la Convention CEE nº 80/934 sur la loi applicable aux obligations contractuelles, ouverte à la signature à Rome le 19 juin 1980), RTDE (1981), 215–285. Rec. p. 629. The text can be found in www.tribunalconstitucional.es..

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necessarily covered by the Rome I Regulation (see: art. 22 RR I Regulation, second paragraph: “2. A Member State where different territorial units have their own rules of law in respect of contractual obligations shall not be required to apply this Regulation to conflicts solely between the laws of such units”. These national rules have not been repealed, so they are still in force and can be applied to cases not covered by the Rome I Regulation. For instance, in Spain, certain self-governing Communities have their own private law. The basic principle followed by the Rome I Regulation is that of “non- application” of the Regulation to the contracts causing problems of interregional conflict of laws. Nevertheless, a Member State may decide to apply the Rome I Regulation to the “interregional” conflict of laws inside its territory. In the case of Spain, since Spain has given no indication with regard to this issue, the general principle applies. Hence, the applicable Law to the contracts causing problems of interregional conflict of laws has to be found in the national (Spanish) conflict of laws rules, i.e., art. 10.5 of the Spanish Civil Code. 7 (2) In the event of international contracts excluded from the material scope of application of

the Rome I Regulation, and not covered, the national conflict of laws rules of the Member States apply. 8 (3) In the event of contracts which have been celebrated before the entry into force of the

Rome I Regulation, the national conflict of laws rules still apply, including the Rome Convention (The Convention on the Law Applicable to Contractual Obligations 19 June, 1980), which entered into force in 1991. The Rome I Regulation applies only to contracts concluded after 17th December 2009. II. Application of the Regulation Rome I to the so-called “non-European” contracts 9 The EU has legislative competence to create conflict of laws rules governing all international

contracts.9 Several reasons explain this solution, as it has been pointed out e.g. by Lagarde and Franzina, among other legal scholars.10 10 Firstly, the fact itself that companies of Third States linked by a contract that does not

present any contact with the EU may litigate before the judges of a Member State can affect the proper functioning of the internal market. In such a case, if Rome I Regulation were not applicable, the courts of the Member States would apply different conflict rules to the same contract. This fact would result in a Forum Shopping practice. Forum Shopping impedes the proper functioning of the internal market and jeopardizes the free movement of people within the EU as well as the other European freedoms of movement.11 More restrictive laws in some countries will inevitably lead to Forum Shopping, creating, thus, an unbalance in the internal market.12 In fact, more restrictive laws in some Member States will divert people and business toward other countries where litigation is more favourable.13 9 10 11 12

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See Heuzé, in: Mélanges en l’honneur de Paul Lagarde (2005), p. 393–416; Heuzé, RCDIP 89 (2000), 595. See only Lagarde, RCDIP 95 (2006), 331, 332–333; Franzina, NLCC 2009, 608–609. North, RdC (1990), 152–205; North, [1980] JBL 382–388. Ferrari (ed.), Rome I Regulation: Pocket Commentary, (Munich, 2014) 3–13; Calvo Caravaca/Carrascosa González, Obligaciones contractuales, in: Calvo Caravaca/Carrascosa González, Derecho internacional privado II, 15th ed., (Granada, 2014), 718–921; Ortiz Vidal, Ley aplicable a los contratos internacionales y eficiencia conflictual, (Granada, 2014), 22 et seq.; Poillot-Peruzzetto, Le règlement Rome I du 17 juin 2007

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Chapter II: Uniform Rules

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Secondly, the judgement pronounced by a competent judge of a Member State in a litigation 11 involving contractual obligations among individuals who do not have their habitual residence in the EU will move freely in the European Judicial Area. Therefore, a case affecting two persons or companies with habitual residence outside the EU will have an undeniable impact on the European Judicial Area/the Area of Freedom, Security and Justice in the EU. Such a case produces a “European effect”.14 Thirdly, it is very difficult to distinguish between “non-European” cases and “real European” 12 cases.15 A wide approach, accepting that Rome I Regulation has to be applied to every situation concerning international contracts raised before the authorities of the Member States, solves this problem radically.16 This approach relies on the idea that all contracts generating controversies that have to be solved before the tribunals of the Member States produce an impact on the good functioning of the internal market.17 The Rome I Regulation and the Rome II Regulation have adopted this wide focus. Hence, the conflict rules contained in both Rome I and Rome II Regulation are to be applied to all litigation before the courts and authorities of the Member States and related to international conflict of laws in the field of contracts and extracontractual obligations respectively.18

Chapter II: Uniform Rules Article 3: Freedom of choice 1. A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or to part only of the contract. 2. The parties may at any time agree to subject the contract to a law other than that which previously governed it, whether as a result of an earlier choice made under this Article or of

13 14 15

16 17 18

sur la loi applicable aux obligations contractuelles, Répertoire Dalloz de Droit communautaire, Cahiers de l’actualité, (2008), 3–11; Salerno/Franzina, Commentario al Regolamento CE n.593/2008 del Parlamento europeo e del Consiglio del 17 giugno 2008 sulla legge applicabile alle obbligazioni contrattuali (Roma I), in: Le nuove Leggi civili commentate, (Padova, 2009); Cebrián Salvat, Agencia comercial, leyes de policía y derecho internacional privado europeo, CDT, (2014), 357–366; Lorente Martínez, Protección de los derechos sobre bienes inmateriales ofertados en Internet’, CDT (2014), 379–386. Ancel, Les contrats de distribution et la nouvelle donne du réglement Rome I, RCDIP (2008), 561–579. Franzina, NLCC 2009, 609. Jayme/Kohler, RCDIP 84 (1995), 1; Kenfack, Clunet 136 (2009), 2; Lagarde/Tenenbaum, RCDIP 97 (2008), 727. Magnus/Mankowski, ZvglRWiss 103 (2004), 131. Nielsen/Lando, (2008) 45 CMLRev 1687. Max Planck Institute for Comparative and Private International Law, RabelsZ 71 (2007), 225; Francq, Clunet 136 (2009), 40; Ortiz Vidal, Espacio judicial europeo y Tratado de Lisboa: hacia un nuevo Derecho internacional privado, CDT, (2010), 376–402; Ballarino, Dalla Convenzione di Roma del 1980 al regolamento Roma I, RDI, (2009), 40–64; Berlioz, Clunet 135 (2008), 675; Cebrián Salvat, CDT (2013) 125– 138.

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other provisions of this Regulation. Any change in the law to be applied that is made after the conclusion of the contract shall not prejudice its formal validity under Article 11 or adversely affect the rights of third parties. 3. Where all other elements relevant to the situation at the time of the choice are located in a country other than the country whose law has been chosen, the choice of the parties shall not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement. 4. Where all other elements relevant to the situation at the time of the choice are located in one or more Member States, the parties’ choice of applicable law other than that of a Member State shall not prejudice the application of provisions of Community law, where appropriate as implemented in the Member State of the forum, which cannot be derogated from by agreement. The existence and validity of the consent of the parties as to the choice of the applicable law shall be determined in accordance with the provisions of Articles 10, 11 and 13.

Bibliography I. Choice of law in general Alpa, Autonomie des parties et choix d’une loi étrangère applicable au contrat “national”, Rev. int. dr. comp. 2014, 33 Alpa, Party Autonomy and Choice of Law Applicable to “Domestic” Contracts, Eur. Bus. L. Rev. 25 (2014), 605 Marie-Élodie Ancel, L’internationalité à la lumière du contrat d’electio fori, in: Écrits rédigés en l’honneur de Jacques Foyer (2008), p. 39 de Araujo, Uma visão econômica do direito internacional privado: contratos internacionais e autonomia de vondade, Libro homenaje a Roberto Ruiz Díaz Labrano, Asunción 2013, S. 205 Bernard Audit, Le choix de Principes d’Unidroit comme loi du contrat et le droit international privé, in: Mélanges Camille Jauffret-Spinosi (2013), p. 13 Ayoğlu, Lex Mercatoria (Istanbul 2011) Bairlein, Die Rechtswahl bei Masterfranchiseverträgen und mehrstufigen internationalen Liefer- oder Vertriebsverträgen, IHR 2014, 1 Bamodu, The Rome I Regulation and the Relevance of Non-State Law, in: Peter Stone/Farah (eds.), Research Handbook on EU Private International Law (Cheltenham/Northampton MA 2015), p. 221 Baptista, The UNIDROIT Principles for International Commercial Projects – Aspects of Private International Law, 69 Tul. L. Rev. 1209 (1995) Basedow, Theorie der Rechtswahl oder Parteiautonomie als Grundlage des Internationalen Privatrechts, RabelsZ 75 (2011), 32

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Basedow, The Law of Open Societies – Private Ordering and Public Regulation of International Relations, Rec. des Cours 360 (2013), 9 Ulrich Bauer, Grenzen der nachträglichen Rechtswahl durch Rechte Dritter im Internationalen Privatrecht (1992) Baumert, Abschlusskontrolle bei Rechtswahlvereinbarungen, RIW 1997, 805 Beck, Floating Choice of Law Clauses, [1987] LMCLQ 523 Begemann/Nölle, Rechtswahlklausel in Unternehmenskaufverträgen und ihre kostenrechtliche Relevanz nach dem Gerichts- und Notarkostengesetz, BB 2016, 137 Matthias Benecke/Henneberger, Globalisierung der Vertriebswege: Die Vorteile einer deutschen Rechtswahl, ZVertriebsR 2014, 370 Klaus Peter Berger, The Creeping Codification of the New Lex Mercatoria (2nd ed. Alphen 2010) Béraudo, Faut-il avoir peur le contrat sans loi?, in: Mélanges en l’honneur de Paul Lagarde (2005), p. 93 Blase, Die Grundregeln des europäischen Vertragsrechts als Recht grenzüberschreitender Verträge (2001) Boele-Woelki, Principles and Private International Law – The UNIDROIT Principles of International Commercial Contracts and the European Principles of Contract Law: How to Apply Them to International Contracts, Unif. L. Rev. 1996, 652 Boele-Woelki, Die Anwendung der UNIDROIT

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Chapter II: Uniform Rules Principles auf internationals Handelsverträge, IPRax 1997, 161 Boele-Woelki, European and UNIDROIT Principles of Contract Law, in: von Hoffmann (ed.), European Private International Law (1998), p. 67 Boele-Woelki, Unifying and Harmonizing Substantive Law and the Role of Conflict of Laws, Rec. des Cours 340 (2009), 1 Boele-Woelki, When to Say ‘Yes’ and When to Say ‘No’ to the Parties’ Choice of the Applicable Law in International Contracts, in: FS Ingeborg Schwenzer (2011), p. 191 Bogdan, The Rome I Regulation on the Law Applicable to Contractual Obligations and the Choice of Law by the Parties, NIPR 2009, 407 Booysen, Völkerrecht als Vertragsstatut internationaler Verträge, RabelsZ 59 (1995), 245 Born, International Arbitration and Forum Selection Agreements: Drafting and Enforcing (4th ed. Alphen aan den Rijn 2013) Bortolotti, The UNIDROIT Principles as a basis for alternative choice-of-law clauses, with particular reference to the ICC model contracts, Unif. L. Rev. 2014, 542 Boschiero, I limiti al principio d’autonomia posti dalle norme generali del regolamento Roma I, in: Boschiero (a cura di), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), p. 67 Bouza Vidal, Aspectos actuales de la autonomía de la voluntad en la elección de la Jurisdicción y de la Ley aplicable a los contratos internacionales, in: Cursos de Derecho Internacional y Relaciones Internacionales Vitoria-Gasteiz 2004 (2005), p. 32 Brachert/Dietzel, Deutsche AGB-Rechtsprechung und Flucht ins Schweizer Recht, ZGS 2005, 441 Brand, Balancing Sovereignty and Party Autonomy in Private International Law, in: Liber memorialis Petar Šarčević (2006), p. 35 Bratvogel, Rechtswahlfreiheit (2016) Briggs, The Validity of “Floating” Choice of Law and Jurisdiction Clauses, [1986] LMCLQ 508 Briggs, Choice of Choice of Law, [2003] LMCLQ 12 Briggs, On Drafting Agreements of Choice of Law, [2003] LMCLQ 389 Briggs, Agreements on Jurisdiction and Choice of Law (2008) Brödermann, Internationales Privatrecht: Europäi-

Peter Mankowski

Article 3 sche Entwicklungen für die Rechtswahl, in: Christian Graf/Paschke (eds.), Brennpunkt Exportrecht (2010), p. 73 Brödermann, Zustandekommen von Rechtswahl-, Gerichtsstands- und Schiedsvereinbarungen – Rechtssoziologische Notizen, in: FS Dieter Martiny (2014), p. 1045 Brödermann, Choice of Law and Choice of UPICC Clauses in the Shadow of the Dispute Resolution Clause – Fundamental Aspects of Developing a Coherent Basis for Cross-Border Contracts, Hamburg. L. Rev. 2016, 21 Brödermann, Internationales Privatrecht (§ 6), in: Piltz (ed.), Münchener Anwaltshandbuch Internationales Wirtschaftsrecht (2016) (cited as: Brödermann, in: MünchHdb IWR) Broggini, La scelta della legge applicabile alle obbligazioni contrattuali nella convenzione di Roma del 19 giugno 1980, Foro pad. 1992 II 31 Brulhard, Le choix de la loi applicable – Questions choisies (Bern 2004) Bureau, L’influence de la volonté individuelle sur les conflits de lois, in: Mélanges François Terré (1999), p. 285 Busseuil, Le choix de la loi applicable au contrat électronique, in: Corneloup/Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 397 Calvo Caravaca/Carrascosa González, Los contratos internacionales y el mito de la “Nueva Lex Mercatoria”, in: Calvo Caravaca/Carrascosa González (dir.), Estudios sobre contratación internacional (Madrid 2006), p. 55 Carbone, Il “contratto senza legge” e la Convenzione di Roma del 1980, RDIPP 1983, 279 Carbone, L’autonomia privata nei rapporti economici internazionali i suoi limiti, RDIPP 2007, 891 Carbone, Autonomia privata nel diritto sostanziale e nel diritto internazionale privato: diverse techniche e un’unica funzione, RDIPP 2013, 569 Carbone, Autonomia privata nel diritto sostanziale e nel diritto internazionale privato: diverse techniche e un’unica funzione, in: Studi in onore di Laura Picchio Forlati (2014), p. 163 Carbone, Autonomia privata e commercio internazionale (2014) Carella, Autonomia della volontà e scelta di legge nel diritto international privato (1999)

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Article 3 Carella, La scelta della legge applicabile da parte dei contraenti, in: Il nuovo diritto europeo dei contratti dalla Convenzione di Roma al Regolamento Roma I (2007), p. 78 Carrascosa González, Elección multiple y elección parcial de la Ley aplicable al contrato internacional, An. Der. Univ. Murcia 18 (2000), 7 Castellaños Ruiz, Autonomía conflictual y contratos internacionales: algunas reflexiones, in: Calvo Caravaca/Areal Ludeña (dir.), Cuestiones actuales del derecho mercantil internacional (Madrid 2005), p. 425 Coale, Stabilization Clauses in International Petroleum Transactions, 30 Denver J. Int’l. L. & Pol’y. 217 (2001–2002) Coester-Waltjen, Einige Überlegungen zur konkludenten Rechtswahl im europäischen Vertragsrecht, in: FS Hans Jürgen Sonnenberger (2004), p. 343 Connerty, Lex mercatoria: Reflection from an English Lawyer, (2014) 30 Arb. Int. 701 Cordero Moss, Tacit Choice of Law, Partial Choice and Closest Connection, in: Festskrift Helge Johan Thue (2007), p. 367 Corneloup, Choix de loi et contrats liés, in: Corneloup/Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 285 Cuniberti, Three Theories of Lex Mercatoria, 52 Columb. J. Trans. L. 369 (2014) Curti Gialdino, La volonté des parties en droit international privé, Rec. des Cours 137 (1972 III), 743 Czernich, Die Rechtswahl im österreichischen internationalen Vertragsrecht, ZfRV 2013, 157 DACH Europäische Anwaltsvereinigung e.V. (ed.), Rechtswahlklauseln (2005) Dalhuisen, What Could the Selection by the Parties of English Law in a Civil Law Contract in Commerce and Finance Truly Mean?, in: Liber amicorum Tom Bingham (2009), p. 615 Danilowicz, “Floating” Choice-of-Law Clauses and Their Enforceability, 20 Int’l. Lawyer 1005 (1986) Dasser, Internationale Schiedsgerichte und lex mercatoria (1989) Dasser, Mouse or Monster? Some Facts and Figures on the lex mercatoria, in: Zimmermann/Blaurock/ Kirchner/Spellenberg (eds.), Globalisierung und Entstaatlichung des Recht, vol. 2 (2008), p. 129

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Rome I Regulation Dickinson, A Principled Approach to Choice of Law in Contract?, [2013] BJIBFL 151 Diedrich, Rechtswahlfreiheit und Vertragsstatut, RIW 2009, 378 De Donatis, L’autonomia delle parti e la scelta della legge applicabile al contratto internazionale (1991) Drobnig, The Use of the UNIDROIT Principles by National and Supranational Courts, in: Institute of International Business Law and Practice/ICC (eds.), The UNIDROIT Principles for International Commercial Contracts: A New Lex Mercatoria? (1995), p. 223 Droste, Der Begriff der “zwingenden Bestimmung” in den Art. 27 ff. EGBGB (1991) Druzin, Buying Commercial Law: Choice of Law, Choice of Forum, and Network Externalities, 18 Tulane J. Int’l. & Comp. L. 131 (2009) Durand-Barthez, The “Governing Law” Clause: Legal and Economic Consequences of the Choice of Law in International Contracts, (2010) IBLJ 505 Durand-Barthez/Lenglart (dir.), Choisir son loi (2012) Dutta, Kollidierende Rechtswahlklauseln in allgemeinen Geschäftsbedingungen, ZvglRWiss 104 (2005), 461 Egerer, Konsensprobleme im internationalen Schuldvertragsrecht (1994) Feraci, L’autonomia della volontà nel diritto internazionale privato dell’Unione Europea, Riv. dir. int. 2013, 424 Fiedler, Stabilisierungsklauseln und materielle Verweisung im internationalen Vertragsrecht (2001) Finazzi, Autonomia privata e scelta di regole non statuali quali diritto applicabile, Dir. comm. int. 2005, 604 Fountoulakis, The Parties’ Choice of ‘Neutral Law’ in International Sales Contracts, Eur. J. Leg. Reform 3/4 (2006), 303 Foyer, Le contrat d’electio juris à la lumière de la Convention du Rome de 19 juin 1980, in: Mélanges Yvon Loussouarn (1994), p. 169 Franzina, Sovereign Bonds and the Conflict of Laws, in: Studi in onore di Luigi Costato, vol. II (2014), p. 513 Léa Gannagé, Le contrat sans loi en droit international privé et droit non étatique, Rapport général, XVIIth Congress of the International Academy of Comparative Law (Utrecht 2006)

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Peter Mankowski

Article 3 AGB nach europäischem Internationalem Privatrecht?, RabelsZ 65 (2001), 634 Heiss, Party Autonomy, in: Ferrari/Leible (eds.), Rome I Regulation (2009), p. 1 Henry, Kollisionsrechtliche Rechtswahl: eine Untersuchung ihrer Auswirkungen und Grenzen (2009) Hermann Hoffmann/Stegemann, Die Parteiautonomie im Internationalen Schuldvertragsrecht, JuS 2013, 207 Johannes Hoffmann, Art. 3 Abs. 4 Rom I-VO – Das Ende des Quellenpluralismus im europäischen internationalen Vertragsrecht?, EWS 2009, 254 Hohloch, Rechtswahl als Anknüpfungspunkt – Zur Bedeutung des Parteiwillens im europäischen Internationalen Privatrecht, in: Festskrift Helge Johan Thue (2007), p. 257 Hohloch/Kjelland, Abändernde stillschweigende Rechtswahl und Rechtswahlbewusstsein, IPRax 2002, 30 Hook, The Choice of Law Contract (Oxford 2016) Howard, Floating Choice of Law Clauses, [1995] LMCLQ 1 Holger Jacobs, Die Notwendigkeit der Wahl des auf außervertragliche Ansprüche anwendbaren Rechts in internationalen Wirtschaftsverträgen, IPRax 2015, 293 Jacquet, L’incorporation de la loi dans le contrat, Trav. Com. fr. dr. int. pr. 1993–94, 23 Jacquet, Le principe d’autonomie entre consolidation et évolution, in: Mélanges en l’honneur de Hélène Gaudemet-Tallon (2008), p. 727 Jacquet, La théorie de l’autonomie de la volonté, in: Corneloup/Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 1 Jaspers, Nachträgliche Rechtswahl im internationalen Schuldvertragsrecht (2002) Jayme, Inhaltskontrolle von Rechtswahlklauseln in Allgemeinen Geschäftsbedingungen, in: FS Werner Lorenz zum 70. Geb. (1991), p. 435 Jayme, L’autonomie de la volonté des parties dans les contrats internationaux des personnes privées, Ann. Inst. dr. int. 1991, 14 Jayme, BOT-Projekte – Probleme der Rechtswahl, in: Nicklisch (ed.), Rechtsfragen privat finanzierter Projekte (1994), p. 65 Jayme, Die Kodifikationsidee am Beispiel der kollisionsrechtlichen Parteiautonomie, in: Jud/Rechber-

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Article 3 ger/Reichelt (eds.), Kollisionsrecht in der Europäischen Union (2008), p. 63 Johns, Performing Party Autonomy, 71 L. & Cont. Prbls. 243 (2008) Joubert, Le choix tacite dans le jurisprudences nationals: vers une interpretation uniforme du Règlement Rome I?, in: Corneloup/Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 229 Jud, Neue Dimensionen privatautonomer Rechtswahl, JBl 2006, 695 Hill, Choice of Law in Contract under the Rome Convention: The Approach of UK Courts, (2004) 53 ICLQ 325 Junker, Die freie Rechtswahl und ihre Grenzen, IPRax 1993, 1 Kadner Graziano, Solving the Riddle of Conflicting Choice of Law Clauses in Battle of Forms Situations: The Hague Solution, Yb. PIL 14 (2012/13), 71 Kappus, “Lex mercatoria” als Geschäftsstatut vor staatlichen Gerichten im deutschen internationalen Schuldvertragsrecht, IPRax 1993, 137 Krasauskaite/Philipp Schwarz, Rechtswahlklauseln in Unternehmenskaufverträgen nach Einführung des Gerichts- und Notarkostengesetzes, DZWIR 2014, 51 Kessedjian, Les dangers liés à une mauvaise choix du droit applicable (analyse de la jurisprudence française et de sentences arbitrales), Rev. int. dr. comp. 1995, 373 Kessedjian, Les norms a-nationales et le future règlement Rome I – une occasion manquée (jusqu’à nouvel ordre?), Rev. dr. civ. 2007, 1740 Kessedjian, Party Autonomy and Characteristic Performance in the Rome Convention and the Rome I Proposal, in: Basedow/Baum/Nishitani (eds.), Japanese and European Private International Law in Comparative Perspective (2008), p. 105 Klumb, Teilrechtswahl in standardisierten Kreditverträgen, ZBB 2012, 449 Kodek, Praktische und theoretische Anforderungen an die Rechtswahl, in: Verschraegen (ed.), Rechtswahl (2010), p. 85 Kötz, Der Einfluss des Common Law auf die internationale Vertragspraxis, in: FS Andreas Heldrich (2005), p. 771 Christian Kohler, L’autonomie de volonté en droit

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Rome I Regulation international privé: un principe universel entre libéralisme et étatisme, RdC 359 (2012), 285 Koloseus, Begrenzungen der Rechtswahl insbesondere durch den ordre public, in: Verschraegen (ed.), Rechtswahl (2010), p. 33 Kondring, “Der Vertrag ist das Recht der Parteien” – Zur Verwirklichung des Parteiwillens durch nachträgliche Teilsrechtswahl, IPRax 2006, 425 Kondring, Nichtstaatliches Recht als Vertragsstatut vor staatlichen Gerichten – oder: Privatkodifikationen in der Abseitsfalle?, IPRax 2007, 241 Kondring, Flucht vor dem deutschen AGB-Recht bei Inlandsverträgen, RIW 2010, 184 Heiko Krüger, Rechtseinheit von unten? (2005) Kühn, Internationales Vertragsrecht und Rechtswahl, in: Spickhoff (ed.), Symposium Parteiautonomie im Europäischen Internationalen Privatrecht (2014), p. 9 Kühne, Die Parteiautonomie zwischen kollisionsrechtlicher und materiellrechtlicher Gerechtigkeit, in: Liber amicorum Gerhard Kegel (2002), p. 65 Lando, Some Issues Relating to the Law Applicable to Contractual Obligations, (1996) 7 King’s College L.J. 55 Lando, Choice of Lex Mercatoria, in: Mélanges en l’honneur de Hélène Gaudemet-Tallon (2008), p. 747 Lando, Principles of Contract Law as the Applicable Law and as Incorporation, in: FS Willibald Posch zum 70. Geburtstag (Wien 2012), p. 393 Matthias Lehmann, Liberating the Individual from Battles between States: Party Autonomy in Conflict of Laws, 41 Vand. J. Trans. L. 381 (2008) Leible, Parteiautonomie im IPR – Allgemeines Anknüpfungsprinzip oder Verlegenheitslösung?, in: FS Erik Jayme (2004), p. 485 Leible, Rechtswahl, in: Ferrari/Leible (eds.), Ein neues Internationales Vertragsrecht für Europa (2007), p. 41 Leible, Choice of the Applicable Law, in: Cashin Ritaine/Bonomi (éds.), Le nouveau règlement européen “Rome I” relative aux obligations contractuelles (2008), p. 61 Leible, La importancia de la autonomía conflictual para el futuro del derecho de los contratos internacionales, Cuad. der. trans. 3 (1) (2011), 214 Lischek/Mahnken, Vertragsverhandlungen zwischen Unternehmen und AGB – Anmerkungen aus der Sicht der Praxis, ZIP 2007, 158

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Chapter II: Uniform Rules Livingstone, Party Autonomy in International Commercial Arbitration: Popular Fallacy or Proven Fact?, (2008) 25 J. Int. Arb. 529 Loquin, Rome I et les principes et règles de droit materiel international des contrats, in: Corneloup/ Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 119 Egon Lorenz, Die Rechtswahlfreiheit im internationalen Schuldvertragsrecht – Grundsätze und Grenzen, RIW 1987, 569 Egon Lorenz, Die Auslegung schlüssiger und ausdrücklicher Rechtswahlerklärungen im internationalen Schuldvertragsrecht, RIW 1992, 697 Low, A Psychology of Choice of Laws, [2013] Eur. Bus. L. Rev. 363 De Ly, Choice of Law Clauses, UNIDROIT Principles of International Commercial Contract and Article 3 Rome Convention: The Lex Mercatoria before Domestic Courts or Arbitration Privilege?, in: Études offertes à Barthélmy Mercadal (2002), p. 133 Mäsch, Rechtswahlfreiheit und Verbraucherschutz (1993) Magnus, Fremdsprachige Verträge unter deutschem Vertragsstatut – Auslegungsregeln für internationale Verträge, in: FS Ingeborg Schwenzer (2011), p. 1153 Mahieu, La clause Paramount dans les contrats maritimes, Rev. dr. transp. Octobre-NovembreDécembre 2013, p. 46 Mallmann, Rechtswahlklauseln unter Ausschluss des IPR, NJW 2008, 2953 Mankowski, Nationale Erweiterungen der Rechtswahl im neuen Internationalen Versicherungsvertragsrecht, VersR 1993, 154 Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht (1995) (cited by author’s name only) Mankowski, Internationales Rückversicherungsrecht, VersR 2002, 1177 Mankowski, Überlegungen zur sach- und interessengerechten Rechtswahl in Verträgen des internationalen Wirtschaftsverkehrs, RIW 2003, 2 Mankowski, Stillschweigende Rechtswahl und wählbares Recht, in: Stefan Leible (ed.), Das Grünbuch zum Internationalen Vertragsrecht (2004), p. 63 Mankowski, Internationale Zuständigkeit und an-

Peter Mankowski

Article 3 wendbares Recht – Parallelen und Divergenzen, in: FS Andreas Heldrich (2005), p. 867 Mankowski, Deutsches Recht im türkischen Basar? – Oder. Grundsatzfragen des internationalen Verbraucherschutzes in der Bewährung am konkreten Fall, in: FS Tuğrul Ansay (2006), p. 189 Mankowski, Rechtswahl und Gerichtsstandsvereinbarung im Lichte der Spieltheorie, in: FS Hans-Bernd Schäfer (2008), p. 369 Mankowski, CFR und Rechtswahl, in: SchmidtKessel (ed.), Der Common Frame of Reference (2009), p. 391 Mankowski, Dépeçage unter der Rom I-VO, in: FS Ulrich Spellenberg (2010), p. 261 Mankowski, Rom I-VO und Schiedsverfahren, RIW 2011, 30 Mankowski, Interessenpolitik und europäisches Kollisionsrecht (2011) Mankowski, Besondere Arten der Rechtswahl in Verträgen, in: FS Dieter Martiny (2014), p. 449 Mankowski, Rechtswahlklauseln in Luftbeförderungs-AGB auf dem Prüfstand, RRa 2014, 118 Mankowski, Rechtswahlklauseln in Verbraucherverträgen – keine einfache Sache, in: FS Wulf-Henning Roth (2015), p. 363 Mankowski, Stillschweigende Rechtswahl, Günstigkeitsvergleich und Anknüpfung von Kündigungsschutzrecht im Internationalen Arbeitsvertragsrecht, IPRax 2015, 309 Mankowski, Verbandsklagen, AGB-Recht und Rechtsanwaltsklauseln in Verbraucherverträgen, NJW 2016, 2705 Mansel, Parteiautonomie, Rechtsgeschäftslehre der Rechtswahl und Allgemeiner Teil des europäischen Kollisionsrechts, in: Leible/Unberath (eds.), Brauchen wir eine Rom 0-Verordnung? (2013), p. 241 Marrella, Autonomia privata e contratti internazionali, in: Sicchiero (a cura di), Autonomia contrattuale e diritto europeo (2005), p. 217 Marrella, Autonomia privata e contratti internazionali, Contratto e impresa/Europa 2003, 823 Marrella, Prime nota circa la scelta del diritto applicabile di regolamento “Roma I”, in: Franzina (a cura di), La legge applicabile ai contratti nella proposta di regolamento “Roma I” (2006), p. 28 Marrella, Funzione e oggetto dell’autonomia della volontà nell’era della globalizzazione del contratto, in: Boschiero (a cura di), La nuova disciplina

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Article 3 comunitaria della legge applicabile ai contratti (Roma I) (2009), p. 15 Martiny, Common Frame of Reference und Internationales Vertragsrecht, ZEuP 2007, 212 Martiny, Die Haager Principles on Choice of Law in International Commercial Contracts, RabelsZ 79 (2015), 624 Maultzsch, Rechtswahl und ius cogens im Internationalen Schuldvertragsrecht, RabelsZ 75 (2011), 60 Pierre Mayer, Réflexions sur la notion de contrat international, in: Mélanges en l’honneur de Pierre Tercier (2008), p. 873 McConnaughay, The Scope of Autonomy in International Contracts and Its Relation to Economic Regulation and Development, 39 Columb. J. Trans. L. 595 (2001) Meira Moser, Parties’ Preferences on International Sales Contracts: An Empirical Analysis of the Choice of Law, Unif. L. Rev. 2015, 21 Meira Moser, Global empirical survey on choice of law, Rev. Arb. Med. 47 (2015), 195 Merkt, Investitionsschutz durch Stabilisierungsklauseln (1990) Meyer-Sparenberg, Rechtswahlvereinbarungen in Allgemeinen Geschäftsbedingungen, RIW 1989, 347 Michaels, Privatautonomie und Privatkodifikation, RabelsZ 62 (1998), 580 Michaels, Non-State Law in the Hague Principles on Choice of Law in International Commercial Contracts, in: Liber amicorum Hans-W. Micklitz (Berlin/ Heidelberg 2014), p. 43 Michou, L’articulation, en pratique, entre la clause de choix de loi applicable et la clause relative à la compétence internationale (clause attributive de jurisdiction ou clause compromissoire), in: Corneloup/ Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 97 Mills, The Confluence of Public and Private International Law, Cambridge 2009 Mitterer, Die stillschweigende Wahl des Obligationsstatuts nach der Neufassung des EGBGB vom 1.9. 1986 (1993) Möll, Kollidierende Rechtswahlklauseln in Allgemeinen Geschäftsbedingungen im Internationalen Vertragsrecht (2012) Möllenhoff, Nachträgliche Rechtswahl und Rechte Dritter (1993)

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Rome I Regulation Morse, Choice of Law, Territoriality and National Law: The Case of Employment, in: Mélanges en l’honneur de Hélène Gaudemet-Tallon (2008), p. 763 Muir Watt, Le principe d’autonomie entre libéralisme et néo-libéralisme, in: Fallon/Lagarde/PoillotPeruzzetto (éds.), La matière civile et commerciale, socle d’un code européen de droit international privé (2009), p. 77 Peruzzetto, “Party Autonomy” in International Contracts: From the Making of a Myth to the Requirements of Global Governance, ECRL 2010, 250 Peruzzetto, Les limites du choix: dispositions imperatives et internationalité du contrat, in: Corneloup/ Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 341 Neels, The Nature, Objective and Purposes of the Hague Principles on Choice of Law in International Commercial Contracts, YBPIL 15 (2012/13), 45 Nourissat, Le dépeçage, in: Corneloup/Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 205 Nygh, The Reasonable Expectations of the Parties as a Guide to the Choice of Law in Contract and Tort, Rec. des Cours 251 (1995), 269 Nygh, Autonomy in International Contracts (1999) O’Brien, Choice of Law under the Rome Convention: the Dancer or the Dance?, [2004] LMCLQ 375 Ömür, Rechtswahl als Rechtsgeschäft (2016) Ofner, Voraussetzungen für das Vorliegen von schlüssiger Rechtswahl und Geltungsannahme, ZfRV 1995, 149 Oschmann, Faktische Grenzen der Rechtswahl, in: FG Otto Sandrock (2005), p. 25 Oser, The UNIDROIT Principles of International Commercial Contracts: A Governing Law? (Leiden 2008) Ostendorf, Wirksame Wahl ausländischen Rechts auch bei fehlendem Auslandsbezug im Fall einer Schiedsgerichtsvereinbarung und ausländischem Schiedsort?, SchiedsVZ 2010, 234 Ostendorf, Die Wahl des auf internationale Wirtschaftsverträge anwendbaren Rechtsrahmens im Europäischen Kollisionsrecht: Rechtswahlklauseln 2.0, IHR 2012, 177 Pauknerová, The “Contrat sans loi” in Czech and

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Chapter II: Uniform Rules European Private International Law, in: Liber amicorum Hélène Gaudemet-Tallon (2008), p. 775 Penadés Fons, Elección tacita de ley en los contratos internacionales (2012) Penadés Fons, Commercial Choice of Law in Context: Looking Beyond Rome, (2015) 78 Mod. L. Rev. 241 Pertegás, Hague Principles on Choice of Law in International Contracts, in: Essays in Honour of Michael Bogdan (Lund 2013), p. 461 Pertegás/Brooke Adele Marshall, Party Autonomy and Its Limits: Convergence through the New Hague Principles on Choice of Law in International Contracts, 39 Brooklyn J. Int’l. L. 975 (2014) Petsche, The Application of Transnational Law (Lex Mercatoria) by Domestic Courts, (2014) 10 JPrIL 489 Pfeiffer, Flucht ins schweizerische Recht?, in: FS Friedrich Graf v. Westphalen (2010), p. 555 Pfeiffer, Die Haager Prinzipien des internationalen Vertragsrechts – Ausgewählte Aspekte aus der Sicht der Rom I-VO, in: FS Ulrich Magnus (2014), p. 501 Pfeiffer, Rechtswahlvereinbarung und Transparenzkontrolle, in: FS Egon Lorenz zum 80. Geb. (2014), p. 843 Pfeiffer, AGB-Kontrolle von Rechtswahlvereinbarungen und Fehlverständnisse beim Günstigkeitsvergleich, IPRax 2015, 320 Pfütze, Die Inhaltskontrolle von Rechtswahlvereinbarungen im Rahmen der Verordnungen Rom I bis III, ZEuS 2011, 35 Pierce, Post-Formation Choice of Law in Contract, (1987) 50 Mod. L. Rev. 174 Pillai/Glover, ISDA Master Agreement: party choice versus non-derogable state law, [2016] BJIBFL Y01 Pillet/Boskovic, Rome I, choix de la loi et compatibilité avec la chari’a, in: Corneloup/Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 173 Pörnbacher/Sebastian Baur, Rechtswahl und ihre Grenzen in der internationalen Schiedsgerichtsbarkeit, in: FS Rolf A. Schütze zum 80. Geb. (2014), p. 431 Poillot-Peruzzetto, Le choix de loi dans les contrats internationaux et la construction européenne, in: Corneloup/Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 35

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Article 3 Pommier, Principe d’autonomie et loi du contrat en droit international privé conventionelle (1992) Posenato, Autonomia della volontà e scelta delle legge applicabile ai contratti nel sistemi giuridici latino-americani (2010) Prebble, Choice of Law to Determine the Validity and Effects of Contract, 58 Cornell L. Rev. 433 (1973) Püls, Parteiautonomie (1996) Radicati di Brozolo, Non-National Rules and Conflicts of Laws: Reflections in Light of the UNIDROIT and Hague Principles, RDIPP 2012, 841 Rasmussen-Bonne, Alternative Rechts- und Forumwahlklauseln (1999) Ravillon, La recherche de la sécurité juridique: la stipulation quasi systématique d’une clause de choix de la loi applicable, in: Corneloup/Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 67 Reimann, Was ist wählbares Recht?, in: Verschraegen (ed.), Rechtswahl (2010), p. 1 Reinhart, Zur nachträglichen Änderung des Vertragsstatuts nach Art. 27 Abs. 2 EGBGB durch Parteivereinbarung, IPRax 1995, 365 Renner, Zwingendes transnationales Recht (2011) Riedl, Vereinheitlichung des Privatrechts in Europa – Wissenschaftliche Initiativen im Prozess der Privatrechtseuropäisierung (2004) Riesenhuber, Die konkludente Rechtswahl im Arbeitsvertrag, DB 2005, 1571 Rinze, The Scope of Party Autonomy under the 1980 Rome Convention on the Law Applicable to Contractual Obligations, [1994] JBL 412 Romano, Le choix des Principes UNIDROIT par les contractants à l’épreuve des dispositions impératives, Clunet 134 (2007), 473 Wulf-Henning Roth, Zur Wählbarkeit nichtstaatlichen Rechts, in: FS Erik Jayme (2004), p. 757 Wulf-Henning Roth, Zur stillschweigenden Rechtswahl in einem zukünftigen EU-Gemeinschaftsinstrument über das Internationale Schuldvertragsrecht, in: FS Apostolos Georgiades (2005), p. 905 Wulf-Henning Roth, Handelsvertretervertrag und Rom I-Verordnung – Eine Skizze, in: FS Ulrich Spellenberg (2010), p. 309 Wulf-Henning Roth, Rechtswahlklauseln in Verbraucherverträgen – eine schwierige Sache?, IPRax 2013, 515 Wulf-Henning Roth, Informationspflichten über das

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Article 3 anwendbare Recht, in: FS Dieter Martiny (2014), p. 543 Rozehnalová/Valdhans, A Few Observations on Choice of Law, Czech Yb. Int. L. 1 (2010), 3 Christiane Rühl, Rechtswahlfreiheit und Rechtswahlklauseln in Allgemeinen Geschäftsbedingungen (1999) Giesela Rühl, Party Autonomy in the Private International Law of Contracts: Transatlantic Convergence and Economic Efficiency, in: Gottschalk/Michaels/Giesela Rühl/von Hein (eds.), Conflict of Laws in a Globalized World (2007), p. 153 Giesela Rühl, Rechtswahlfreiheit im europäischen Kollisionsrecht, in: FS Jan Kropholler (2008), p. 187 Giesela Rühl, Choice of Law by the Parties, in: Basedow/Hopt/Zimmermann/Stier (eds.), Max Planck Encyclopedia of European Private Law (2012), p. 190 Rugullis, Die Rechtswahl nach Art. 27 Abs. 1 EGBGB – Sachnorm- oder Gesamtverweisung, ZvglRWiss 106 (2007), 217 Sambugaro, What “Law” to Choose for International Contracts?, EuLF 2008, I-126 Friederike Sandrock, Die Vereinbarung eines “neutralen” internationalen Gerichtsstands (1997) Otto Sandrock, “Versteinerungsklauseln” in Rechtswahlvereinbarungen für internationale Handelsverträge, in: FS Stefan Riesenfeld (1983), p. 211 Otto Sandrock, Rück- und Weiterverweisungen im internationalen Schuldvertragsrecht, in: FS Gunther Kühne, 2009, p. 881 Saravalle, Clausole con scelta di legge variabile e Convenzione di Roma del 1980, RDIPP 1995, 17 Sbordone, La scelta detta legge applicable al contratto (2003) Schaack, Zu den Prinzipien der Parteiautonomie im deutschen und französischen Rechtsanwendungsrecht (1990) Schack, Rechtswahl im Prozeß?, NJW 1984, 2736 Schack, Keine stillschweigende Rechtswahl im Prozeß!, IPRax 1986, 272 Friederike Schäfer, Die Wahl nichtstaatlichen Rechts nach Art. 3 Abs. 2 des Entwurfs einer Rom I-VO, GPR 2006, 54 Schacherreiter/Thiede, Ingmar und Unamar, ÖJZ 2015, 598 Maxi Scherer, Le choix implicite dans les jurisprudences nationales: vers une interprétation uniforme du Règlement Rome I? – L’exemple du choix tacite

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Rome I Regulation résultant des clauses attributives de jurisdiction et d’arbitrage, in: Corneloup/Joubert (dir.), Le Règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 253 Schilf, Allgemeine Vertragsregeln als Vertragsstatut (2005) Johannes Schilling, Eingriffsnormen im europäischen Richtlinienrecht, ZEuP 2014, 843 Schinkels, Die (Un-)Zulässigkeit einer kollisionsrechtlichen Wahl der Unidroit Principles nach Rom I: Wirklich nur eine Frage der Rechtspolitik?, GPR 2007, 106 Schinkels, “Horizontalrichtlinie” und kollisionsrechtlicher Verbraucherschutz – Zugleich ein Beitrag zum Verhältnis von Artt. 3 Abs. 4 und 6 Abs. 2 Rom I-VO, in: Michael Stürner (ed.), Vollharmonisierung im Europäischen Verbraucherrecht? (2010), p. 113 Schmeding, Zur Bedeutung der Rechtswahl im Kollisionsrecht, RabelsZ 41 (1977), 299 Christof Schneider/Korn, Die Auswirkungen des neuen Kostenrechts auf Rechtswahlklauseln in M & A-Transaktionen, WM 2015, 62 Jochen Schröder/Wenner, Internationales Vertragsrecht (2nd ed. 1998) Schütze, Rechtswahl- und Gerichtsstandsvereinbarung bei equal bargaining power der Parteien, in: GS Manfred Wolf (2011), p. 551 Schwander, Zur Rechtswahl im IPR des Schuldvertrages, in: FS Max Keller (Zürich 1989), p. 473 Schwander, Subjektivismus in der Anknüpfung im internationalen Privatrecht, in: Études de droit international en l’honneur de Pierre Lalive (1993), p. 181 Schwander, Kollisionsrechtliche Rechtswahl und Vertrag, in: FS Eugen Bucher zum 80. Geb. (2009), p. 711 Schwander, Rechtswahl im Spannungsfeld zwischen Kollisionsrecht und Sachrecht, in: FS Ingeborg Schwenzer (2011), p. 1581 Schwartze, Weltweit einheitliche Standards für die Wahl des Vertragsstatuts – Anwendungschancen und Anwendungsbereich der Hague Principles on Choice of Law in International Contracts, in: FS Christian Kirchner (2014), p. 315 Schweinoch, Rechtswahl in Allgemeinen Geschäftsbedingungen – Vernunft oder Unvernunft?, in: Liber amicorum Jochen Schneider (2008), p. 62

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Chapter II: Uniform Rules Schwenzer/Tebel, Das Wort ist nicht genug – Schieds-, Gerichtsstands- und Rechtswahlklauseln unter dem CISG, in: FS Ulrich Magnus (2014), p. 319 Sendmeyer, The Freedom of Choice in European Private International Law. An Analysis of Party Autonomy in the Rome I and Rome II Regulation, Contratto e impresa/Europa 2009, 792 Siehr, Vertrauensschutz im IPR, in: FS Claus-Wilhelm Canaris, vol. II (2007), p. 815 Siehr, International Contracts, Party Autonomy and Mandatory Rules, RHDI 67 (2014), 801 Spickhoff, Internationales Handelsrecht vor Schiedsgerichten und staatlichen Gerichten, RabelsZ 56 (1992), 116 Spickhoff, Nachträgliche Rechtswahl – Interlokales und Intertemporales Privatrecht, Form, Rückwirkung und Beweislast, IPRax 1998, 462 Spickhoff, Die Rechtswahl und ihre Grenzen unter der Rom I-VO, in: Kieninger/Remien (eds.), Europäische Kollisionsrechtsvereinheitlichung (2012), S. 117 Spickhoff, Reichweite und Grenzen der Rechtswahl im internationalen Schuld- und Sachenrecht, in: Spickhoff (ed.), Symposium Parteiautonomie im Europäischen Internationalen Privatrecht (2014), p. 29 Hans-Jörg Stadler, Allgemeine Geschäftsbedingungen im internationalen Handel (2003) Stankewitsch, Entscheidungsnormen im IPR als Wirksamkeitsvoraussetzungen der Rechtswahl (2003) Stein, The Drafting of Effective Choice-of Law Clauses, J. Int. Arb. 8 (1991), 69 Stein, Lex mercatoria – Realität und Theorie (1995) Steiner, Die stillschweigende Rechtswahl im Prozeß im System der subjektiven Anknüpfungen im deutschen internationalen Privatrecht (1998) Steinle, Konkludente Rechtswahl und objektive Anknüpfung nach altem und neuem deutschem Internationalem Vertragsrecht, ZvglRWiss 93 (1994), 300 Stoll, Rechtliche Inhaltskontrolle bei internationalen Handelsverträgen, in: FS Gerhard Kegel zum 75. Geb. (1987), p. 623 Stoll, Das Statut der Rechtswahlvereinbarung – eine irreführende Konstruktion, in: FS Anton Heini (1995), p. 429 Symeonides, Party Autonomy in Rome I and II from

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Article 3 a Comparative Perspective, in: Liber amicorum Kurt Siehr (2010), p. 513 Symeonides, L’autonomie de la volonté dans les principes de La Haye sur le choix de la loi applicable en matière de contrats internationaux, RCDIP 102 (2013), 807 Symeonides, Party Autonomy and the Lex Limitativa, in: Essays in Honour of Spyridon Vl. Vrellis (2014), p. 909 Tassikas, Dispositives Recht und Rechtswahlfreiheit als Ausnahmebereiche der EG-Grundfreiheiten (2004) Thiede, Die Rechtswahl in den Römischen Verordnungen, in: Verschraegen (ed.), Rechtswahl (2010), p. 51 Thüsing, Rechtswahlklauseln, in: Graf v. Westphalen (ed.), Vertragsrecht und AGB-Klauselwerke (28th ed. 2010) Thüsing/Kroh, Rechtswahlklauseln nach Inkrafttreten der Rom I-VO, ZGS 2010, 346 Stefan Tiedemann, Kollidierende AGB-Rechtswahlklauseln im österreichischen und deutschen IPR, IPRax 1991, 424 Tillmann, The Relationship Between Party Autonomy and the Mandatory Rules in the Rome Convention, [2002] JBL 45 Tomaszewski, La désignation, postérieur à la conclusion du contrat, de la loi qui le régit, RCDIP 61 (1972), 599 Triebel, The Choice of Law in Commercial Relations – A German Perspective, (1988) 37 ICLQ 935 Vander Elst, Liberté, respect et protection de la volonté en droit international privé, in: Hommage à François Rigaux (1993), p. 507 de Vareilles-Sommières, Autonomie substantielle et autonomie conflictuelle en droit international privé, in: Mélanges Pierre Mayer (2015), p. 869 Veltins, Umfang und Grenzen von Rechtswahlklauseln, JbPraxSch 3 (1989), 126 Verschraegen, Kritische Bestandsaufnahme zur Rechtswahl, in: Verschraegen (ed.), Rechtswahl (2010), p. 111 Vidmar, Rechtswahlklauseln und deren Formulierung im internationalen Schuldvertragsrecht, ZfRV 2015, 219 Vinci, La “modernizzazione” della convenzione di Roma sulla legge applicabile alle obbligazioni con-

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Article 3 trattuali: la scelta del diritto applicabile, Contratto e impresa 2007, 1223 Vischer, The Relevance of the Unidroit Principles for Judges and Arbitrators in Disputes Arising out of Commercial Contracts, Eur. J. Leg. Reform 1 (1998/ 1999), 210 Vischer, Die kollisionsrechtliche Bedeutung der Wahl einer nichtstaatlichen Ordnung für den staatlichen Richter am Beispiel der Unidroit Principles on International Commercial Contracts, in: FS Peter Schlechtriem (2003), p. 445 Vogenauer/Hodges (eds.), Civil Justice Systems in Europe – Implications for Choice of Forum and Choice of Contract Law (2016) Volz, Harmonisierung des Rechts der individuellen Rechtswahl, der Gerichtsstandsvereinbarung und der Schiedsvereinbarung im Europäischen Wirtschaftsraum (EWR) (1993) Vonken, Een apologie voor een rechtskeuze van Principles; voorstel tot wijziging van artikel 3 lid 1 Rome I, NIPR 2014, 339 Rolf Wagner, Der Grundsatz der Rechtswahl und das mangels Rechtswahl anwendbare Recht (Rom I-Verordnung), IPRax 2008, 377 Wałachowska, Wybór prawa właściwego a interesy osób trzecich, in: Księga dedykowana Profesorowi Dieterowi Martiny (2014), p. 367 Walsh, The Uses and Abuses of Party Autonomy in International Contracts, (2010) 60 U. N. Br. L.J. 12 Martina Walter, Rechtswahlklauseln, in: Ostendorf/ Kluth (eds.), Internationale Wirtschaftsverträge (2013), p. 393 (§ 13) Sandra Wandt, Rechtswahlregelungen im Europäischen Kollisionsrecht (2014) Wautelet, Weg met de impliciete rechtskeuze!, in: Liber amicorum Johan Erauw (2014), p. 305 Wegner, Überseekauf im Agrarhandel (2013) Wengler, Allgemeine Rechtsgrundsätze als wählbares Geschäftsstatut?, ZfRV 1982, 11 Wengler, IPR-Rechtsnormen und Wahl des Vertragsstatuts (1991) Wengler, Rechtswahl unter Zwang, in: Mélanges Pierre Lalive (1993), p. 211 Wenner, Rechtswahlblüten, in: FS Ulrich Werner (2005), p. 39 Werlauff, International Contracts – The UNIDROIT Principles as an Alternative to Clauses on Governing Law (København 2013)

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Rome I Regulation Wetzler, Rechtswahl im deutschen Recht, in: Dach (ed.), Rechtswahlklauseln (2005), p. 1 Wichard, Die Anwendung der UNIDROIT-Prinzipien für internationale Handelsverträge durch Schiedsgerichte und staatliche Gerichte, RabelsZ 60 (1996), 269 Wiener Vertragshandbuch (2006) Windmöller, Die Vertragsspaltung im Internationalen Privatrecht des EGBGB und des EGVVG (2000) Woitge, Die Wählbarkeit nichtstaatlichen Rechts im Recht der EU (2015) Manfred Wolf, Auslegung und Inhaltskontrolle von AGB im internationalen kaufmännischen Verkehr 153 (1989), 300 Lutz Christian Wolff, The Law of Cross-Border Business Transactions (Alphen aan den Rijn 2013) Wolfgang, Stabilization Clauses in State Contracts, RDAI 1988, 875 Yeo, Breach of Agreements on Choice of Law, [2010] LMCLQ 194 Yüksel, The Relevance of the Rome I Regulation to International Commercial Arbitration in the European Union, (2011) 7 JPrIL 149 Zhang, Party Autonomy and Beyond: An International Perspective of Contractual Choice of Law, 20 Emory Int’l. L. Rev. 511 (2006) Zhang, Contractual Choice of Law in Contracts of Adhesion and Party Autonomy, 41 Akron L. Rev. 123 (2008). II. Choice of law and the economic analysis of law Basedow, Lex Mercatoria and the Private International Law of Contracts in Economic Perspective, in: Basedow/Kono (eds.), An Economic Analysis of Private International Law (2006), p. 57 Basedow, Lex Mercatoria und Internationales Schuldvertragsrecht, in: FS Norbert Horn (2006), p. 229 Basedow, Lex Mercatoria and the Private International Law of Contracts in Economic Perspective, in: Libro homenaje al profesor Santiago Benadava, tomo II (2008), p. 43 Basedow, Lex mercatoria e diritto internazionale private dei contratti: una perspettiva economica, in: Liber Fausto Pocar (2009), p. 55 Basedow/Kono (eds.), An Economic Analysis of Private International Law (2006)

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Chapter II: Uniform Rules Carrascosa González, Conflicto de leyes y teoría económica (2011) de Araujo, Uma visão econômica do Direito Internacional Privado – contractos internacionais e autonomia da vontade, in: Libro homenaje a Roberto Ruiz Díaz Labrano (Asunción 2013), p. 205 Druzin, Buying Commercial Law: Choice of Law, Choice of Forum, and Network Externalities, 18 Tulane J. Int’l. & Comp. L. 131 (2009) Eidenmüller, Effizienz als Rechtsprinzip (3th ed. 2005) Eidenmüller, Recht als Produkt, JZ 2009, 641 Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Portland, Oreg./Baden-Baden 2013) Eisenberg/Geoffrey P. Miller, The Flight to New York: An Empirical Study of Choice of Law and Choice of Forum Clauses in Publicly-Held Companies’ Contracts, 30 Cardozo L. Rev. 1475 (2009) Engert, Networks and Lemons in the Market for Contract Law, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Portland, Oreg./Baden-Baden 2013), p. 304 Kagami, The Systematic Choice of Legal Rules for Private International Law: An Economic Approach, in: Basedow/Kono (eds.), An Economic Analysis of Private International Law (2006), p. 15 Christoph A. Kern, Wettbewerbsverzerrungen im Wettbewerb der Rechtsordnungen – Die vergessene Kehrseite der Medaille, GreifRecht 2014, 114 Kieninger, Wettbewerb der Privatrechtsordnungen im europäischen Binnenmarkt (2002) Kieninger, Europäische Vertragsrechtsvereinheitlichung aus rechtsökonomischer Sicht, in: FS HansBernd Schäfer (2008), p. 352 Kirchner, An Economic Analysis of Choice-of-Law and Choice-of-Forum Clauses, in: Basedow/Kono (eds.), An Economic Analysis of Private International Law (2006), p. 33 Matthias Lehmann, Liberating the Individual from Battles between States: Party Autonomy in Conflict of Laws, 41 Vand. J. Trans. L. 381 (2008) Mankowski, Europäisches Internationales Privatund Prozessrecht im Lichte der ökonomischen Analyse, in: Claus Ott/Hans-Bernd Schäfer (eds.), Vereinheitlichung und Diversität des Zivilrechts in transnationalen Wirtschaftsräumen (2002), p. 118

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Article 3 Mankowski, Rechtswahl und Gerichtsstandsvereinbarung im Lichte der Spieltheorie, in: FS Hans-Bernd Schäfer (2008), p. 369 Mankowski, Interessenpolitik und europäisches Kollisionsrecht (2011) Michaels, Economics of Law as Choice of Law, 71 L. & Contemp. Prbls. 73 (2008) Muir Watt, Aspects économiques du droit international privé, Rec. des Cours 307 (2004), 29 Muir Watt, “Party Autonomy” in International Contracts: From the Making of a Myth to the Requirements of Global Governance, ECRL 2010, 250 Muir Watt, La fonction économique du droit international privé, Rev. int. dr. écon. 2010, 103 O’Hara, Opting Out of Regulation: A Public Choice Analysis of Contractual Choice of Law, 53 Vand. L. Rev. 1551 (2000) O’Hara/Ribstein, Interest Groups, Contracts and Interest Analysis, 48 Mercer L. Rev. 765 (1997) O’Hara, From Politics to Efficiency in Conflicts of Law, 67 U. Chi. L. Rev. 1151 (2000) O’Hara, Conflict of Laws and Choice of Law, in: Bouckaer/De Geest (eds.), Encyclopedia of Law and Economics, Vol. V: The Economics of Crime and Litigation (2000), p. 631 O’Hara, The Law Market (Oxford 2009) Ortiz Vidal, Ley aplicable a los contratos internacionales y eficiencia conflictual (2014) Parisi/Ribstein, Choice of Law, in: Newman (ed.), The New Palgrave Dictionary of Law and Economics, vol. I (1998), p. 236 Reps, Rechtswettbewerb und Debt Governance bei Anleihen (2015) Ribstein, Chosing Law by Contract, 18 J. Corp. L. 245 (1993) Ribstein, From Efficiency to Politics in Contractual Choice of Law, 37 Ga. L. Rev. 363 (2003) Giesela Rühl, Methods and Approaches in Choice of Law: An Economic Perspective, 24 Berkeley J. Int’l. L. 801 (2006) Giesela Rühl, Party Autonomy in the Private International Law of Contracts: Transatlantic Convergence and Economic Efficiency, in: Gottschalk/Michaels/Giesela Rühl/von Hein (eds.), Conflict of Laws in a Globalized World (2007), p. 153 Giesela Rühl, Statut und Effizienz (2012) Giesela Rühl, Regulatory Competition in Contract

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Article 3 Law: Empirical Evidence and Normative Implications, ERCL 2013, 61 Giesela Rühl, The Choice of Law Framework for Efficient Regulatory Competition in Contract Law, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/ Oxford/Baden-Baden 2013), p. 287 Giesela Rühl, Wettbewerb der Rechtsordnungen im Vertragsrecht: Wunsch oder Wirklichkeit?, in: FS Christian Kirchner (2014), p. 975 Schäfer/Lantermann, Choice of Law from an Economic Perspective, in: Basedow/Kono (eds.), An Economic Analysis of Private International Law (2006), p. 87 Schmidtchen, Territorialität des Rechts, Internationales Privatrecht und die privatautonome Regelung internationaler Sachverhalte, RabelsZ 59 (1995), 56 Schmidtchen/Schmidt-Trenz,Territoriality of the Law and the International Trade Game: Towards a New Institutional Economics of International Transactions, in: FS Rudolf Richter (2006), p. 327 Spagnolo, Green Eggs and Ham: The CISG, Path Dependence and the Behavioural Economics of Lawyers’ Choice of Law in International Sale Contracts, (2010) 6 JPrIL 417 Spagnolo, CISG Exclusion and Legal Efficiency (2014) Streit/Mangels, Privatautonomes Recht und grenzüberschreitende Transaktion, ORDO 47 (1996), 73 I.

II.

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Generalities 1. Party autonomy as the basic principle of the Rome I Regulation . . . . . . . . . . . . . . . 1 2. Influence of Directive 93/13/EC? . . . . . . 13 3. Infection by invalidity of a combined jurisdiction clause? . . . . . . . . . . . . . . . . . . . . . . 21 4. Economic justification of party autonomy a) Neo-classical law and economics . . . . . . 23 b) New institutional law and economics . 25 c) Behavioral Law and Economics . . . . . . . . 29 d) Game theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 e) Parties’ disinterest in the search for any “best law” . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 f) Inexistence of a “Law Market” or “Regulatory Competition” . . . . . . . . . . . . . . 42 Express choice of law 1. Generalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Rome I Regulation Vogenauer, Regulatory Competition through Choice of Contract Law and Choice of Forum in Europe: Theory and Evidence, ERPL 2013, 13 Vogenauer, Regulatory Competition through Choice of Contract Law and Choice of Forum in Europe: Theory and Evidence, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 227 Vogenauer/Weatherill, Eine empirische Untersuchung zur Angleichung des Vertragsrechts in der EG, JZ 2005, 870 Vogenauer, The European Community’s Competence to Pursue the Harmonisation of Contract Law – An Empirical Contribution to the Debate, in: Vogenauer/Weatherill (eds.), Harmonisation of European Contract Law: Implications for European Private Laws (2006), p. 105 Voigt, Are International Merchants Stupid? Their Choice of Laws Sheds Doubt on the Legal Origin Theory, 5 J. Empir. Leg. Stud. 1 (2008) Whincop/Keyes, Policy and Pragmatism in the Conflict of Laws (2001) Alexander J. Wulf, Institutional Comparison between Optional Codes in European Contract Law (Wiesbaden 2014).

2. Examples a) Examples for clear or acceptable drafting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 b) Elaborate Specimen Clause . . . . . . . . . . . . . 58 c) Minimalist Specimen Clause . . . . . . . . . . . 60 d) Further examples . . . . . . . . . . . . . . . . . . . . . . . . 62 e) Examples of bad drafting . . . . . . . . . . . . . . . 63 3. Petrification clauses . . . . . . . . . . . . . . . . . . . . . 79 4. Stabilisation clauses, fundamental changes in the chosen law and the doctrine of clausula rebus sic stantibus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 5. Choice of law for all obligations “arising out of the contract” or “arising out of the relation between the parties” a) Contractual obligation as basic requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

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III.

b) “Arising out of the relation between the parties” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 c) Other contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 88 aa) Umbrella agreements and executing contracts thereunder . . . . . . . . . . . . . . . . . . . . 89 bb) “Sister contracts” . . . . . . . . . . . . . . . . . . . . . . . . 91 cc) Previous or preceding contracts . . . . . . . . 94 d) Extension to claims in tort aa) Generalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 bb) Extension to claims in tort . . . . . . . . . . . . . . 98 cc) Claims in tort concurring with genuinely contractual claims . . . . . . . . . . . 99 dd) Claims in tort with a cause independent from the contract . . . . . . . 101 e) Extension to claims in unjust enrichment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 6. Exclusion of Art. 12 (2)? . . . . . . . . . . . . . . 103 Implicit or tacit choice of law . . . . . . . . . . . . 104 1. Exclusive jurisdiction clauses a) The impact of Recital (12) . . . . . . . . . . . . 115 b) Qui eligit forum vel iudicem eligit ius and the ensuing presumption . . . . 122 c) Conditions of a valid prorogation . . . 129 d) Non-exclusive choice of jurisdiction clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 2. Tacit choice of law by choosing an arbitral tribunal with specific local grounding a) Grounding of the arbitral tribunal in a certain legal order as fundamental condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 b) Types of arbitration clauses not carrying a choice of law . . . . . . . . . . . . . . . 138 c) No choice of law through an arbitral tribunal not specifically grounded in a certain legal order or through other modes of ADR . . . . . . . . . . . . . . . . . . . . . . . . . 141 d) No choice of law through other ADR clauses than arbitration clauses . . . . . . 142 3. Tacit choice of law by parties’ conduct in court proceedings . . . . . . . . 143 a) Principal-agent-conflict and the power of attorney . . . . . . . . . . . . . . . . . . . . . . 146 b) Modes of consensus . . . . . . . . . . . . . . . . . . . 150 c) Dangers inherent in a bias favouring the application of the lex fori . . . . . . . . . 153 d) Judicial duties . . . . . . . . . . . . . . . . . . . . . . . . . . 155

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4. References to rules or institutions of a certain law . . . . . . . . . . . . . . . . . . . . . . . . . 5. Agreement on a uniform place of performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Accordance established between the parties themselves or transaction structures a) Established business relations . . . . . . . . b) Transaction structures . . . . . . . . . . . . . . . . 7. “Construction Clauses” . . . . . . . . . . . . . . . 8. Further instances . . . . . . . . . . . . . . . . . . . . . . 9. Requirements as to parties’ mindsets and intentions . . . . . . . . . . . . . . . . . . . . . . . . . . Modes, types and objects of choice 1. Free choice of law a) Basic principle . . . . . . . . . . . . . . . . . . . . . . . . . b) Choice of a so-called “neutral” law . . c) Choice of the allegedly “most elaborate law”, market standard setting and network effects . . . . . . . . . . . d) Choice of the law of a “Transition State” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Choice of the law of a State not existing anymore . . . . . . . . . . . . . . . . . . . . . . f) Choice of a future law . . . . . . . . . . . . . . . . . g) Choice of the law of a not existing State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h) Choice of law under exclusion of PIL rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i) Conditional choice of law . . . . . . . . . . . . . j) Paramount Clauses . . . . . . . . . . . . . . . . . . . . k) Choice of federal law or choice of the law of a Member State . . . . . . . . . . . . l) Choice of conflict rules, in particular in Rules of Arbitration . . . . . . . . . . . . . . . . 2. “Choice” of non-State instruments a) Generalities and legislative history . . . aa) Legislative history . . . . . . . . . . . . . . . . . . . . . . bb) Conclusions from other conflict rules cc) Conclusions from Art. 20 . . . . . . . . . . . . . dd) Conclusions from other rules on parties’ choice of law . . . . . . . . . . . . . . . . . . ee) Black letter wording of Recital (13) . . b) PECL and PEICL . . . . . . . . . . . . . . . . . . . . . . c) UNIDROIT Principles . . . . . . . . . . . . . . . . d) ACQP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) DCFR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) CESL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

160 172

174 176 181 184 191

193 201

212 222 223 224 225 226 229 231 241 243 247 248 256 258 259 262 266 268 273 274 277

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102

g) Uniform Law as such . . . . . . . . . . . . . . . . . h) “International Law” . . . . . . . . . . . . . . . . . . . i) “European Law” . . . . . . . . . . . . . . . . . . . . . . . j) Religious Laws . . . . . . . . . . . . . . . . . . . . . . . . . aa) Sharia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Jewish Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . k) Private sets of rules (e.g. FIFA) . . . . . . l) Lex mercatoria or New Law Merchant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . m) Uniform usages of international commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n) General principles of law . . . . . . . . . . . . . o) Inexistence of “self-regulatory contracts” or “contrats sans lois” . . . . p) Negative choice of law . . . . . . . . . . . . . . . . q) INCOTERMS . . . . . . . . . . . . . . . . . . . . . . . . . . r) Codes of Conduct . . . . . . . . . . . . . . . . . . . . . s) Hague Principles on Choice of Law . 3. Partial choice of law a) Dépeçage as phenomenon . . . . . . . . . . . . b) Party autonomy and partial choice of law aa) General admissibility under (1) cl. 3 bb) Limits: severability of issues . . . . . . . . . . cc) Tacit partial choice . . . . . . . . . . . . . . . . . . . . dd) Consequences in the event of lacking severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Subsequent choice of law a) Generalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Formal validity and Art. 11 . . . . . . . . . . . c) Rights of third parties . . . . . . . . . . . . . . . . . d) Floating choice of law clauses . . . . . . . . e) Split choice of law clauses . . . . . . . . . . . . 5. Other types of specific choice of law clauses a) Hierarchical choice of law clauses aa) Principal remarks . . . . . . . . . . . . . . . . . . . . . . bb) Problems with defining the failure of the primary choice of law . . . . . . . . . . b) Choice of law dependent on the outcome of a coin toss or a lottery . . . c) Alternative choice of law clauses . . . . . Incorporation mechanism in purely domestic cases, (3) 1. Generalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rome I Regulation 282 284 286 287 288 292 293 294 301 302 305 308 309 310 311 313

315 317 326 327 328 338 340 344 361

367 369 372 373

374

2. Provisions which cannot be derogated from by agreement . . . . . . . . 378 3. Location of relevant elements . . . . . . . . 383 4. Application of the law initially chosen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 5. Proper choice of law or materiellrechtliche Verweisung as consequence? . . . . . . . . . . . . . . . . . . . . . . . . . . . 392 6. Relevant point of time . . . . . . . . . . . . . . . . 394 VI. “Intra-EU cases”, (4) 1. Generalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398 2. Relevant elements a) Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402 b) Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 3. “Member State” . . . . . . . . . . . . . . . . . . . . . . . . 405 4. Provisions of EU law a) Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407 b) No limitation to B2C contracts . . . . . . 411 5. Choice of the law of a Third State . . . 415 6. Relevant point of time . . . . . . . . . . . . . . . . 417 7. Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . 419 8. Relationship with still existing Directives in the field of PIL . . . . . . . . . 423 VII. “Bootstrap principle”, (5) 1. Generalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427 2. Object of regulation . . . . . . . . . . . . . . . . . . . 436 3. Fact of choice . . . . . . . . . . . . . . . . . . . . . . . . . . 439 4. No review of content as to substance 443 5. Reservations in favour of other Articles a) Reservation in favour of Art. 10 . . . . . . 459 b) Reservation in favour of Art. 11 . . . . . . 462 c) Reservation in favour of Art. 13 . . . . . . 467 6. Conflicting or colliding choice of law clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468 VIII. Extension to third parties 1. General remarks . . . . . . . . . . . . . . . . . . . . . . . 478 2. Cases of a possible extension to third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479 3. Overarching transactions . . . . . . . . . . . . . 481 4. Tortious conduct by third parties . . . . 483 5. Multipartite contracts . . . . . . . . . . . . . . . . . 484 IX. Remedies for breach of a choice of law agreement 1. Contractual arena . . . . . . . . . . . . . . . . . . . . . . 485 2. State liability for incorrect judicial application of the Rome I Regulation 491

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I. Generalities 1. Party autonomy as the basic principle of the Rome I Regulation Party autonomy and the parties’ freedom to choose the law applicable to their contract are 1 the very fundament of, and at the core, of the Rome I Regulation.1 Recital (11) enshrines that: (11) The parties’ freedom to choose the applicable law should be one of the cornerstones of the system of conflict-of-law rules in matters of contractual obligations. In particular, they are the cornerstone of legal Regulation of cross-border commercial 2 transactions.2 The ECJ has correctly3 pointed out that the quality of this cornerstone has been elevated from “a” cornerstone to “the” cornerstone.4 The outcome of conflict-of-laws issues primarily concerns individuals, not states.5 Parties are believed to know best what might be appropriate for their contract. The percentage of contracts which are subject to ICC arbitration and contain a choice of law clause reached an overwhelming 87 % in 2008,6 88 % in 2009,7 84 % in 2011,8 88 % in 2012,9 90 % in 2013,10 and 84 % in 201411 plus a vast majority in 2010.12 Party autonomy is some kind of common denominator regardless of the parties’ nationality.13 To describe party autonomy as “a shorthand expression for the principle that parties to a multistate contract should be allowed, within certain parameters and limitations, to agree in advance on which State’s law will govern the contract”14 is correct, but seems too modest and does not mark the importance of the institution clearly enough. A liberal legal order does not see any necessity for general intervention. Else it would militate 3 against its own basic approach.15 Party autonomy can claim footing in human rights and 1 2

3 4

5 6 7 8 9 10 11 12 13 14 15

See only Ringe, in: jurisPK Art. 3 note 5; Michou, in: Corneloup/Joubert p. 97, 107; McParland para. 9.01. See only Rühl, in: Gottschalk/Michaels/Giesela Rühl/von Hein (eds.), Conflict of Laws in a Globalized World (2007), p. 153; Diedrich, RIW 2009, 378, 379; Muir Watt, ERCL 2010, 250, 252; Kuipers, RabelsZ 76 (2012), 562, 566. McParland para. 9.01. United Antwerp Maritime Agencies (Unamar) v. Navigation Maritime Bulgare (Case C-184/12), ECLI: EU:C:2013:663 para. 49. Matthias Lehmann, 41 Vand. J. Trans. L. 381, 414 (2008). Statistical Report 2008, ICC Bull. 20 (1) (2009), 5, 12. Statistical Report 2009, ICC Bull. 21 (1) (2010), 5, 12. Statistical Report 2011, ICC Bull. 23 (1) (2012), 5, 14. Statistical Report 2012, ICC Bull. 24 (1) (2013), 5, 13. Statistical Report 2013, ICC Bull. 25 (1) (2014), 5, 13. 2014 ICC Dispute Resolution Statistics, ICC Disp. Resolution Bull. 2015 (1), 7, 15. Statistical Report 2010, ICC Bull. 22 (1) (2011), 5, 14. Bencheneb, Rev. dr. aff. int. 2010, 398, 399–400; Ravillon, in: Corneloup/Joubert p. 67, 72. Symeonides, Codifying Choice of Law Around the World (2014) p. 110. On possible philosophical underpinnings of party autonomy Matthias Lehmann, 41 Vand. J. Trans. L. 381, 417–419 (2008); Basedow, RabelsZ 75 (2011), 32, 50 et seq. and of private international law in general Graveson, (1962) 78 L.Q. Rev. 337; Siehr, in: Festskrift Helge Johan Thue (Oslo 2007), p. 440; Romano, in: FS Ivo Schwander (2011), p. 613; Romano, Clunet 139 (2012), 456; Peari, NIPR 2012, 597; Peari, 23 Duke J. Int’l. & Comp. L. 477 (2013).

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fundamental rights which guarantee individuality,16 these in turn are based on the liberal philosophy of the enlightenment relating back to Locke, Hume, Kant and Rousseau.17 Particularly ambitious attempts try to establish such international private rights as an idea of international public policy in a wider sense.18 Even the fundamental freedoms of EU primary law are invoked to foster party autonomy although some doubts remain concerning the proper deduction19 and the vagueness of having to rely on the market freedoms in this regard.20 Overarching concepts try to circumscribe party autonomy as an abstraction of free movements’ principles, enabling a choice of legal Regulation without the need for physical movement which de-territorialises the boundaries between regulatory systems.21 Parties’ choice of law can help to establish a genuinely free Internal Market for goods and services.22 It is not surprising that the transformation of Art. 3 Rome Convention into Art. 3 hardly triggered any general debate.23 Party autonomy is accepted as a pillar and a pivot of the system.24 Yet a caveat appears appropriate that this applies only to contractual issues, and to non-contractual relations, issues of agency or proprietary matters.25 4 Party autonomy in contract is almost26 universally recognised27 and enshrined, time-hon-

oured and a proven working-horse,28 after a long and protracted history.29 It is heralded as featured among the general principles of law recognised by civilised nations30 within the meaning of Art. 38 (1) (c) ICJ Statute31 and as common core of legal systems.32 In a European context it can be said to be enshrined in Art. 16 Fundamental Rights Charter.33 Party 16

17 18 19

20 21 22 23 24

25 26

27

28

29 30 31 32

104

See only Jayme, Ann. Inst. dr. int. 54-I (1991), 65 et seq.; Pfütze, ZEuS 2011, 35, 39; Basedow, RabelsZ 75 (2011), 32, 50–59; Basedow, Rec. des Cours 360 (2013), 9, 196–208. Basedow, Rec. des Cours 360 (2013), 9, 200–202; Flessner, in: FS Ulrich Magnus (2014), p. 403, 410. Mills p. 293. See the rather critical approach by Tassikas, Dispositives Recht und Rechtswahlfreiheit als Ausnahmebereiche der EG-Grundfreiheiten (2004). See Pfütze, ZEuS 2011, 35, 71–83. Mills p. 293. See Poillot-Peruzzetto, in: Corneloup/Joubert p. 35, 38–42. Kuipers, RabelsZ 76 (2012), 562, 566. See only Kühn, in: Spickhoff (ed.), Symposium Parteiautonomie im Europäischen Internationalen Privatrecht (2014), p. 9, 10. Symeonides, in: Essays in Honour of Spyridon Vl. Vrellis (2014), p. 909, 910 lists modern PIL codifications which espouse party autonomy as their pivot in contracts, and names only three codifications (Ecuador, Paraguay, and Guinea-Conakry) as exceptions from this rule. Brödermann, in: MünchHdb IWR § 6 note 103. Prominent exceptions can be found in Brazil (Art. 9 § 2 Lei de Introdução ao Código Civil Brasileiro) and Iran (Art. 968 Iranian Civil Code); see also before 1 January 2016 Art. 1.209 Código Civil de la Nación in Argentina, now superseded by Art. 2651 Código Civil y Comercial de la Nación. See only Mo Zhang, 20 Emory Int’l. L. Rev. 511 (2005); Peari, 23 Duke J. Comp. & Int’l. L. 477, 483 (2013); Val Undurraga, Rev. Chil. Der. 40 (2013), 891, 893; Bratvogel p. 196. See only Stoll, in: FS Anton Heini (1995), p. 429 at 429; Leible, in: FS Erik Jayme (2004), p. 495, 505; Pfütze, ZEuS 2011, 35, 50; Sendmeyer, Contratto e impresa/Europa 2009, 792, 796; Basedow, RabelsZ 75 (2011), 32, 33 et seq. In detail Bratvogel pp. 68–169. Lord McNair, (1957) BYIL 1, 4–6, 15–16; Plender/Wilderspin para. 6–001. Statute of the International Court of Justice, done at San Francisco 26 June 1945, 1945 UKTS 76. Lando, 30 Am. J. Comp. L. 19, 40 (1982).

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autonomy is probably the rule that caused the least difficulties under the Rome Convention.34 Where it is allowed to rule party autonomy trumps all other conflict rules.35 The parties’ intentions, if expressed, constitute the relevant connecting factor.36 This might be carried by some psychological moment since the parties would be puzzled to see their intentions overruled if a legal rule intervened.37 Party autonomy is a liberal approach but not a neo-liberal one.38 It existed already before neo-liberalism gained weight in economics and politics. It can be seen as an essential component of the liberal model of market regulation.39 It merges commercial convenience with the pursuit of maximising personal welfare.40 As Art. 2 evidences the parties of a contract are free to chose any law for their contractual 5 relationship, be it the law of a Member State or be it the law of a third, non-Member State without any requirement of reciprocity as between the legislators.41 Parties have the free choice from the worldwide menu of legal orders and are at their complete liberty.42 Even if the contract at stake does present connections only with the States A, B or C, the parties are permitted to choose the law of D.43 Parties’ choice of law is, if free, not about localising the contract in a jurisdiction with which it has close connections.44 (1) is characterised by its breadth and width.45 The contrast may be found in Art. 5 which, in principle, establishes a restricted or limited choice of law for contracts of carriage. Parties are not obliged to choose a law which regards their contract as valid, and a choice of 6 law can be made without any auspices of a favor negotii.46 Prudent parties and businessmen in particular will not enter into a commercial venture choosing a law with strange or unfamiliar standards.47

33 34 35 36

37

38

39 40

41 42 43 44

45 46

47

Schacherreiter/Thiede, Ingmar und Unamar, ÖJZ 2015, 598, 602–603. Boele-Woelki, in: FS Ingeborg Schwenzer (2011), p. 191. Matthias Lehmann, 41 Vand. J. Trans. L. 381, 389 (2008). See only Patocchi, Règles de rattachement localisatrices et règles de rattachement à caractère substantiel (Génève 1985) p. 119; Jacquet, in: Liber amicorum Hélène Gaudemet-Tallon (2008), p. 727, 736. Curti-Gialdino, Rec. des Cours 137 (1972 III), 743, 754; Jacquet, in: Liber amicorum Hélène GaudemetTallon (2008), p. 727, 737. Muir Watt, in: Fallon/Lagarde/Poillot-Peruzzetto (éds.), La matière civile et commerciale, solce d’un code européen de droit international privé (2009), p. 77; see also Kinsch, in: Mélanges Pierre Mayer (2015), p. 377, 381. Muir Watt, ERCL 2010, 250, 254; Ragno, in: Ferrari, Art. 3 note 2. See Rühl, in: Gottschalk/Michaels/Rühl/von Hein (eds.), Conflict of Laws in a Globalized World (2007), p. 153, 177; Ragno, in: Ferrari, Art. 3 note 3. Gardella, NLCC 2009, 611, 615. See only Bogdan, NIPR 2009, 407. See only Jacquet, in: Liber amicorum Hélène Gaudemet-Tallon (2008), p. 727, 731. Lagarde, RCDIP 80 (1991) 287, 300; Coester-Waltjen, in: FS Hans Jürgen Sonnenberger (2004), p. 343 (343); see also Mincke, IPRax 1985, 313. Vinci, Contratto e impresa 2007, 1223, 1230; Sambugaro, EuLF 2008, I-126, I-127. See only Pierre Mayer/Heuzé, Droit international privé (9th ed. 2008) p. 536; Gardella, NLCC 2009, 611, 619. See only Druzin, 18 Tulane J. Int’l. & Comp. L. 131, 165 (2009).

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7 Only special cases, particularly involving weaker parties, informational asymmetry or gen-

uine state interest, might prompt intervention. Arts. 6, 7, 8 and 9 are the limits of party autonomy which are characteristic for the Rome I system (and have been a major novelty when their predecessors were introduced in the Rome Convention back in 1980). 8 A modern perspective might put this in a line with requirements of good governance.48

Choosing the applicable law provides for some kind of “private contract”, at least it constitutes a case of so-called private ordering.49 Party autonomy thus leads to a form of regulatory lift-off 50 and to some extent to the neutralisation of the mandatory character of national laws.51 The legislator recognises and accepts this insofar as it is prepared to vest autonomy in the parties.52 The parties’ will and intention as such would not carry and would not serve as proper basis for party autonomy, but the legal acceptance and the effect attributed to the parties’ choice by the law does.53 But it is the PIL of the forum which allows or disallows party autonomy.54 In all Member States of the Rome I Regulation, (1) casts the die.

9 Party autonomy and freedom of choice of law in the field of contract could on the one hand

be seen as the extension of the prevailing freedom of contract from substantive law to conflicts law.55 On the other hand, the permission of parties’ choice of law allows parties to reduce constitutional uncertainty by providing a clear determination of the law applicable ex ante as between the parties and ex post in relation to any court or arbitration tribunal.56 The parties are at liberty to avoid any subjectively felt uncertainties about which law might be applicable in the absence of choice.57 The lack of objective unification of the contract laws of the world fosters the case of subjective clarification.58 Parties’ choice of law clarifies idealiter ex ante, from the very “birth” of the contract throughout its entire life.59 The parties’ common reasonable expectations as evidenced by their consented choice of law are protected.60 Insofar party autonomy may serve as a form of catalysing device or even as the deal48 49 50 51 52 53 54

55

56

57

58 59

106

Muir Watt, ERCL 2010, 250, 258. See only Kirchner, in: Basedow/Kono p. 33, 45; Muir Watt, ERCL 2010, 250, 282. Notion coined by Wai, 40 Col. J. Trans. L. 209 (2002). Muir Watt, Rev. int. dr. écon. 2010, 103, 107; Landbrecht, RIW 2011, 291; Czernich, ZfRV 2013, 157. Czernich, ZfRV 2013, 157, 158. Czernich, ZfRV 2013, 157, 158. See only Vischer, Rec. des Cours 232 (1992 I), 9, 125, 139; Nygh, Autonomy in International Contracts (1999) p. 260; Marrella, Contratto e impresa/Europa 2003, 823, 830–831; Sambugaro, EuLF 2008, I-126, I-127. Most intensely Matthias Lehmann, 41 Vand. J. Trans. L. 381, 413 et seq. (2008); Carbone, RDIPP 2013, 569; Carbone, in: Studi in onore di Laura Picchio Forlati (2014), p. 163; see also e.g. Jayme, IPRax 1991, 429; Pfütze, ZEuS 2011, 35, 39; Ringe, in: jurisPK Art. 3 note 5; Symeonides, in: Essays in Honour of Spyridon Vl. Vrellis (2014), p. 909, 912; Ragno, in: Ferrari, Art. 3 note 2. Maultzsch, RabelsZ 75 (2011), 60, 64; Ravillon, in: Corneloup/Joubert p. 67, 69, 71; Basedow, Rec. des Cours 360 82013), 9, 36, 437–438; Courvoisier/Zogg, in: Peter Münch/Passadelis/Jens Lehne (eds.), Handbuch internationales Handels- und Wirtschaftsrecht (2015) para. 8.09. See only Leible, in: FS Erik Jayme (2004), p. 485; Diedrich, RIW 2009, 378, 379; Gardella, NLCC 2009, 611, 614; Czernich, ZfRV 2013, 157, 158. Flessner, in: FS Ulrich Magnus (2014), p. 403, 410. Schmeding, RabelsZ 41 (1977), 299, 304; Manuela Köck, Die einheitliche Auslegung der Rom I-, Rom IIund Brüssel I-Verordnung im europäischen internationalen Privat- und Verfahrensrecht (2014) p. 159.

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breaker for the transaction.61 A good choice of law clause produces a clear and simple answer to the question of the applicable law.62 It might serve a dual purpose: to foster the parties’ material interests and to quasi-localise the contract.63 Additionally, it reduces the effort and the costs for identifying the applicable law for the court or alternative dispute resolver,64 thus saving time. A bad choice of law encounters language and cultural barriers between both parties and the law selected.65 It generates learning and thus transactions costs,66 or it may lead to suboptimal results if avoiding strategies are used. Prudent and provident parties should even consider how accessible sources on the chosen 10 law are and will refrain from choosing exotic laws (in spite of all due respect to Tuvalu, parties should refrain for instance from a choice of the law of Tuvalu) or laws with scarcity of interpreting judicature.67 Likewise, the language of the law chosen should be an accessible and international language.68 The chosen law should be developed and stable.69 “Young” law from developing countries might suffer from prejudices against them so that parties form the so called “First World” might not be inclined to choose them.70 A law with a conceived “bad” reputation maybe derived from mere prejudices, might not become a common favourite, either.71 The law chosen should provide an adequate degree of certainty and predictability in order to achieve economic transactions and to decrease transaction costs.72 Planning and contract management require a degree of foreseeability as high as possible.73 Furthermore, the chosen law should contain legal regimes which address transactions of the kind at stake.74 Parties’ preferences oscillate between legal certainty on the one hand and flexibility on the other hand.75 Flexibility for commercial parties mainly means freedom of contract, but combined with remedies and damages as tools for contract enforcement.76 Little wonder and small surprise that parties loath complex structures or mandatory rules which curtail their contractual options.77 Non-hermetic and easy-to-ascertain rules star amongst desirable features.78

60 61 62 63 64

65 66 67 68 69 70 71 72 73 74 75 76 77 78

E.g. Fiedler, 37 U. Kan. L. Rev. 471 (1999); Shapira, 26 Brooklyn J. Int’l. L. 199, 203 (2000). See Gardella, NLCC 2009, 611, 613. Kodek, in: Verschraegen p. 85, 91. Feraci, Riv. dir. int. 2013, 424, 438. Schmeding, RabelsZ 41 (1977), 299, 305; Manuela Köck, Die einheitliche Auslegung der Rom I-, Rom IIund Brüssel I-Verordnung im europäischen internationalen Privat- und Verfahrensrecht (2014) p. 159. Meira Moser, Unif. L. Rev. 2015, 19, 21. Meira Moser, Unif. L. Rev. 2015, 19, 34. Kodek, in: Verschraegen p. 85, 91; Ravillon, in: Corneloup/Joubert p. 67, 75; Spagnolo p. 109. Oschmann, in: FG Otto Sandrock (2005), p. 25, 27. See only Michou, in: Corneloup/Joubert p. 97, 99. Durand-Barthez/Lenglart p. 104. Durand-Barthez/Lenglart p. 103. Meira Moser, Unif. L. Rev. 2015, 19, 21; Reps pp. 101–102. Reps, p. 102. Oschmann, in: FG Otto Sandrock (2005), p. 25, 26. See Meira Moser, Unif. L. Rev. 2015, 19, 27. Meira Moser, Unif. L. Rev. 2015, 19, 31, 39–40; Meira Moser, Rev. Arb. Med. 47 (2015), 195, 201–202. Meira Moser, Unif. L. Rev. 2015, 19, 36; Meira Moser, Rev. Arb. Med. 47 (2015), 195, 203. Meira Moser, Unif. L. Rev. 2015, 19, 43–44; Meira Moser, Rev. Arb. Med. 47 (2015), 195, 207.

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11 “Legal certainty” is further enhanced by a guarantee of choice of law, which ought to be

uniformly applied in all Member States. Recital (31) of the Rome II Regulation emphasises this.79 Party autonomy is a doctrine of convenience and efficiency.80 If PIL aims at fostering private interests, prevalence for party autonomy is the natural consequence.81 12 Yet borderless freedom without any limitations would be a feast for the lions. It would enable

parties to opt out of the Regulation and to undermine any regulatory purposes of domestic laws.82 Wisely and in a most considerate manner, the Rome Convention, and in its wake the Rome I Regulation, adopt appropriate counter-measures in order to keep such dangers at bay. In the Rome I Regulation there are a number of limitations on party autonomy, starting with Art. 3 (3) and (4), continuing with the protection of weaker parties in Arts. 6 (consumer contracts), 7 (insurance contracts) and 8 (employment agreements), fumbling with contracts for the carriage of passengers in Art. 5 (2), and reserving lois de police or lois d’application immediate in Art. 9. Legitimate regulation is protected against being overwhelmed and overpowered by autonomy by the persons to be regulated. Purely domestic contracts, contracts with weaker parties and direct state intervention are preserved for regulation. (1) is the basic rule, though, on which at least Arts. 6 (2) and 8 (2) build.83 Arts. 5 (2) and 7 employ concepts of restricted choice of law not referring to free choice of law as the basic notion. 2. Influence of Directive 93/13/EC? 13 Matters would be different if and insofar as the Unfair Contract Terms Directive84 exacted

influence and rendered choice of law-clauses in consumer contracts invalid. A preformulated term on the choice of the applicable law designating the law of the professional’s state of establishment is said to be unfair, but only insofar as it displays certain specific characteristics inherent in its wording or context which cause a significant imbalance in the rights and obligations of the parties.84a Unfairness may in particular result from a formulation that does not comply with the requirement of being drafted in plain and intelligible language.84b Art. 3 (3) in conjunction with Annex (1) (q) Unfair Contract Terms Directive invalidate jurisdiction clauses and arbitration clauses to the extent that they put hindrances in the consumer’s access to justice.85 With regard to the Brussels I and Brussels Ibis Regu79

80

81

82 83 84

84a

84b 85

108

Likewise Mankowski, RabelsZ 74 (2010), 182; von Hein, in: Callies, Art. 14 Rome II Regulation note 2; Boele-Woelki, in: FS Ingeborg Schwenzer (2011), p. 191. Werner Lorenz, Vertragsschluss und Parteiwille im internationalen Obligationenrecht (1957) p. 154; Junker, IPRax 1993, 1, 2 et seq.; Diedrich, RIW 2009, 378, 379; Marc-Philippe Weller, IPRax 2011, 429, 433. Flessner, Interessenjurisprudenz im Internationalen Privatrecht (1990) p. 99; supported by Diedrich, RIW 2009, 378, 379. See only Renner, (2009) 26 J. Int. Arb. 533, 535. Briggs, Private International Law in English Courts (2014) para. 7.93. Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ EEC 1993 L 95/ 29. Verein für Konsumenteninformation v. Amazon EU Sàrl (Case C-191 15), ECLI:EU:C:2016:612 para. 67; A-G Saugmansgaard Øe, ECLI:EU:C:2016:388 para. 94. Verein für Konsumenteninformation v. Amazon EU Sàrl (Case C-191/15), ECLI:EU:C:2016:612 para. 68. On arbitration clauses in consumer contracts Elisa María Mostaza Claro v. Centro Móvil Milenium SpA (Case C-168/05), [2006] ECR I-10421, I-10448 et seq. paras. 35–39; Asturcom Telecomunicaciones SL v. Cristina Rodríguez Nogueira (Case C-40/08), [2009] ECR I-9579, I-9614-I-9620 paras. 37–59; commen-

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lations this could prevail by virtue of Art. 67 Brussels I/Brussels Ibis Regulation.86 Yet choice of law clauses do not appear in the Annex to the Unfair Contract Terms Directive. At first glance, this appears to imply e contrario that only an issue expressly mentioned in that Annex could take precedence over the Rome I Regulation by virtue of Art. 23 Rome I Regulation.87 At least the German, French and Italian legislators have taken such stances and have not included any restriction on choice of law clauses when implementing and transforming the Unfair Contrat Terms Directive.88 On the contrary, the German legislator stuck with the abolition of the former § 10 (8) AGBG which rule was abandoned at the advent of Germany implementing the Rome Convention, as being in conflict with Art. 3 (1) cl. 1 Rome Convention.89 Striking out the choice of law clause would destroy the basis for the consumer-friendly more favourable law principle and would cause a protection paradox.89a To correct it would be theoretically conceivable if the professional way barred from pleading the invalidity of its own choice of law clause by venire contra factum proprium. But this would be a secondary solution and would amount to a restriction on the consequences flowing from the law regulating Standard Terms and Conditions. But that would be a simplification. The Annex to the Unfair Contract Terms Directive is not 14 exhaustive. The categories of clauses listed there are indicated and red-flagged as unfair contract terms per se. But this does not constitute the ground for a proper argumentum e contrario. That something is not expressly listed does not indicate that the Unfair Contract Terms Directive would permit it automatically.90 The transparency review established in Art. 5 cl. 1 Unfair Contract Terms Directive could possibly be extended to choice of law clauses.91 Occasionally, choice of law clauses have been invalidated based on an alleged lack of trans- 15 parency.92 It was contended that they did not indicate clearly enough which rules of law

86

87

88 89 89a 90 91

92

ted upon i.a. by d’Alessandro, Riv. arb. 2006, 679; Norbert Reich, ERCL 2007, 41; Jordans, GPR 2007, 48; Idot, Rev. arb. 2007, 115; Pavillon, NTBR 2007, 149; Legros, Les petites affiches 2007 n°. 152 p. 9; Celeste Pesce, Dir. pubbl. comp. eur. 2007, 430; Mourre, Clunet 134 (2007), 583; Poissonnier/Tricoit, Les petites affiches 2007 n°. 189 S. 13; Liebscher, (2008) 45 CMLRev. 545; Jarrosson, Rev. arb. 2009, 822; Mankowski, EWiR Art. 6 RL 93/13/EWG 1/10, 91; Cheneviere, Rev. eur. dr. consomm. 2010, 351; Stuyck, (2010) 47 CMLRev. 879; Ebers, ERPL 2010, 823. Aud. Prov. Santa Cruz de Tenerife REDI 2002, 378 with note Jiménez Blanco; Rauscher/Mankowski, Art. 67 Brüssel I-VO note 2. But cf. on the one hand Spellenberg, in: Münchener Kommentar zum BGB Art. 10 Rom I-VO notes 170– 171 and on the other hand Pfeiffer, in: Grabitz/Hilf/Manfred Wolf, Das Recht der Europäischen Union (looseleaf 1993-ongoing) A 5 Anh. notes 157–158 (2009); Pfeiffer, LMK 2013, 343552; Requejo, Unfair Terms in Low-Cost Airline Contracts – A Spanish Court Takes a Bold Step (21 November 2013) http:// conflictoflaws.net/2013/unfair-terms-in-low-cost-airline-contracts-a-spanish-court-takes-a-bold-step/. Alpa, Rev. int. dr. comp. 2014, 33, 48. See e.g. Whittaker, ERCL 2011, 25, 38; Basedow, ERCL 2012, 82, 84. Mankowski, NJW 2010, 2705, 2706; Mankowski, in: FS Wulf-Henning Roth (2015) p 361, 367. See Heiss, RabelsZ 65 (2001), 634, 647–648. AG Bremen RRa 2014, 95, 96; Pfeiffer, LMK 2013, 343552. Contra with regard to § 305b (2) BGB LAG Mecklenburg-Vorpommern 3 April 2014 – Case 4 Sa 57/13 [36]. BGH IPRax 2013, 557, 561; AG Bremen RRa 2014, 95, 96, 97; see also Verein für Konsumenteninformation v. Amazon EU Sàrl (Case C-191/15), ECLI:EU:C:2016:612 para. 68.

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should govern the contractual relationship.93 This allegation is at least imprecise and misses the point. A simple choice of a foreign law is per se transparent. It does not leave any doubt as to its content. “This contract is subject to Irish law.” could not possibly be more transparent.94 The said allegation at its core aims at the ensuing unambiguity which might suggest that the chosen law is the only law applicable which would not be true in consumer or employment contracts.95 The choice of law is criticised for being worded in an unconditional manner and not being made subject to the restrictions imposed by Art. 6 (2).96 16 The allegation should be read in the vein that the weaker party is not informed about the

most favourable law approach stemming from Art. 6 (2). But both rules do not require the stronger party to inform the weaker party.97 They leave the risk of lacking information on the weaker party. Duties to inform must be introduced legislatively the more so if the addressed such a complex issue as the most favourable law approach.98 The legislator must give a helping hand to the party on which such a duty would be imposed. 17 Not even Art. 6 (2) requires that choice of law clauses in consumer contracts should be

worded differently from choice of law clauses in B2B contracts.99 Art. 6 (2) refers to Art. 3 (1),100 without imposing any modification.101 Even if one forced businesses to mirror the most favourable law approach as established by Art. 6 (2) cl. 2, this would prompt the subsequent question how this should be reflected in the wording of the respective clauses. The first idea would be simply to copy the wording of Art. 6 (2) itself into the choice of law clause. But this rule follows a rather complex concept, and laymen are not prone to understand it easily. If Art. 6 (2) was a Standard Term the allegation of lacking transparency and of an overly complex formulation could be raised.102 It would be rescued only by Art. 1 (3) Unfair Contract Terms Directive not recognising a clause which only repeats and reiterates the content of a rule of law, as unfair.103

93 94

95 96 97

98 99 100

101 102 103

110

BGH IPRax 2013, 557, 561. Mankowski, NJW 2016, 2705, 2706; see LG Hamburg MMR 2012, 96, 97 = VuR 2011, 473, 474 = IPRspr. 2011 Nr. 22 p. 53: A choice of law clause “Deutsches Recht ist anwendbar.” [“This contract is subject to German law.”] is not ambiguous for the purposes of § 305c (2) BGB. See also Pfeiffer, LMK 2013, 343552. See Sascha Faber, MMR 2013, 594. See Sascha Faber, MMR 2013, 594. On duties to inform in conflicts law as imposed by EU law comprehensively Wulf-Henning Roth, in: FS Dieter Martiny (2014), p. 543. Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 369–370. Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 369–370. BGH IPRax 2013, 557, 561; LG Hamburg MMR 2012, 96, 98; Briggs, (2009) 125 LQR 191, 192; Lambrecht, RIW 2010, 783, 788; Magnus, in: Staudinger, Art. 6 Rom I-VO note 24; Ansgar Staudinger, in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger, Art. 6 Rom I-VO note 71; Thomas Pfeiffer, LMK 2013, 343552; Wulf-Henning Roth, IPRax 2013, 515, 520; Wulf-Henning Roth, in: FS Dieter Martiny (2014), p. 543, 544; Thorn, in: Palandt, Art. 6 Rom I-VO note 8; Calliess, in: Calliess, Art. 6 Rome I Regulation note 69. LG Hamburg MMR 2012, 96, 98. Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 369–370. See Alpa, Rev. int. dr. comp. 2014, 33, 47.

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The legislative concept is clear, though: Art. 6 (2) cl. 2 presupposes that the juxtaposition of 18 the chosen law and the internally mandatory rules of the law that would be applicable but for the parties’ choice of law, does not generate consequences which are so ambiguous and incomprehensible that they might not be imposed upon consumers.104 Furthermore, Art. 6 (2) cl. 2 rules out that consumer might trust that only and exclusively the law of their habitual residence will apply and that a derogating choice of law might not happen.105 The overall picture must include the normatively binding implications established by Art. 6 (2).106 Businesses are not obliged to list the mandatory rules possibly applicable besides the chosen law in an exhaustive manner.107 The allegation of lacking transparency would be startling if it were justified because the 19 choice of law clause would be found not in the beginning but at the end of a set of General Terms and Conditions.108 It can be conceded that judging by its substance the choice of law clause should be the very starter of Standard and Conditions for it lays the fundament according to which the clauses addressing substantive law issues must be judged. But this does not imply a strict rule that it must appear their very beginning under all circumstances. In every set of General Terms and Conditions invariably some clause must be the last.109 It has become a common and universally respected feature that “Law and Jurisdiction” are dealt with at the end of contracts.110 This position must not be judged, and consequentially be inhibited, as surprising even if one was prepared (putting aside any methodological counterarguments) to control as to whether there was sufficient consent as to the choice of law by virtue, e.g. of § 305c (1) BGB.111 Hence the vast majority of choice of law clauses, even those in consumer contracts, would 20 comply with the yardsticks applied by virtue of this control. It does not matter if the content of the chosen law is unknown to the consumer since the chosen law remains its basic quality as law and is not diminished to the rank of a mere contract clause.112 Choosing a law the content of which is unknown to the consumer party does not render invalid a choice of law clause which if measured on its own merits in isolation, is transparent and clear. The formulation of the clause itself is what matters for the purposes of Art. 5 cl. 1 Unfair Contract Terms Directive, not the content of the law chosen.113 One must not punish the commercial party for the inabilities of a national legislator to express its intentions clearly. 3. Infection by invalidity of a combined jurisdiction clause? Choice of law clauses are often, if not regularly, found as part of a combined clause with a 21 common heading of “Law and Jurisdiction”. If and insofar as the jurisdiction clause is 104 105 106 107 108 109 110 111 112 113

See BGH IPRax 2013, 557, 561. KG MMR 2013, 591, 592; Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 369–370. Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 369–370; KG MMR 2013, 591, 592. LG Hamburg MMR 2012, 96, 99; see Mankowski, NJW 2016, 2705, 2707. Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 369–370. KG MMR 2013, 591, 592; Stefan Ernst, jurisPR-WettbR 8/2013 Anm. 5 sub E. Stefan Ernst, jurisPR-WettbR 8/2013 Anm. 5 sub E. Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 369–370. Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 372. Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 372. Contra AG Bremen RRa 2014, 95, 96.

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invalid,114 this could possibly imply that the choice of law clause is invalid, too.115 Even leaving aside that it requires quite some very strenuous effort to bring down a jurisdiction clause in a European context (at least in B2B relations beyond Arts. 15; 19; 23 Brussels Ibis Regulation; 13; 17; 21 2007 Lugano Convention),116 one would have to overcome some additional obstacles before one could arrive at the result that the invalidity of the jurisdiction clause infected the choice of law clause. 22 Firstly, choice of law and jurisdiction are two distinct features to be kept strictly apart and

separated.117 Secondly, it would not amount to conflict with any verdict on retaining unfair terms to the utmost extent if one retained the choice of law clause – precisely the two clauses addressing different issues.118 Thirdly, it is correct that combined law and jurisdiction clauses generally aim at harmonising jurisdiction and applicable law to the ultimate goal that a court would apply its own lex fori by virtue of the parties’ choice of law. But if the choice of law clauses designates and nominates a certain law (e.g. Swiss law or Spanish law), it does not call for the application of the respective lex fori. In this event, it must be judged, regardless of and independently from, the fate of the jurisdiction clause. That the combination might fail does not render either of its parts invalid automatically.119 4. Economic justification of party autonomy a) Neo-classical law and economics 23 Party autonomy can be viewed from different angles of law and economics. Still neo-clas-

sical law and economics, based on the belief in markets and cherishing efficiency, might be regarded as the dominant angle. 24 A choice of law can be deemed more efficient the more it generates synchronisation effects as

positive network externalities; it is more efficient to simply utilise whatever law is used by the majority of market participants with whom one might possibly engage in commercial transactions.120 114 115 116

117 118 119

112

In particular by virtue of Art. 17 Brussels I Regulation or Art. 19 Brussels Ibis Regulation respectively. To this avail AG Bremen RRa 2014, 95, 97. But see in the event that the parties prorogate for the jurisdiction of a court in a Third State outside the EU which would not grant the same protection to commercial agents as is provided for by Arts. 17; 18 Commercial Agents Directive BGH IHR 2013, 35, 36 = BB 2012, 3103 with note Ayad/Schnell = GWR 2012, 486 with note Eckhoff = Rev. crit. dr. int. pr. 102 (2013), 890 note Jault-Seseke; OLG München IPRax 2007, 322 = IHR 2006, 166 with note Thume; OLG Stuttgart IHR 2012, 163, 165; Mankowski, Yb. PIL 10 (2008), 19, 46–51; Antomo, IHR 2013, 225; Gräfe/Giesa, ZVertriebsR 2014, 29 and Cass. com. JCP G 2008.10187 note d’Avout = Gaz. Pal. 20–21 février 2009, 27 note Guez = Clunet 136 (2009) 599 note Jobard-Bachellier/Train; Bureau/Muir Watt, RCDIP 98 (2009), 1; Gaudemet-Tallon, in: Liber amicorum Kurt Siehr (2010), p. 720; Basedow, in: FS Ulrich Magnus (2014), p. 337, 347–351 and in other instances, particularly if the standards established by the Hague Rules are not met in bills of lading The “Hollandia” [1983] 1 AC 1 (H.L.); BGH MDR 1968, 474, 475; BGH NJW 1971, 325; BGH AWD 1974, 221 with note von Hoffmann; BGH NJW 1983, 2772; BGH WM 1984, 1425; BGH NJW 1987, 3193; BGH WM 1987, 1353; BGH NJW 1991, 2215; BGH WM 1993, 2121. Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 373. Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 373. Mankowski, in: FS Wulf-Henning Roth (2015), p. 361, 373.

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b) New institutional law and economics New institutional economics are generally based on neo-classical economics but add a focus 25 on both the role of institutions, i.e. on the transactions cost perspective,121 and on the possible incentives for legal players. The term “E[W(Lj)] = – C[e(Lj)] – p[e(Lj)]X – (FA +FB) – p[e(Lj)]{E[RA(Lj)] + E[RB(Lj)]} + E[ZA(Lj)] + E[ZB(Lj)]” said to describe the expectation value of the advance of overall welfare by the use of a certain law122 looks very impressive. But which parties however sophisticated could even remotely calculate it in a concrete case?123 Real parties tend to employ heuristics and mental shortcuts which are workable in a real world environment, based on limited and incomplete information and not according to logical or mathematic rules.124 The assumption that parties know best what is good for them125 follows their individual 26 preferences and is thus prima facie Pareto-efficient.126 Insofar as the interest of third parties or of the State are not detrimentally effected, parties’ choice of law is even Kaldor/Hicksefficient.127 The Coase theorem is said to support party autonomy,128 and likewise party autonomy is believed to have an inherent tendency to reduce transaction costs.129 Transactions costs in the present context encompass some main elements: information costs, negotiation costs, and suboptimal choice of law costs arising from provisions of the chosen law that fail to fully meet the requirements of the contracting parties in the given case.130 From the perspective of New Institutional Economics: conflicts rules in general should meet 27 two requirements: firstly, they should come as close as possible to the parties’ ex ante will; 120

121

122 123 124 125

126

127

128

129

130

Klausner, 81 Va. L. Rev. 757, 785 (1995); Druzin, 18 Tulane J. Int’l. & Comp. L. 131, 165 (2009); Vogenauer, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/ Oxford/Baden-Baden 2013), p. 227, 235; Engert, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 304, 305; Rühl, in: FS Christian Kirchner (2014), p. 975, 978. Seminal Furubotn/Rudolf Richter, The New Institutional Economics (1991); Furubotn (ed.), The New Institutional Economics of Markets (2010); Rudolf Richter, (2005) 6 EBOR 161; Rudolf Richter, Neue Institutionenökonomik (4th ed. 2010). Kagumi/Kono/Nishitani, in: Basedow/Kono, p. 121, 133. Mankowski, RabelsZ 74 (2010), 182 (182–183). Meira Moser, Unif. L. Rev. 2015, 19, 23. See only Whincop/Keyes, (1997) 21 Melbourne U. L. Rev. 515; Garcimartín Alférez, Eur. J. L. & Econ. 8 (1999), 251, 261–263; Diedrich, RIW 2009, 378, 379. See only Garcimartín Alférez, Eur. J. L. & Econ. 8 (1999), 251, 255; Ribstein, 37 Ga. L. Rev. 363, 390–412 (2003); Muir Watt, Rec. des Cours 307 (2004) 25, 120 et seq., 161 et seq.; Whincop/Keyes pp. 38–42 et passim; Carbonara/Parisi, in: FS Hans-Bernd Schäfer (2008), p. 339, 346; Mankowski, in: FS Hans-Bernd Schäfer, p. 369, 370; Diedrich, RIW 2009, 378, 379; Rühl p. 348 with ample references. See only Ribstein, 18 J. Corp. L. 245, 247–261 (1993); Garcimartín/Alférez, Eur. J. L. & Econ. 8 (1999), 251, 255; 363, 390–412; Rühl, in: Essays in Honor of Arthur T. Van Mehren (2007), p. 153, 176 et seq.; Rühl, p. 349 with ample references; Mankowski, in: FS Hans-Bernd Schäfer (2008), p. 369, 370. Muir Watt, in: Fallo/Lagarde/Poillot-Peruzzetto (dir.), La matière civile et commerciale, socle d’un Code européen de droit international privé (2009), p. 77; Marc-Philippe Weller, IPRax 2011, 429, 433. Bureau/Muir Watt, Droit international privé, vol. I (2nd ed. 2010) para. 532; Marc-Philippe Weller, IPRax 2011, 429, 433. Alexander J. Wulf p. 117.

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secondly they should not overtax informational capacities and should provide courts with simple rules which in most cases lead to syllogistic decisions.131 Party autonomy meets both requirements. 28 That contracting parties by a choice of law may evade mandatory law which functions as

constraint to private autonomy is no general motivation.132 Parties think even less about delegating law making to the national legislation of the law chosen.133 American contracts with their overwhelming length and their ever new details conversely strive for self-regulatory regimes without intervention by default rules (and fueled by the drafting lawyers’ interest in billing per time unit and piling up hours).134 c) Behavioral Law and Economics 29 Steadily Behavioral Law and Economics135 are gaining ground, primarily in the USA, but

also in Europe.136 Behavioral Law and Economics include experiences from the behavioral sciences, in particular from psychology. They recognise that human beings are subject to only bounded rationality137 (which could result in legal consequences)138. They develop models based on the assumption of incomplete information and inherent deficiencies decision making. For instance, group polarisation might produce social obligations,139 foster fallacies,140 and exert informal influence on parties’ mindsets in order to become part of majority opinion,141 whereas the range of accepted options is reduced due to asymmetric discussions.142 The herd phenomenon allows to hide and to argue that one did not stand alone with a wrong decision following majority opinion.143 “That’s how they all do it” develops a magnetic force. 131 132 133 134 135

136

137

138

139 140

141 142

143

114

Hans-Bernd Schäfer/Lantermann, in: Basedow/Kono, p. 87, 118. Tentatively Contra Kirchner, in: Basedow/Kono p. 33, 45. Contra Kirchner, in: Basedow/Kono p. 33, 45. See only Merkt, in: FS Otto Sandrock (2000), p. 657; Kötz, in: FS Andreas Heldrich (2005), p. 771. In more detail e.g. the contributions in 51 Vand. L. Rev. 1495–1788 (1998); Sunstein (ed.), Behavioral Law and Economics (2000) and Rachlinski, (ed.), Behavioral Law and Economics (2009) (three volumes) and furthermore Jolls/Sunstein/Thaler, 50 Stan. L. Rev. 1471 and 1593 (1998); Sunstein, 1 Am. L. & Econ. Rev. 115 (1999); Sunstein, 29 J. Leg. Stud. 1059 (2000); Korobkin/Ulen, 88 Cal. L. Rev. 1051 (2000); Christoph Engel, JZ 2005, 581; Jolls/Sunstein, 35 J. Leg. Stud. 199 (2006); Christoph Engel/Englerth/Lüdemann/ Spiecker called Döhmann (eds.), Recht und Verhalten (2007); Jolls, in: Marciano (ed.), Law and Economics (2009), p. 71. Tentatively Eidenmüller, JZ 2005, 216; more robust Fleischer/Zimmer (eds.), Der Beitrag der Verhaltensökonomie zum Handels- und Wirtschaftsrecht (2009); Leistner, ZGE/IPJ 1 (2009), 3. Grundlegend Gigenzer/Goldstein, Psych. Rev. 103 (1996), 650; Korobkin/Ulen, 88 Cal. L. Rev. 1051 (2000); Kahneman, 93 Am. Econ. Rev. 1449 (2003). Lüdemann, in: Christoph Engel/Englerth/Lüdemann/Spiecker genannt Döhmann (ed.), Recht und Verhalten, 2007, p. 7; Englerth, Recht und Verhalten, p. 231. Sunstein, 110 Yale L.J. 71, 78 (2000). Isenberg, J. Personality & Soc. Psych. 50 (1986), 1141; Sunstein, 110 Yale L.J. 71, 78 (2000); Kahan, 67 U. Chi. L. Rev. 607 (2000). Isenberg, J. Personality & Soc. Psych. 50 (1986), 1141, 1144 et seq.; Sunstein, 110 Yale L.J. 71, 78 (2000). Isenberg, J. Personality & Soc. Psych. 50 (1986), 1141, 1145; Sunstein, 110 Yale L.J. 71, 85 (2000); Spagnolo, (2010) 6 JPrIL 417, 445. Kahan/Klausner, 74 Wash. U. L. Q. 347, 356–358 (1996).

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The most enlightening example for bounded rationality might be the so-called endowment 30 effect: Losing goods one already had in principle is regarded more powerful than making a gaining of equal value.144 The value of what one already has is irrationally inflated.145 Subjective preferences are not consistent.146 Firstly, the endowment effect might be based on the fear of losses, thus conservating a certain status quo (status quo bias),147 secondly on inertia,148 and thirdly on subjective uncertainty about the availability and enforcement of the gain at stake. From the endowment effect it follows that sellers will attribute a higher value to goods they sell than buyers to goods they acquire. This is known as offer/asking gap149 or willingness to accept/willingness to pay gap.150 A further effect is the so-called framing effect: In making decisions under uncertainty not 31 only the absolute value matters but also in which direction options are moving away from a certain point of reference.151 This point of reference leads to a so-called anchoring bias.152 Behavioral Law and Economics are empirical, in particular if founded in psychologic re- 32 search. There is no need for an own discipline of Empirical Legal Studies153 or an empiric turn in legal sciences.154 To transform (or better: translate) Behavioral Law and Economics into concrete legal con- 33 sequences is not the easiest task, however.155 In the context of parties, choice of law bounded rationality might find its predominant expression in each party striving for a legal “home game” having its “home law” applied regardless as to whether the choice of a different law would be more preferential to the party at stake at the level of substantive law.156 Familiarity, 144

145 146 147 148

149 150 151

152

153

154 155

156

See only Thaler, 1 J. Econ. Behav. & Org. 39, 44 (1980); Kahneman/Knetsch/Thaler, 98 J. Pol. Econ. 1325, 1339 et seq. (1990); Thaler, in: Sunstein (ed.), Behavioral Law and Economics (2000), p. 211; Tversky/ Kahneman, 5 J. Risk & Uncert. 297 (1992); Korobkin, 97 Nw. U. L. Rev. 1227 (2003); De Coninck, 9 (4) Global Jurist art. 4 (2009). Kahan/Klausner, 74 Was. U. L.Q. 347, 355–358 (1995); Spagnolo p. 191. See only Unberath/Cziupka, AcP 209 (2009), 37, 72. Tversky/Kahneman, 106 Q. J. Econ. 1039 (1991). Korobkin, 83 Cornell L. Rev. 608 (1998); Korobkin, in: Sunstein (ed.), Behavioral Law and Economics, (2000), p. 116. See only Korobkin, 46 Stan. L. Rev. 663 (1994). E.g. Elizabeth Hoffman/Spitzer, 71 Wash. U. L. Q. 59 (1993). In more detail Kahneman/Tversky, 47 Econometrica 263 (1979); Kahneman, 51 Org. Behav. & Hum. Decision Processes 296 (1992). See only Chapman/Bornstein, App. Cogn. Psych. 10 (1996), 519; Englich/Mussweiler, J. App. Soc. Psych. 31 (2001), 1535. See only Heise, 2002 U. Ill. L. Rev. 819; Korobkin, 2002 U. Ill. L. Rev. 1033; Revesz, 69 U. Chi. L. Rev. 169 (2002); Lindgren, 2006 B. U. L. Rev. 1447; Mertz/Suchman, 2010 Ann. Rev. L. & Soc. Sc. 555; Lempert, 98 Cal. L. Rev. 877 (2010); van Dijck, WPNR 6912 (2011), 1105 and Lawless/Robbennolt/Ulen, Empirical Methods in Law (2010) pp. 55–187 on empirical research and pp. 189–366 on the necessary statistical instruments (in particular regression techniques). Propagated e.g. by Niels Petersen, Der Staat 49 (2010), 435. In more detail Christoph Engel, in: Christoph Engel/Englerth/Lüdemann/Spiecker called Döhmann (eds.), Recht und Verhalten (2007), p. 363. See Ravillon, in: Corneloup/Joubert p. 67, 74.

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whether real or imaginary, and horror alieni trump considerations grounded on effectivity and rationality.157 Perhaps an endowment effect might be the best explanation barring parties from trading away their home law. d) Game theory 34 Game theory might open a very valuable additional perspective. Game theory deals with

interactions of a multiplicity of persons particularly in transactions.158 Cross-border transactions are a paradigm for transactions and drafting contracts with sometimes complex strategies and some degree of opportunism on either party’s side. It comes just as naturally to approach choice of law clauses on basis of the game theory as any agreement between the parties can be construed as the result of a game.159 In particular, previous contract negotiations can be interpreted as a game. Choice of law clauses deal with mere contractual understandings and, thus, contracts including the negotiations leading up to it can be considered as exemplary for the applicability of the game theory. The game theory progressively gains ground, also with regard to the economic analysis.160 35 Most attempts by economists in game theory161 however miss the point of contract law and

are too fascinated by their own economic models162 as to become concrete enough. Yet a ‘choice of law game’ is played each time a lawyer drafts, or a business uses, a choice of law clause.163 36 In the past, the east-west-trade with the USSR produced some fine examples for sophisti-

cated game strategies: In this trade traditionally parties could not agree on an express choice since the party from the USSR insisted on having the law of the USSR chosen, which in turn was unacceptable to the western party (unless after lengthy negotiations in Moscow quantities of vodka or Crimean champagne catalysed and facilitated a choice of the law of the USSR)164. Parties could only agree on arbitration before the Chamber of Commerce in Stockholm, Sweden being a seemingly neutral state. With an arbitrator each from the western country and the USSR the Stockholm Chamber of Commerce nominated a Swedish jurist as umpire. Swedish PIL at that time opted for the seller’s law in the absence of a choice of law by the parties, which led to the law of the USSR if the state-run export trade organisation of the USSR was the seller.165 One might imagine whether the Swedish umpire felt more inclined to listen to, and to believe as a reliable source, the arbitrator from the USSR or the western arbitrator when it came down to content and details of the law of the USSR.166 157 158

159 160 161

162 163 164 165 166

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Michou, in: Corneloup/Joubert p. 97, 99. Still to be recommended is Dixit/Nalebuff, Thinking Strategically (2nd ed. 1993). More ambitious Riechmann, Spieltheorie (2008) and with particular reference to the law Baird/Gertner/Randal C. Picker, Game Theory and the Law (1994); Rasmussen (ed.), Game Theory and the Law (2007). See after all an attempting approach in Kagami, in: Basedow/Kono, p. 15, 27. See the contributions assembled in: Rasmussen (ed.), Game Theory and the Law (2007). Schmidtchen, in: Eger/Hans Bernd Schäfer (eds.), Ökonomische Analyse der europäischen Zivilrechtsentwicklung (2007), p. 1, 12 et seq. Kieninger, in: FS Hans-Bernd Schäfer (2008), p. 357, 358–359. Spagnolo p. 200. Schütze, in: GS Manfred Wolf (2011), p. 551, 557. Schütze, in: GS Manfred Wolf (2011), p. 551, 557. Schütze, in: GS Manfred Wolf (2011), p. 551, 557.

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e) Parties’ disinterest in the search for any “best law” Parties are not interested in the search for any “best law” at least not at their time and 37 expense.167 The few existing surveys support such disinterest: According to the Clifford Chance Study of 2005168 each party is primarily interested in getting its own law, the familiar law of its seat or relevant place of business, as lex contractus;169 if the respective party does not succeed in that it is often at loss,170 and foreign law is only chosen by a minority.171 If asked which law is the one chosen with the greatest frequency, once again the “own” law of the party asked is the favourite172 whereas for instance English law (which is touted and promoted as particularly elaborate and appropriate for international commercial cases by the English legal business) finds favour only with a minority.173 If asked which law is the one chosen with the greatest frequency, once again the “own” law of the respective party dominates the subjective impression.174 Although the sample is not mirroring the distribution of enterprises by size in Europe it is unusually consistent and thus relatively robust.175 Other surveys investigating standard forms, practice guides and recommendations by national or local trade associations reveal the same impression.176 The idea of the efficient choice of law does not appear to affect legal practice.177 Major firms express a stronger preference for choice of law than SMEs.178 The difficulties 38 which an SME, or the in-house legal staff, or the ordinary lawyer only trained in his “own” law, encounter when faced with foreign law are by no means fortuitous, but happen to

167

168

169 170 171 172

173

174 175

176

177 178

Seminally Kieninger pp. 275–332; Kieninger, in: Hans-Bernd Schäfer/Claus Ott (eds.), Vereinheitlichung und Diversität des Zivilrechts in Europa (2002), p. 72, 97 et seq.; Kieninger, in: FS Hans-Bernd Schäfer (2008), p. 362, 363 et seq.; to the same avail Basedow, in: FS Hans-Joachim Mestmäcker zum 70. Geb. (1996), p. 347, 360 et seq.; Basedow, (1996) 33 C.M. L. Rev. 1169, 1184 et seq.; Basedow, in: FS Norbert Horn (2006), p. 229, 242 et seq.; Basedow, in: Basedow/Kono p. 57, 67 et seq.; Basedow, Liber Fausto Pocar, vol. II (2009), p. 59, 68 et seq.; Gerhard Wagner, (2002) 39 C. M. L. Rev. 995, 1006 et seq. Clifford Chance Survey European Contract Law (2005) http:://www.cliffordchance.com/expertise/Publications/details.aspx?contentitemid=8354; commented upon by Vogenauer/Weatherill, JZ 2005, 870; Vogenauer/Weatherill, in: Vogenauer/Weatherill (eds.), The Harmonisation of European Contract Law (2006), p. 105, 117–131; Vogenauer/Weatherill, in: Vogenauer/Weatherill (2006) Bus. & Leg. Prac. 105. Clifford Chance Survey European Contract Law (2005) Table A 32. Clifford Chance Survey European Contract Law (2005) Table A 32. Clifford Chance Survey European Contract Law (2005) Table A 34. Clifford Chance Survey European Contract Law (2005) Table A 34; Vogenauer/Weatherill, in: Vogenauer/ Weatherill (eds.), The Harmonisation of European Contract Law (2006), p. 105, 121. Clifford Chance Survey European Contract Law (2005) Table A 33; Vogenauer/Weatherill, in: Vogenauer/ Weatherill (eds.), The Harmonisation of European Contract Law (2006), p. 105, 124. Clifford Chance Survey European Contract Law (2005) Table A 32. Vogenauer/Weatherill, in: Vogenauer/Weatherill (eds.), The Harmonisation of European Contract Law (2006), p. 105, 138. Kieninger pp. 287 et seq.; Mankowski, RIW 2003, 2, 7; Max-Planck-Institute for Foreign Private and Private International Law, RabelsZ 68 (2004), 1, 6 et seq. Basedow, in: Basedow/Kono p. 57, 67. Vogenauer/Weatherill, in: Vogenauer/Weatherill (eds.), The Harmonisation of European Contract Law (2006), p. 105, 120.

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coincide with the age-old experience of comparative law.179 Furthermore, parties incur high information costs for any research into foreign law and thus transaction costs can rise substantially.180 The list of possibly choice-influencing factors, which might differ from case to case and from negotiation to negotiation, is long and extensive. Amongst these factors might e.g. be: business considerations,181 the significance of the contract for the company, its value in relation to business figures of the company and its impact on the company’s risk management, connected contracts, if any, or the language abilities of the stakeholders in the contract project (including but not limited to, if applicable, engineers, project managers, shareholders), the language ability of the contract partner, or the language in which law that might be chosen is written.182 Respective bargaining power and trade-offs within the overall framework of the contract might have considerable impact on the eventual agreement.183 Stronger parties like to score easy victories which are regularly not driven by the substantive qualities or efficiency of their preferred choice.184 Furthermore, the dispute resolution clause might trump the choice of law clause because it sets the stage and might overshadow the choice of law agreement.185 39 An alternative phenomenon consists of choice of law clauses forming part of a standard set

of General Terms and Conditions as developed by some form of institution.186 Parties adopt this standard set without individually negotiating the choice of the applicable law and simply accept by general assent the choice of law clause as it stands. Invariably, this leads to a standardised choice of law without the parties considering “their” choice of law or inquiring the content of the law so chosen but taking it more or less for granted. This can not be termed a search for the best law, either. 40 Since the references of the parties are heterogeneous and based on imperfect information, it

is virtually impossible for a given party entering into a given transaction to quantify the merits or demerits of individual rules of contract law, let alone those of entire contract law regimes, without incurring extremely high costs.187 There is no realistic perspective of conducting a reliable cost-benefit analysis and there cannot be simple headline figures.188 The 179

180

181

182

183 184 185

186 187

188

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Kieninger, in: FS Hans-Bernd Schäfer (2008), p. 353, 365; see also Beale, in: Reiner Schulze (ed.), New Features in Contract Law (2007), p. 343, 358 et seq. See only Kieninger pp. 58, 60; Kirchner, in: FS Ulrich Immenga (2004), p. 607, 614 et seq.; Rühl pp. 229 et seq.; Alexander J. Wulf p. 118. For instance when attacking a certain market it might not be advisable to deter prospective customers by introducing a choice of law clause in favour of another law than that of the market state; Brödermann, in: MünchHdb IWR § 6 note 139. Brödermann, Hamburg L. Rev. 2016, 21, 30; see also Brödermann/von Dietze, in: Paschke/Graf/Olbrisch (eds.), Hamburger Handbuch des Exportrechts (2nd ed. 2014), p. 60; Brödermann, NJW 2012, 971, 973. Brödermann, in: MünchHdb IWR § 6 note 114. Spagnolo p. 166. Durand-Barthez/Lenglart p. 105; Brödermann, Hamburg L. Rev. 2016, 21, 50; Brödermann, in: MünchHdb IWR § 6 note 95. Wegner p. 26, taking GAFTA 100 cl. 26 and its choice of English law as an example. Vogenauer, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 227, 233. Vogenauer, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 227, 233.

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benefits expected to be gained from an investigation into the contents of different laws are uncertain whereas search and information costs involved with shopping around are high.189 Furthermore, there is no discernible incentive to discover the absolutely best and most appropriate law for a given transaction whilst on the other hand there is no immediate sanction for making “inefficient” choices.190 Rational parties must conclude that it is not worth the while, the effort and particularly the cost to discover about the positive and negative qualities of different laws. Consequentially, apathy and indifference are rational.191 Rather than optimising their utility parties will tend to cope with the complexity of making choice of law decisions by simplifying their decision making strategies.192 Party autonomy should not be the object of myths. It is alleged to ameliorate the drafting and 41 the execution of contracts.193 It begs sympathy if freedom and interests in self-governance are invoked.194 This might lead to unconsciously imaging two contracting parties searching for the optimal outcome.195 Such conduct might happen. But it is not the regular occurrence.196 The reality is grimmer: choice of law clauses in Standard Terms and Conditions. Standardisation, not individual tailor-made negotiation is the rule.197 Negotiations of choice of law (and dispute resolution) clauses even if they are staged at all, are not often based on solid legal argument,198 e.g. a careful balancing of comparative legal options searching for the best possible and most coherent set of choice of law and choice of the dispute resolution mechanism under the circumstances.199 Path dependency adds to this insofar as cultural or political circumstances determine parties’ implied preferences.200 Furthermore, unsophisticated parties (if such category is recognised)201 do not truly negotiate choice of law.202

189

190

191

192

193 194 195 196

197

198 199 200 201 202

Vogenauer, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 227, 234. Vogenauer, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 227, 234. Vogenauer, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 227, 234. Kirchner, in: Basedow/Kono (eds.), An Economic Analysis of Private International Law (Tübingen 2006), p. 33, 39–41. Hohloch, in: Festskrift Helge Johan Thue (Oslo 2007), p. 257, 263. Hohloch, in: Festskrift Helge Johan Thue (Oslo 2007), p. 257, 264. Hans-Bernd Schäfer/Lantermann, in: Basedow/Kono p. 87, 92. Mankowski, RIW 2003, 2, 3 et seq.; Kieninger p. 286 et passim; Kieninger, in: FS Hans-Bernd Schäfer (2008), p. 353, 361; Max Planck Institute for Foreign and Private International Law, RabelsZ 68 (2004), 1, 6 et seq.; Basedow, in: Basedow/Kono p. 57, 67; Basedow, in: FS Norbert Horn (2005), p. 229, 242; Basedow, in: Libro homenaje al profesor Santiago Benadava, tomo II (Santiago de Chile 2008), p. 43, 54. Fili Shipping Co. v. Premium Nafta [2007] UKHL 40, [2007] Bus. LR 1719 [26] (H.L. per Lord Hope); Johns, 71 L. & Comtemp. Prbls. 243, 259 (2008); Rushworth/Scott, [2008] LMCLQ 274, 293. Brödermann, in: FS Dieter Martiny (2014), p. 1045, 1061–1067. Brödermann, Hamburg L. Rev. 2016, 21, 22. Christoph A. Kern, GreifRecht 2014, 114, 115. Doubting its usefulness Spagnolo pp. 132, 141–143. Cuniberti, 39 Vand. J. Trans. L. 1511, 1521, 1540–1541 (2006).

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f) Inexistence of a “Law Market” or “Regulatory Competition”

42 On the institutional level a “Law Market” is said to exist203 which generates regulatory

competition in turn leading to better and more efficient law.204 Party autonomy is a condicio sine qua non and fundamental prerequisite for any kind of regulatory competition in contract law.205 But this is only to say that regulatory competition in contract can not possibly exist without party autonomy as an exit or voice option for the parties to concrete contracts; it does not say that regulatory competition in contract law really exists. 43 The ordinary contract party is interested in the application of a law which it knows or is

familiar with, or which gives it a comparative advantage over the other party of the contract,206 particularly a home ground advantage.207 The party is not inclined to investigate, and not inclined in our research and information costs regarding any foreign law. At best it makes a simple calculation about the trade-off between such information costs and the possible amelioration of its own position. By opting for its home law on a regular basis it strives for positive economies of scale and does not express any evaluation that other laws are better or worse than its home law.208 Disinterest is rational in this regard.209 In the vast majority of instances, a party does not make any evaluation or qualitative judgment for this would be way too costly and would not pay off with regard to its business. Sticking with the familiar happens to coincide with the status quo bias as a basic pattern of human behaviour and decision-making.210 Furthermore, legal staff versed in the law of a certain jurisdiction might think of obtaining increased returns by sticking with familiar law since they have already invested in its knowledge, and will resist looking for alternatives because that would depreciate their existing human capital.211 Internal or external staff’s self interested behaviour might generate principal-agent conflicts,212 but might nonetheless heavily influence the course taken by the respective business. 44 Parties’ general disinterest in a search for the absolutely best contract law diminishes if not

extinguishes proper incentives for national legislators to indulge in competition as far as contract law is concerned, but for successful lobbying by interest groups and certain market makers. The threshold is further raised by the language barrier making comparative research

203

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206 207 208

209 210

211 212

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Seminally at present O’Hara/Ribstein, The Law Market (2009) with extensive review by Rühl, 59 Am. J. Comp. L. 841 (2011). A brilliant nutshell for a very informative first glance may be found in Rühl pp. 224– 229. On the latter from a European perspective Garcimartín Alférez, (1999) 8 Eur. J. L. & Econ. 251; de Lima Pinheiro, IPRax 2008, 206. Eidenmüller, JZ 2009, 641, 651; Eidenmüller, 28 Ind. J. Global Leg. Stud. 707, 733, 741–742 (2011); Rühl, in: FS Christian Kirchner (2014), p. 975, 988–989. Carrascosa González p. 210. See only Lookofsky, in: FS Albert Kritzer (2008), p. 287, 291; Spagnolo p. 166. Carrascosa González p. 210; see also Vogenauer, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 227, 234. Christoph A. Kern, GreifRecht 2014, 114, 115–116. Vogenauer, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 227, 234. Spagnolo p. 187 with reference to Prado/Trebilcock, (2009) 59 U. Toronto L.J. 341, 351, 361. Spagnolo pp. 189–191.

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into foreign law for national legislators (in fact their government or their parliamentary bureaucracy preparing the drafts for national Acts) ever more costly and time-consuming. States may have an indirect interest to gain higher tax revenue from a legal industry213 or 45 specialised markets which are centres for the respective trade in the world or at least for a wider region (e.g. Europe) but they do not and cannot tax the choice of their law for contracts generally are not to be registered or published to be publicly accessible, and their content is thus not known to national authorities.214 Generally, this fact generates a severe information problem legislators would have to overcome if they really wanted to stir regulatory competition.215 That parties exercise an exit option and migrate to another country for the quality of its 46 contract law is a rare, if ever appearing phenomenon; thus States do not have incentives to prevent parties from exercising such exit options.216 If businesses pretend, in surveys, that the quality of the law chosen matters to them importantly, this is either mere lip service (producing a socially likeable answer), self-allusion, self-idealisation or subjective self-assertion. How could someone dare to presume that business would go for anything else than quality? But how can businesses assess quality? Are businesses really willing and prepared to invest into information about the laws available for choice and their respective quality? The fate of the CISG and its regular derogation for no better reason than that businesses are not familiar with it217 tells a fairly different story. What businesses pretend to do (or if one likes a less biased formulation: what they say they do) and what they really do are two rather different things. Such answers to surveys are not robust and truly reliable.218 Even expressing a homeward bias might disregard issues of enforceability.219 Party autonomy might on a general level be regarded as a device to “migrate” and to evade 47 national regulations. Insofar “Regulatory Competition” is argued to exist with the lex mercatoria being an additional competitor.220 Even leaving aside all problems inherent to the lex mercatoria, yet a mere contractual choice of law does not lead to migration in the proper and strict sense. II. Express choice of law 1. Generalities Express choice of law is the optimal choice of law. Insofar as the parties unambiguously 48 express their common understanding and intention as to which law shall be applicable to 213

214 215 216 217 218 219 220

Ogus, (1999) 48 ICLQ 405, 408; Ogus, in: Mélanges en l’honneur de Denis Tallon (2000), p. 169, 172; Rühl p. 234. Rühl, in: FS Christian Kirchner (2014), p. 975, 979. Admitted by Rühl, in: FS Christian Kirchner (2014), p. 975, 979. See only Bratton/McCahery, 86 Geo. L.J. 201, 236 et seq.; Rühl p. 233 et seq. In detail Mankowski, in: FS Ulrich Magnus (2013), p. 255, 257–261. This is where Rühl, ERCL 2013, 61, 71–72 falls victim to an illusion. Brödermann, in: MünchHdb IWR § 6 note 115. Muir Watt, Rec. des Cours 307 (2004), 29, 95 et seq.; Jacquet, in: Liber amicorum Hélène GaudemetTallon (2008), p. 727, 733.

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their contract in a mutually consented choice of law agreement they exert the liberty vested in them and could not do better. Parties are then left to the maxim that they know best what is in their interest. Parties should check whether and if so, to which extent, all jurisdictions possible relevant to the contract allow for party autonomy or whether some of them disregard some options like floating choice of law clauses.221 49 Express choice might be used an instrument to harmonise jurisdiction and applicable law by

contractual means insofar as a choice-of-law clause identical to the parties’ choice of forum or other dispute resolution agreement is designed to track that dispute solution provision.222 On the other side, an exclusive choice of forum clause in favour of Swiss courts might interact badly with a choice of New York law.223 Optimally, prudent and foresighted parties should take into account the legal and linguistic abilities of the chosen forum.224 50 An express choice must not necessarily be made in the contract itself. It can be made in

another document to which the contract refers expressly. Then the relevant terms of the other document are integrated into the contract and should be read as though they were spelled out in the contract. For instance, a reference to a charterparty in a bill of lading225 regularly leads to importing the express choice of law made in the charterparty into the bill of lading, at least if the wording of the reference or incorporation clause is wide enough to cover, or expressly refers to, the choice of law clause of the charterparty.226 A reference to the governing law of a charterparty amounts to an irrefutable case that the parties of the bill of lading intended their contract to be governed by the same law as was applicable to the charterparty.227 Or the choice of law made in a guarantee accompanying the main deal might be read into other parts of an M & A transaction.228 But if a party does not submit to Standard Terms and Conditions containing a choice of law clause which are introduced only in the relation between the other party and a third party, the choice of law clause is not imported into the contract between the non assenting party and the other party.229 2. Examples a) Examples for clear or acceptable drafting 51 The simplest and most common form of a choice of law is an express choice of law. Art. 3 (1) 221 222 223 224 225

226

227

228 229

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See the elaborate and skilfully deviced checklist by Lutz Christian Wolff p. 78. Born p. 160. Born p. 164. Born pp. 163–164. For the sake of the argument questions about the scope of Art. 1 (2) (d) and the ensuing applicability or non-applicability of the Rome I Regulation with regard to bills of lading are deliberately left out; see in detail Mankowski, TranspR 2008, 339; Mankowski, Neues aus Europa zum Internationalen Privat- und Prozessrecht der seerechtlichen Beförderungsverträge (2011) paras. 81–113. Caresse Navigation Ltd. v. Office nationale d’électricité (The “Channel Ranger”) [2013] EWHC 3081 (Comm), [2014] 1 Lloyd’s Rep. 337 [34]-[35] (Q.B.D., Males J.) with reference to The “San Nicholas” [1976] 1 Lloyd’s Rep. 8 (C.A., per Lord Denning MR); The “Njegos” [1936] p. 90. Caresse Navigation Ltd. v. Office nationale d’électricité (The “Channel Ranger”) [2013] EWHC 3081 (Comm), [2014] 1 Lloyd’s Rep. 337 [36] (Q.B.D., Males J.). OLG Frankfurt GmbHR 2013, 139. But cf. also OLG Düsseldorf NJOZ 2013, 698. Rb. Gelderland, zittingsplaats Zutphen NIPR 2014 Nr. 41 p. 94.

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cl. 2 var. 1 permits so. The parties are free to expressly designate a certain law to be applicable. They can nominate that law by its nationality (e.g. “This contract shall be subject to German law” or “The contract shall be governed by Swiss law”230 or “This contract shall be subject to the laws of England and Wales” or “[T]his contract shall be construed and take effect in accordance with the laws of England”)231. Generally, it appears advisable to refer to “the law”, not to “the laws” of a certain State for the 52 latter could possibly and arguably be read as not including precedents, lower ranked legal sources or customary law232 (although such reading would almost equate “laws” with “statutes”, which term is not used by the parties, presumably deliberately). But there are other permissible modes. The identity and identifiability of the law chosen is 53 more important than the precise formulation by which the scope of the chosen law is defined.233 For instance, parties can employ a certain connecting factor to designate the chosen law. The law of the court seized might find some favour. Or the law of either party’s seat, residence or domicile, principal or simple place of business might do. The relevant party might be indicated by its name or by its role in the contract so that “the seller’s law” or “the buyer’s law” might be chosen.234 It is only required that the criterion employed is a workable one and that it is handled with 54 reasonable care and diligence. If parties express their choice in more oblique form (it is clear that they made a choice, but is less clear which choice), the choice will be upheld if a dispute resolution instance is able to make sense of it.235 The more complicated the criterion employed by the parties is, the more problems might ensue Instrumentalising normative notions in particular might generate uncertainty. The most (in)famous instance is to be found in the carriage of goods by sea: Parties choose the law of the carrier’s principal place of business and simultaneously insert a so called Identity of Carrier (IoC) clause which deals with the identification and definition of “carrier”, i.e. determines who shall be deemed to be the carrier, in the event of a bareboat charter or demise charter. The main trouble is the legal validity of the IoC clause since it ordinarily designates the ship’s owner as carrier who might not even have appeared in the contract or its negotiation. In the extreme, parties might choose the law applicable by coin flip. If all parties to the 55 contract assent to such procedure, so be it. That the choice is aleatory and fortuitous does not prevent that it is based on the parties’ intention. If parties instruct a neutral third person to virtually toss the coin, the parties’ intention is also clear.236 If the parties want to play games or want games to be played, they shall be pleased. The choice of law clause ordinarily appears amongst the Final Clauses of a contract. But 56 there is no strict rule to this avail, and the concrete place of the choice of law clause within the 230 231 232 233 234 235 236

See e.g. BAG AP H. 4/2012 Verordnung Nr. 44/2001/EG Nr. 3 [6]. GAFTA 100 cl. 26. Lutz Christian Wolff p. 76. Briggs, Private International Law in English Courts (2014) para. 7.96. See only OLG Celle OLGZ 1991, 485, 486; Mankowski, in: FS Tuğrul Ansay (2006), p. 189, 209–210. Briggs, Private International Law in English Courts (2014) para. 7.97. OLG München 9 October 2013 – Case 34 SchH 6/13 para. 41.

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contractual framework is a matter of convenience. The choice of law clause would be equally effective if it was to be found at the beginning of the contract or even in a preamble to the contract. Likewise, a choice of law clause in contract documents attached to the main contract is effective.237 If different documents attached contain conflicting choice of law clauses it is advisable to devise a further clause on hierarchy and priority between the documents.238 57 It is a matter for the law referred to in the choice of law clause pursuant to Art. 3 (5) in

conjunction with Art. 10 (1) to answer the question which prerequisites an incorporation clause must meet in order to fulfil its purpose. The main examples are incorporation clauses in bills of lading referring to charterparties which in turn contain choice of law clauses.239 The general idea behind Art. 3 (5) in conjunction with Art. 10 (1) does also apply to a choice of law for bills of ladings although bills of lading are exempt from a direct application of the Rome I Regulation by virtue of its Art. 1 (2) (d).240 b) Elaborate Specimen Clause 58 The eminent English conflicts scholar Adrian Briggs has proposed an elaborate version of a

specimen choice of law clause. Making an express choice of law,241 aiming at being exclusive,242 it reads: “Governing law This Agreement, and the whole of the relationship between the parties to it, is governed by English law. The parties agree that all disputes arising out or in connection with it, or with the negotiation, validity or enforceability of this Agreement, and the relationship between the parties, and whether or not the same shall be regarded as contractual claims, shall be exclusively governed by and determined only in accordance with English law.”243 59 With all respect due to one of Europe’s most learned and most prominent conflicts lawyers

this focuses a notch too much on dispute resolution – which is understandable considering the overwhelming weight which the Specimen Clause in the following attaches to procedural and in particular jurisdictional issues.244 Furthermore, with regard to non-contractual claims, it crosses the border into the territory of Art. 14 Rome II Regulation without visibly paying regard to the particularities of that rule. It is a special purpose of the Specimen Clause to extend to the realm of tort in particular,245 but there should be proper regard for characterisation, which is more than mere labelling.246 237 238

239

240 241 242 243 244 245

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Ravillon, in: Corneloup/Joubert p. 67, 76–77. Helleringer, in: Lewkowicz/Xifaras (dir.), Repenser le contrat (2009), p. 277–278; Ravillon, in: Corneloup/ Joubert p. 67, 77. See The “Dolphina” [2011] SGHC 273, [2012] 1 Lloyd’s Rep. 304 (Singapore H.C., Ang J.); Liang Zhao/ Felix Chan, [2012] LMCLQ 481. BGHZ 99, 207, 210. Briggs para. 5.18. Briggs para. 5.20. Briggs para. 5.17 Clause 20 (a). Briggs para. 5.17 Clause 20 (b)-(h). Briggs para. 5.19.

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c) Minimalist Specimen Clause The prominent Englishman Briggs has drafted a minimum specimen clause, too:

60

“All disputes shall be determined exclusively by the English courts and in accordance with English law.”247 This clause does not restrict its own scope of application, deliberately avoiding references to 61 “contract”, “agreement” or “relationship of the parties”, but referring to “all disputes”.248 Some shortcoming is admitted with regard to third parties.249 Scrutiny would reveal whether a strictly procedural understanding of “disputes” (only covering formalised dispute resolution mechanisms like litigation, arbitration, conciliation and all kinds of mediation) could prevail or whether a broader meaning should be attached to “disputes” including nonformalised disputes. Furthermore, it is not clear how jurists trained in common law jurisdiction and fixated/focused on identifying the exact meaning of words, would apply such a clause in the event that no disputes arise. One should not underestimate the guiding force of choice of law agreements in the absence, or prior to the emergence, of disputes. d) Further examples Choice of law clauses might also come in such form as: “This Contract and its execution as 62 well as any questions arising in connection with this contract or its execution, including but not limited to its breach, termination and validity, shall be subject to the laws of [X].”250 Evidently, this sample was drafted by someone with a personal background in common law not relying on default rules or gap-filling interpretation. To continental eyes, it might appear a little verbose and might expressly mention issues the inclusion of which should go without saying. The sample is certainly more elaborate than a simple “This Contract shall be governed by the law of [X].”, but it may be questionable if the additional wording adds anything in terms of contents or clarity.251 The intention behind it addresses some concerns as to whether without express inclusion courts or arbitrators would regard some issues covered by the choice of law clause. Insofar the sample serves as some kind of safety valve and provides additional protection against unwanted eventualities and unexpected decisions.252 “Including” does not imply that other issues are excluded; hence, the “but not limited to” appears redundant.253 e) Examples of bad drafting There are a number of possible reasons why in particular at the end of intense negotiations 63 badly drafted choice of law clauses are the result. Sometimes aspects of prestige prevent the

246 247 248 249 250 251

252 253

Insofar Contra Briggs para. 5.20. Briggs para. 5.53. Briggs para. 5.54. Briggs para. 5.60. Lutz Christian Wolff p. 75. Graeme Johnston, The Conflict of Laws in Hong Kong (2nd ed. Hong Kong/Singapore 2012) p. 328; Lutz Christian Wolff p. 76. See Lutz Christian Wolff p. 76. Chuah, Law of International Trade (4th ed. 2009, Reprint 2011) p. 706; Lutz Christian Wolff p. 76.

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parties from reaching a proper compromise.254 Contracts between States and private parties are particularly prone to this. Other reasons for pathologic, not well drafted choice of law clauses are ignorance, risk taking or assembling different pieces of some kind of jigsaw.255 Or parties are not inclined to struggle but rather cater for harmony in order to avoid negative emotions.256 Sometimes parties do not invest in the budgets necessary for professional advice.257 Legal advice is a form of information costs which in particular SMEs might be prone not to invest for they face proportionally higher costs since the generally same amount of costs must be averaged across a smaller number of lower value transactions.258 In some instances lack of investment in legal advice is even driven by internal power struggles within enterprises, mainly between managers or project leaders on the one side and the law department, inhouse counsel or external legal advisors on the other side.259 64 Even outside State contracts, sometimes the mopping up of the final clauses happens in the

early hours of a day after a night without sleep. Sometimes the pressure is on the lawyers to finalise the drafting in the backroom whilst the business people already celebrate the successful completion of the contract in the front room (which is known as the “champagne hour syndrome”)260 – and a failure to complete the contract is no valid option anymore. Like many highly complex decisions, choices of law must often be made quickly, in less than ideal conditions.261 65 Experience shows that that a choice of law frequently occurs at the end of the negotiation

process and almost as an afterthought once the “material” and “substantive” contract terms have already been agreed upon262 and the economic deal has ben sealed in the commercial dealmakers’ eyes. From a legal point of view this is clearly suboptimal. Choice of law agreement should be concluded earlier in the negotiations, best even before the first detailed draft is developed.263 Equally often the parties do not bother to verify the results of their choice and of the application of the chosen law to their transaction.264 This is far from the theoretical ideal that the chosen law is the basis and yardstick, established early in the negotiations, against which all substantive clauses have to be measured. Parties usually give first priority to upholding the economic result reached.265 Team play between managers and lawyers can be

254

255 256 257 258

259 260

261 262 263

264 265

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See only Friederike Sandrock, Die Vereinbarung eines “neutralen” internationalen Gerichtsstandes (1997) p. 60; Mankowski, RIW 2003, 2, 5. Brödermann, in: FS Dieter Martiny (2014), p. 1045, 1063–1065. Brödermann, in: FS Dieter Martiny (2014), p. 1045, 1066. Brödermann, in: FS Dieter Martiny (2014), p. 1045, 1067. Spagnolo pp. 185–186 with references to Linarelli, 48 Wayne L. Rev. 1387, 1402 (2003); Castellani, Vindobona J. Int. Comm. L & Arb. 13 (2009), 241, 247. Brödermann, in: FS Dieter Martiny (2014), p. 1045, 1067. Kronke, in: FS Dieter Henrich (2000), p. 385, 390. Cited with approval e.g. by Mankowski, RIW 2003, 2; Brödermann, in: FS Dieter Martiny (2014), p. 1045, 1062 fn. 76. Spagnolo p. 192. Radicati di Brozolo, RDIPP 2012, 841, 853. Rainer Schumacher, Vertragsgestaltung (2004) para. 1708; Courvoisier/Zogg, in: Peter Münch/Passadelis/ Jens Lehne (eds.), Handbuch internationales Handels- und Wirtschaftsrecht (2015) para. 8.10. Radicati di Brozolo, RDIPP 2012, 841, 853. Brödermann, in: FS Dieter Martiny (2014), p. 1045, 1065.

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written in rather small letters, the more so if in the “business leaders’” opinion lawyers are relegated to the lower echelons of the internal hierarchy.266 The most notorious and (in)famous example for a choice of law clause which has completely 66 and utterly gone wrong was the clause in the Channel Tunnel contract between the United Kingdom and France: “The construction, validity and performance of the contract shall in all respects be governed and interpreted in accordance with the principles common to both English and French law, and in the absence of such common principles by such general principles of international trade law as have been applied by national and international tribunals. Subject in all cases, with the works to be respectively performed in the French and in the English part of the site, to the respective French or English public policy (ordre public) provisions.” The House of Lords rightly and fully justifiedly squashed it for sheer unworkability.267 But of 67 course, judges should be very careful before setting a choice of law clause aside and should have recourse to any trick in the “Book of interpretation” to save such a clause.268 Only little better fared the following example from a contract between the Ottoman Empire 68 and an Austrian enterprise dating back to 1872: “Les principes appliqués dans les circonstances analogues dans les autres grands États de l’Europe, tel que l’Autriche, l’Italie, la France et l’Allemagne.”269 Underlying and pervading not only these specimen and samples, the so called tronc commun 69 doctrine might be at the source of the difficulties.270 It combines a multiple choice of the common principles of a majority of laws or of a multiplicity of laws insofar as they happen to coincide.271 The comparatistic abilities of commercial men and their lawyers are put hard to the test by this kind of compromise. Since the comparison as to the content of the laws heaped upon each other has to take place in the first step (at least if one takes the wording of the clause seriously), it does not matter whether there is a default solution in a second step (for instance a choice of Swiss law insofar as German and French law do not coincide)272 or not. No masterpiece (although one could guess what parties intended to say) is also the following 70 clause from a contract between a German seller and an Indonesian buyer: 266 267

268 269

270 271

272

Brödermann, in: FS Dieter Martiny (2014), p. 1045, 1068. Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd. [1993] AC 334 = [1993] 2 WLR 262 (H. L.). Wenner para. 61. Cited by Klaus Peter Berger, Formalisierte oder “schleichende” Kodifizierung des transnationalen Wirtschaftsrechts (1996) p. 31. See Pörnbacher/Sebastian Baur, FS Rolf A. Schütze zum 80. Geb. (2014), p. 431, 435. See e.g. Blackaby/Partasides, Redfern and Hunter on International Arbitrations (2009) paras. 3.141– 3.161; Fouchard/Gaillard/Goldman, International Commercial Arbitration (1999) para. 1436. Example taken from Pörnbacher/Sebastian Baur, FS Rolf A. Schütze zum 80. Geb. (2014), p. 431, 435.

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“For purpose of performance of obligations under this contract, obligations being performed in Indonesia shall be subject to the applicable laws of Indonesia and, all other obligations shall be subject to applicable laws of the Federal Republic of Germany”.273 Even some guides for contract drafting contain examples how not to do without noticing, like the following example taken from a German guide for the law of architect contracts:274 “The parties agree that all their relations, be they contractual or non-contractual, are subject to German law insofar as this does not contradict mandatory rules.”275 71 “This contract is subject to European law” simply overlooks that for the time being there is

no body of European contract law.276 It leaves the Court or the arbitrators with the task to answer the question whether this could be possibly interpreted as the choice of the law of a EU Member State and, if so, of which Member State.277 72 Not a masterpiece either was its UK counterpart: Parties choose “the laws of the United

Kingdom”.278 British, English, Welsh, Scottish and Northern Irish law certainly rejoiced. 73 Likewise, the choice of “the laws and regulations of the International Chamber of Commerce

of Paris (France)” as it appeared in a contract about certain rabbits between a Slovenian seller and an Italian buyer was not very convincing.279 74 A further nicety prone to unworkability:

“The parties agree that the laws of France and Germany apply to their contract. In case these legal systems provide conflicting rules, Swiss law shall apply.”280 Obviously the parties placed much trust in the abilities of the judges or arbitrators who might be called upon to resolve any ensuing dispute.281 75 Duplicating or triplicating appears also to be very popular if negotiations are mutually

prestige-driven or if each party is not prepared to give full way to the other whilst generally accepting the need for a compromise. Three examples:282 A clause urged the arbitration tribunal to apply Austrian law, but in the Iraq Iraqi law should be exclusively applicable. 273 274

275 276 277 278 279 280 281 282

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Cited by Jochen Schröder/Wenner para. 115. Namely Fischer, in: Thode/Wirth/Kuffer, Praxishandbuch Architektenrecht (2004) § 8 note 60 and cited with some amusement by Wenner, in: FS Ulrich Werner (2005), p. 39, 43. My translation. Wenner para. 59. More favourable Ravillon, in: Corneloup/Joubert p. 67, 81. See Ravillon, in: Corneloup/Joubert p. 67, 86. Upheld by Rb. Zeeland-West Brabant, zittingsplaats Breda NIPR 2014 Nr. 154 p. 283. Wenner para. 134. Cited by Klaus Peter Berger, International Economic Arbitration (1993) p. 493 fn. 94. Wenner para. 170. Kodek, in: Verschraegen p. 85, 90 takes these from Heller, in: Aicher/Korinek, Rechtsfragen des nationalen und internationalen Industrieanlagenbaus (1991) p. 177.

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Another clause read: “Arbitration shall decide upon pending disputes applying Austrian law to the extent which is not inconsistent as regards interpretation that might influence the rights and obligations of the Yugoslavian party according to the valid Iraqi law.” The third clause calls to apply “the law of the canton Genève or Saudi-Arabian law or both.” without giving any indication who if anyone should decide which option shall become the relevant one in a concrete case. Generally, self-contradictory choice of law agreements calling for two or more laws applied simultaneously to the same issues is pathological.283 If a Standard Term still declares the law of the then GDR284 (which has now ceased to exist 76 for some decades already) to be applicable no-one did apparently care about re-considering and re-editing the said Standard Term, and the intended choice of law can only be read as a materiellrechtliche Verweisung at best. Perhaps it would be even better to ask the parties and their advisors whether they had any second thoughts in the meantime and might want to replace the clause with another, more suitable choice of law. Sometimes clauses provide for “Italian jurisdiction shall govern this contract.”285 The re- 77 ference to “jurisdiction”, not to any law as such is unfortunate at best. It makes it unclear whether the clause should be a choice of forum clause or a choice of law clause or both in one. “Jurisdiction” bears a strong relation to dispute resolution not with the governing substantive law.286 Another recipe for disaster is simply translating a choice of law clause (which is perfectly 78 valid and carefully drafted in the original language) from one language to another without cross-checking it as to its consistency with the legal terminology of the target language.287 “False friends” might appear in their shades. The inherent danger is even augmented if the translating interpreter is not versed with legal terminology in either language. The party who relies on bi-langual dictionaries or on online tools might fare even worse.288 A well advised party will invest the extra cost for legal expertise and familiarity with legal terminology. 3. Petrification clauses Petrification clauses aim at freezing the applicable law as it stands when the choice of law 79 agreement is concluded.289 Conflicts force should be denied to such clauses.290 The effects of a petrification clause are limited to those of a materiellrechtliche Verweisung:291 The parties could have copied the law as it was into their contract, but are subjected to the limits 283 284 285 286 287 288 289 290

291

Brödermann, in: FS Dieter Martiny (2014), p. 1045, 1062 et seq. Example yet again from Kodek, in: Verschraegen p. 85, 90. Lutz Christian Wolff p. 75. Lutz Christian Wolff p. 77. Göthel, in: Göthel (ed.), Grenzüberschreitende M & A-Transaktionen (4th ed. 2015) § 6 note 71. Göthel, in: Göthel (ed.), Grenzüberschreitende M & A-Transaktionen (4th ed. 2015) § 6 note 72. Seminal still Otto Sandrock, in: FS Stefan Riesenfeld (1983), p. 211. Rigaux, Cah. dr. eur. 1988, 315, 320; von Bar, IPR, vol. II, para. 482; Lagarde, RCDIP 80 (1991) 287, 303; Carrascosa González p. 140; Dicey/Morris/Collins/Morse para. 32–082; Martiny, in: Münchener Kommentar zum BGB Art. 3 note 26; Magnus, in: Staudinger, Art. 3 note 51. Contra Otto Sandrock, in: FS Stefan Riesenfeld (1983), p. 211, 220 et seq. Ragno, in: Ferrari, Art. 3 note 29.

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imposed by the current version of the lex causae, since the reference to the lex causae is a dynamic one.292 If the intertemporal law of the chosen law permits petrification, this ought to be accepted.293 80 Insofar as parties relate to sources in private codifications and thus exert only a materiell-

rechtliche Verweisung, they are at liberty to petrify this, i.e. to relate only to the version of such codification current at the time when the agreement was concluded with the exclusion of any later version.294 If the parties have not done so the agreement should be understood as a dynamic one relating to the version of such private codification which is in force when proceedings are commenced.295 4. Stabilisation clauses, fundamental changes in the chosen law and the doctrine of clausula rebus sic stantibus 81 Close neighbours of petrification clauses, but still a slightly different treat,296 are stabilisation

clauses.297 They do not attempt at freezing the chosen law as it stands at the time of the conclusion of the choice of law agreement. They do not operate on the conflicts level but rather on the level of substantive law. They react to fundamental changes in the chosen law and try to negate effects of such changes as far as possible.298 Examples verging on extraordinary circumstances could for instance be a revolution (especially an Islamic one), a change of systems (especially from socialism or dictatorship to market economy) or the switch to another national ruler (especially due to an occupation).299 Some kind of variation are so called economic equilibrium clauses under which a State party is required either to restore the economic equilibrium prevailing at the time when the contract was concluded, or to compensate the commercial party for any adverse consequences of respective changes.300 Likewise, hybrid freezing and rigid economic equilibrium clauses might occur.301 Stabilisation clauses aim at the law before the relevant event to remain applicable.302 Such an agreement should not be imputed light-handedly.303

292 293 294 295 296

297

298

299 300 301 302

303

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Vidmar, ZfRV 2015, 219, 223. Schwander, in: FS Ingeborg Schwenzer (2011), p. 1581, 1586; Vidmar, ZfRV 2015, 219, 223. Brödermann, RIW 2004, 721, 734 et seq.; Kondring, IPRax 2007, 241, 243. Kondring, IPRax 2007, 241, 244. A more elaborate systematisation might even distinguish between freezing clauses, stabilisation clauses stricto sensu, non-application clauses, and clauses of non-intervention; Franzina, in: Studi in onore di Luigi Costato, vol. II (2014), p. 513, 522 fn. 45 with further references. Most extensively on the topic Fiedler, Stabilisierungsklauseln und materielle Verweisung im internationalen Vertragsrecht (2001). See only Mengel, RIW 1983, 739; Jutta Stoll, RIW 1981, 808; Jutta Stoll, Vereinbarungen zwischen Staat und privatem Investor (1982). Magnus, in: Staudinger, Art. 3 note 53. Born p. 166. Born p. 166. To this avail von Bar, IPR, vol. II, para. 482; differentiating Martiny, in: Münchener Kommentar zum BGB Art. 3 note 27; Magnus, in: Staudinger, Art. 3 note 53. See BGH NJW-RR 2007, 1463, 1464.

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The desired effect of stabilisation clauses might collide with the doctrine of clausula rebus sic 82 stantibus, if the chosen law employs such a device. The doctrine of clausula rebus sic stantibus establishes an implied condition that all relevant circumstances remain practically the same and are fundamentally unchanged. If a fundamental change affects the circumstances, it permits the law to react and to adapt itself to the now prevailing circumstances. An adaptation is barely consistent with a stabilisation referring back to the initial situation as it was when the contract was concluded. The correct approach refers to the lex contractus and its handling of the clausula rebus sic stantibus.304 The prime example for stabilisation clauses are contracts between States and private inves- 83 tors.305 The private investor wants to slip away from the grip of the State in which he is investing. The clause shall provide some protection and safeguard against this State legislating in its own favour.306 The State might feel tempted to act opportunistically ex post. A further contractual attempt at escaping from such opportunism is a clause declaring a new regulatory regime to be enacted in the future applicable only insofar as it is not detrimental to the private party’s interests.307 The case is different if the contract is made between private parties since none of them can 84 legislate in its own favour and enjoys a dual role as contracting party and as legislator simultaneously. To admit stabilisation clauses between private parties would indirectly lessen the position of weaker parties, for it would threaten to disregard future reforms in the protective regimes of the chosen law.308 5. Choice of law for all obligations “arising out of the contract” or “arising out of the relation between the parties” a) Contractual obligation as basic requirement Basic requirement for the applicability of Art. 3 is the contractual nature of the obligations at 85 stake. Contract means contract in the strict sense, and it means a contract which generates obligations. By virtue of Art. 1 (2) (b), (c) all contracts concerning family relations, maintenance, marital property and questions of succession are excluded. Insofar Art. 3 can not go beyond the general scope of application of the Rome I Regulation as a whole how it is defined in Art. 1. More difficult are issues relating to the transfer of property. Transfer of property as such is 86 outside the Rome I Regulation309 but for the express inclusion of property consequences of an assignment inter partes in Recital (38). Yet if the respective contract also generates ob-

304 305

306 307 308 309

von Bar, IPR vol. II para. 482; Magnus, in: Staudinger, Art. 3 note 52. Most extensively Merkt, Investitionsschutz durch Stabilisierungsklauseln (1990); Wolfgang, RDAI 1988, 875; Lemaire, Les contrats internationaux de l’administration (2005) pp. 91–100; Faruque, J. Int. Arb. 23 (2006), 318; Foster Halabi, 31 Nw. J. Int’l. L. & Bus. 263 (2011); Tafotie, Rev. dr. int. dr. comp. 2014, 429. For examples from the petrol industry Coale, 30 Denver J. Int’l. L. & Pol’y. 217 (2001–2002). Jud, JBl 2006, 695, 696. Ravillon, in: Corneloup/Joubert p. 67, 80. von Hein, in: Rauscher, Art. 3 note 70. See only Report Giuliano/Lagarde OJ EEC 1980/42.

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ligations (like in the Roman legal orders), these obligations are governed by the Rome I Regulation.310 b) “Arising out of the relation between the parties”

87 If the parties want to choose the law for all obligations “arising out of the relation between

the parties”, matters become even trickier and more complicated. One is bound to distinguish between contractual and non-contractual obligations because “the relation between the parties” is a wider notion, at least wider than “arising out of this contract”. There is a broad range of variations, particularly so in clauses drafted in English. It displays the full beauty of English prepositions and literal interpretation sticking to the wording of a given clause.311 “Arising under this contract”, “Arising out of this contract”, “Arising in any way whatsoever out of this contract”, “Arising from this contract”, “Arising in connection with this contract”, “in relation to this contract”, “construction of this contract” and “any disputes” are only the most popular or (notorious) amongst the possible variations.312 Presumably they are of different width and ambition.313 The core issues are the inclusion of rectification on the one hand314 and of precontractual relations on the other hand.315 Even in England one has turned from a literal interpretation towards a more purposive reading.316 German-language clauses are not less differing,317 as are also their French, Spanish etc. counterparts.

310 311 312 313

314

315 316

317

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See only Magnus, in: Staudinger, Art. 3 note 16. See Briggs para. 5.73. See Briggs paras. 5.74–5.91. Vgl. Heyman v. Darwins [1942] AC 356, 385, 399 (H.L.); The “Evje” [1975] AC 757, 814, 817 (H.L.); The “Antonis P. Lemos” [1985] AC 711, 728 (H.L.); Mackender v. Feldia AG [1967] 2 QB 50, 598 (C.A., per Lord Denning MR), 602 f. (C.A., per Diplock LJ); The “Makefjell” [1976] 2 Lloyd’s Rep. 29, 33 (C.A., per Cairns LJ); Ashville Investments Ltd. v. Elmer Contractos Ltd. [1989] QB 488 (C.A.); Fillite (Runcorn) v. Aqua-Lift (1989) 26 Construction LR 66 (C.A.); Pacific Resources Corp. v. Credit Lyonnais Rouse C.A. 7 October 1994 (per Hirst LJ); Fiona Trust & Holding Corp. v. Privalov [2007] EWCA Civ 20, [2007] Bus. LR 686 (C.A.), affirmed sub nomine Premium Nafta Products Ltd. v. Fili Shipping Corp. [2007] UKHL 40, [2008] 1 Lloyd’s Rep. 254, [2007] 4 All ER 951 (H.L.); Comandate Marine Corp. v. Pan Australia Shipping Pty. Ltd. (2006) 157 FCR 45 [175] (Fed. C.A. Australia, per Allsop J.); FAI General Insurance Co. Ltd. v. Ocean Marine Mutual Protection and Indemnity Association [1998] 1 Lloyd’s Rep. 24, 31 f. (NSW High Ct.). Briggs para. 5.79, 5.88 with reference to Pacific Resources Corp. v. Credit Lyonnais Rouse C.A. 7 October 1994 (per Hirst LJ); Ethiopian Oilseeds and Pulses Export Co. v. Rio del Mar Foods [1990] 1 Lloyd’s Rep. 86 (Q.B.D., Hirst J.); Kathmer Investments Pty. Ltd. v. Woolworts Pty. Ltd. 1970 (2) SA 498 (App. Div., Sup. Ct. SA); Roose Industries Ltd. v. Ready Mix Concrete Ltd. [1974] 2 NZLR 246 (NZ C.A.); Drennan v. Pickett [1983] 1 Qd. R. 445 (High Ct. Qd.); Francis Travel Marketing Pty. Ltd. v. Virgin Atlantic Airways Ltd. (1996) 39 NSWLR 160 (NSW C.A.); Comandate Marine Corp. v. Pan Australia Shipping Pty. Ltd. (2006) 157 FCR 45 (Fed. C.A. Australia). Mankowski, in: FS Dieter Martiny (2014), p. 449, 465–466. Briggs para. 5.67 with reference to Fiona Trust & Holding Corp. v. Privalov [2007] EWCA Civ 20, [2007] Bus. LR 686, affirmed sub nomine Premium Nafta Products Ltd. v. Fili Shipping Corp. [2007] UKHL 40, [2008] 1 Lloyd’s Rep. 254, [2007] 4 All ER 951 (H.L.). Mankowski, in: FS Dieter Martiny (2014), p. 449, 466.

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c) Other contracts The first object referred to are other contracts which bear a close connection with the 88 contract containing the choice of law clause (of course, unless they themselves contain an own choice of law agreement respectively). The prime candidates are contracts forming another part of an overall transaction which is only formally split into a number of contracts. The economic transaction should be seen an as entity although by legal terms it is subdivided into the single contracts. But eventually the overarching framework should take precedence.318 Of course, the ideal solution would be an express choice of law designating the lex causae of a determinated contract also as the law applicable to the other contracts at stake.319 Parallel express choices in the outcome designating the same law as lex causae for all contracts concerned would also be a solution, which would render the search for a tacit choice of law futile and nugatory. aa) Umbrella agreements and executing contracts thereunder A widely worded choice of law clause might gain particular importance if it is found in an 89 umbrella agreement. Regularly, it should be read as not only covering the umbrella agreement as such, but also the single executing contracts under that umbrella agreement.320 But caution is called for: If any single executing contract contains its own choice of law 90 clause, this clause prevails over that in the umbrella agreement. It is the more specific device. Parties, and commercial parties at that, are believed that they intend to deviate from the umbrella framework if they consent to a different choice of clause in the executing contract.321 If the choice of law in the executing contract concerns the same law as the umbrella agreement, the former still prevails over the latter due to speciality, but without any true conflict arising between the two of them.322 bb) “Sister contracts” The case is different with “sister contracts”. There is no automatism attached to them. 91 Conversely, they call for a specific reasoning in the concrete case as to why the nexus and connection between them justifies the transfer of parties’ choice of law from one contract to another. Not every nexus is strong enough to carry such justification and to pierce the severability of contracts.323 This holds particularly true where neither contract can be identified as the leading one and where all contracts are of equal rank and on equal footing.324 Auxiliary and ancillary contracts follow the main contracts, though, accessorium sequitur principale.325

318

319 320

321 322 323 324 325

Mankowski, in: FS Dieter Martiny (2014), p. 449, 466. Sceptical Briggs, Private International Law in English Courts (2014) para. 7.103. Corneloup, in: Corneloup/Joubert p. 285, 301. OLG Hamburg IPRspr. 1998 Nr. 34 pp. 68–69; LG Karlsruhe NJW-RR 1999, 1284; Mankowski, in: FS Dieter Martiny (2014), p. 449, 466. Mankowski, in: FS Dieter Martiny (2014), p. 449, 466. Mankowski, in: FS Dieter Martiny (2014), p. 449, 466–467. Bernard Audit, Droit international privé (7th ed. 2013) para. 820. Mankowski, in: Leible, p. 63, 71. Mankowski, in: FS Dieter Martiny (2014), p. 449, 467.

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92 Generally it might be implied in case of doubt that parties may want to subject their entire

contractual relations to the same law in order to reduce search and information costs. But this does not answer the question which law they want to subject it. If parties assume different roles within the overall transactional framework (one party being on the demand side of one contract, but on the supply side of another and vice versa) parties’ interests may equally change or even reverse. This might result in each party striving for a “home game” under the single contract again.326 93 Related transactions might be just that and might not justify a nexus and a bond between

them justifying to subject the law applicable to one of them to the law applicable to the other. The case might be even more disrupted where the related contracts do not feature the same parties but are between different parties.327 Nonetheless, there might be an implied choice of the same law as is applicable to an underlying contract, with regard to a guarantee contract,328 to a commission agreement,329 or to a reinsurance agreement.330 cc) Previous or preceding contracts 94 Another point of reference might be found in previous or preceding contracts of the same

type. Parties might stick to what has been proven in the past. They might not want to change a winning team or they adhere to the adage “If something ain’t broken, don’t fix it.” They might not be prone to adapt changes for the future want only. Already known features might appear as a better basis than running “innovative” risks. A certain status quo bias might prevail,331 and investment in alterations would not be promising. Furthermore, the parties might already have invested information costs in the law once chosen and might try to amortise them. A repeat game generates a reduction of costs by standardisation and other positive economies of scale.332 If parties are in a permanent business relationship with each other, it should even be presumed that all single contracts between them should be governed by the same law as previously chosen in earlier contracts unless there is an express choice of a different law.333 To change the applicable law within some kind of continuum would need a strong justification. It would be prone to generate surprise effects and adaptation costs.334 A preventive reaction would even generate suboptimally high costs.335 Even if directly addressing only the form of jurisdiction clauses Art. 25 (1) cl. 3 (b) Brussels Ibis Regulation can be generalised.336 In order to reach a contrary conclusion, circumstances must indicate a delib326 327

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329 330 331 332 333

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Mankowski, in: FS Dieter Martiny (2014), p. 449, 467. Contra BGH NJW 2001, 1396, 1397; Dicey/Morris/Collins/Morse para. 32–061; Ragno, in: Ferrari, Art. 3 note 42. Broken Hill Proprietary Co. Ltd. v. Xenakis [1982] 2 Lloyd’s Rep. 304 (Q.D.B.); Wahda Bank v. Arab Bank [1996] 1 Lloyd’s Rep. 470; Bank of Scotland v. Henry Butcher & Co. [2001] 2 All ER (Comm) 691; Emeraldian Ltd. Partnership v. Wellmix Shipping Ltd. [2010] 1 CLC 993. But contra Samcrete Egypt Engineers & Contractors SAE v. Land Rover Exports Ltd. [2001] EWCA Civ 2019. Fr. Lürssen Werft GmbH & Co. KG v. Halle [2010] EWCA Civ 587 (C.A.). Gard Marine and Energy Ltd. v. Tunnicliffe [2011] Bus. L.R. 839. v. Pommern-Peglow, ZRP 2015, 178, 180–181. Mankowski, in: FS Dieter Martiny (2014), p. 449, 467. See only Report Giuliano/Lagarde, OJ EEC 1980 C 282/17; Egon Lorenz, RIW 1992, 697, 702; Mankowski, in: Leible, p. 63, 71; Magnus, in: Staudinger, Art. 3 Rn. 95. Mankowski, in: FS Dieter Martiny (2014), p. 449, 467–468. Mankowski, in: FS Dieter Martiny (2014), p. 449, 468.

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erate change so that a mere omission without the presence of such circumstances would not rebut the point of reference.337 d) Extension to claims in tort aa) Generalities Art. 3 directly covers only contractual obligations whilst it is for Art. 14 Rome II Regulation 95 to govern party autonomy with regard to torts and other non-contractual obligations.338 Art. 14 Rome II Regulation imposes stricter requirements than Art. 3. On the other hand, Art. 4 (3) Rome II Regulation establishes an akzessorische Anknüpfung 96 which in particular becomes relevant if non-contractual obligations are to be found in the close vicinity of a contractual relation between the parties. Hence, by the backdoor and indirectly, Art. 3 might gain some relevance even for non-contractual obligations in general.339 Particularly in B2B relations where Art. 14 (1) (a) Rome II Regulation allows an ex ante 97 choice of the law applicable to non-contractual obligations, it might be advisable to draft a choice of law clause which also covers concurring claims in tort. Such a clause might for example read as follows: “(1) This Agreement is governed by the law of X. (2) This choice of law applies (to the exclusion of claims based on an act of unfair competition, the restriction of competition of an infringement of an intellectual property right pursuant to Arts. 6 (4) and 8 (3) Rome II Regulation) also with regard to any concurring claims under a tort arising out of, or related to, the performance of this Agreement.”340 bb) Extension to claims in tort If parties want to extend their choice of law beyond the ambit of the contract as such and 98 want to extend it to concurring or non-concurring claims in tort, delict or quasi-delict, they might be advised to opt for wider formulations and to avoid any express reference to the contract as such, though, for this would be tentatively limiting.341 Businessmen will generally not only want any dispute arising out of the relationship into which they have entered, whether based in contract or tort or anything else, to be resolved by the same tribunal,342 but also to be governed by the same applicable law if ever possible. Accordingly, clauses are often 336

337

338 339 340

341 342

Mankowski, in: Leible, p. 63, 71; Mankowski, in: FS Dieter Martiny (2014), p. 449, 468; Pauknerová, in: Liber amicorum Hélène Gaudemet-Tallon (2008), p. 775, 784–785. Magnus, in: Staudinger, Art. 3 note 95; Ferrari, in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/ Götz Schulze/Ansgar Staudinger, Art. 3 Rom I-VO note 32; Ragno, in: Ferrari, Art. 3 note 41. See only Magnus, in: Staudinger, Art. 3 note 15; Vidmar, ZfRV 2015, 219, 224. See Schwander, in: FS Ingeborg Schwenzer (2011), p. 1581, 1589. Ostendorf, IHR 2012, 177, 180 (opting for the “laws” of X, plural in (1) which would be inconsistent with the point of criticism leveled in Art. 3 note 52 above). Born p. 160. AMT Futures Ltd. v. Marzillier, Dr. Meier & Dr. Guntner Rechtsanwaltsgesellschaft mbH [2014] EWHC 1085 (Comm), [2015] 2 WLR 187 [41] (Q.B.D., Popplewell J.).

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couched in terms which are deliberately and on purpose wide enough to cover non-contractual claims which have a connection with the contractual relationship.343 One stop shopping does not work for jurisdictional issues only but has also a great appeal in determining the applicable law. Regularly law and jurisdiction clauses are a combined effort and do not distinguish between their single elements in the goal pursued. Ordinarily they call for the lex fori prorogati as the law applicable to the merits. Furthermore, an appropriately wide phrased choice of law in a related contract clause might help to reduce uncertainty under Art. 4 (3) cl. 1 Rome II Regulation344 and might trigger the application of Art. 4 (3) cl. 2 Rome II Regulation. cc) Claims in tort concurring with genuinely contractual claims 99 “Arising out of the contract” ordinarily covers claims in tort, too.345 The parties may intend

to see claims in tort which concur with genuinely contractual claims, governed by the same law as those contractual claims. One stop law shopping is their aim. Accordingly, they opt for a wide wording of their choice of law clause and refrain from phrasing it in a manner that could be read as being limited to contractual claims. But of course this has to conform to the stricter regime established by Art. 14 Rome II Regulation. In the field of concurring claims, the objective determination of the law applicable to the claim in tort should also be observed. It is exactly in this field that the akzessorische Anknüpfung via Art. (3) cl. 2 Rome II Regulation might become particularly helpful and might allow contractual party autonomy governed by Art. 3 Rome I Regulation in, indirectly346 by the backdoor.347 But a direct, express and unambiguous choice of the law applicable to the non-contractual relation possibly at stake would be both the more elegant and the most advisable solution for provident commercial parties, and Art. 14 Rome II Regulation allows so.348 100 A special question is which law decides whether there are concurring claims in contract and

tort or whether a principe de non cumul applies.349 As far as party autonomy reaches, the chosen law should be called upon to make such decision.350 dd) Claims in tort with a cause independent from the contract 101 Claims in tort with a cause independent from the contract might not be the object of an 343

344 345

346 347

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Fiona Trust and Holding Corp. v. Privalov [2007] UKHL 40, [2007] Bus. L.R. 1719, [2008] 1 Lloyd’s Rep. 254 (H.L.); AMT Futures Ltd. v. Marzillier, Dr. Meier & Dr. Guntner Rechtsanwaltsgesellschaft mbH [2014] EWHC 1085 (Comm), [2015] 2 WLR 187 [41] (Q.B.D., Popplewell J.). Vidmar, ZfRV 2015, 219, 224. The “Playa Larga” [1983] 2 Lloyd’s Rep. 171 (C.A.); Continental Bank NA v. Aeakos Compania Naviera SA [1994] 1 WLR 588 (C.A.); Government of Gibraltar v. Kenney [1956] 2 QB 410, 422 (Q.B.D., Seilers J.). See only Mankowski, in: von Bar/Mankowski, IPR I, 2. Aufl 2003, § 7 note 73 with further references. See only Junker, in: Münchener Kommentar zum BGB, Art. 4 Rom II-VO note 51; von Hein, in: Calliess, Art. 4 Rome II Regulation note 59; Bach, in: Peter Huber, Rome II Regulation (2011) Art. 4 Rome II Regulation note 86. See Gerhard Wagner, IPRax 2008, 1, 6; Ostendorf, IHR 2012, 177, 180; Martina Walter, in: Ostendorf/ Kluth (eds.), Internationale Wirtschaftsverträge (2013), § 13 note 77; Land, BB 2013, 2697, 2699; Holger Jacobs, IPRax 2015, 293, 297. In detail Spelsberg-Korspeter, Anspruchskonkurrenz im internationalen Privatrecht (2009) pp. 110 et passim; see also Mankowski, RIW 2011, 420, 422. Mankowski, in: FS Dieter Martiny (2014), p. 449, 469.

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akzessorische Anknüpfung under Art. 4 (3) Rome II Regulation. They are not located in the close vicinity of the contract, but are only rather loosely and accidentally connected with the contract. They are not connected closely enough with the contract to apply the law governing the contract as their proper law, too.351 Hence, the basic condition for an akzessorische Anknüpfung is lacking.352 This does not automatically cast the die for the contractual arena. But one could hardly qualify such torts arising independently of the contract as “arising out of this contract”. On the other hand, there is still parties’ general interest to see all their relations governed by the same law. But this interest must be expressed in terms suitably wide. If parties themselves take their contract as the point of reference they do not opt for the widest possible wording of the clause.353 e) Extension to claims in unjust enrichment A further candidate to be covered by clauses for claims “arising out of or in relation with the 102 contract” are claims in unjust enrichment, primarily condictiones indebiti. But attention has to be paid to Art. 12 (1) (e): Insofar as this rule characterises condictiones indebiti as contractual, they are beyond any doubt governed by the contractual regime and will already be covered by the less ambitious clause “arising of this contract”. This is generally the case under the auspices of Art. 12 (1) (e).354 Parties are at liberty to define their own notion of “contract” in order to escape Arts. 10; 12 (1), though.355 Arts. 10; 12 (1) are only default rules, filling gaps in the contractual frameworks if there are any.356 6. Exclusion of Art. 12 (2)? Ostendorf, a seasoned and experienced practitioner, has proposed the draft for a choice of 103 law clause which – apart from choosing the applicable law – excludes the application of Art. 12 (2).357 Its aims at avoiding the cumulative application of certain mandatory rules of the law of the place of performance, the lex loci executionis.358 Yet it is not beyond any reasonable doubt whether such negative choice of law excluding a conflicts rule of the forum is permissible. Party autonomy is granted only by the conflicts rules of the lex fori, and only to such extents as the lex fori grants it. Taking into account its systematic position which covers both a chosen and an objectively determined lex causae, Art. 12 (2) can also be regarded as a limit to party autonomy. Furthermore, it would not make too much sense to disregard and to evade holiday laws or security regulations in force at the place of performance by an attempt to be inventive on the level of European conflicts law. If and insofar as Art. 12 (2) can be deemed derogated already by an ordinary choice of

351 352

353 354

355 356 357 358

Mankowski, in: FS Dieter Martiny (2014), p. 449, 469–470. See only Kreytenberg, Die individuelle Schwerpunktbestimmung internationaler Schuldverträge nach der Ausweichklausel des Artikel 4 Absatz 5 Satz 2 EVÜ (2007) p. 188. Mankowski, in: FS Dieter Martiny (2014), p. 449, 470. See only Spellenberg, in: Münchener Kommentar zum BGB, Art. 12 Rom I-VO note 169; Magnus, in: Staudinger, Art. 12 Rom I-VO note 76 with further references. Mankowski, in: FS Dieter Martiny (2014), p. 449, 468. Mankowski, in: FS Dieter Martiny (2014), p. 449, 468. Ostendorf, IHR 2012, 177, 180. Ostendorf, IHR 2012, 177, 179; see also Magnus, in: Staudinger, Art. 12 note 98.

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clause359 – which is a matter of construing Art. 12 (2), intricate questions would not arise, though.360 III. Implicit or tacit choice of law 104 A choice of law does not have to be made expressly. An implicit or tacit (sometimes also

called implied) choice of law exists when an unexpressed agreement between the parties is clearly demonstrated by the terms of the contract and the circumstances of the case.361 105 The wording of Art. 3 (1) cl. 2 is the result of a protracted legislative history.362 Trouble

commenced with an attempt of the Commission unilaterally to retract the word “reasonable” from Art. 3 (1) cl. 2 Proposal which referred to “reasonable certainty”.363 Albeit supported by some, this attempt met fierce opposition by the majority of the Member States.364 Germany,365 the United Kingdom,366 and Ireland367 in particular were adamant that some flexibility should be maintained. Counterproposals by the Finnish Presidency to qualify “certainty” by adding “sufficient” did not succeed, either. The United Kingdom resolved the dispute by offering compromise amendments368 which were accepted by the initial Finnish and – afterwards – German Presidency.369 By introducing “clearly” the threshold is gradually raised.370 The criterion is borrowed from the formula which the Hague Conventions371 employ where they are dealing with tacit choice of law by the parties.372 Furthermore, the previously in part diverging linguistic versions of the Rome Convention373 are brought into line and realigned.374

359

360 361 362 363 364

365 366 367 368 369

370 371

372 373 374

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To this avail Verschraegen, in: Rummel, ABGB, vol. II (3rd ed. Wien 2010) Art. 10 EVÜ note 33; Spellenberg, in: Münchener Kommentar zum BGB, Art. 12 note 187. Skeptical Magnus, in: Staudinger, Art. 12 note 98. Vidmar, ZfRV 2015, 219, 221. Penadés Font, (2015) 78 Mod. L. Rev. 241, 242. McParland paras. 9.51–9.64. Council Doc. 9618/06 (6 June 2006). McParland para. 9.60 reproduces the respective part of the Minutes of the 26–27 October 2006 meeting of the Council’s Rome I Committee. Council Doc. 13035/06 ADD 12 (27 September 2006). Council Doc. 13035/06 ADD 4 (22 September 2006). Council Doc. 13035/06 ADD 15 (2 October 2006). Council Doc. 14691/06 ADD 1 (31 October 2006). Council Doc. 16353/06 JUSTCIV 276 CODEC 1485 (12 December 2006); Council Doc. 6935/07 JUSTCIV 44 CODEC 168 (2 March 2007). E.g. Thode, NZBau 2011, 449, 453. In particular, Art. 7 (1) Hague Convention of 22 December 1986 on the Law Applicable to the International Sale of Goods; Art. 4 Hague Convention of 5 July 2006 on intermediary-held securities. Gardella, NLCC 2009, 611, 626; McParland para. 9.62. See Coester-Waltjen, in: FS Hans Jürgen Sonnenberger (2004), p. 343, 348 et seq. Wulf-Henning Roth, in: FS Apostolos Georgiades (2005), p. 905, 913; Thüsing, in: Graf v. Westphalen, Vertragsrecht und AGB-Klauselwerke (28th ed. 2010) Rechtswahlklauseln note 8; see also Hohloch/Kjelland, IPRax 2002, 30, 32; Mankowski, in: Leible, p. 63, 84 et seq.; Maxi Scherer, in: Corneloup/Joubert p. 253, 266–272.

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Implicit or tacit choice of law is a common feature in everyday practice. Art. 3 (1) cl. 2 106 supports and sanctions this in the tradition of Art. 3 (1) cl. 2 Rome Convention.375 Insofar no material and substantial changes have been implemented. In particular, the EU legislator refrained from establishing a list or catalogue of factors and elements possibly to be considered as indicating a tacit choice of law. To proceed the other way would have burdened the wording and would have put a relative emphasis on the phenomenon that would have been out of proportion compared to the basic rule in Art. 3 (1) 1 on the one hand and the importance of express choices on the other hand. The fundamental difficulty to draw the fine line between an implicit, but real intention on the one hand and a mere hypothetical or imputed intention on the other hand remains376 and might pose a conundrum insoluble at an abstract level.377 A court must not speculate what the parties might have intended if they had considered it but has to decide whether they expressed any real intention or not.378 It is certainly wrong to deduce from the absence of an explicit choice of law in the contract that there is not any implicit choice of law, either.379 Institutionally, tacit choice of law is a source of uncertainty. But this is not justification enough for completely abandoning tacit choice of law as an institution380 since it undeniably meets a need in modern contractual practice. Since the Rome I Regulation is an act of EU legislation, it is to be interpreted uniformly and 107 autonomously rather than on the basis of a national law including the lex fori.381 This involves a purposive approach to interpretation of terms contained in it rather than a narrow and literal reading.382 On the other hand a court must not strive to find a choice of law where none exists. An implied choice still is a real choice which must be demonstrated, else Art. 4 would be rendered nugatory.383 The possibility of an implied choice does not permit to infer a choice of law where the parties show no clear intention to make such a choice.384 The mere fact that a court regards such choice as being reasonable is plainly insufficient.385 The tacit choice of law has to be “clearly demonstrated”, and “eindeutig” as contrasted with “reasonable certainty”, “de façon certaine”, “mit hinreichender Sicher-

375 376 377 378

379 380 381

382

383

384

385

On the history of tacit choice of law Wautelet, in: Liber amicorum Johan Erauw (2014), p. 305, 311–318. See only Wautelet, in: Liber amicorum Johan Erauw (2014), p. 305, 329–330. Joubert, in: Corneloup/Joubert p. 229, 231. See Timothy Joseph Lawlor v. Sandvik Mining and Construction Mobile Crushers and Screens Ltd. [2012] EWHC 1188 (QB) [45] (Q.B.D., Judge Mackie QC); Plender/Wilderspin para. 6–038. This mishap is taken from Rb. Rotterdam NIPR 2014 Nr. 44 p. 98. As Wautelet, in: Liber amicorum Johan Erauw (2014), p. 305, 334–336 advocates for. See only Friedrich Lürssen Werft v. Halle [2009] EWHC 2607 (Comm), [2010] 2 Lloyd’s Rep. 20, 24 [20] (Q.B.D., Simon J.). See only Egon Oldendorff v. Libera Corp. [1996] 1 Lloyd’s Rep. 380, 387 (Q.B.D., Clarke J.); Friedrich Lürssen Werft v. Halle [2009] EWHC 2607 (Comm), [2010] 2 Lloyd’s Rep. 20, 25 [33] (2) (Q.B.D., Simon J.). See only Friedrich Lürssen Werft v. Halle [2009] EWHC 2607 (Comm), [2010] 2 Lloyd’s Rep. 20, 25 [33] (3) (Q.B.D., Simon J.). See only Friedrich Lürssen Werft v. Halle [2009] EWHC 2607 (Comm), [2010] 2 Lloyd’s Rep. 20, 25 [33] (4) (Q.B.D., Simon J.); Wulf-Henning Roth, in: FS Apostolos Georgiades (2005), p. 905, 906. See only American Motorists Insurance Co. (Amico) v. Cellstar Corp. [2003] Lloyd’s IR [44] (C.A., per Mance L.J.); Friedrich Lürssen Werft v. Halle [2009] EWHC 2607 (Comm), [2010] 2 Lloyd’s Rep. 20, 25 [33] (5) (Q.B.D., Simon J.).

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heit” under Art. 3 (1) cl. 2 Rome Convention.386 Whereas the respective formulations in the different language versions might not convey exactly the same level of emphasis, it appears exaggerated to talk of a hiatus between them.387 (1) cl. 2 constitutes a substantive yardstick against which the existence of a tacit choice of law in the concrete case is to be measured.388 The intention behind the change in the wording, as to be deduced from the legislative history,389 was to ensure the perceivedly more flexible approach adopted in Germany and the United Kingdom under the Rome Convention should cease to be employed, and to make it even clearer than under the Rome Convention that only a real, not an inferred, imposed or imputed choice by the parties is sufficient.390 Respect for the principle of party autonomy is, in practice, subject to the availability of sufficient evidence to clearly demonstrate that the choice was made.391 108 This is tentatively more restrictive and aims at limiting judges’ discretion to find a tacit

choice of law more than under Art. 3 (1) cl. 2 Rome Convention.392 The legislative intention is to equalise the differences in the case law of national courts which had developed under the Rome Convention, with French courts adopting a more restrictive approach393 than their German, Dutch or English counterparts,394 and make these differences disappear. But even within the same Member State courts could have adopted different approaches.395 Discretion is inevitably the enemy of uniformity.396 Hence, limiting discretion means closing possible gateways to decisional variance.397 Operating the mechanism of implicit or tacit choice of law might entail a holistic evaluation of the terms of the contract and the circumstances of the case, heavily depending on the respective facts.398 109 To draw a distinction between an “implicit” and a “tacit” choice of law, if only by nuances,399

means overstating the linguistical case, though. To distinguish in that regard could trigger a necessity to establish two sub-definitions demarcating the borderline at high dogmatic cost without an equalising benefit. 110 Different elements of the contract might point to different laws or might converge. Con-

verging elements pointing towards the same direction support and strengthen each other 386

387 388 389 390 391 392 393

394 395 396 397 398 399

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See on the German “mit hinreichender Sicherheit” in Art. 3 (1) cl. 2 Rome Convention Wulf-Henning Roth, in: FS Apostolos Georgiades (2005), p. 905, 907. As Wautelet, in: Liber amicorum Johan Erauw (2014), p. 305, 320 does. Stankewitsch pp. 20 et seq.; Pfeiffer, in: FS Egon Lorenz zum 80. Geb. (2014), p. 843, 852. Supra Art. 3 note 105 (Mankowski). McParland para. 9.65. Penadés Font, (2015) 78 Mod. L. Rev. 241, 245. See only Joubert, in: Corneloup/Joubert p. 229, 230; McParland para. 9.66. Cass. RCDIP 95 (2006), 94 with note Lagarde = D. 2006, 1498 with note Courbe = Clunet 133 (2006), 985 with note Sinay-Cytermann = Dr. & patr. 142 (2005), 113 with note Marie-Elodie Ancel; CA Paris JCP G 1994 II 22314 with note Bernard Audit = Clunet 121 (1994), 678 with note Jacquet. Explained e.g. by Joubert, in: Corneloup/Joubert p. 229, 234–237. Joubert, in: Corneloup/Joubert p. 229, 237 et seq. Fentiman, 82 Tulane L. Rev. 2021, 2048 (2008). See Penadés Font, (2015) 78 Mod. L. Rev. 241, 245. Penadés Font, (2015) 78 Mod. L. Rev. 241, 247. As Joubert, in: Corneloup/Joubert p. 229, 232 does.

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whereas diverging elements might lead to the conclusion that an intention to choose a certain law is not discernible.400 The argument that if parties had had an intention to choose a certain law they would have moulded it in an express choice of law,401 should not be too readily at hand, either. The conclusion of the tacit choice of law agreement is not relegated to (5), but governed by 111 (1) 2 itself.402 The conflict rules of the lex fori are the logical basis for answering this question since party autonomy can only be granted, and its extension can only be defined by these rules.403 Unanimously, consensus of all parties concerned is required for a tacit choice of law not less than for an express choice of law.404 The one-sided intention by one party only does not suffice.405 Generally, both parties must have parallel intentions. In particular, it would not suffice if one of the parties tabled a draft which contained a certain choice of law clause and if the other party struck out that very clause or insisted that it be removed, to infer a common intention to choose the law referred to in that clause impliedly.406 To demand a Rechtswahlbewusstsein in the sense of a conscious reflection that a choice of 112 law in particular is made should not be required, though.407 If parties to a contract reflected choice of law consciously, they would have opted for an express choice of law, indeed, to avoid any uncertainties and to exert the utmost clarity in expressing their intention. Intention and Rechtswahlbewusstsein work on a lower and lesser level. Subsequent conduct of the parties after the conclusion of the contract is admissible to the 113 extent that it sheds light on what if anything the parties impliedly agreed at the time the contract was entered into.408 Likewise, evidence coming into existence after the contract between the parties has been entered into is admissible.409 Correspondence, both prior and subsequent to the conclusion of the contract, might serve as 114 evidence for the parties’ intentions. But it has to be looked at in its entirety, and reliance

400 401 402

403 404 405 406 407 408

409

Joubert, in: Corneloup/Joubert p. 229, 246 et seq. Joubert, in: Corneloup/Joubert p. 229, 247. Egon Lorenz, RIW 1992, 697, 699; Hohloch/Kjelland, IPRax 2002, 30, 31 et seq.; Mankowski, in: Leible, p. 63, 64; Coester-Waltjen, in: FS Hans Jürgen Sonnenberger (2004), p. 343, 350; Wulf-Henning Roth, in: FS Apostolos Georgiades (2005), p. 905, 914. Hohloch/Kjelland, IPRax 2002, 30, 31. See only Coester-Waltjen, in: FS Hans Jürgen Sonnenberger (2004), p. 343, 345. Joubert, in: Corneloup/Joubert p. 229, 241. Plender/Wilderspin para. 6–039. But cf. Wautelet, in: Liber amicorum Johan Erauw (2014), p. 305, 320–322. Print Concept GmbH v. GEW (EC) Ltd. [2001] EWCA Civ 352 (C.A., per Longmore L.J.); Lupofresh Ltd. v. Sapporo Breweries Ltd. [2013] EWCA Civ 948, [2014] 1 All ER (Comm) 484 [17] (C.A., per Tomlinson L. J.); Timothy Joseph Lawlor v. Sandvik Mining and Construction Mobile Crushers and Screens Ltd. [2012] EWHC 1188 (QB) [12] (Q.B.D., Judge Mackie QC); Dicey/Morris/Collins/Morse para. 32–037; Andrew Scott, (2013) 84 BYIL 485, 522; Plender/Wilderspin para. 6–045. Timothy Joseph Lawlor v. Sandvik Mining and Construction Mobile Crushers and Screens Ltd. [2012] EWHC 1188 (QB) [47] (Q.B.D., Judge Mackie QC).

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upon a few selected and handpicked sentences out of context might not be a very reliable guide.410 1. Exclusive jurisdiction clauses a) The impact of Recital (12) 115 Traditionally the most important indication for a tacit choice of law is an exclusive choice of

jurisdiction clause.411 A valuable illustration has been added by virtue of Recital (12), which reads: (12) An agreement between the parties to confer on one or more courts or tribunals of a Member State exclusive jurisdiction to determine disputes under the contract should be one of the factors to be taken into account in determining whether a choice of law has been clearly demonstrated. 116 The Commission finally stepped back from introducing a full list of indications for a tacit

choice of law,412 but restricted the explicit mention to exclusive jurisdiction clauses. A fullfledged presumption “choice of court imputing choice of law” was excised during the negotiations leading to the Brussels Ibis Regulation413 but traces are still to be found in Recital (12).414 Recital (12) is the result of a compromise,415 first introduced by the Netherlands416 and then developed by the Finnish and incoming German Presidency.417 A Slovakian proposal418 that an exclusive jurisdiction only “may” be one of the factors to be taken into account was rejected in the Council’s Rome I Committee which maintained that it should be taken into account.419 117 The main inference to be drawn from Recital (12) is that exclusive jurisdiction clauses rank

very high as indications for a tacit choice of law. They are the only factor that is expressly mentioned, and at least this elevates them above the rest of the bunch. Qui eligit forum vel iudicem eligit ius in its strict version might not be quite the maxim of the day, though. It is 410

411

412

413 414 415 416 417 418 419

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Lupofresh Ltd. v. Sapporo Breweries Ltd. [2013] EWCA Civ 948, [2014] 1 All ER (Comm) 484 [20] (C.A., per Tomlinson L.J.). See only BGH, NJW-RR 1990, 183; BGH, NJW 1991, 1420; BGH, NJW 1996, 2569; OLG Hamburg, TranspR 1993, 111; OLG Frankfurt, RIW 1998, 477 = DZWir 1997, 423 with note Klaus Peter Berger; LAG Düsseldorf, RIW 1987, 59, 61; Golden Ocean Group Ltd. v. Salgaocar Mining Industries [2012] EWCA Civ 265, [2012] 1 WLR 3674 [45] (C.A., per Tomlinson L.J.); Marubeni Hong Kong & South China Ltd. (Hong Kong) v. The Mongolian Government (Ministry of Finance) [2002] 2 All ER 873 [41]-[43] (Q. B.D., Cresswell J.); Deutsche Bank (Suisse) SA v. Gulzar Ahmed Khan [2013] EWHC 482 (Comm) [367] (Q.B.D., Hamblen J.). On this topic e.g. Mankowski, in: Leible p. 63, 82–84; Coester-Waltjen, in: FS Hans Jürgen Sonnenberger (2004), p. 343, 345 et seq. See in detail McParland paras. 9.83–9.89. Crawford/Carruthers, (2014) 63 ICLQ 1, 17–18. As to the details of the drafting history McParland paras. 9.90–9.97. Council Doc. 13035/06 ADD 16 (3 October 2006). Council Doc. 13035/06 JUSTCIV 276 CODEC 1485 (12 December 2006). Council Doc. 14222/07 ADD 11 (24 October 2007). Council Doc. 15961/07 (4 December 2007).

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rather the slightly down-graded version: Qui eligit forum vel iudicem apparet eligere ius. Nonetheless, it is sensible to assume that parties might want the chosen court to apply its own lex fori. The court is most familiar with its own law, there is no language barrier for the court, and the tertiary costs of law enforcement are reduced since the court does not have to inquire into law which is foreign or even alien to it. One of the main functions of a choice of forum is the selection of a tribunal which is familiar with the law in question, and so best placed to determine and apply that law to any dispute which has arisen so as to uphold the parties’ rights; a primary function of a jurisdiction clause is securing this protection.420 “To be taken into account” diminishes and reduces the decisiveness of the jurisdiction clause 118 with regard to its consequences in the conflict of laws. In exceptional cases, an exclusive jurisdiction might not carry the implication of a choice of the law of the chosen forum.421 But generally it ought to be presumed that parties purchasing certain dispute resolutions by a State court have the rational intention to purchase high quality services at the lowest possible price which goal is best achieved it the chosen forum applies its own law.422 Only an exclusive jurisdiction clause carries the effect described in Recital (12). A merely 119 optional or facultative jurisdiction clause does not.423 If parties add a named jurisdiction without derogating others or if one of the parties unilaterally is granted an option to choose from a range or a menu of jurisdictions, this does not suffice to trigger the implication that a certain choice of law might have been made and intended mutually even if the respective option is actualised later-on. A jurisdiction clause is exclusive if only one jurisdiction is chosen and any other jurisdiction 120 is derogated. If parties designate a competent court in a Member State without expressly stating whether this should be an exclusive choice or not, Art. 25 (1) cl. 2 Brussels Ibis Regulation establishes a presumption that such choice of jurisdiction is an exclusive one if the chosen court is a court in a Member State of the Brussels I Regulation. This presumption is rebuttable in principle but it is a very strong one, though it should not be regarded as rebutted in any concrete case and should not be put aside lightly. Recital (12) only mentions the exclusive choice of courts in Member States, obviously before 121 the background of Brussels Ibis, but should not be read strictly literally.424 To disregard exclusive choice of court agreements vesting jurisdiction in courts in non-Member States would fit ill with the principle of universal application in Art. 2,425 let alone for reasons of substance.426 A reference to “countries” instead of “Member States” was ventilated as a 420

421 422 423

424 425 426

AMT Futures Ltd. v. Marzillier, Dr. Meier & Dr. Guntner Rechtsanwaltsgesellschaft mbH [2014] EWHC 1085 (Comm), [2015] 2 WLR 187 [43] (Q.B.D., Popplewell J.). Even more hostile against any regular implication Bogdan, NIPR 2009, 407, 408. Mankowski, in: Leible, p. 63, 82–84. See Armadora Occidental SA v. Horace Mann Insurance Co. [1977] 2 Lloyd’s Rep. 406 (Q.B.D.); Cantieri Navali Riuniti SpA v. NV Omne Justitia [1985] 2 Lloyd’s Rep. 428 (Q.B.D.); EI Du Pont de Nemours & Co. v. Agnew [1987] 2 Lloyd’s Rep. 585 (Q.B.D.); King v. Brandywine Reinsurance Co. (UK) Ltd. [2004] 1 Lloyd’s Rep. I.R. 846 (Q.B.D.). Lagarde/Tenenbaum, RCDIP 97 (2008), 727, 733; Kenfack, Clunet 136 (2009), 1, 14. Bogdan, NIPR 2009, 407, 408. Tentatively to the opposite result Maxi Scherer, in: Corneloup/Joubert p. 253, 273 et seq.

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possible option427 but not pursued further and the less adopted eventually. This should not carry any implication,428 since a reasoned rejection cannot be detected, and sloppy drafting is a possible alternative explanation.429 On aggregate, an integrative interpretation of Recital (12) in the context of (1) cl. 2 is called for.430 b) Qui eligit forum vel iudicem eligit ius and the ensuing presumption 122 Qui eligit forum vel iudicem eligit ius features amongst the oldest doctrines of the entire PIL.

It is based on the presumption that the parties intend to combine forum and ius and want the chosen forum to apply its own law, the lex fori. This saves time and at least for the court research and information costs for inquiring the content of the law to be applied.431 Furthermore, the quality of decisions might be enhanced insofar as, and by the degree to which, the court is more familiar with its own law than with foreign law.432 123 An exclusive choice of forum carries a tacit choice even if there is nothing else to support

it.433 It is not necessary that further elements support such contention434 as the parties are deemed to act in their very own self-interest.435 Of course such supporting elements might exist: e.g., the choice of forum might form part of a standard setting commonly used in the market of the forum state,436 for instance the London reinsurance market. In this event, the chosen forum could represent the State of a market on the conditions of which the contract was designed.437 A subsequent choice of forum generally has the same weight as an initial choice of forum,438 yet the possibility of altering the applicable law has to be considered. 124 The maxim qui eligit forum vel iudicem eligit ius in principle applies irrespective of whether

the chosen court is the court of a Member State of the Brussels I Regulation, the Revised Lugano Convention, any other Treaty or Convention to which the EU is party, or not.439 125 Qui eligit forum vel iudicem eligit ius is a rational rule. It might not be rebutted simply 427 428

429 430 431 432

433

434

435 436

437

438 439

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Council Doc. 13853/96 JUSTCIV 224 CODEC 1085 (12 October 2006). Lagarde/Tenenbaum, RCDIP 97 (2008), 727, 736; Garcimartín Alférez, EuLF 2008, I-61, I-65; Carrascosa González p. 131; Dicey/Morris/Collins/Morse para. 32–069; Plender/Wilderspin para. 6–037. Contra McParland para. 9.102. Plender/Wilderspin para. 6–037. Penadés Fons pp. 133–141. See only Bernard Audit, Droit international privé (7th ed. 2013) para. 796. See only Fentiman, (1992) 108 LQR 142, 152 et seq. and generally LG Karlsruhe, IPRspr. 1999 Nr. 32A p. 84. Anders Trib.arr. Luxembourg, RDIPP 1991, 1092; Lagarde, RCDIP 80 (1991), 287, 303; v. Bar, Internationales Privatrecht II: Besonderer Teil, 1991, paras. 469 et seq. Contra Trib.arr. Luxembourg RDIPP 1991, 1092; Lagarde, RCDIP 80 (1991), 287, 303; v. Bar, paras. 469 et seq. Junker, RIW 2001, 94, 97. Groupama Navigation et Transports v. Catatumbo CA Seguros [2000] 2 Lloyd’s Rep. 350, 355 = [2000] 2 All ER (Comm) 193, 200 (C.A., per Mance L.J.); Mankowski, VersR 2002, 1177, 1180. Groupama Navigation et Transports v. Catatumbo CA Seguros [2000] 2 Lloyd’s Rep. 350, 355 = [2000] 2 All ER (Comm.) 193, 200 (C.A., per Mance L.J.); Mankowski, VersR 2002, 1177, 1180. Mitterer p. 92. Bogdan, NIPR 2009, 407, 408.

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because other intentions carried the parties’ thinking, particularly such as being more related to procedure and proceedings as such for instance that the chosen forum promises particularly appropriate, or cost reduced, or expeditious proceedings or that the parties wanted to avail themselves of specific rules of evidence (with discovery as the most prominent example),440 or convenience of geographical access, fairness of the process or independence and integrity or reputation of the judicial system of the chosen forum441 or rapidity and efficiency of the judicial process.442 Such procedural elements might even be the primary reasons underlying the parties’ choice of forum. Yet they do not automatically exclude consequences as to the choice of law, but can even support such consequences particularly so as parties interested in expeditious proceedings are equally interested in the court not being bothered and burdened with foreign law.443 Synchronisation of forum und law saves time and costs.444 It does, on the other hand, not make sense to coerce parties which have thought about the relative optimum, into concluding an express parallel choice of law in each and every case.445 For instance, they might prefer the combination of a “neutral” forum and a law with particular sophistication for the specific activity at stake providing particularly appropriate substantive answers.446 Even less, one should develop a conclusio e contrario from the fact that the parties have not in 126 the same context where they made their choice of court, spelled out an express choice of law and a choice of the lex fori prorogati at that.447 Parties simply are not forced to conclude an express choice of law else the entire institution of tacit choice of law would be robbed of its right to exist. An argument along said lines would be incompatible with the very existence of the tacit choice of law as an institution of PIL. It would be at least one step too far to assume that parties who strive for optimal quality of a court decision would not solely conclude a choice of forum agreement, but add an express choice of law agreement.448 Legal experience of the parties, combined with the assumption that they know about the freedom to choose the applicable law, is no counter-indication, either.449 An argumentum e contrario that the parties have not made an express choice of law is even less admissible.450 The ensuing presumption451 is strong, but not irrefutable. Choice of forum clauses might in 127 some instances not state an intention to choose the lex fori. But the presumption is a rule of 440 441 442 443 444

445 446 447

448 449 450 451

Mankowski, in: Leible, p. 63, 66. Boele-Woelki, in: FS Ingeborg Schwenzer (Bern 2011), p. 191, 200. Ragno, in: Ferrari, Art. 3 note 37. Mankowski, in: Leible, p. 63, 66. Comments of Max Planck Institute for Comparative and Private International Law on the Commission Proposal, RabelsZ 71 (2007), 225, 243. Mankowski, in: Leible, p. 63, 66. Contra Mitterer p. 89. Boele-Woelki, in: FS Ingeborg Schwenzer (Bern 2011), p. 191, 200. Contra Garcimartín Alférez, EuLF 2008, I-61, I-67; Boele-Woelki, in: FS Ingeborg Schwenzer (Bern 2011), p. 191, 202; Ragno, in: Ferrari, Art. 3 note 37. Contra Mitterer p. 89; Maxi Scherer, in: Corneloup/Joubert p. 253, 282. Contra Mitterer p. 91. Contra Trib. arr. Luxembourg RDIPP 1991, 1092. Against attributing Recital (12) the strength of a presumption but keeping it to a mere indication below the level of a presumption Lagarde/Tenenbaum, RCDIP 97 (2008), 727, 733; Francq, Clunet 136 (2009), 41, 53; Maxi Scherer, in: Corneloup/Joubert p. 253, 277 et seq.

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reason. This rule is not rebutted if it can be proven that other, procedural motivations, were primarily behind the choice of forum agreement, for instance that parties expected particularly expeditive, appropriate or cost-reducing proceedings in the chosen forum or that the parties wanted to avail themselves of certain rules as to proof, particularly so discovery. Rather often such procedural motivations will underlie choice of forum agreements. But they do not summarily dismiss or exclude an intention to choose the lex fori as the applicable law, but can co-exist with such intention.452 In particular, a party interested in speedy and less cost-intensive proceedings will have no intention to bother the court with the cost- and time-intensive research of a foreign law.453 128 Neither party must be at liberty and permitted to argue and allege ex post that it had not

considered possible consequences of a choice-of-court clause made for the choice of law. Else such party would have too great an opportunity for seeking booty and too great a bargaining chip. The risk of ex post opportunism would be too high.454 One must not foster any risk of such ex post opportunism in any way. Conversely, every party challenging the presumption has to produce or to prove intersubjectively recognisable counter-indications. The party turning its back against the presumption must argue and provide proof that there are counter-indications of at least equal weight.455 Ex post opportunism must not be rewarded but discouraged by putting the risk and the burden on the opportunistic party. c) Conditions of a valid prorogation 129 Implied precondition is that the choice of forum agreement is valid according to the rules

regulating it. Only a valid choice of forum can exert the full force of a presumption.456 If the choice of forum agreement is itself invalid, it can not provide the ground for coordination of law and jurisdiction by agreement.457 The parties fail to reach their primary goal. Particularly sensitive are the form requirements established e.g. by Art. 25 Brussels Ibis Regulation. But a jurisdiction clause might alternatively fall victim to Art. 15 or 19 or 23 in conjunction with Art. 25 (4) Brussels Ibis Regulation.458 130 Whether parties want to retain their secondary intention to reach an agreement as to choice

of law is a subsequent question.459 The basis of the presumption falters, but only in its normative and not necessarily in its factual element. The parties have undeniably concluded a certain choice of forum agreement after considering it. This factual element and the considerations in the drafting process are still existent even if the choice of forum lacks normative effectiveness.460 Whether they still carry a mutual intention as to choose a particular law or should be superseded if the choice of forum as such fails remains to be answered.461 The relevant point of time is the conclusion of the contract. 452 453 454 455 456 457 458

459 460

146

See only Mankowski, in: Leible, p. 63, 66. See only Mankowski, in: Leible, p. 63, 66. See only Mankowski, in: Leible, p. 63, 66. See only Mankowski, in: Leible, p. 63, 66. See only Mankowski, p. 34; Mankowski, RabelsZ 63 (1999), 203, 213; Tang, (2008) 4 JPrIL 35, 48. Mankowski, RabelsZ 63 (1999), 203, 213. For examples with regard to Art. 21 Brussels I Regulation see BAG RIW 2014, 691, 693 and Hessisches LAG IPRspr. 2012 Nr. 68 p. 131. Mankowski, IPRax 2015, 309, 310. See only Hessisches LAG IPRspr. 2012 Nr. 68 p. 131; Mankowski, in: Leible, p. 63, 67.

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The parties may choose the lex fori regardless whether the choice of forum clause as such and 131 judged in isolation is formally valid or not.462 But it cannot be assumed that they do so regularly. The parties want the designated court to apply its own law and they want forum and ius to coincide. The designated court shall have the most expedient means at hands and shall have the fastest access to the applicable law since the latter is its own law and not a law alien to it which to inquire it has to investigate time, cost and effort or alternatively which either party has to proof under a doctrine of foreign law as a fact. But such parallels between forum and ius cannot be properly established if the court designated is in fact not designated. If the designated court is not to decide the case at all and particularly if it does not judge the merits of the case, the intention to establish synchronity between forum and ius fails.463 Or from another perspective: The intention to choose the lex fori prorogati is made dependent upon the condition precedent that the forum prorogatum does decide the case on the merits.464 Once the choice of court agreement is dismissed as invalid or ineffective, it does not carry an intention by the parties to choose the lex fori (non) prorogati unless such intention is clearly corrobated by other means than the choice of court agreement. d) Non-exclusive choice of jurisdiction clauses Non-exclusive choice of jurisdiction clauses465 do not procure a similar indication for an 132 intention to choose the lex fori.466 This is at least the case for facultative or optional choice of forum clauses granting only one party to select from a menu wider than the objectively founded grounds of jurisdictions applicable in the case.467 This lacks a derogative effect and does not provide for concentration in a single forum; therefore, the multiplicity of possible fora is at odds with an intention to choose any particular law of any additional or optional forum or of the eventually selected forum.468 The same is true for alternative choice of forum clauses granting the parties in their respective roles as plaintiff or defendant a right to select between two or more fora.469

461 462

463 464 465

466 467

468 469

See Cassaz. RDIPP 2011, 431, 434–435. Comp. BAG RIW 2014, 691, 693 in a case where the jurisdiction agreement was rendered invalid by Art. 21 Brussels I Regulation. Mankowski, IPRax 2015, 309, 310–311. Mankowski, IPRax 2015, 309, 311. For their permissibility see Art. 23 (1) cl. 2 Brussels Regulation and under Art. 17 (1) Brussels Convention Nikolaus Meeth/Fa. Glacetal (Case 23/78), [1978] ECR 2133, 2141 para. 5 = RCDIP (1981), 127 with note Gaudemet-Tallon = Ned. Jur. 1979 Nr. 538 with note Jan C. Schultsz (further annotations by André Huet, Clunet 106 [1979], 663); OLG München RIW 1982, 281; Insured Fiancial Structures Ltd v. Electrocieplownia Tychy SA [2003] 2 WLR 656 (C.A.); Kurz v. Stella Musical VeranstaltungsGmbH [1992] Ch. 196, 203 (Ch. D., Hoffmann J.) = RIW 1992, 140 with note Ebert-Weidenfeller; IP Metal Ltd. v. Route OZ SpA [1993] 2 Lloyd’s Rep. 60, 67 (Q.B.D., Waller J.); Gamlestaden plc v. Casa de Suecia SA [1994] 1 Lloyd’s Rep. 433 (Q.B.D., Potter J.); Hough v. P & O Containers Ltd. [1998] 2 Lloyd’s Rep. 318, 323 (Q.B.D., Rix J.); Lafi Office and International Business SL v. Meriden Animal Health Ltd. [2000] 2 Lloyd’s Rep. 51, 59 (Q.B.D., Judge Symons Q.C.). McParland para. 9.103. See only Patrzek, Die vertragsakzessorische Anknüpfung im Internationalen Privatrecht, 1992, p. 9; Mankowski p. 35; Heiss, in: Czernich/Heiss Art. 3 EVÜ note 10. Contra tentatively OLG München, IPRspr. 1997 Nr. 51 pp. 90 et seq. The “Star Texas” [1993] 2 Lloyd’s Rep. 445, 448 (C.A., per Lloyd L.J.); Mitterer p. 93.

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133 Floating choice of forum clauses vesting jurisdiction in the courts at the respective plaintiff’s

or defendant’s seat as such can not properly serve as indications for an intention to choose the respective lex fori, for they are only concretised when proceedings are commenced whilst not having any effect if proceedings are not commenced.470 Similar problems are in the way of assuming a tacit choice of law from service-of-suit-clauses as they are common in re-insurance contracts.471 134 A tacit choice of law could follow from a non-exclusive, facultative, optional, alternative or

reciprocal choice of forum clause only after proceedings are commenced, since only then the necessary concretisation is possible.472 Still that could not have the advantages of an initial choice of law, and a change of the applicable law is threatened with ensuing problems. In particular, the latter momentum has to be weighed very carefully against the advantages stemming from an application of the lex fori. 2. Tacit choice of law by choosing an arbitral tribunal with specific local grounding a) Grounding of the arbitral tribunal in a certain legal order as fundamental condition 135 Second most important indication might be an arbitration agreement.473 Qui eligit arbitrum

eligit ius. The fact that arbitration clauses are not mentioned in Recital (12) has other reasons and does not carry argumentative weight nurturing an argumentum e contrario.474 136 Basic requirement is, once again, that the arbitration agreement as such is valid, in particular

formally valid.475 To this, a substantial fact must concur in order to indicate an implicit choice of law: The arbitral tribunal must be grounded in a certain legal order to the degree that – absent any diverging agreement by the parties – it applies the law of its seat which the parties must have ruminated about when concluding the arbitration agreement. Otherwise, there would not be a sufficient basis for the presumption that the parties wanted to choose the law of seat of the arbitral tribunal.476 Conversely, the parties must regard it as unreasonable to argue on the basis of another law than that of this seat whilst in extremis to be put under any duty to prove the content of such other law.477 137 This prerequisite is given in particular if the respective institution has a certain and invari-

able seat, e.g. the London Maritime Arbitrators’ Association, the Schiedsgericht der Han470 471

472 473

474 475 476 477

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Mankowski, VersR 2002, 1177, 1180. Excess Insurance Co. Ltd. v. Allendale Mutual Insurance Co. C.A. March 8, 1995 (per Hobhouse L.J.); Ace Insurance SA-NV v. Zurich Insurance Co. [2001] 1 Lloyd’s Rep. 618, 629 et seq. (C.A., per Rix L.J.); Mankowski, VersR 2002, 1177, 1180; Plender/Wilderspin para. 6–030. Fawcett, [2001] LMCLQ 234, 253; Mankowski, VersR 2002, 1177, 1180. See only OLG Düsseldorf TranspR 1992, 415, 417; OLG Hamm, NJW-RR 1993, 1445; The “Aeolian” [2001] 2 Lloyd’s Rep. 641, 647 (C.A., per Mance L.J.); Egon Oldendorff v. Libera Corp. [1996] 1 Lloyd’s Rep. 380, 389 et seq. (Q.B.D., Clarke J.); LG Berlin RIW 1997, 873; SchiedsG Handelskammer Hamburg NJW 1996, 3229, 3230; Schiedsgericht Hamburger Freundschaftliche Arbitrage RIW 1999, 394, 395. Maxi Scherer, in: Corneloup/Joubert p. 253, 274 et seq. See only Martiny, in: Reithmann/Martiny, para. 2.86; Magnus, in: Staudinger, Art. 3 note 81. See only OLG Hamm NJW 1990, 652, 653; Mankowski, VersR 2002, 1177, 1180. Richard Plender/Michael Wilderspin, The European Contracts Convention, 2. Aufl London 2001, Rn. 5–09.

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delskammer Wien, or the Hamburger Freundschaftliche Arbitrage.478 Arbitral tribunals established by national semi-public or official bodies like local Chambers of Commerce (and a maiore ad minus by official bodies)479 generally are amongst the qualifiers. In most instances, it will be absolutely telling and indicative if a certain national, regional or local connection is part of the name of the respective institution. But there are certain exceptions which deserve a second glance and closer inspection: For instance, the Schiedsgericht des Warenvereins der Getreidehändler an der Hamburger Börse e.V., which now nurtures an international ambition, has been delocalised insofar as the seat of its arbitration tribunals has not to be exclusively in Hamburg anymore. b) Types of arbitration clauses not carrying a choice of law Not every arbitration agreement thus is an indication for an implicit choice of law. Just as in 138 the event of choice of forum clauses, mere optional arbitration clauses are not sufficient.480 An arbitration tribunal without determined seat and not grounded in a certain legal order does not suffice, either.481 This is in particular the case where a renowned institution (most prominently the ICC) is called upon to regulate the persons of the arbitrators and the seat of the arbitration.482 To suggest that the parties generally chose the lex loci arbitri wherever the seat of arbitration, might be dangerous. Indirectly the institution localising the seat of arbitration would become competent to determine the lex causae, too, depriving the parties of this competence. A hidden principal-agent-conflict could rise. The choice of seat of arbitration might also be only a matter of convenience.483 If the applicable rules of arbitration contained a rule like Art. 17 (1) ICC Rules of Arbitration 139 1998, according to which the arbitration tribunal shall apply (in the mode of a voie directe) the substantive law,484 which it deems appropriate, there is, a maiore ad minus, no basis for any presumption that the seat of arbitration should carry any relevance with regard to determine the lex causae.485 Ad hoc arbitration tribunals usually do not carry an intention to choose the law of the seat of 140 arbitration, but for all the arbitrators being from the same State and the tribunal sitting in that State.486 Tribunals without a specified seat of arbitration do not carry such intention, either. Just imagine that the two arbitrators nominated by the parties are resident in Hamburg and Rotterdam respectively, whilst the umpire is resident in London. Proceedings were 478 479 480

481 482

483

484 485 486

Mankowski p. 37. Emphasis added respectively. Examples may be found for instance in the Czech Republic; see Marke/Bohata, WiRO 2014, 71. The “Star Texas” [1993] 2 Lloyd’s Rep. 445, 448 (C.A., per Lloyd L.J.); Dicey/Morris/Collins/Morse para. 32–094; Mankowski, VersR 2002, 1177, 1180. Dicey/Morris/Collins/Morse para. 32–094. Vischer/Oser, in: Vischer/Lucius Huber/Oser, Internationales Vertragsrecht (2nd ed. Bern 2000) para. 175; Dicey/Morris/Collins/Morse para. 32–094. Mezger, AWD 1964, 201, 204; Thüsing, in: Graf v. Westphalen, Vertragsrecht und AGB-Klauselwerke (28th ed. 2010) Rechtswahlklauseln note 10. On this topic Calvo, (1997) J. Int. Arb. 41. Magnus, in: Staudinger, Art. 3 note 81; Mankowski, in: Leible, p. 63, 70. See only v. Bar para. 472; Martiny, in: Reithmann/Martiny, para. 2.82; Vischer/Oser, in: Vischer/Lucius Huber/Oser, Internationales Vertragsrecht (2nd ed. Bern 2000) para. 175; Magnus, in: Staudinger, Art. 3 note 81.

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conducted in writing or by video conferences, the internal matters of the arbitral tribunal by phone or any means of electronic communication. Without a certain place of arbitration any indication for a certain choice of law will fail. c) No choice of law through an arbitral tribunal not specifically grounded in a certain legal order or through other modes of ADR 141 A tacit choice of law does not exist if the parties opt for amiable composition, equitable arbitral decision, decision following general principles of law or decision relieved from any rules of law.487 All these instances do not carry the intention to choose a particular law. The same holds true if the parties agree on conciliation, mediation and other kinds of Alternative Dispute Resolution (ADR) which are more related to interests than to the proper application of law. They all lack the rooting in a certain legal order. d) No choice of law through other ADR clauses than arbitration clauses 142 Today, arbitration is but one of the modes of Alternative Dispute Resolution. Conciliation

and in particular mediation gain increasing popularity even in cross-border B2B transactions.488 The traditional arbitration clause is often replaced by a conciliation or mediation clause. Under the specific auspices of Art. 3 (1) 2 such clauses do not lay the ground for the assumption of a tacit choice of law. Both conciliation and, even more, mediation are not grounded in a specific legal order but conversely aim to step away from any law recurring to the parties’ interests instead. 3. Tacit choice of law by parties’ conduct in court proceedings 143 An alleged tacit choice of law can be misused as a vehicle to disguise a homeward trend by

courts.489 In particular490 German courts,491 but also Dutch courts492 rather light-handedly alleged an implied choice of the lex fori by the parties’ conduct in court proceedings493 487

488

489

490 491

492

150

See only Lüderitz, Internationales Privatrecht (2nd ed. 1992) para. 271; Kaye, The New Private International Law of Contract of the European Community (1993) p. 151; Mankowski, in: Leible, p. 63, 71. See only Bühring-Uhle/Lars Kirchhoff/Gabriele Scherer, Arbitration and Mediation in International Business (Alphen 2006); McIllwrath/Savage, International Arbitration and Mediation (Alphen 2010); Petsche, RDAI 2013, 251. See. only Schack, NJW 1984, 2763, 2764; Schack, IPRax 1986, 272; Wenner, BauR 1993, 257, 260; Wenner, RIW 1998, 173; Wenner, in: FS Reinhold Thode (2005), p. 661, 661–663; Wenner, para. 283; Maxi Scherer, in: Corneloup/Joubert p. 253, 281. See in addition OGH ZfRV 2014, 124 with note Ofner; OGH ZfRV 2016, 80 with note Ofner. See only BGH ZIP 2002, 1155, 1157; BGH ZIP 2003, 838, 839; BGH WM 1991, 464, 465; BGH WM 1992, 567, 568; BGH ZIP 1993, 1706, 1707; BGHZ 130, 371; BGH RIW 1996, 602; BGH RIW 2010, 629; BGH TranspR 2010, 427; BAG IPRspr. 2004 Nr. 28; BAG RIW 2014, 534, 535; OLG Düsseldorf TranspR 1991, 235, 237; OLG Koblenz RIW 1992, 491; OLG München TranspR 1992, 60, 62; OLG Köln OLGZ 1993, 193; OLG Düsseldorf TranspR 1992, 218; OLG Hamburg TranspR 1993, 22, 23; OLG Zweibrücken FamRZ 1994, 982, 983; OLG Düsseldorf NJW-RR 1994, 506, 507; OLG Köln RIW 1994, 970, 971; OLG Frankfurt WM 1995, 1179; OLG Saarbrücken RIW 1996, 605; OLG Düsseldorf TranspR 1996, 109; OLG Düsseldorf TranspR 1996, 152; OLG Hamm RIW 1996, 879; LAG Düsseldorf IPRspr. 2008 Nr. 40a p. 107; LG Berlin IPRax 1998, 79 = RIW 1996, 960; LG München I SchiedsVZ 2014, 100, 112. A stricter course is taken by BGH NJW 2011, 2809, 2812; BGH RIW 2012, 403, 405. E.g. Hof Amsterdam NIPR 2001 Nr. 190 p. 328; Hof ’s-Hertogenbosch NIPR 2001 Nr. 266 p. 446; Hof ’s-

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(stillschweigende Rechtswahl durch Prozessverhalten or processuele rechtskeuze respectively). As a subsequent choice of law this triggers the protection of third party as provided for in (2) cl. 2 and all negative consequences stemming from an alteration of the applicable law.494 This requires careful consideration. Choice requires a conscious decision. To proceed on the basis of a certain law because that law is believed to be applicable anyway, does not amount to a proper choice.495 Passive submission must not be equated with active consent,496 the latter in the assumed conscience to possibly alter the course of things and to deviate from the status quo. Mere ignorance or sloppiness, even if mutual, do not constitute consensus.497 Not objecting and keeping silent is not tantamount to consenting.498 Two corresponding mistakes or wrongs do not make a right.499 That the claimant might not be thinking at all about a choice of law is evident if he bases his allegation that a certain law is applicable on Art. 4500 and thus on an objective connection which becomes only operable as a choice of law. Particularly, the inherent danger is that a parties’ intention to the said avail is rather con- 144 structive and hypothetic,501 especially so if choosing the lex fori were detrimental for either party.502 Besides the additional danger of triggering counsels’ liability,503 this comes dangerously close to a facultative application of PIL.504 Any intra- or supranational Act unifying conflicts rules aims at an opposite goal: Unification can not be reached if the application of the Act as such depended on the parties’ intentions. The case that the parties commonly plead on the basis of the same foreign law is different anyway.505 Strictly speaking, parties should have a common intention to shape the ground of their legal relationship.506 A limit to any assumption that the parties have implicitly agreed on the application of a 145 certain law might be reached if one of the parties pleads another law at the very first occasion when the matter and its possible implications are consciously discussed.507 But on the other hand, this raises the danger of ex post opportunism and would generate some form of withdrawal from a previous agreement if such agreement was really concluded.

493 494 495 496 497 498

499 500 501 502 503 504 505 506 507

Hertogenbosch NIPR 2011 Nr. 56 p. 140; Rb. Utrecht NIPR 2000 Nr. 152 p. 237; Rb. Rotterdam, NIPR 2001 Nr. 120 p. 243. OLG Stuttgart RdTW 2015, 143, 146 refers even to pre-trial correspondence. Sandrock, JZ 2000, 1118, 1120. Ofner, ZfRV 1995, 149; Ofner, ZfRV 2014, 124; Ofner, ZfRV 2016, 80. Ofner, ZfRV 1995, 149. See Michael Stürner, in: FS Rolf Stürner (2013), p. 1071, 1083. Schack, IPRax 1986, 272, 273; Schwenzer, IPRax 1991, 129; Mankowski p. 36; Fauvarque-Cosson, in: Mélanges Paul Lagarde (2005), p. 263, 270; Gaudemet-Tallon, in: Mélanges Pierre Mayer (2015), p. 255, 263. Mankowski, AP H. 3/2015 § 130 BGB Nr. 26. de Heer, NIPR 2009, 144, 147. Heiss, in: Czernich/Heiss Art. 3 EVÜ note 10. BGH NJW 2009, 1205, 1206; Michael Stürner, in: FS Rolf Stürner (2013), p. 1071, 1084. Wenner para. 288. See only Bolka, ZfRV 1972, 241, 250 et seq. BGH NJW-RR 1990, 248, 249; OLG Celle RIW 1990, 320, 322; Magnus, in: Staudinger Art. 3 note 82. BGH NJW 2009, 1205, 1206; Schack, NJW 1984, 2736, 2739; Mansel, ZvglRWiss 86 (1987), 1, 13. BGH NJW 2009, 1205, 1206. See also de Heer, NIPR 2009, 144, 147.

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a) Principal-agent-conflict and the power of attorney 146 If both parties plead on the basis of the substantive law of the lex fori, the intention to choose

the Lex fori tacitly might be imputed to the parties. This would subject their standing as to the law applicable to the rather often quite defective knowledge of PIL germane to their counsels (insofar as pleadings with regard to the applicability of a certain law are deemed covered by the respective power of attorney508 as to be judged by the standards of the law applicable in this regard, which is the lex fori)509. 147 An additional danger is the inherent principal-agent-conflict: the attorney has a strong self

interest – particularly so if he is billing on a time basis – that the proceedings take place on the basis of the substantive law of the lex fori in which he is experienced and that he does not have to share earnings with a foreign colleague.510

148 Indirectly, the horror alieni, the fear of foreign law, precipitates tendencies to agree to

conclude less beneficial and overall inefficient settlements.511 149 On the other hand, attorneys are subjected to liability (which might not become all too

practical, though). In the event that their respective party loses legal advantages due to the attorney’s deficient conduct of proceedings without any balance obtained512 and that the tacit choice of law imputed causes grave disadvantages as compared to the law applicable without such a tacit choice of law, a violation of advocatorial duties and obligations is at stake. b) Modes of consensus 150 Mere submission is not a positive assent.513 A proper choice of law requires mutual con-

sensus and requires the parties to become active, to express an intention to choose a certain law.514 Courts show a tendency to lower this threshold by relying on mere submission.515 Insofar they neglect the missing counterpart to Art. 26 Brussels Ibis Regulation in PIL. Even with regard to the proper interpretation of Art. 26 Brussels Ibis Regulation there are two 508

509

510

511

512 513

514

515

152

See on the necessity of a respective power of attorney only Schack, NJW 1984, 2736, 2739; Mansel, ZVglRWiss 86 (1987), 1, 13; Herkner, Die Grenzen der Rechtswahl im internationalen Deliktsrecht (2003) pp. 136 et seq. To the closest connection of a power of attorney to be exercised in a given set of proceedings BGH MDR 1958, 319; OLG München WM 1969, 731. Mankowski, in: Claus Ott/Hans-Bernd Schäfer (eds.), Vereinheitlichung und Diversität des Zivilrechts in transnationalen Wirtschaftsräumen (2002), p. 118, 121. See only Purcell, 40 UCLA L. Rev. 423, 447 (1992); Mankowski, in: Claus Ott/Hans-Bernd Schäfer (eds.), Vereinheitlichung und Diversität des Zivilrechts in transnationalen Wirtschaftsräumen (2002), p. 118, 121. Jaspers pp. 185 et seq. Schack, IPRax 1986, 272, 273; Schwenzer, IPRax 1991, 129; Mankowski p. 36; Coester-Waltjen, in: FS Hans Jürgen Sonnenberger (2004), p. 343, 351. See only BGH NJW 2009, 1205, 1206; OLG Köln RIW 1992, 1021, 1023 et seq.; OLG München RIW 1996, 329, 330; Mankowski pp. 35 et seq.; Thüsing, in: Graf v. Westphalen, Vertragsrecht und AGB-Klauselwerke (28th ed. 2010) Rechtswahlklauseln note 11. See e.g. BGH NJW 1991, 1292, 1293 (with reference to BGH NJW-RR 1986, 456 = IPRax 1986, 292); OLG Celle IPRspr. 1999 Nr. 31 p. 77.

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opposing camps: Is submission a tacit choice of forum,516 or does it have to be understood as some rule of preclusion?517 Rules of preclusion can preclude certain objections which are not raised or not raised timely enough. To raise objections is a self-obligation of the respective party. With regard to a choice of law one is not talking about preclusion but about a positive 151 intention to choose a certain law. Otherwise the party offering a proposal would gain too strong a position in negotiations as it could impose a self-obligation to raise an objection upon the other party.518 Such a self-obligation would foster a dangerous race for tabling the proposal and would not enhance the climate for conducting negotiations on an equal footing.519 A back and forth of conflicting initiatives would be the extreme consequence. Furthermore, one would threaten to bind parties on the ground of a mistake at law and thus would reverse the alleged freedom of the parties.520 Likewise, it would be fallible to impute that the plaintiff, by suing the defendant in the State 152 the courts of which have general jurisdiction against the defendant, utters an intention to submit to the lex fori and to forsake a foreign lex contractus.521 At least, attorneys might be held liable.522 c) Dangers inherent in a bias favouring the application of the lex fori National particularities leading to a precocious application of the lex fori endanger the 153 uniform interpretation and application of the European conflicts rules.523 Furthermore, they are detrimental to the trust in justice since they cause distrust in the impartiality of the court.524 Lastly, national particularities leading to a precocious application of the lex fori enhance the 154 danger of forum shopping. This would be incompatible and inconsistent with fundamentals of the PIL of contracts. European PIL has set its mind against forum shopping and wants to

516

517

518 519 520

521 522 523 524

Favouring this i.a. ECJ, ECR 1981, 1671 (1684 para. 8) – Elefanten Schuh GmbH/Pierre Jacqmain and Hoge Raad N.J. 1985 Nr. 698 with note Jan C. Schultsz; östOGH JBl 1998, 726, 728; Droz, Compétence judiciare et effets des jugements dans le Marché commun (1972) paras. 221, 230 et seq.; Arthur Bülow, RabelsZ 38 (1974), 262, 270. Favouring this in particular Sabine Schulte-Beckhausen, Internationale Zuständigkeit durch rügelose Einlassung im Europäischen Zivilprozeßrecht (1994) pp. 100–106; Mankowski, NJW 1995, 2540 and Walter J. Habscheid, ZfRV 1973, 262, 266; Samtleben, NJW 1974, 1590, 1594; Piltz, NJW 1979, 1071, 1072 fn. 28. Herkner, Die Grenzen der Rechtswahl im internationalen Deliktsrecht (2003) p. 129. Mankowski, in: Leible, p. 63, 74. Fudickar, Die nachträgliche Rechtswahl im internationalen Schuldvertragsrecht (1983) p. 88; Jochen Schröder/Wenner para. 246; Herkner, Die Grenzen der Rechtswahl im internationalen Deliktsrecht (2003) p. 134. But see to this avail OLG Frankfurt TranspR 2000, 260. Schack, NJW 1984, 2736, 2738 et seq.; IPRax 1986, 272, 273. Schack, NJW 1984, 2736, 2739 et seq.; Jaspers p. 183. Mankowski, in: Leible, p. 63, 74.

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reduce incentives for forum shopping.525 Forum shopping is inefficient, enhances transaction costs and reduces overall welfare.526 d) Judicial duties 155 Any serious judge should ask the parties whether their conduct in the proceedings should

really carry an intention to choose the lex fori. He should elevate matters from the realm of the “only implied” to the realm of the “truly expressed”. This is particularly appropriate if the parties have expressly chosen a different law previously.527 If both parties declare that they now want the lex fori to be applied, this amounts to an express choice of law. Under German procedural rules, a respective duty is imposed on the judge by § 139 (2) ZPO.528 156 Duties to ask and to investigate the parties’ intentions are a matter of procedural law. In

principle, they are thus governed by the procedural rules of the forum.529 There are two alternative ways to solve this conundrum: – Firstly, one could rule out all and any implicit choice of law in running proceedings. – Secondly, a judicial duty to investigate whether the parties really want to choose the lex fori, could be imposed upon courts and judges. 157 The first solution would be the more radical one. On the other hand it would not invade into

the territory of national procedural laws and would not produce frictions there, particularly where the judge is limited to a generally receptive and passive role.530 It would accord better with jurisdictions where parties must plead the law and where iura novit curia is not a valid maxim. In particular, it would accord better with jurisdictions where PIL is not applied ex officio. But such tendencies were not compatible with the Rome Convention and are the less compatible with the Rome I Regulation.531 This first solution would reach certainty by rigidity. It would introduce special rules for tacit choice of law once procedings have been commenced.532 158 The second solution is the more lenient one. Within the overall system of PIL it is more

compatible with general principles. It provides for clarity and certainty by compelling the 525 526

527 528

529 530

531

532

154

Report Giuliano/Lagarde, OJ EEC 1980 C 282/1 Introduction note 2. See in more detail Mankowski, in: Claus Ott/Hans-Bernd Schäfer (eds.), Vereinheitlichung und Diversität des Zivilrechts in transnationalen Wirtschaftsräumen (2002), p. 118, 119–124. See only Rb. Arnhem NIPR 2001 Nr. 20 p. 79. Fudickar, Die nachträgliche Rechtswahl im internationalen Schuldvertragsrecht (1983) pp. 94–97; Schack, NJW 1984, 2736, 2739; Schack, IPRax 1986, 272, 274; Buchta, Die nachträgliche Bestimmung des Schuldstatuts durch Prozessverhalten im deutschen, österreichischen und schweizerischen IPR (1986) pp. 61 et seq.; Mitterer p. 139; Thode, WuB IV A. § 817 BGB 2.94, 312, 313 et seq.; Steinle, ZVglRWiss 93 (1994), 300, 313; Mankowski p. 36; Mankowski, in: Leible, p. 63, 75–76; Mankowski, in: FS Tuğrul Ansay (2006), p. 189, 211; Herkner, Die Grenzen der Rechtswahl im internationalen Deliktsrecht (2003) p. 129; Michael Stürner, in: FS Rolf Stürner (2013), p. 1071, 1084. Mankowski, in: Leible p. 63, 75; Joubert, in: Corneloup/Joubert p. 229, 252. Mankowski, in: Leible p. 63, 75; see also Trautmann, Europäisches Kollisionsrecht und ausländisches Recht im nationalen Zivilverfahren (2011) pp. 422 et seq. Fentiman, (1992) 108 LQR 142, 144 et seq.; Fentiman, Foreign Law in English Courts: Pleading, Proof and Choice of Law (1998); Hartmut Ost, EVÜ und fact doctrine (1996) pp. 209–229. Mankowski, in: Leible p. 63, 75.

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parties to make an express decision. On the other hand, it imposes a duty upon the judge which the judge might not know like features from his national procedural law.533 Another problem are the sanctions: If the applicable national procedural law does not provide proper sanctions against a judge not complying with duties to inform the parties since it does not know such judicial duties at all.534 One might justify this by an annex competence of the EU following from Art. 81 (1), (2) TFEU in order to enhance the effectiveness of EU PIL by adding the necessary procedural devices and instruments.535 Introducing a new Recital (12) or (12a)536 would not suffice. The judge might propose the choice of a certain law to the parties.537 If the judge does so, the 159 parties are under no obligation whatsoever to accept this proposal. Parties might not seize upon the occasion and might not positively assent to the proposal. In this event there is no choice of law by the parties, and the applicable law ought to be determined objectively.538 4. References to rules or institutions of a certain law The express reference in the contract mutually agreed upon539 to rules or institutions of a 160 certain national law540 indicates the choice of that law.541 There is some kind of assumption to this avail.542 But this relates to rules and institutions from the law of obligations only, yet not, for instance, to rules of tax law,543 for the latter apply or do not apply independently from any choice of law made by the parties. Likewise, the use of legal instruments germane to, and stemming from, certain legal orders (like an Eigentumsvorbehalt, reservation of title 533 534 535 536

537 538 539

540 541

542

543

Mankowski, in: Leible p. 63, 75. Mankowski, in: Leible p. 63, 75. Mankowski, in: Leible p. 63, 75. As proposed by Wulf-Henning Roth, in: FS Apostolos Georgiades (2005), p. 905, 919; Trautmann, Europäisches Kollisionrecht und ausländisches Recht im nationalen Zivilverfahren (2011) p. 422. Rb. Rotterdam S&S 2014 Nr. 3 p. 17. Rb. Rotterdam S&S 2014 Nr. 121 p. 817. The unilateral reference by only one party is not sufficient; OLG Brandenburg, NJ 2001, 257, 258 with note Ehlers = IPRspr. 2000 Nr. 28 p. 64. Like e.g. the German DIN rules. See only Report Giuliano/Lagarde, ABl. EG 1980 C 282/17; BGH NJW 1992, 618; BGH NJW-RR 1996, 1034, 1035; BGH RIW 1997, 426; BGH WM 1999, 1177, 1178; BGH WM 2000, 1643, 1644 = IPRax 2002, 37, 38; BGH WM 2004, 2066, 2068; BGH NJW 2013, 308, 310; BAGE 100, 130, 134; BAG RIW 2014, 534, 535; Cass. soc. RCDIP 102 (2013), 518, 522; OLG Köln RIW 1993, 414, 415; OLG Köln IPRspr. 2000 Nr. 21 p. 52; OLG Brandenburg NJW-RR 2012, 535; OLG Saarbrücken 11 June 2015 – Case 4 U 109/14 [26], [31]; CA Luxembourg 15.7.1992 – Hames/Spaarkrediet; Hof Arnhem-Leeuwarden, locatie Leeuwarden NIPR 2014 Nr. 38 p. 88; LAG Düsseldorf IPRspr. 2008 Nr. 40a pp. 107–108; Trib. arr. Luxembourg RDIPP 1991, 1097; AG Rostock RRa 1997, 163 = IPRspr. 1997 Nr. 30 p. 56–57; AG Hamburg NJW-RR 2000, 352, 353; Mitterer pp. 142–147; Mankowski, AR-Blattei ES 920 Nr. 6 p. 6, 7 (Nov. 1999); Dicey/Morris/Lawrence Collins para. 32–096; Pulkowski, IPRax 2001, 306, 309; Wenner para. 256; Siehr, RdA 2014, 206, 207. Cf. also the case of conflicting references to rules of different laws OLG Hamburg IHR 2013, 63, 64 with note Magnus. Critical for the reason that the parties’ intentions have to be explored first, Wulf-Henning Roth, in: FS Apostolos Georgiades (2005), p. 905, 908 et seq. Wenner para. 261. Contra OLG Brandenburg NJW-RR 2012, 535.

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clause for German law) might not per se be sufficient to imply a certain choice of law for the entire contract,544 for it might relate only to a certain and separable issue. The use of legal terminology developed under the auspices of a certain legal order and germane to that legal order might be a (weak) indication that parties wanted to choose the respective law, too.545 161 Said assumption is particularly important if the parties employ a standard contract or

General Terms and Conditions drafted on the basis of a certain law.546 Insofar the chosen law constitutes some kind of platform, some kind of “market law”. Yet parties resident in States with different legal orders might not put that much emphasis on a level playing field without comparative advantages as in the case of an express choice of law would be expressed by the choice of a “neutral” law. The prime example for a “market law” might be the reinsurance market concentrated on London: If a Lloyd’s slip with a Lloyd’s broker and a Lloyd’s underwriter is replete with references to Lloyd’s market clauses, it ought to be assumed that the parties have subjected their relationship to English law.547 Another example might be movie-related contracts, in particular financing contracts, which regularly contain an express reference to Californian law. 162 Generally, caution ought to be advocated for where only single and specific rules of a certain

law are referred to, and the manner and fashion of the reference might play some role as does the commercial or drafting background.548 A careful evaluation is called for, particularly so in order to demarcate the line between a choice of law and a mere contractual importation.549 To adopt a converse argumentum a contrario that a partial reference to selected rules might only indicate a partial choice of law, remains a feasible alternative in any event.550 A third option is to interpret the reference not as a proper conflicts choice of law but only as a materiellrechtliche Verweisung incorporating the rules referred to into the contract by the respective reference.551 163 A particular caveat applies where the specific (statutory) rule referred to ought to be char544

545

546

547

548 549

550 551

156

See OLG Düsseldorf NJW-RR 1995, 1396; LG Limburg NJW 1990, 2206; Mankowski, in: FS Tuğrul Ansay (2006), p. 189, 211. OLG Hamm IPRspr. 2012 Nr. 35 p. 59; OLG Frankfurt GmbHR 2013, 139; Faraday Reinsurance Co. Ltd. v. Howden North America Inc. [2012] EWCA Civ 980, [2012] 2 Lloyd’s Rep. 631 [10]-[12],[31] (C.A., per Longmore L.J.); CGU International Insurance plc v. Ashleigh V. Szabo [2002] 1 All ER (Comm) 83 [33] (Q. B.D.). E.g. BGH NJW 1997, 397, 399; BGH NJW 2013, 308, 310; BAG BeckRS 2013, 65309; Gard Marine & Energy Ltd. v. Glacier Reinsurance AG [2010] EWCA Civ 1052, [2010] 2 CLC 430 (C.A.); Trib. arr. Luxembourg RDIPP 1991, 1097; Wenner para. 264; Briggs, Private International Law in English Courts (2014) para. 7.102. Stonebridge Underwriting v. Ontaria Municipal Insurance Exchange [2010] EWHC 2279 (Comm) [35] (Q.B.D., Christopher Clarke J.); Faraday Reinsurance Co. Ltd. v. Howden North America Inc. [2011] EWHC 2837 (Comm) [60]-[63] (Q.B.D., Beatson J.). McParland para. 9.114; see also BGH IPRax 2002, 37. Clarkson/Jonathan Hill, The Conflict of Laws (4th ed. 2011) p. 215; Dicey/Morris/Collins/Morse, para. 32– 056; Ragno, in: Ferrari, Art. 3 note 40. Joubert, in: Corneloup/Joubert p. 229, 245. Pierre Mayer/Heuzé, Droit international privé (10th ed. 2010) para. 718; Joubert, in: Corneloup/Joubert p. 229, 246.

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acterised as an internationally mandatory rule, as a Eingriffsnorm by the standards of Art. 9 (1). In this event, such reference might be a mere precautionary measure and might not express any further intention on the parties’ side since the parties believe that they cannot escape from such rule by agreement. In fact, they might expressly state that the non-intervention of the State who has decreed that rule is a condition precedent for the performance, if not for the validity of the contract. If the parties draft their contract as a contract of a type known to the law of the relevant place 164 of business of only one party but not to the law of the other party’s place of business, this indicates that the parties have chosen the former.552 Likewise, it is an indication if the parties substantially pay respect to one legal order, but not to another.553 If the parties clearly proceed on the ground of a standard form or contrat-type as defined by a certain legal order this regularly will amount to a tacit choice of the law of this legal order.554 The model for the elaboration of the contract and its legal background prevails.555 A similar indication is the reference to collective agreements, in force only in a certain State 165 or in parts of such State, in employment contracts.556 In employment contracts the reference to a certain law on free days and vacancies can be important.557 The same might be true with regard to references to certain national rules on dismissal, even if they are contained in collective agreements.558 Fee regulations for certain industries might play a similar role,559 552 553 554

555 556

557 558

559

Bernard Audit, Droit international privé (7th ed. 2013) para. 796. Wenner para. 257. American Motorists Insurance Co. v. Cellstar Corp. [2003] EWCA Civ 206, [2003] 1 Lloyd’s Rep. 295 [53] (C.A., per Longmore L.J.); Gard Marine & Energy Ltd. v. Glacier Reinsurance AG [2010] EWCA Civ 1052, [2011] 2 All ER (Comm) 208 [37]-[45] (C.A., per Thomas L.J.); Gan Insurance Co. Ltd. v. Tai Ping Insurance Co. Ltd. [1999] 2 All ER (Comm) 54 [38] (Q.B.D., Cresswell J.); Joubert, in: Corneloup/Joubert p. 229, 243. Plender/Wilderspin para. 6–036; Joubert, in: Corneloup/Joubert p. 229, 243. BAG NJW 1996, 741 = AP Nr. 7 zu § 157 BGB Bl. 2 = AR-Blattei ES 340 Nr. 15 p. 3 with note Mankowski (April 1996); BAGE 100, 130 = AP issue 8/2002 Nr. 10 zu Art. 30 EGBGB nF fol. 3R with note Schlachter = AR-Blattei ES 920 Nr. 8 with note Mankowski (March 2003); Cass. soc. 4 July 2001 – n°. 99–44519; Rolf Birk, RdA 1989, 201, 204; Rolf Birk, in: Münchener Handbuch zum Arbeitsrecht, vol. I (2. Aufl 2000) § 20 note 11; Heilmann, Das Arbeitsvertragsstatut (1991) p. 53; Junker, Internationales Arbeitsrecht im Konzern (1992) p. 201; Junker, RIW 2001, 94, 96; Junker, SAE 2002, 258, 259; Franzen, AR-Blattei SD 920 note 67 (October 1993); Mankowski, AR-Blattei ES 340 Nr. 15 p. 5 et seq. (April 1996); Lhuillier, Clunet 126 (1999), 766, 770; Schlachter, NZA 2000, 57, 58–59; Jault-Seseke, RCDIP 94 (2005), 253, 262. Differentiating Riesenhuber, DB 2005, 1571, 1575. Contra Deinert, Internationales Arbeitsrecht (2013) § 9 note 30. Knöfel, AP issue 10/2008 Nr. 8 zu Art. 27 EGBGB nF fol. 11, 12R points towards a certain circularity if in turn the respective collective agreement is said to cover only such individual labour contracts which are subject to the law of the State in which the collective agreement is applicable. BAG NZA 2003, 339, 340; ArbG Osnabrück 24.2.1998–3 Ca 524/97. BAG NJW 1996, 741 = AP Nr. 7 zu § 157 BGB = AR-Blattei ES 340 Nr. 15 with note Mankowski (April 1996); BGHZ 125, 24 = AP Nr. 27 zu Art. 27 EGBGB n.F. with note Schlachter; ArbG Düsseldorf IPRax 1990, 328, 330; Gero Schneider, NZA 2010, 1380, 1381. Like VOB/B; VOL; see BGH NJW-RR 1999, 813 = RIW 1999, 537, 538; BGH NZBau 2003, 493 = BGHZ 154, 378, 382; BGH NJW-RR 2015, 302; Thode, in: Reithmann/Martiny para. 6.382; Thode, NZBau 2011, 449, 453; Wenner para. 263.

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but this requires some consideration.560 A mere fortuitous mention of certain rules which can not be said to be predominant within the general framework of the contract might not do the trick.561 166 On the other hand, a reference to certain national standards like the German DIN might be

only a weak indication if these standards coincide to be the standards of the jurisdiction where the place of performance is localised.562 Insofar local customs and local rules are to be taken into account already by virtue of Art. 12 (2). This is a matter of interpretation having regard to the typical understanding in the respective industry, to the regional and legal surroundings and to the facts of the case.563 Insofar usages common in trade relations become relevant, just like they do under Art. 23 (1) cl. 3 (c) 2007 Lugano Convention Art. 25 (1) cl. 3 (c) Brussels Ibis Regulation.564 Of course, the parties can put stronger emphasis on effective enforcement by directly choosing the law of the place of performance.565 167 Likewise, if the party responsible for the drafting of the contract believed to be bound by the

national rules referred to as it deemed them to be applicable anyway, the respective party from its subjective perspective might have inserted the reference to these rules not voluntarily on its free will, but felt coerced to do so.566 168 References to rules regulating social security can not serve as a proper indication since social

security is not object of general PIL but of International Social Security Law as it can not be characterised as private law.567 169 The alternative to assuming a tacit choice of law would generally be an incorporation by

reference, but only of the rules which are expressly referred to, and would thus have far lesser effect.568 170 If the rules referred to are founded in EU law and thus form part of the law of all Member

States (but for differences in detail) that does not allow to assume a choice of law insofar as only a choice between the laws of different Member States is at stake.569 171 Below the level of referring to single rules or legal institutions of a certain law operates the

use of standard forms or standardised application forms which are drafted in a certain language and terminologically based on a certain legal system. But caution should be advocated before assuming a tacit choice of law on such slippery ground.570 560 561 562 563 564 565 566 567

568 569

158

BGH NZBau 2001, 333; Thode, in: Reithmann/Martiny para. 6.390; Thode, NZBau 2011, 449, 453. OLG Oldenburg IHR 2013, 63 with note Magnus. But cf. Sonnenberger, IPRax 2014, 400, 403. Cf. Wenner, EWiR Art. 27 EGBGB 1/99, 353, 354; Pulkowski, IPRax 2001, 306, 309. Wulf-Henning Roth, in: FS Apostolos Georgiades (2005), p. 905, 909. Béraudo, in: Mélanges Paul Lagarde (2005), p. 93, 100. Michou, in: Corneloup/Joubert p. 97, 100. Jacotot, RCDIP 102 (2013), 522, 527. Junker, IPRax 1990, 303, 305 et seq.; Wilderspin, in: Lagarde/von Hoffmann (eds.), L’européanisation du droit international privé (Köln 1996), p. 47, 50. Contra ArbG Düsseldorf IPRax 1990, 328, 330. Dicey/Morris/Lawrence Collins paras. 32–086, 32–096. Mankowski, in: Leible, p. 63, 78. With some inherent problems therefore AG Hamburg NJW-RR 2000, 352, 353.

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5. Agreement on a uniform place of performance If the parties agree on a uniform place of performance for all obligations arising under the 172 contract, this can also be an indication for the parties’ intention to choose the law of that very place of performance.571 With the place of performance generally losing importance in the PIL of contracts the weight of such indication has been diminished and reduced, too.572 Even below this level and thus unfit for carrying any assumption towards a tacit choice law is that the goods sold are located in a certain place.573 The case might be different where bonds are explicitly intended to fund particular measures to be carried out solely in a specific and clearly identified jurisdiction.574 An intention to choose the applicable law is generally not what the parties aim at when 173 agreeing on certain place of performance. Conversely, they rather aim at consequences with regard to the competent forum, not the applicable law.575 In particular, they look at Art. 5 (1) 2007 Lugano Convention or Art. 7 (1) Brussels Ibis Regulation which gives procedural effect to agreements on the place of performance.576 Yet Art. 5 (1) 2007 Lugano Convention or Art. 7 (1) Brussels Ibis Regulation only determines special, not general jurisdiction. If one draws a parallel to choice of forum clauses where only exclusive choice of forum clauses indicate that the parties want to choose the lex fori,577 even the importance of a so-called concrete agreement on the place of performance578 is reduced. Even less, the so-called abstract agreement on the place of performance does suffice. The latter will generally be some kind of hidden choice of forum agreement and has thus to be measured against the yardsticks applicable to choice for forum agreements.579 If it does not comply with the formal 570 571 572

573 574 575 576

577 578

579

But cf. LAG Rheinland-Pfalz IPRspr. 2012 Nr. 64 pp. 119–120. OLG Köln RIW 1994, 970; OLG Köln IPRax 1996, 270; Heiss, in: Czernich/Heiss Art. 3 EVÜ note 10. Hohloch, in: Erman, BGB II, 13. Aufl 2011, Anh II Art. 26 EGBGB note 18; von Hoffmann, Internationales Privatrecht, 7. Aufl 2002, § 10 Rn. 35; Magnus, in: Staudinger, Art. 3 Rom I-VO note 96. Wulf-Henning Roth, IPRax 2015, 222, 225. Incorrectly OLG Koblenz IPRax 2015, 255, 257. Franzina, in: Studi in onore di Luigi Costato, vol. II (2014), p. 513, 519–520. See only Mankowski, EWiR § 474 BGB 1/03, 351, 352. Siegfried Zelger v. Sebastiano Salinitri (Case Rs. 56/79), [1980] ECR 89, 97 para. 5 = WM 1980, 720 with note Rolf A. Schütze = RCDIP 69 (1980), 385 with note Ernst Mezger = NJ 1980 Nr. 511 with note Jan C. Schultsz (further annotations by André Huet, Clunet 107 [1980], 435; Spellenberg, IPRax 1981, 75); Mainschifffahrts-Genossenschaft eG (MSG) v. Les Gravières Rhénanes SARL (Case C-106/95), [1997] ECR I-911, I-943 para. 30; GIE Groupe Concorde v. Captain of the vessel “Suhadiwarno Panjan” (Case C-440/97), [1999] I-6307, I-6351 et seq. para. 28; BGH, RIW 1980, 725. Supra Art. 3 notes 132–134 (Mankowski). See on this construction Mankowski, in: Magnus/Mankowski, Brussels Ibis Regulation (2015) Art. 7 Brussels Ibis Regulation note 216. Mainschifffahrts-Genossenschaft eG (MSG) v. Les Gravières Rhénanes SARL (Case C-106/95), [1997] ECR I-911, I-943 et seq. paras. 31–35 = RIW 1997, 415 with note Holl = JZ 1997, 839 with note Harald Koch = Rev. crit. dr. int. pr. 86 (1997), 563 with note Gaudemet-Tallon = ZZP Int. 2 (1997), 161 with note Peter Huber = N.J. 1998 Nr. 565 with note Vlas (further annotations by André Huet, Clunet 124 [1997], 625; Queirolo, RDIPP 1997, 601; Kubis, IPRax 1999, 10); GIE Groupe Concorde v. Captain of the vessel “Suhadiwarno Panjan” (Case C-440/97), [1999] I-6307, I-6351 t seq. para. 28 = RCDIP 89 (2000), 253 with note Bertrand Ancel = ZZP Int. 5 (2000), 279 with note Hau = N.J. 2001 Nr. 595 with note Vlas = ZEuP 2001, 737 with note Kubis (further annotations by Bischoff, Clunet 127 [2000], 547; Hau, IPRax

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requirements it will be invalid580 and insofar as it is invalid it can not indicate an intention to choose a certain law. The same applies to an abstract agreement on the place of performance which contravenes Arts. 15; 19; 23 Brussels Ibis Regulation.581 6. Accordance established between the parties themselves or transaction structures a) Established business relations 174 The parties might have established business relations. In this case it ought to be presumed

that they want to subject all contracts between them to the same law, namely the lex causae of the first contracts unless they have expressed an intention to the contrary.582 Subsequent contracts should follow the lead of the choice of law clause in the original and prior contract.583 A change of the applicable law within a continuum would need a strong justification. It would threaten both some surprise effects and costs to adapt. An advance reaction to that would be tantamount to investing suboptimally high costs to follow the developments of the business relation. Yet a counter-argument would be that the parties could avoid this by choosing the applicable law expressly. 175 There is a certain parallel to Arts. 25 (1) cl. 3 (b) Brussels Ibis Regulation; 23 (1) cl. 3 (b)

Brussels I Regulation/2007 Lugano Convention.584 In both instances there is a common fundamental understanding which founds mutual reliance, and anyone who ex post alleges not to be bound would act contravening good faith.585 On the other hand, a parallel to Arts. 25 (1) cl. 3 (c) Brussels Ibis Regulation; 23 (1) cl. 3 (c) Brussels I Regulation/2007 Lugano Convention permitting trade practices should not be taken into account too light-handedly.586 b) Transaction structures 176 Of particular relevance might be that the concrete contract forms part of an overall transac-

tion or of transaction structures. There might be interrelated and more or less closely connected contracts which exert quite some influence on each other and which might gain

580

581

582

583

584

585

586

160

2000, 354); BGH NJW-RR 1998, 755; Schack, IPRax 1996, 247; Mankowski, in: Magnus/Mankowski, Brussels Ibis Regulation (2015), Art. 7 Brussels Ibis Regulation note 216. See only Mainschifffahrts-Genossenschaft eG (MSG) v. Les Gravières Rhénanes SARL (Case C-106/95), [1997] ECR I-911, I-943 et seq. paras. 33 et seq. See Mankowski, in: Magnus/Mankowski, Brussels Ibis Regulation (2015), Art. 7 Brussels Ibis Regulation note 216. See only Report Giuliano/Lagarde, OJ EC 1980 C 282/17; Egon Lorenz, RIW 1992, 697, 702; Mankowski, in: Leible p. 63, 79–80; Ravillon, in: Corneloup/Joubert p. 67, 76; Dicey/Morris/Collins/Morse para. 32– 091; Magnus, in: Staudinger Art. 3 note 95. Report Giuliano/Lagarde OJ EEC C 282/9 fn.; Joubert, in: Corneloup/Joubert p. 229, 244; Corneloup, in: Corneloup/Joubert p. 285, 304. Mankowski, in: Leible p. 63, 80; Pauknerová, in: Liber amicorum Hélène Gaudemet-Tallon (2008), 775, 784 et seq. See under Art. 17 (1) cl. 2 (b) Brussels Convention IP Metal Ltd. v. Route OZ SpA [1993] 2 Lloyd’s Rep. 60, 66 (Q.B.D., Waller J.); Lafrage Plasterboard Ltd. v. Fritz Peters & Co. KG [2000] 2 Lloyd’s Rep. 689, 698, 699 (Q.B.D., Judge Browsher Q.C.); SSQ Europe SA v. Johann & Backes OHG [2002] 1 Lloyd’s Rep. 465, 481 et seq. (Q.B.D., Judge Havelock-Allan Q.C.). See Plender/Wilderspin para. 6–029.

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relevance for the specific purposes of parties’ choice of law, too.587 They might create a “contractual environment”.588 Then it might be sensible to submit all contracts concerned by the entire transaction to the same law, establishing a uniform lex causae in order to avoid frictions.589 Insofar parties might intend that contracts might follow the lex causae of the leading contract,590 especially so for any executory contract under an umbrella agreement which contains a choice of law clause.591 An economic transaction intended to form unity should not be legally split.592 An implied choice can, and in most instances, should be inferred from the connection between several related contracts.593 Parties are well advised to express such intention in an express choice of law clause in the leading contract,594 appropriately wide and apt as to catch the interlinked contracts, too.595 An express choice of law in a leading or earlier contract indicates that without a subsequent change of policy parties might intend to follow that lead in subsequent contracts.596 Furthermore, if the parties insert parallel choice of law clauses in the interlinked contracts there should not be a contradicting stipulation emphasising the independence of the single contract.597 But not each and every connection between two or more contracts carries such assumption 177 and allows an exception to the rule that generally every single contract has its own lex causae which has to be determined on its own merits.598 This is particularly true if no leading contract can be identified since it would be unclear which lead the contracts should possibly

587 588

589

590 591

592 593

594 595

596

597 598

Penadés Fons pp. 141–148. Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation, COM (2002) 654 final sub 3.2. 4. 1. Mankowski, in: Leible, p. 63, 80; Corneloup, in: Corneloup/Joubert p. 285, 291; see also BGH NJW 2001, 1936, 1937; Wenner para. 266. See only Report Giuliano/Lagarde, OJ EEC 1980 C 282/17; Dicey/Morris/Collins/Morse para. 32–091. OLG Hamburg IPRspr. 1998 Nr. 34 pp. 68 et seq. = TranspR-IHR 1999, 37; LG Karlsruhe NJW-RR 1999, 1284. Corneloup, in: Corneloup/Joubert p. 285, 291. Friedrich Lürssen Werft GmbH & Co. KG v. Halle [2010] EWCA Civ 587, [2011] 1 Lloyd’s Rep. 265 [20][21] (C.A., per Aikens L.J.); Golden Ocean Group Ltd. v. Salgaocar Mining Industries PVT Ltd. [2012] EWCA Civ 265, [2012] 1 WLR 3674, [2012] 1 Lloyd’s Rep. 542 [45] (C.A., per Tomlinson L.J.); Alliance Bank JSC v. Aquanta Corp. [2012] EWCA Civ 1588, [2013] 1 All ER (Comm) 819 [54] (C.A., per Tomlinson L.J.); Emeraldian Partnership v. Wellmix Shipping Ltd. [2010] EWHC 1411 (Comm), [2011] 1 Lloyd’s Rep. 301 [170] (Q.B.D., Teare J.); Star Reefers Pool Inc. v. JFC Group Ltd. [2011] EWHC 339 (Comm), [2011] 2 Lloyd’s Rep. 215 [23] (Q.B.D., Andrew Smith J.); BAT Industries plc v. Windward Prospects Ltd. [2013] EWHC 4087 (Comm) [74] (Q.B.D., Field J.); Stone, EU Private International Law (3rd ed. 2014) p. 301. Corneloup, in: Corneloup/Joubert p. 285, 301. Corneloup, in: Corneloup/Joubert p. 285, 303–304; Porcheron, La règle de l’accessoire et les conflicts de lois en droit international privé (2012) para. 376. Report Giuliano/Lagarde, OJ EEC 1980 C 282/17; Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation, COM (2002) 654 final sub 3.2. 4. 1. Corneloup, in: Corneloup/Joubert p. 285, 301–302. Bernard Audit, Droit international privé (7th ed. 2013), para. 797.

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follow.599 The case of a void leading contract presents a particular difficulty, too.600 In addition, it is not very likely that a choice of law clause in a single, executing contract is intended to also embrace an umbrella agreement.601 There is no automatism that the mere connection between contracts carries an implied choice of law for either of them.602 178 If a leading contract can be identified but contains only a tacit choice of law, some caution is

advisable in order to not force an intention upon the parties they possible do not have with regard to the interlinked contracts.603 The same applies where the leading contract does not contain any express or implicit choice of its lex contractus. But such caution should not effectively bar from legally recognising the unified entity and the overall package which is economically intended if it is so intended.604 Else the often rather tiny difference between interlinked, but legally separate contracts and legally uniform complex contracts threatens to be overly emphasised.605 179 Yet the maxim accessorium sequitur principale suggests that mere ancillary contracts should

follow the lead of the respective principal contracts, e.g. contracts for the subsequent maintenance of goods to be delivered should have the same lex causae as the sales contract at the centre of the transaction. 180 The overall transaction might even comprise contracts with other partners if they only arise

in connection with the concrete contract.606 This is especially the case where a party is contracting with different firms of a group of companies or a network of co-operating companies. For instance, it is of importance if the contract but for the denomination of the contracting party is identical with another contract with another company.607 Another constellation might be that of contract and sub-contract with different contractors where the choice of law for the sub-contracts might follow the lead of the head contract.608 Anyway, prudent parties to contracts forming part of such transactions insert an express choice of law clause if they want to establish a leading lex causae.609 A differing alternative which negates any implication as to a tacit choice of law is an express choice of law for every single contract within the general framework of the transaction, for instance where a number of contracts (so called Country Agreements) is concluded with local subsidiaries and another contract with the parent company of a group.610 599 600 601 602 603 604 605 606

607 608

609 610

162

Mankowski, in: Leible, p. 63, 80. See Corneloup, in: Corneloup/Joubert p. 285, 311–312. OLG Düsseldorf IHR 2014, 162, 165. Kaspers, Die gemischten und verbundenen Verträge im Internationalen Privatrecht (2015) pp. 138–139. Corneloup, in: Corneloup/Joubert p. 285, 305. Leclerc, Trav. Com. Fr. d.i.p. 2002–2004, 1, 21. Sceptical Corneloup, in: Corneloup/Joubert p. 285, 307. See generally Corneloup, in: Corneloup/Joubert p. 285, 315. Mankowski, in: Leible, p. 63, 81. Sceptical Corneloup, in: Corneloup/Joubert p. 285, 291, 302. Sceptical Wulf-Henning Roth, in: FS Apostolos Georgiades (2005), p. 907, 917. BAG NZA 2003, 339, 340; Mankowski, in: Leible, p. 63, 81. See ICC Award 2119 (1978), in: Recueil des sentences arbitrales de la CCI 1974–1985 (1990), p. 997 et seq.; Ravillon, in: Corneloup/Joubert p. 67, 87; Corneloup, in: Corneloup/Joubert p. 285, 302–303. Corneloup, in: Corneloup/Joubert p. 285, 302. See Brödermann, in: Piltz (ed.), Handbuch des Fachanwalts für Internationales Wirtschaftsrecht (forthcoming) § 6 II 5 c dd.

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7. “Construction Clauses” On their very wording, so-called “construction clauses” provide only for the contract to be 181 construed and interpreted in accordance with the law designated by the parties. Yet on proper and purposive reading, they go beyond that and constitute a choice of law, be it an express or be it an implied one.611 It would not make too much sense to subject the construction and interpretation of a contract on the one hand and the other issues of the same contract on the other hand to different laws.612 Prudently, parties and their advisers avoid construction clauses and similar formulations,613 for these are a source of confusion and uncertainty and might lead to a split in the middle of the applicable law and the applicability of two different laws which in turn need to be reconciled with each other. Clauses expressly extending the application of the chosen law to issues of formation, construction, performance, or validity are superfluous and redundant in the light of Arts. 10; 12.614 Furthermore, they raise the danger of being interpreted as a mere particle choice of law.615 A different feature is to construe a contract the language of which differs from the one 182 commonly spoken in the jurisdiction the law of which is chosen. An English language contract using English legal terminology might be subject to German law as its lex contractus. Then German law has to mirror to the greatest extent possible the English construction insofar as this complies with the parties’ common intentions.616 The simple use of the English language cannot subject the contract to English law: Firstly, English is the common ground of languages in the common law countries. Secondly, the use of a certain language does not imply the applicability of the law of the main jurisdiction in which this language is spoken, but might be the only ground for a common understanding of the parties each not versed in the other’s language.617 If the parties did not consider the particularities English terminology and English legal 183 constructions carry with them, the case might prove difficult.618 But in these constellations English law is not applicable as law and as the lex contractus since the contract clearly has a different lex contractus. The question of an implied choice of law of English law will not arise, especially in the face of an express choice of law clause in favour of German law. It is a different question whether a specifically “international” interpretation of such contracts should take place. The use of the English language as the lingua franca of our time does not per se constitute an implied choice of the law of any English-speaking country, particu611

612 613 614 615 616 617 618

OLG München IPRax 1989, 41; LG München I IPRax 1984, 318; Jochen Schröder, IPRax 1985, 131; Werner Lorenz, IPRax 1989, 22; Martiny, in: Münchener Kommentar zum BGB Art. 3 note 57; Magnus, in: Staudinger, Art. 3 note 89; Ostendorf, IHR 2012, 177, 178 et seq. Ostendorf, IHR 2012, 177, 179. Born p. 160. Vidmar, ZfRV 2015, 219, 221. Ostendorf, IHR 2012, 177, 179; Czernich, ZfRV 2013, 157, 163; Vidmar, ZfRV 2015, 219, 221. Magnus, in: FS Ingeborg Schwenzer (2011), p. 1153, 1167. Magnus, in: FS Ingeborg Schwenzer (2011), p. 1153, 1163 et seq. See only BGH NJW 1992, 243; Joachim Gruber, DZWiR 1997, 353, 357; Maier-Reimer, NJW 2010, 2545; de Nova, in: Studi in onore di Giorgio Cian (2010), p. 725; Magnus, in: FS Ingeborg Schwenzer (2011), p. 1153, 1166.

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larly so where the variations below native speaker standard reign, namely Globish or European legalese. 8. Further instances 184 Other instances in which a tacit choice of law could be discussed are more special. For

instance, it would be conceivable that in the event of cross-border online auctions the General Terms and Conditions of the respective marketing platform could be the decisive factor.619 In particular, certain Standard Contracts or Model Contracts might be in general use on a certain market.620 Insofar as both parties submit to these General Terms and Conditions, the General Terms and Conditions could constitute some kind of firm which would be relevant also for the performance of the single sales contracts.621 The General Terms and Conditions define the rules of play on the platform particularly so if the General Terms and Conditions in their wording cover all contractual and non-contractual relations to be derived from the auctions.622 He who is operating on the respective platform could be deemed to accept such rules. But this is questionable where the seller’s General Terms and Conditions collide with the buyer’s General Terms and Conditions.623 185 For reinsurance contracts a presumption in favour of a tacit choice of English law is put

forward at least from the English perspective, if the reinsurance contract is concluded on the London market.624 It is rather evident that such presumption might be argued for in the selfinterest of the English legal industry on the secondary market for legal services.625 The London market primarily is a platform for making contact. The performance of the contract later on is not specifically connected with this market. Additionally, it is not necessary to 619

620 621

622

623

624

625

164

Mankowski, in: Leible, p. 63, 81; Mankowski, in: Spindler/Wiebe (eds.), Internet-Auktionen (2nd ed. 2005) para. G 46. See Penadés Fons pp. 150–153. Mankowski, in: Leible, p. 63, 81; Mankowski, in: Spindler/Wiebe (eds.), Internet-Auktionen (2nd ed. 2005) para. G 46. Mankowski, in: Leible, p. 63, 81; Mankowski, in: Spindler/Wiebe (eds.), Internet-Auktionen (2nd ed. 2005) para. G 48. Mankowski, in: Leible, p. 63, 81; Mankowski, in: Spindler/Wiebe (eds.), Internet-Auktionen (2nd ed. 2005) para. G 50. To this avail Ace Insurance SA NV (formerly Cigna Insurance Co. of Europe SA NV) v. Zurich Insurance Co. [2001] EWCA Civ 173, [2001] 1 Lloyd’s Rep. 618 (C.A.); Glacier Reinsurance AG v. Gard Marine & Energy Ltd. [2010] EWCA Civ 1052, [2010] 2 CLC 430, [2011] Bus. L.R. 839 (C.A.); Faraday Reinsurance Co. Ltd. v. Howden North America Inc. [2012] EWCA Civ 980 (C.A.); Trade Indemnity plc v. Försäkringsaktiebolaget Njord (in liquidation) [1995] 1 All ER 796, 807 et seq. (Q.B.D.); Tiernan v. Magen Insurance Co. Ltd. [2000] I.L.Pr. 517 (Q.B.D.); Ace Insurance SA-NV v. Zurich Insurance Co. [2000] 2 Lloyd’s Rep. 423, 426 = [2001] I.L.Pr. 320, 325 (Q.B.D.); CGU International Insurance Plc v. Szabo [2002] Lloyd’s Rep. I.R. 196 (Q.B.D.); Assicurazioni Generali v. Ege Sigorta SpA [2002] Lloyd’s Rep. I.R. 480 (Q.B. D.); Tonictsar Ltd. v. American Home Assurance [2005] Lloyd’s Rep. I.R. 32 (Q.B.D.); Tryg Baltica International (UK) Ltd. v. Boston Compania de Seguros SpA [2005] Lloyd’s Rep. I.R. 40 (Q.B.D.); Wasa v. Lexington [2009] Lloyd’s Rep. I.R. 675 (Q.B.D.); Stonebridge Underwirting Ltd. v. Ontario Municipal Insurance Exchange [2010] EWHC 2279 (Comm), [2010] 2 CLC 349 (Q.B.D.). But see contra The “Stolt Marmaro” [1985] 2 Lloyd’s Rep. 428, 434 et seq. (C.A., per Robert Goff L.J.). Mankowski, VersR 2002, 1177, 1180.

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submit to English law in order to enter the London market.626 Yet a tacit choice of market law might be implied if the parties base their performances on that law627 or if one of the parties (especially in order to escape a rather strict and limiting home law) generally operate on the basis of the respective market law.628 Placement in a certain market using terminology and contract wording germane to that very market might indicate an implied choice of law (even if London is not the market at stake).629 Generally, negotiations leading to the conclusion of the contract can provide an indication 186 for the parties’ intention to subject the potential contract to a certain law.630 But mere drafts remain mere drafts, particularly so if they were tabled unilaterally by one party and rejected by the other party.631 A relevant transaction needs to be a concluded contract.632 Parties might not only deem it sensible but also outrightly assume without saying that 187 subsequent contracts will be governed by the same law as their predecessors. Parties might regard their business or contractual relationship as some kind of continuum without interruption and without any switch in its fundamental features. This might indicate that the later contracts are subject to a tacit choice of law of the very same lex causae which governed previous contracts.633 The underlying idea is basically the same as the one expressed in Arts. 25 (1) cl. 3 (b) Brussels Ibis Regulation; 23 (1) cl. 3 (b) 2007 Lugano Convention. If there is a multiplicity of possibly leading earlier contracts, the immediately preceding one, the ultimate and last one of these might be regarded as the most relevant one on which the parties aspire to lean. Furthermore, past choices of law are attractive due to cognitive biases, namely the status quo bias and the endowment effect the latter inflating what one already has634 (or rather: had). Past choices of law might have worked and might be taken as tested, fostering trust and reliance.

626 627

628

629

630

631

632 633 634

Mankowski, VersR 2002, 1177, 1181. Overseas Insurance Ltd. v. Incorporated General Insurance Ltd. [1992] 1 Lloyd’s Rep. 439, 443 (C.A., per Parker L.J.). Islamic Insurance Co. v. Saudi Egyptian American Reinsurance Co. [1987] 1 Lloyd’s Rep. 315, 318 (C.A., per Parker L.J.). AIG Europe SA v. QBE International Insurance [2002] Lloyd’s Rep. I.R. 22 (Q.B.D.); Arnould on Law of Marine Insurance and Average (18th ed. 2013) para. 5–22; see also American Motorists Insurance Co. v. Cellstar Corp. [2003] Lloyd’s Rep. I.R. 359 (Q.B.D.); Travelers Casualty & Surety Co. of Canada v. Sun Life assurance Co. of Canada (UK) Ltd. (No. 2) [2007] Lloyd’s Rep. I.R. 619 (Q.B.D.). Samcrete Egypt Engineers and Constructors SAE v. Land Rover Exports Ltd. [2001] EWCA Civ 2019, [2002] LC 533 [23] (C.A., per Potter L.J.); Dornoch Ltd. v. Mauritius Union Assurance Co. Ltd. [2006] Lloyd’s I.R. 127 (Q.B.D, Aikens J.), affirmed by [2006] Lloyd’s Rep. I.R. 786 (C.A.); Stonebridge Underwriting Ltd. v. Ontario Municipal Insurance Exchange [2010] EWHC 2279 (Comm) (Q.B.D.). Carl A. Sax v. Lev Tchernoy [201] EWHC 795 (Comm) [128] (Q.B.D., Hamblen J.); McParland para. 9.124. Carl A. Sax v. Lev Tchernoy [201] EWHC 795 (Comm) [129] (Q.B.D., Hamblen J.). See Penadés Fons pp. 148–150. Spagnolo p. 191.

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188 The language of the contract,635 the currency employed under the contract,636 the nationality

of the parties,637 the place of performance, the place of contracting and the seat or the relevant place of business of the parties are, if at all, very weak indications to infer the intention for a certain choice of law,638 even less Top Level Domains of the respective websites or e-mails pointing toward seats in the same country.639 Correctly, all this has its correct place in the context of the objective determination of the applicable law pursuant to Art. 4, namely under the escape clause in Art. 4 (3) or, if an employment agreement is at stake, in Art. 8 (4) respectively. Furthermore, the choice of language is very often only a matter of convenience640 as is the choice for a certain currency. If a number of indicators points towards the same direction they add their respective weights.641 189 With regard to an employment agreement a tacit choice of law was deducted from the

following combination: language of the contract; the employee being assigned to a certain superior during periods of posting abroad; a contractual right to call back the employee home on the employer’s side; priority given for the interests of the first employer in the event of a conflict of interest or loyalty between the first and the second employers, all pointing towards the same direction in the concrete case642 (which happened to be the lex fori). 190 The place or port of loading or the place or port of discharge added to an Incoterm (for

instance “cif [UK port]” or “fob [Dutch port]” are not sufficient evidence for a tacit choice of law.643 9. Requirements as to parties’ mindsets and intentions

191 If an express or tacit choice of law is found, it ought to be presumed that parties intended to

choose the applicable law. Parties are assumed to have had sufficient knowledge and an intention carrying the consequences. It is not required that parties must have had actual knowledge about the existence of a situation giving rise to determining an applicable law and even less about the correct fact patterns in the concrete case.644 If either party routinely 635

636 637 638

639

640 641

642 643

166

BAG IPRax 2013, 576, 579; OLG Celle OLGZ 1991, 485, 486; OLG Düsseldorf, NJW-RR 1995, 1396; LAG Düsseldorf IPRspr. 2008 Nr. 40a p. 107; OLG Saarbrücken 11 June 2015 – Case 4 U 109/14 [26]; Mankowski, in: FS Tuğrul Ansay (2006), p. 189, 211. Particularly on this issue OLG Köln RIW 1994, 970 = NJW-RR 1995, 245. Hessisches LAG IPRspr. 2008 Nr. 48 p. 155. To the same avail Ragno, in: Ferrari, Art. 3 note 43; see also CA Colmar Rev. proc. coll. Novembredécembre 2011, p. 43 note Menjucq. Contra BGH RIW 1997, 426 = WM 1997, 560; BGH ZIP 1998, 956; OLG Düsseldorf NJW-RR 1991, 55; OLG Nürnberg NJW-RR 1997, 1484, 1485; OLG München RIW 1997, 507, 508; OLG München VersR 2001, 459; Hessisches LAG IPRspr. 2000 Nr. 42 p. 90; Matthias Weller/Nordmeier, in: Spindler/Schuster, Recht der elektronischen Medien (3rd ed. 2015) Art. 3 note 5. Contra Matthias Weller/Nordmeier, in: Spindler/Schuster, Recht der elektronischen Medien (3rd ed. 2015) Art. 3 note 5. Riesenhuber, DB 2005, 1571, 1575; Martiny, IPRax 2013, 536, 543. OLG Saarbrücken 11 June 2015 – Case 4 U 109/14 [26]; Spickhoff, in: Bamberger/Herbert Roth, Art. 3 note 25. ArbG Stuttgart AuR 2012, 501 = IPRspr. 2012 Nr. 69 p. 133. Lupofresh Ltd. v. Sapporo Breweries Ltd. [2013] EWCA Civ 948, [2014] 1 All ER (Comm) 484 [15], [20] m (C.A., per Tomlinson L.J.).

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inserts a choice of law clause in its General Terms and Conditions, such boilerplate stuff would perfectly do the trick. If a certain mindset and, the more so, if a certain common understanding was required already, a unilateral mistake, misunderstanding or misapprehension would threaten the choice of law made.645 Even less, parties are required to have a common understanding that their choice effects a 192 change as to the applicable law.646 Whether the law chosen would have been applied anyway does not matter at all.647 Any intention to implement or to promote a certain change is not required at all. It is of some importance that the chosen law corresponds to what the parties probably understood, otherwise the significant risk of frustrating the parties’ expectations and intentions by imposing upon them rules which they did not intend or foresee applying to them might arise.648 But generally it is the parties’ risk to make the “right” choice corresponding to their expectations. IV. Modes, types and objects of choice 1. Free choice of law a) Basic principle (1) cl. 1 establishes the basic principle of free choice of law. It does not implement any 193 restrictions whatsoever as to the number of State laws from which parties can choose the applicable law. Free choice means exactly that: free and unrestricted choice, and the total choice from the entire menu. The parties can chose any State law they want, however remote, however unrelated to the circumstances of the case649 and however exotic this law is. Yet they should be aware that “exotic” choices might trigger the need for a very sophisticated contractual risk management.650 This effectively dismisses any restriction. In particular it inhibits any assumption that there 194 must be a justifiable interest for the particular choice. Parties must not specifically justify why they made the choice at stake. Party autonomy as such and more precisely the freedom of free choice provide an entirely sufficient justification. Consequentially, it is misconceived to invalidate a choice of law clause as being an unfair surprise by the means of e.g. § 305c (1) BGB where the chosen law would neither be applicable anyway absent the parties’ choice of law nor is the law of the habitual residence of either party.651 To uphold the choice of law clause is justified even more where the party which has introduced it later-on invokes its

644 645 646

647

648 649

650 651

Much stricter Schwander, in: FS Eugen Bucher zum 80. Geb. (2009), p. 711, 716. Schwander, SZIER 2009, 412 et seq. Schwander, in: FS Max Keller (1989), p. 473, 480 et seq.; Schwander, in: FS Eugen Bucher zum 80. Geb. (2009), p. 711, 716 et seq. Schwander, in: FS Max Keller (1989), p. 473, 480 et seq.; Schwander, in: FS Eugen Bucher zum 80. Geb. (2009), p. 711, 716 et seq. O’Brien, [2004] LMCLQ 375, 383. See only Mankowski, RIW 2003, 2, 4; Bogdan, NIPR 2009, 407; Martiny, in: Reithmann/Martiny para. 2.5; Ringe, in: jurisPK Art. 3 note 32; Thorn, in: Palandt, Art. 3 note 4. See Brödermann, in: MünchHdb IWR § 6 note 126. Contra LG Hamburg IPRax 2015, 348.

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invalidity and would profit from such invalidity by gaining a better position at substantive law that it had under the chosen law.652 195 It might be trite, and it might mean carrying owls to Athens, but nonetheless it appears

worthwhile to stress that freedom to choose implies a responsibility to choose wisely. In theory, each party concerned should check and double-check whether a certain choice of law really suits its interests and really is appropriate for the concrete contract. Bad choices will invariably generate adverse consequences, both financially and legally.653 A badly formulated choice gives rise to more problems than it solves.654 196 Psychology provides ample evidence that there can be too many options for choice,655 thus

creating so-called choice angst.656 Too large an assortment might produce information overload.657 To reduce the range of available options mentally might provide a way out of this dilemma. Hence, parties might look for parameters which might guide such reduction of the range. This applies not only to psychology and choice in general or in business life, but also to parties’ choice of law, for parties are veritable decision-makers in the market for contract laws.658 Legal products and the underlying laws tend to be rather complex.659 To distinguish amongst them might become an even more challenging task the more similar the contract laws to be compared are,660 since tiny details might matter. 197 Accordingly and in consequence, no-one in his plain mind will consider all the laws in the

world on an equal footing and with the same intensity. The number of options available is ecologically unusual.661 The effect on cognitive load of choices of law is not simply a numbers game but might also depend on the parties’ respective familiarity with a certain law.662 An unguided layperson without legal advisers might all too understandably throw his hands in the air and give up663 on any attempt of choosing on a basis striving for comprehensiveness. 198 Generally and ordinarily, each party intrinsically is interested in having a legal “home

game”664.665 Insofar a prior preference is very likely to exist and prevail.666 To have the own home law apply produces the major advantage that as far as possible all contracts of 652 653 654 655

656 657 658 659 660 661 662 663 664

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Pfeiffer, IPRax 2015, 320, 321–322. Chatillon, Le contrat international (3rd ed. Paris 2007) p. 97. See in particular Kessedjian, Rev. int. dr. comp. 1995, 373. In particular Iyengar, The Art of Choosing (Boston 2010); Iyengar/Lepper, 79 J. Personality & Soc. Psych. 995 (2000); see also Schwartz, 55 Am. Psychologist 79 (2000); Schwartz, The Paradox of Choice (New York 2004); Chernev, 30 J. Cons. Research 170 (2003); Shah/Wolford, 18 Psych. Science 369 (2007); Scheibehenne/Greifeneder/Todd, 37 J. Cons. Research 409 (2010); Iyengar/Kamenica, 94 J. Publ. Econ. 530 (2011); Sefton-Green, ERCL 7 (2011), 134; Mak, ERCL 7 (2011), 257; Cartwright, ERCL 7 (2011), 335. See only Sorensen, Inside the Mind of the Shopper (2009) p. 12. See only Low, [2013] EBLR 363, 366. See Low, [2013] EBLR 363, 372. Low, [2013] EBLR 363, 377. Low, [2013] EBLR 363, 375. Low, [2013] EBLR 363, 373. Low, [2013] EBLR 363, 374. Low, [2013] EBLR 363, 376. On the advantages of such “home game” Mankowski, IPRax 2006, 454, 456–458.

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the same kind are subjected to the same law. This generates positive economies of scale. The respective party has to provide for only one set of General Terms and Conditions and faces the necessity to see it checked on the basis of only one law instead of a variety of laws possibly demanding different Conditions.667 Familiarity and ease of access are features not be underestimated and belittled.668 On the other hand, learning costs invested in knowledge about a foreign law are up-front investments and “start up” costs spent for familiarisation.669 Strong parties strive for avoiding such heavy investment of which the amortisation might be doubtful. Bargaining strength influences choice of law, and a party with superior bargaining strength frequently gets its preferred choice of law, just because it can.670 This might be different if the party has a specialisation in trading with certain jurisdictions 199 only since – as time goes by – such party might acquire sufficient knowledge about the laws of these jurisdictions, and might even discover that the law of such familiar foreign jurisdiction might be more favourable to its own position as to substance (e.g. with regard to limitation of liability or to warranties).671 Yet an effort to choose a law favourable to the own position might often be a chimercial effort, because of the difficulty of predicting in advance and ex ante which issues will arise in future disputes and on which side of a dispute the respective party may be.672 Or the sales department might be driven by a desire to win over or, if a certain customer is already on the hook, not to loose that customer and such desire might become paramount.673 Or a trade-off with the choice of dispute resolution mechanism might be favourable if the customer can be persuaded not to insist on dispute resolution in his own jurisdiction.674 The choice of law clause might become a mere bargaining chip.675 Finally, the legal “home game” agreed upon might not be worth the paper on which it is written, since the choice of any foreign law will not be recognised in the customer’s jurisdiction and would thus not be reliable, but produce a “limping” choice of law.676 There might even be other motives which set the respective party’s mind for trading away its 200 home law. Giving up the comparative advantage of having the own home law applied might help to build confidence and trust on the other party’s side. It might serve as a positive

665

666 667 668 669 670 671

672 673

674

675 676

Mankowski, RIW 2003, 2, 6; Mankowski, in: FS Tuğrul Ansay (2006), p. 189, 210; Magnus, BerDGesVR 41 (2005), 77, 93; Fountoulakis, Eur. J. Leg. Reform 7 (2005), 303, 304. Low, [2013] EBLR 363, 374. Mankowski, RIW 2003, 2, 3; Mankowski, in: FS Tuğrul Ansay (2006), p. 189, 210. Born p. 162. Spagnolo, (2010) 6 JPrIL 417, 423. Spagnolo, (2010) 6 JPrIL 417, 426. Oschmann, in: FG Otto Sandrock (2005), p. 25, 31; Nerz, Probleme der Streiterledigung im Verhältnis zu China und Saudi-Arabien – Richtige Rechtswahl und optimaler Rechtsschutz (2nd ed. 2011) pp. 1 et seq. Born p. 163. Nerz, Probleme der Streiterledigung im Verhältnis zu China und Saudi-Arabien – Richtige Rechtswahl und optimaler Rechtsschutz (2nd ed. 2011) p. 1. Nerz, Probleme der Streiterledigung im Verhältnis zu China und Saudi-Arabien – Richtige Rechtswahl und optimaler Rechtsschutz (2nd ed. 2011) p. 3. Durand-Barthez/Lenglart p. 112. Nerz, Probleme der Streiterledigung im Verhältnis zu China und Saudi-Arabien – Richtige Rechtswahl und optimaler Rechtsschutz (2nd ed. 2011) p. 74.

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signal.677 It might indicate a lower level of egotism. It might avoid having to pay a price for the privilege or even losing the deal altogether.678 Insofar, the proposal for a certain choice of law might become a (rather sophisticated) marketing tool.679 But on the other hand it might give away too much and call for at least some safeguards and ramifications in the minute detail of the choice of law clause. For instance, it can be advisable to phrase (and in a certain way “neutralise”) the choice of law clause in such terms that the chosen national law “would be applied with due respect to international practice and, in particular, the principle of good faith.”680 If a commercial party is confronted with trading away either the dispute resolution clause or the choice of law clause it might be preferable to give up on the latter for getting a bargain on the former, since the former is more decisive (and might generate implications for the handling of the choice of law anyway).681 b) Choice of a so-called “neutral” law

201 As parties can choose any law they want, they are not in the least way restricted to choose the

home law of either of them. On the contrary, free choice of law enables them to break the deadlock when each of them insists on having its own home law chosen in the first round. The second round might see a compromise with each party abandoning each own goal but not permitting the other party having its way, either. Each party will then try to avoid the other party having a comparative advantage682 and enjoying a “home bias” in its “own” courts683 (which in itself would be a costly source for constitutional uncertainty).684 An established kind of compromise is agreeing on a so-called “neutral” law. It is not required that the parties have a reasonable interest for choosing particularly this law or that any objective connection with the State of the chosen law must exist.685 “Neutral” in this context basically means not more than “not the home law of either party”. It does not per se imply political neutrality of the State whose law is chosen, nor equidistance to the parties. The underlying assertion is that neither party has its domicile or any relevant place of business in the jurisdiction of the law chosen. Stability, developedness, accessibility and workability might be factors featuring in the selection which “neutral” law to pick.686 Political stability in particular ranks high on the list.687 202 Yet such compromise comes with a price. By not permitting the other party to have a “home

game” without asserting one’s own “home game” each party consents to having an “away 677 678 679 680 681

682

683 684 685

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Mankowski, in: FS Tuğrul Ansay (2006), p. 189, 211. See Spagnolo p. 123. Mankowski, in: FS Tuğrul Ansay (2006), p. 189, 211. Brödermann, Unif. L. Rev. 2011, 589, 593. Brödermann, in: Piltz (ed.), Handbuch des Fachanwalts für Internationales Wirtschaftsrecht (forthcoming) § 6 II 5 c bb. Fountoulakis, Eur. J. Leg. Reform 7 (2005), 303, 305; Wenner, in: FS Ulrich Werner (2005), p. 39, 45; Mankowski, in: FS Hans-Bernd Schäfer (2008), p. 369, 374. Mankowski, RIW 2003, 2, 8; Voigt, 5 (1) J. Empir. Leg. Stud., 1, 8 (2008). Schmidtchen/Schmidt-Trenz, in: FS Rudolf Richter (2006), p. 327, 334. See only Garcimartín Alférez, EuLF 2008, I-61, I-66; Bonomi, (2008) 10 Yb. PIL 165, 170; Matthias Weller/ Nordmeier, in: Spindler/Schuster, Recht der elektronischen Medien (3rd ed. 2015) Art. 3 note 2; McParland para. 9.12; Siehr, RHDI 67 (2014), 801, 803. See only Pörnbacher/Sebastian Baur, FS Rolf A. Schütze zum 80. Geb. (2014), p. 431, 434. Meira Moser, Unif. L. Rev. 2015, 19, 37.

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game”. On aggregate, both parties have “away games”.688 Both parties are in principle submitting their contractual position to a law they are not familiar with on a day-to-day basis. Each party leaves familiar ground and incurs search costs and information costs since it is confronted with an unfamiliar legal basis.689 This is a severe disadvantage – for both parties.690 In theory, legal staffs on both sides are out of their reach. Accordingly, the choice of a “neutral” law might turn out to be an expensive compromise possibly more than doubling the overall sum of transaction and enforcement costs involved.691 In turn, the fear of incurring such costs (in particular if they are not recoverable) might lead to a sub-optimal level of enforcement and might undermine to a certain extent any enforcement threat. Parties tend to neglect practicability and do not always ask how accessible the chosen 203 “neutral” law is or whether its content can be ascertained with sufficient certainty.692 For instance, choosing Swedish law as “neutral” law might leave the parties up a tree since none of them masters the Swedish language and it might be discovered the hard way that there are far less judicial precedents from Swedish courts than would be found in major legal orders.693 Furthermore, parties will rather likely not be repeat players with regard to the chosen 204 “neutral law” and might be faced with a severe principal-agent conflict insofar as the services of foreign lawyers have to be employed.694 It is very doubtful whether there is some trade in immediate costs of negotiation if the parties 205 cut short the discussion on the applicable law by agreeing on a “neutral” law.695 Such contention may hold for some instances where choices resulting from a battle of forms might be at stake. But it will rather not stand when confronted with the “champagne hour syndrome”: In the lobby, in the spotlight, the traders already celebrate the conclusion of the contract while in the dark backroom the lawyers still are mopping up the final clauses of the contract.696 Discussions in the backroom will be vastly accelerated and cut short already by the clients’ expectations that the deal is already made and that the lawyers should not put unwarranted hindrances in its “final finalisation”. It is barely imaginable and even less realistic that the entire deal, once it has progressed to this late stage,697 will be abandoned if consensus on the choice of law cannot be reached.698 Business coal-faces are unlikely to 688

689 690 691 692 693 694 695 696 697

698

Mankowski, in: FS Hans-Bernd Schäfer (2008), p. 369, 373 et seq.; Wenner, in: FS Ulrich Werner (2005), p. 39, 45. See only Land, BB 2013, 2697, 2698. Werlauff, International Contracts (København 2013) p. 19. See only Garcimartín Alférez, REDI 1995, 11, 28; Brödermann, in: MünchHdb IWR § 6 note131. See Wenner para. 52. Wenner para. 53. See generally Brödermann, in: MünchHdb IWR § 6 note 121. As Basedow, in: Basedow/Kono p. 57, 67 fn. 46 alleges. Kronke, in: FS Dieter Henrich (2000), p. 385, 390. Adopted i.a. by Mankowski, RIW 2003, 2. The case is completely different where the final stages are not reached yet and one of the parties deliberately (with business consideration at the back of its mind) tries to delay the conclusion of the contract by bargaining for the choice of law agreement; see Brödermann, in: FS Dieter Martiny (2014), p. 1045, 1061; Brödermann, MünchHdb IWR § 6 note 137. See Schwander, in: FS Eugen Bucher zum 80. Geb. (2009), 711, 714; Schwander, in: FS Ingeborg Schwenzer (2011), p. 1582, 1583.

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ponder choices of law in everyday transactions.699 In the minds of business people choice of law questions are like the entrance of a distant relative at a wedding reception where he lets everyone know in a loud voice his highly unpleasant experiences with divorces.700 206 Furthermore, parties in their minds might mix political neutrality with neutrality as between

the positions of the sides of the contract.701 Many a party might for instance have discovered to its own surprise and detriment that “neutral” Swiss law (Switzerland being the epitome of political neutrality) does not prove at all neutral between buyer and seller and subjects the seller to a rather strict liability regime whilst the buyer has to observe alarmingly short notice periods for defects and there is a thorny distinction between aliud and peius.702 Political neutrality is not tantamount to equidistance between the roles of buyer and seller, the more so if the law chosen is that of an importing or exporting nation as the case may be: An importing nation might show a certain tendency to foster buyers’ position whereas an exporting nation might feel tempted to align with sellers’ interests. So, the “neutral” law might contain quite some chestnuts to chew upon which ought to be considered in advance.703 A “neutral” law is not a guaranteed insurance policy against undesirable or unpredictable substantive results.704 Each party is well advised to check the content of the intended “neutral” law before finally agreeing to its choice.705 Else, suboptimal choice of law costs might arise.706 But as information costs and suboptimal choice of law costs are closely intertwined, the aggregated level of overall transaction costs will drop beneath a certain level.707 207 Next, the choice of a “neutral” law might be “limping”. This is the case if it will not be

recognised in a relevant jurisdiction the PIL of which requires some reasonable relation between the case and the chosen law, as for instance § 187 (2) (a) Restatement 2d Conflict of Laws in the USA (if it enshrines the prevailing opinion in the respective Member State of the USA) requires.708 208 Finally, a party both shrewd and malign might set a trap for its counter-party by anticipating

the need for settling on a law outside each party’s home jurisdiction and by consequentially proposing a law pre-considered and favouring that particular party’s position. Game theory suggests that provident (and well-advised) parties might do so. The seemingly “neutral” law then in reality greatly favours the proponent. The strategy employing advance planning

699 700 701

702

703 704 705

706 707 708

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Spagnolo p. 185. Schroeter, IJVO 2007, 35, 37. See only Mankowski, RIW 2003, 2, 5; Wenner, in: FS Ulrich Werner (2005), p. 39, 44; Schwenzer/Hachem, 57 Am. J. Comp. L. 457, 465–466 (2009); Spagnolo p. 106. Fountoulakis, Eur. J. Leg. Reform 7 (2005), 303, 306–311; Schwenzer/Hachem, 57 Am. J. Comp. L. 457, 466–467 (2009); Spagnolo p. 106. This is exemplified with regard to Swiss law by Voser/Boog, RIW 2009, 126. Schwenzer/Hachem, 57 Am. J. Comp. L. 457, 464 (2009); Meira Moser, Unif. L. Rev. 2015, 19, 28. Courvoisier/Zogg, in: Peter Münch/Passadelis/Jens Lehne (eds.), Handbuch internationales Handels- und Wirtschaftsrecht (2015) para. 8.13. See Alexander J. Wulf pp. 119–121. Alexander J. Wulf pp. 119–120. Stoll, in: FS Anton Heini (1995), p. 429, 437; Wenner, in: FS Ulrich Werner (2005), p. 39, 45.

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would succeed and would reward ex ante opportunism.709 Only in theory parties depart from identical starting points.710 A lesser version of achieving a comparative advantage by choosing a seemingly “neutral” law 209 is the lack of linguistic or geographical equidistance between the parties kept by the law chosen. For instance, a German enterprise might still enjoy a comparative advantage in relation to an English enterprise if Swiss law is chosen, since German is one of the official languages of Switzerland and Swiss law texts are available in German.711 Lacking linguistic equidistance liberates one of the parties of the need to have legal texts translated into its own native language. Likewise, a neighbouring country might offer more advantageous opportunities than a distant country. Proposing a seemingly “neutral” law might be a certain party’s preferred second best strat- 210 egy, if that party tries to get this very law chosen for virtually all its cross-border contracts, since acquiring knowledge of the content of this law generally generates costs incurred only once (but for the investments in up-dates) and that party might enjoy positive economies of scale whereas the other party does not so; this would give the proposing party a comparative edge.712 In M&A transactions in particular, the law of the country where the enterprise to be ac- 211 quired has its seat might be a compromise as a “neutral” law if both seller and buyer primarily want to see their respective home law applied.713 c) Choice of the allegedly “most elaborate law”, market standard setting and network effects In other cases, parties might fall jointly victims to the legend and the myth that a certain law 212 is believed to be the most elaborate one. English law in maritime trade or New York law for loans, bonds and financing714 might be the most prominent examples. Certain industries develop prevalent choices, for instance English law in commodity trade (historically derived from a symbiotic relation with originally English trade associations)715 or New York or English law in ISDA Master Agreements in finance.716 The party which proposes such law gives a certain signal and might incur a higher probability to succeed with its proposal for this law might better “sell” to the other party.717 A herd phenomenon might prevail, with all the lemmings heading for the cliff. Ex post, the legal staff might hide behind così fan tutti, “Thus do they all”, but this amounts to a rather lame excuse only, and quite evidences that the legal staff was not up to its genuine task of finding the most favourable solution for their client as to substance. Hiding behind the allegation that the law recommended to be chosen 709 710 711 712 713 714

715 716 717

Mankowski, RIW 2003, 2, 5; Mankowski, in: FS Hans-Bernd Schäfer (2008), p. 369, 375. See Meira Moser, Unif. L. Rev. 2015, 19, 28. Mankowski, FS Hans-Bernd Schäfer (2008), p. 369, 371. Mankowski, FS Hans-Bernd Schäfer (2008), p. 369, 371. Land, BB 2013, 2697, 2698. See only Gruson, 1982 U. Ill. L. Rev. 207; Cates/Isern-Feliu, [1983] Int. Fin. L. Rev. 28; Ebenroth/Tzeschlock, IPRax 1988, 197. Bridge, 15 Pace Int’l. L. Rev. 55, 68 (2003); Bridge, (2007) 37 HK L.J. 17, 22, 29, 40. Spagnolo p. 105. Durand-Barthez/Lenglart p. 112.

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was generally regarded as developed, stable, and well-adapted to sophisticated commercial dealings718 does not make it any better. Reputation is not everything, but has to be subjected to scrutiny. Furthermore, reputation might to a certain extent correlate with a party’s desire for certain results, for instance if the chosen law is a liberal one,719 thus creating maximum of leeway for that party’s Standard Terms and Conditions. For financial transactions English law and New York law almost perfectly fit this bill.720 But clients should not unconsciously fall victim to their law firms’ preference, which might follow an internal, more or less undisclosed policy to submit all contracts of a certain type advised on worldwide to the same law, often derived from the law firm’s seat.721 213 Many States, particularly from the Anglo-Saxon parts of the world, actively promote their

alleged expertise in particular legal services and tout themselves as potential hubs for these services.722 The perception and the created image of the administration of justice in the State of the law selected might be confused with the quality of the substantive law, not distinguishing between law and jurisdiction, between choice of forum and choice of law – which can have recriminating repercussions.723 The perceived or alleged experience of jurists in the preferred jurisdictions with international transactions should not serve as an argument724 either, for that would mix personal expertise and professionalism on the one hand with the alleged quality of the law on the other hand. Other lawyers somewhere else might even be more experienced – and every lawyer has a comparative edge over foreign lawyers with regard to the law of his own jurisdiction. Furthermore, any lawyer has a homeward bias recommending his “own” law for which he has a natural monopoly. Many an advice in favour of a certain law might be biased in this regard.725 Parties might tend to analyse the issues of applicable law, dispute resolution and enforcement mechanisms in a joint fashion,726 but this kind of imprecise and flawed analysis cannot generate proper arguments. 214 In particular, parties from civil law countries should consider very carefully if New York law

or English law, i.e. law from common law jurisdictions, really is a sound choice.727 Popularity must not be automatically equated with substantive appropriateness.728 Parties from civil law countries should not unwarily fall victim to marketing or to the dominance of the 718 719 720 721 722 723

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Born p. 162. See Reps p. 103. See Reps p. 105. Christoph A. Kern, GreifRecht 2014, 114, 122. Spagnolo p. 125. See e.g. Christoph A. Kern, GreifRecht 2014, 114, 118; Vogenauer/Hodges (eds.), Civil Justice Systems in Europe (2016). Contra e.g. Meijer/Richard H. Hansen, in: Golden/Lamm (eds.), International Financial Disputes (2015) para. 6.40. See Mankowski, RabelsZ 74 (2010), 182, 184–185; Reps, p. 109. Meira Moser, Unif. L. Rev. 2015, 19, 33. See as an example the answers to a survey undertaken by the Deutsche Industrie- und Handelstag amongst 2500 German businesses; DIHK, International aktuell 01/2013, 1 (7 January 2013) http://www.dihk.de/themenfelder/international/info/aktuell-internatio nal#2013. Mankowski, RIW 2003, 2, 6; Fountoulakis, Eur. J. Leg. Reform 7 (2005), 303, 306. See Meijer/Richard H. Hansen, in: Golden/Lamm (eds.), International Financial Disputes (2015) para. 6.41.

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English language (in all its varieties).729 Common law for all its flexibility often lacks precise and reliable answers to questions possibly asked. Codification-based civil law might have an edge in this regard due to its systematic approach.730 And common law might contain legal constructs of which parties from civil law countries might not be aware enough. A prominent example might be trust constructs. That the choice of law which is commonly used for transactions of the kind at stake saves costs,731 is not correct in this generality, for it neglects the level of lawyers’ fees for gaining information about the content of that legal order. Furthermore, anecdotal evidence is said to support the contention that the laws of common law jurisdictions are more inclined towards a literal interpretation of party agreements whereas civil law jurisdictions rather lean towards a more purposive interpretation.732 A parol evidence rule implemented simply does its work. The Voigt Study based on statistical data from the ICC Paris, barring some path dependen- 215 cy,733 amply evidences that the so called “Legal Origins Theory” or LLSV734 – cherished in the USA and advertising the superiority in particular of New York law compared to Continental legal orders, which rose to prominence and became very influential for government policies after having been adopted in the Doing Business Reports735 of the World Bank736 – is partisan and wrong.737 On the other hand, if one is prepared to look beyond the veil of self-advertising, there might 216 be another, more convincing explanation why, in certain businesses, certain laws gain the edge over others and why a small number of laws constitute the object of the vast majority of choices in these businesses: The laws of these jurisdictions might have become the legal standard for the respective type of transactions or in the respective market.738 Parties might 729 730 731 732 733

734

735 736

737

738

Similarly Christoph A. Kern, GreifRecht 2014, 114, 117. E.g. Stephan Wernicke, ZRP 2014, 34, 35. Oschmann, in: FG Otto Sandrock (2005), p. 25, 29. Born p. 163. Namely that businesses from continental Europe might resort to ICC arbitration more often and with a greater likelihood than businesses from the USA. Coined after La Porta/Lopez de Silanes/Shleifer/Vishny, 52 (3) J. Finance 1131 (1997); La Porta/Lopez de Silanes/Shleifer/Vishny, 1998 J. Polit. Econ. 1113; La Porta/Lopez de Silanes/Shleifer/Vishny, 15 (1) J. L., Econ. & Org. 222 (1999). On the Legal Origins Theory see also Oto-Peralías/Romero-Ávila, Styles of Imperialism and the Consequences of European Colonialism on Institutional Development (Sevilla 2013); Oto-Peralías/Romero-Ávila, 46 J. Money, Credit & Banking 43 (2014); Oto-Peralías/Romero-Ávila, 57 J. L. & Econ. 561 (2014). Especially World Bank, Doing Business Report 2004: Understanding Regulations p. XIV. See only Michaels, 57 Am. J. Comp. L. 765 (2009); Husa, (2104) 9 (2) J. Comp. L. 28, 30–34; Estrella Faria, AnwBl 2015, 104, 105–106. Voigt, 5 (1) J. Empir. Leg. Stud. 1 (2008); Michaels, 57 Am. J. Comp. L. 765 (2009); see also Christoph A. Kern, GreifRecht 2014, 114, 120–121. The theoretical discussion pro and contra the Legal Origin theory might be best documented in Faure/Smits (eds.), On Law and Economic Growth (Antwerpen 2011). See also Christoph A. Kern, JZ 2009, 488; Christoph A. Kern, Justice between Simplification and Formalism (Tübingen 2007); Siems, RabelsZ 72 (2008), 354; Maultzsch, in: 100 Jahre Rechtswissenschaft in Frankfurt (2014), p. 501, 515. Engert, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden 2013), p. 304, 305.

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minimise their learning investment if they choose a law which is basically known to both of them and can be relied on as the market standard.739 The sheer dominance of a certain law in the respective market sector drastically clouds perceptions of its substantive merit as choice of law.740 217 The shared knowledge of a particular contract law causes network effects741 and might even

generate positive economics of scale. Using the same law creates a network, and alliance to a network of users confers an advantage because it facilitates transactions with other members of the same network and reduces the need to learn about the content of another law.742 The larger the network grows, the more beneficial it becomes, as members have access to a larger pool of potential partners.743 The more contracts conform to a single model, the greater flexibility there might be on the other hand to bargain for, and finetune, the level of risk each party is willing to bear.744 218 The market’s push for a common standard might even overpower intrinsic quality of an-

other law better than the standard-setting one, insofar as parties rate the benefits of a larger network over intrinsic quality.745 Standardised choice of any law carries economic value per se by facilitating string and back-to-back transactions746 and thus facilitating the vital function of trade in price risks.747 Contracts that are not “alike” cannot be netted or closed out against each other.748 Group polarisation favours swift and clear-cut solutions, thus amplifying possible errors within groups.749 Suggesting an alteration of choice of law would carry a degree of impracticability,750 since swapping platforms midstream would necessarily create a major disruption to the market.751 Search and information costs generated by looking for alternatives deter to a certain extent and create some lock-in effect.752

739

740 741

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746 747 748 749 750 751 752

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Engert, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden 2013), p. 304, 305. Spagnolo, (2010) 6 JPrIL 417, 433. Klausner, 81 Va. L. Rev. 757, 785 (1995); Druzin, 18 Tulane J. Int’l. & Comp. L. 131, 165 (2009); Engert, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/ Baden 2013), p. 304, 305; Rühl, in: FS Christian Kirchner (2014), p. 975, 978; Spagnolo p. 210; Reps, p. 110; O’/Hara O’Connor, Unif. L. Rev. 2016, 41, 55–56. Engert, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden 2013), p. 304, 305. Engert, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden 2013), p. 304, 305; Reps, p. 111. Spagnolo, (2010) 6 JPrIL 417, 459. Engert, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden 2013), p. 304, 306; see also Reps, p. 154. Bridge, 15 Pace Int’l. L. Rev. 55, 60 (2003). Spagnolo, (2010) 6 JPrIL 417, 459. Spagnolo, (2010) 6 JPrIL 417, 459. Spagnolo, (2010) 6 JPrIL 417, 445; Spagnolo, pp. 195–196. Mullis, in: Essays in honour of A.G. Guest (1997), p. 137, 159. Spagnolo, (2010) 6 JPrIL 417, 459. Eidenmüller, 18 Ind. J. Global Leg. Studies 707, 739–740 (2011); Hornuf, Regulatory Competition in European Corporate and Capital Market Law (2012) pp. 146, 150; Reps, p. 155–156.

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Businesses are unlikely to ponder choices of law in unspecific every day transactions; they 219 follow path dependencies, being locked into certain choices because of a historical path of events753 and presumed positive experiences. Past choices are irrationally attractive due to a status quo bias as a cognitive bias.754 Risk-averse rules of thumb help to reduce complexity by simplifying decision-making strategies.755 Fast and frugal heuristics might imitate seemingly fruitful activities by others756 or single out one, perhaps the best available information,757 being economical within the confines of limited time, limited information or high probability that better information might not guarantee better results.758 Furthermore, a herd effect759 might be influential. Herding occurs when private parties choose the law provided in model or sample forms or the laws known to be chosen by others, not because they necessarily provide benefits, but rather because the parties wish to free ride on the potentially informed choices of others.760 One might feast on presumed information costs possibly invested by the first movers and market-makers. Plus there might be an excuse for acting agents and functionaries in the case of eventual displeasure: If you follow the market and the presumed market leaders, you do not commit an individual fault and cannot be held responsible for being too idiosyncratic or eccentric. Not every choice of law is truly negotiable; often the decision is preordained by standard 220 form contracts designed and sanctioned by industries.761 Commodity markets provide the prime example: There the influence of the trade associations on the choice of law is profound; learning costs and familiarity will be inconsequential, and individual preferences of parties or advising lawyers matter little.762 Proposing the choice of a law which sets the standard on the respective market is a case of 221 signalling, too. The party proposing such choice sends a number of positive signals: firstly, that it is up-to-date; secondly, that it is prepared to comply with the market standard; thirdly, that it is not striving for a comparative advantage over the other party (this signal is only sent where the proposing party is not resident in the jurisdiction of choice or enjoys native speakers advantages). The signal might convey the positive message that the propos-

753 754 755 756

757

758

759

760 761 762

Spagnolo, (2010) 6 JPrIL 417, 435; Spagnolo, p. 186. Spagnolo, (2010) 6 JPrIL 417, 441; Spagnolo, p. 186 with fn. 14. Spagnolo, (2010) 6 JPrIL 417, 442. Hertwig, in: Gigerenzer/Christoph Engel (eds.), Heuristics and the Law (2006), p. 391, 398; Mankowski, in: FS Helmut Köhler (2014), p. 477, 483. Seminal Gigerenzer/Todd/ABC researcher Group, Simple Heuristics That Make Us Smart (1999) (in particular Gigerenzer/Goldstein, p. 75) and Goldstein/Gigerenzer/Hogarth et al., in: Gigerenzer/Selten (eds.), Bounded Rationality: The Adaptive Toolbox (1002), p. 173; Henrich/Albers/Boyd et al., in: Gigerenzer/Selten (eds.), Bounded Rationality: The Adaptive Toolbox (1002), p. 343. Cooter, in: Gigerenzer/Christoph Engel (eds.), Heuristics and the Law (2006), p. 379, 381; Mankowski, in: FS Helmut Köhler (2014), p. 477, 483. On herding in general e.g. Scharfstein/Jeremy C. Stein, 80 Am. Econ. Rev. 465 (1990); Banerjee, 107 Q. J. Econ. 797 (1992); Bikchandani/Hirschleifer/Welch, 100 J. Pol. Economics 992 (1992). O’Hara O’Connor, Unif. L. Rev. 2016, 41, 55. Spagnolo, (2010) 6 JPrIL 417, 428. Spagnolo, (2010) 6 JPrIL 417, 429; Spagnolo, pp. 208–209.

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ing party is truly willing to perform.763 Yet negative externalities to the detriment of the unwary cannot be ruled out completely.764 d) Choice of the law of a “Transition State”

222 Another example for a choice of law with inherent problems might be the choice of a law in

transition or the law of a so-called “Transition State”.765 It might be cured insofar as the choice of law is interpreted as a dynamic one, thus including reforms implemented at the time when disputes arise. e) Choice of the law of a State not existing anymore

223 The law of a State that does not exist anymore cannot be chosen. Examples might be

provided by the law of the former GDR766 or the law of zaristic Russia.767 The designated law actually does not exist anymore. A dynamisation is impossible due to the respective legislature having ceased to exist. Matters might be different if there is a State that has directly succeeded to the former State and has developed its own law starting from the laws of the former State,768 e.g. the States that have succeeded former Yugoslavia. f) Choice of a future law 224 The choice of a law that does not yet exist at the time when the choice of law agreement is

concluded, a purely future law, is theoretically conceivable.769 This is not an “ordinary” choice of law with its usual dynamic reference to the law chosen as it actually stands at any given point of time. Insofar, but only insofar as an “ordinary” choice of law clause covers future developments in the law chosen. The choice of a purely future law begs to differ insofar as the law selected shall not be chosen in its current version at the time of the conclusion of the choice of law agreement.770 The purpose behind such limited choice of law is to wait for future reforms in the law chosen even if this comes with the price of a subsequent change of the applicable law.771 Its effects are those of a subsequent choice of law under the condition that the envisaged reforms become effective.772 But the choice of law agreement is fully concluded at an earlier point of time and thus is not a genuine subsequent choice of law.773 It happens to differ from floating choice of law clauses insofar as the conditional provision does not refer to any party’s future conduct, but to future developments beyond the parties’ reach.774

763

764 765 766 767 768 769 770 771

772 773 774

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Gulati/Zettelmeyer, 7 Capital Markets L.J. 169 (2012); Julian Schumacher/Trebesch/Henrik Enderlein, 58 J. L. & Econ. 585, 617 (2015). Reps p. 148. Kessedjian, Rev. int. dr. comp. 1995, 373, 383. Kodek, in: Verschraegen p. 85, 90. Carrascosa González p. 141. Mankowski, in: FS Dieter Martiny (2014), p. 449, 464. Schwander, in: FS Ingeborg Schwenzer (Bern 2011), p. 1581, 1586. Mankowski, in: FS Dieter Martiny (2014), p. 449, 464. Schwander, in: FS Ingeborg Schwenzer (Bern 2011), p. 1581, 1586; Mankowski, in: FS Dieter Martiny (2014), p. 449, 464–465. Mankowski, in: FS Dieter Martiny (2014), p. 449, 465. Mankowski, in: FS Dieter Martiny (2014), p. 449, 465. Mankowski, in: FS Dieter Martiny (2014), p. 449, 465.

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g) Choice of the law of a not existing State Rather fun and practical jokes are choices of the law of non-existing States. Whether a State 225 does exist is question of international law, namely as to whether this would-be State is recognised by a sufficient number of fellow States. Artificial “micro-States” like e.g. Sealand or Seborga are not amongst the qualifiers.775 A challenge which international law must resolve is Palestine. h) Choice of law under exclusion of PIL rules A certain species of choice-of-law clause has become commonplace in which the applicable 226 law is chosen “under exclusion of the private international law”.776 This is at best not reflected and at worst highly paradoxical. It would be paradoxical insofar as only PIL rules (namely that of the PIL of the respective forum) grant party autonomy as a starting point. Without PIL rules, permitting the parties to choose the applicable law party autonomy would be questionable.777 Furthermore, the Rome I Regulation itself mandatorily calls for its application and must not be derogated from.778 Insofar as the exclusion is construed as been related to the PIL rules of the chosen law, this 227 issue of renvoi will be dealt with by Art. 20, at least from the European perspective.779 Renvoi has almost been extinguished from the PIL of contracts, and the more so if one is considering parties’ choice of law. Developed jurisdictions accomplish the result of interpreting a choice of law clause as not referring to the conflict rules of the chosen law even without any express anti-renvoi provision.780 The mentioned type of clauses generates from the context of non-European, particularly American conflict laws which are less firm and decided in establishing the principle of parties’ free choice of law, but rather demand e.g. some connection between the contract and the chosen law, some kind of genuine link.781 Generally, one should regard such American style-clause as superfluous and redundant in Member States of the Rome I Regulation outside their American background, but not as genuinely detrimental.782 The clause makes it at least unambiguously clear that parties want to exclude any renvoi.783 On the other hand the clause generates certain risks. It might convey the impression to the 228 unwary that the parties might intend to open up to party autonomy such areas of the law which are not open to it, like the PIL of chattels or international company law.784 Or such clause in a contract with a typically weaker party might be taken to avoid and circumvent the

775 776 777

778 779 780 781 782 783 784

Carrascosa González p. 141. See e.g. Gruson, 37 Int’l. Lawyer 1023 (2003). Mankowski, RIW 2003, 2, 8; Mallmann, NJW 2008, 2953, 2954 et seq.; Wenner para. 219; Vidmar, ZfRV 2015, 219, 220. Vidmar, ZfRV 2015, 219, 220. Göthel, in: Göthel (ed.), Grenzüberschreitende M & A-Transaktionen (4th ed. 2015) § 6 note 65. Born p. 161. Mankowski, RIW 2003, 2, 7 et seq.; Mallmann, NJW 2008, 2953. To a similar avail Wegen, in: FS Wilhelm Haarmann (2015), p. 233, 240. Lutz Christian Wolff p. 77. Mallmann, NJW 2008, 2953, 2955; Göthel, in: Göthel (ed.), Grenzüberschreitende M&A-Transaktionen (4th ed. 2015) § 6 note 64.

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protective regime (which it could not do).785 In turn, this submits the clause to the risk that a court renders it invalid insofar as it oversteps the limits of party autonomy drawn by the PIL of the lex fori and might declare it invalid in its entirety, thus erasing any effect even with regard to the choice of law for the contract.786 In short, an assumed step too far might endanger and jeopardise the commercial venture. In “simple” commercial contracts an interpretation ignoring the addition of the incriminated part of the clause might be a solution, though.787 i) Conditional choice of law 229 The parties are free to subject their choice of law to whichever conditions they want. They

could make no choice at all, and a conditional choice is a maius to a non-choice. They could make a full, unconditional choice, and a conditional choice is a minus to that. Party autonomy is the basis and the fundament, and accordingly the parties’ intentions should govern and should be given their way wherever feasible. 230 Likewise, parties are free to agree on any condition they want to introduce. Conditions

agreed upon might be of an objective nature or of a subjective nature. Conditions might be defined as to depend for a second tier on the outcome at the level of the first tier.788 Hierarchical choice of law clauses are the most prominent example.789 j) Paramount Clauses 231 At first glance, the most common advent of a conditional choice of law appears to be the so-

called Paramount Clauses as they are widely used in carriage of goods. The BIMCO General Paramount Clause displays some distinctive features in its first two paragraphs: “General Paramount Clause

232

The International Convention for the Unification of Certain Rules of Law relating to Bills of Lading signed at Brussels on 24 August 1924 (“the Hague Rules”) as amended by the Protocol signed at Brussels on 23 February 1968 (“the Hague-Visby Rules”) and as enacted in the country of shipment shall apply to this contract. When the Hague-Visby Rules are not enacted in the country of shipment, the corresponding legislation of the country of destination shall apply, irrespective of whether such legislation may only regulate outbound shipments. When there is no enactment of the Hague-Visby Rules in either the country of shipment or the country of destination, the Hague-Visby Rules shall apply to this Contract save where the Hague Rules as enacted in the country of shipment or if no such enactment is in place, the Hague Rules as enacted in the country of destination apply compulsorily to this Contract.”

785 786

787 788 789

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Vidmar, ZfRV 2015, 219, 221. Göthel, in: Göthel (ed.), Grenzüberschreitende M & A-Transaktionen (4th ed. 2015) § 6 note 65; Vidmar, ZfRV 2015, 219, 221. Vidmar, ZfRV 2015, 219, 221. See Wenner paras. 167 et seq. Art. 3 notes 367–371 (Mankowski).

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Characteristically, Paramount Clauses refer to national enactments of the Hague or the 233 Hague-Visby Rules. Both the Hague and the Hague-Visby Rules have been promulgated by a number of Contracting States via national enactments and not directly, telles quelles as applicable international conventions. For the Hague Rules it is even the usual way to proceed down this avenue. In every concrete case it must be ascertained whether the Hague Rules or the Hague-Visby Rules are referred to in the concrete Paramount Clause. Without further amendment in the wording the Hague Rules are referred to.790 But if there is an addition like “as amended”, the reference is to the Hague-Visby Rules or the respective Hague-Visby legislation regardless whether the latter took the form or an amendment of the alternative form of repealing the previous Hague Rules legislation and passing new legislation.791 If parts of the clause clearly distinguish between the Hague Rules on the one hand and the 234 Hague-Visby Rules on the other hand, the Hague-Visby Rules should not be treated as an enactment of the Hague Rules and are thus not covered by a reference to the “Hague Rules as enacted”.792 The Hague-Visby Rules are then applied only if they apply ex lege and not as a matter of contractual incorporation.793 But if the Hague and the Hague-Visby Rules are not distinguished from each other in the clause, the Hague-Visby Rules should be regarded as enactment of the Hague Rules and thus be covered by a reference to the Hague Rules “as enacted”.794 Matters have changed considerably with regard to the Hamburg Rules. The Hamburg Rules 235 require ex lege that contracts of carriage contain a Paramount Clause in favour of the Hamburg Rules. This is an attempt to get the Hamburg Rules applicable as law allegedly chosen by the parties before courts in non-Contracting States. The Rotterdam Rules employ a similar technique. This leads to rather complicated combinations of Paramount Clauses pointing towards the Hamburg Rules on one side and to the Hague or Hague-Visby Rules on the other side.795 The conditional element in many Paramount Clauses is that the alleged choice of law is only 236 to become operable if the chosen Convention or national enactment is compulsorily applicable in a certain country, namely that of shipment or (most time subsidiarily) that of destination. “Compulsorily applicable” means that the respective Convention law is mandatorily applicable in the said country ex lege. The parties “choose” what is already applicable and what cannot be derogated from contractually, from the perspective of the country of shipment or of destination. To regard a Paramount Clause merely as a simple choice of law796 does not do justice to it. It 237

790

791 792 793 794

795 796

The “Agios Lazaros” [1976] 2 Lloyd’s Rep. 47 (C.A., per Lord Denning MR and Shaw L.J.); Seabridge Shipping AB v. A.C. Orsleff’s Eftf’s A/S [1999] 2 Lloyd’s Rep. 685 (Q.B.D., Thomas J.). The “Marinor” [1996] 1 Lloyd’s Rep. 301 (Q.B.D., Colman J.). The “Happy Ranger” [2001] 1 Lloyd’s Rep. 530 (Q.B.D., Tomlinson J.). The “Happy Ranger” [2002] EWCA Civ 694, [2002] 2 Lloyd’s Rep. 357 (C.A., per Tuckey and Aldous L.JJ). Yemgas FZCO v. Superior Pescadores S.A. Panama [201] EWHC 971 (Comm) [33]-[35] (Q.B.D., Males J.). See Cass. DMF 2013, 1015, 1021; Nicolas, DMF 2013, 1022, 1026. As e.g. Mahieu, Rev. dr. transp. octobre-novembre-décembre 2013, 46 does.

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eliminates the most specific element: the qualification797 which lies in the requirement of compulsory applicability. The question one has to ask is “compulsory according to which system of law”?798 To answer this with “according to the proper law of the contract”799 would be too simple and lack precision at least without revealing how to determine the proper law of the contract. It would be rather a mere statement and assertion than a fairly and convincingly reasoned result. 238 A Paramount Clause referring to the Hague-Visby Rules if they are compulsorily applicable

is effective if the bill of lading was issued in a Contracting State of the Hague-Visby Rules or covers transports from a port in a contracting State of the Hague-Visby Rules.800 Otherwise, the Clause does not intend to become effective.801 239 The conditional Paramount Clause does not have constitutive, but only declaratory effect.802

If the respective Rules referred to are not compulsorily applicable ex lege, they cannot apply contractually since the contractual cart must not be put before the legal horse.803 If the reference is to a certain national enactment, it is a conditional partial choice of law, and whether the condition is fulfilled ought to be judged by the law possibly referred to,804 by virtue of (5) in conjunction with Art. 10 (1).805 To answer the question as to whether the Hague or the Hague-Visby Rules are compulsorily applicable based on the PIL of the lex fori806 is incorrect.807 240 If a reference is made to a “general paramount clause”, for instance if a charter party to which 797 798

799

800

801

802 803

804

805 806

807

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The “Agios Lazaros” [1976] 2 Lloyd’s Rep. 47 (C.A., per Lord Denning MR). Mediterranean Shipping Co. SA v. Trafigura Beheer BV [2007] EWCA Civ 794, [2007] 2 Lloyd’s Rep. 622 [12] (C.A., per Longmore L.J.). To this avail Holland Colombo Trading Society Ltd. v. Alawdeen [1954] 2 Lloyd’s Rep. 45, 53 (P.C.); Nea Agrex SA v. Baltic Shipping Co. Ltd. [1976] QB 933, 968 (C.A., per Goff L.J.); The “Happy Ranger” [2002] EWCA Civ 694, [2002] 2 Lloyd’s Rep. 357 [20] (C.A., per Tuckey L.J.); Mediterranean Shipping Co. SA v. Trafigura Beheer BV [2007] EWCA Civ 794, [2007] 2 Lloyd’s Rep. 622 [13] (C.A., per Longmore L.J.); The “Komninos S” [1991] 1 Lloyd’s Rep. 370 (C.A.); The “Happy Ranger” [2001] 1 Lloyd’s Rep. 530 [34] (Q.B. D., Tomlinson J.). The “Happy Ranger” [2002] EWCA Civ 694, [2002] 2 Lloyd’s Rep. 357 [47] (C.A., per Rix L.J.); Hof Amsterdam NIPR 2008 Nr. 36 p. 62; Rb. Middelburg 26.4.2000, NIPR 2002 Nr. 196 p. 333. Rb. Rotterdam NIPR 1999 Nr. 260 p. 338; Rb. Rotterdam NIPR 2001 Nr. 122 p. 244; Rb. Rotterdam NIPR 2001 Nr. 199 p. 340; Rb. Middelburg S&S 2002 Nr. 36 p. 169; Rb. Middelburg NIPR 2004 Nr. 349 p. 463– 464. Rapport Rémery, DMF 1996, 383, 387. Mediterranean Shipping Co. SA v. Trafigura Beheer BV [2007] EWCA Civ 794, [2007] 2 Lloyd’s Rep. 622 [18] (C.A., per Longmore L.J.). Cassaz. Dir. mar. 91 (1989), 754, 756–757; Cassaz. RDIPP 1992, 599; OLG Hamburg IPRspr. 1935–44 Nr. 125 = HansRGZ 1936 B col. 243, 247; Celle, Dir. mar. 90 (1988), 11, 26–27; Mankowski pp. 217–218. Imprecise OLG Hamburg VersR 1970, 1128, 1129; OLG Hamburg VersR 1975, 826, 827; OLG Bremen TranspR 1986, 153, 154. Mankowski pp. 217–218. To this avail OLG Hamburg TranspR 1989, 279, 280–281 and OLG Hamburg TranspR 1990, 109, 111– 112. Mankowski pp. 201–202.

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neither the Hague nor the Hague-Visby Rules can apply ex lege for lack of ratio materiae, such reference ought to be understood as referring to a clause following the lines of the BIMCO General Paramount Clause. Even if there are minor variations, the core of a general paramount clause ought to be believed to consist of three elements: (1) If the Hague Rules are enacted in the country of shipment, then they apply as enacted; (2) if the Hague Rules are not enacted in the country of shipment, the corresponding legislation of the country of destination applies or, if there is no such legislation, the terms of the Convention containing the Hague Rules apply; (3) if the Hague-Visby Rules are compulsorily applicable to the trade in question, then the legislation enacting those rules applies.808 k) Choice of federal law or choice of the law of a Member State If the parties resort to the law of a federal State, this is prone to incur problems where a 241 federal body of law does not exist for the respective area of contract regulation. Art. 22 serves as the tie-breaker for the purposes of European PIL.809 If the parties choose the law of a Member State of a federal State, e.g. Californian law, it is a 242 matter of interpretation whether this comprises those parts of federal law which have been approved by the respective Member State legislature. l) Choice of conflict rules, in particular in Rules of Arbitration Art. 3 does not expressly address the question whether parties are free to choose conflict of 243 law rules810 or are forced to choose a substantive law.811 The seemingly strict wording of Art. 20 marks one counter-argument not allowing for a primary determination through a parties’ choice of law.812 The other is defined by the parties’ interests and the governing principle of party autonomy: generally, parties should be allowed to act as they please.813 The former line of argument is of formal, the latter of material nature. On principle, material aspects should outweigh merely formal aspects.814 If party autonomy constitutes the fundamental and leading maxim of European Private International Law it should also be adhered to in the interpretation of details. Art. 20 excludes the use of renvoi as many Member States generally oppose to the use of 244 renvoi and also because of faith in the strength and beauty of the connecting factors created through the Rome I Regulation. A renvoi should not tear apart what took so much effort in harmonizing and putting together.815 Additionally, any Gesamtverweisung to a Member State’s national law would be reduced to a useless intermediate step as the Rome I Regulation itself is part of the respective Member State’s PIL. These arguments, however, are not viable – at least not to the same extent – in the case of a parties’ choice of law. In this case, there is no 808 809 810

811 812 813 814 815

The “Bukhta Russkaya” [1997] 2 Lloyd’sRep. 744 (Q.B.D., Thomas J.). Magnus, in: Staudinger, Art. 3 Rom I-VO note 21; Ragno, in: Ferrari, Art. 3 note 25. Favouring this solution e.g. Siehr, in: FS Claus-Wilhelm Canaris, vol. II (2007), pp. 815, 822 et seq.; Otto Sandrock, in: FS Gunther Kühne (2009), p. 881, 896. Extensive discussion by Rugullis, ZvglRWiss 106 (2007), 217. In particular Rugullis, ZvglRWiss 106 (2007), 217, 226 et passim. E.g. Otto Sandrock, FS Gunther Kühne (2009), p. 881, 888. Mankowski, RIW 2011, 30, 40. See Report Giuliano/Lagarde, OJ EEC 1980 C 282/37–38 Art. 15; Martiny, in: Münchener Kommentar BGB, Art. 20 Rom I-VO note 2.

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uncertainty; therefore, primacy of the parties’ wishes covered by the fundamental principle of party autonomy needs to be discussed. In a conflict of principles, party autonomy as a maxim higher in value and rank and needs to prevail. Especially with respect to arbitral proceedings that might involve a complex array of contracts with numerous parties party autonomy exhibits an increased significance when it comes to the task of harmonising the statutes governing the various contracts.816 An attempt at consolidating the formal and material perspectives can be seen in reading into Art. 1 (1) cl.1 an empowerment of the parties to choose private international law clauses and viewing this as a special rule allowed under Art. 20.817 245 In any case, one should take the following into consideration: What is the scope of the renvoi

exclusion? The exclusion of renvoi is aimed at the conflict of laws rules present in the applicable law. Applicable law, however, under the Rome I Regulation needs to be state law. In what way does the scope of the renvoi exclusion then include “rules” concerning the applicable law in rules of arbitration? These “rules” are not state law. They are considered as being mere contractual agreements. In this way, they cannot be subject to the scope of the exclusion of renvoi in Art. 20. This prompts a differentiated treatment according to the content of the respective “rule”. 246 Admittedly, the exclusion of renvoi does not include all those “rules” that directly choose

material law, even if these leave the law’s actual designation to the discretion of the court of arbitration. If the parties themselves had agreed upon the applicability of the seemingly most appropriate law, this would constitute the choice of the applicable substantive law – the mere fact that the substantive law is to be determined by the court of arbitration does not change that very clause’s character. It is solely the delegation of the authority to choose the respective substantive law.818 The parties do choose the substantive law themselves, even if indirectly through the court of arbitration as their agent.819 On the international scene, Art. 21 (2) 2 ICC Rules of Arbitration is the most important case of an indirect choice of law clause.820 The court of arbitration needs to justify its decision to the parties and to present substantial reasons for choosing in this way.821 Any clause within any set of rules of arbitration rests on

816 817 818

819

820 821

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Otto Sandrock, in: FS Gunther Kühne (2009), p. 881, 894–896. Symeonides, Liber amicorum Kurt Siehr (2010), p. 513, 536 et seq.; Mankowski, RIW 2011, 30, 40. Aden, Internationale Handelsschiedsgerichtsbarkeit (2nd ed. 2003) § 17 ICC-SchiedsO note 9; Poudret/ Besson, Comparative Law of International Arbitration (2nd ed. 1997) para. 683. Courvoisier, In der Sache anwendbares Recht vor internationalen Schiedsgerichten mit Sitz in der Schweiz (Zürich 2005) pp. 408–410; Heini, in: Zürcher Kommentar zum IPRG (2nd ed. Zürich 2004) Art. 187 schwIPRG note 12; Kaufmann-Kohler/Rigozzi, Arbitrage international (Bern/Zürich/Basel/ Génève 2006) para. 617; Bernhard Berger/Kellerhals, Interne und internationale Schiedsgerichtsbarkeit der Schweiz (Zürich 2006) para. 1275; Poudret/Besson, Comparative Law of International Arbitration (2nd ed. 1997) para. 683; Karrer, in: Basler Kommentar Internationales Privatrecht (2nd ed. Basel/Genf/Zürich 2007) Art. 187 schwIPRG note 124. Kaufmann-Kohler/Rigozzi, Arbitrage international (Bern/Zürich/Basel/Génève 2006) para. 622. Derains/Schwartz, A Guide to ICC Arbitration (2nd ed. 2005) p. 242; Kaufmann-Kohler/Rigozzi, Arbitrage international (Bern/Zürich/Basel/Génève 2006) para. 623; Thomas Pfeiffer, in: Graf v. Westphalen (ed.), Arbeitsgemeinschaft Internationaler Rechtsverkehr – Deutsches Recht im Wettbewerb – 20 Jahre transnationaler Dialog (2009), pp. 178, 186.

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the parties’ intentions and desires and is considered to be just that. They do not constitute a conflict of laws regime that could supersede national PIL.822 2. “Choice” of non-State instruments a) Generalities and legislative history The object of a choice of law traditionally is the national law of a State. Starting point in the 247 Rome I Regulation must be Recital (13) which reads: (13) This Regulation does not preclude parties from incorporating by reference into their contract a non-State body of law or an international convention. (14) Should the Community adopt, in an appropriate legal instrument, rules of substantive contract law, including standard terms and conditions, such instrument may provide that the parties may choose to apply those rules. aa) Legislative history The legislative history leading to Recital (13) and the omission of any rule permitting a 248 genuine choice of non-State instruments in the normative part of the Regulation is telling and provides a very strong argumentum e contrario:823 Whatever the Rome Convention might have said on the topic,824 Art. 3 (2) subpara. 1 Proposal Rome I sought to introduce such choice in the following unequivocal terms: “The parties may also choose as the applicable law the principles and rules of the substantive law of contract recognised internationally or in the Community.” At the back of its mind the Commission had two purposes: firstly, it wanted to cater for 249 future EU instruments harmonising substantive law; secondly, it contemplated sets of rules like the PECL or the UNIDROIT Principles.825 Although the European Economic and Social Committee almost emphatically embraced the Proposal,826 it did not find favour with the

822 823

824

825

826

Mankowski, RIW 2011, 30, 40. But see to this avail e.g. Schmidt-Ahrends/Schmitt, Jura 2010, 520, 526. See only Schinkels, GPR 2007, 106, 107 et seq.; Rühl, in: FS Jan Kropholler (2008), p. 187, 189 et seq.; Clausnitzer/Woopen, BB 2008, 1798, 1799; Bogdan, NIPR 2009, 407; Sendmeyer, Contratto e impresa/ Europa 2009, 792, 798; Thorn, in: FS Karsten Schmidt (2009), p. 1561, 1569; Carrascosa González p. 134; Magnus, IPRax 2010, 27, 33; Thiede, in: Verschraegen p. 51, 55; Ringe, in: jurisPK Art. 3 note 38; Loquin, in: Corneloup/Joubert p. 119, 131 et seq.; Wegner p. 66; McParland para. 4.75; Plender/Wilderspin para. 6– 012; Woitge pp. 89–90; Grünberger, Der Staat 55 (2016), 117 (117). The prevailing academic opinion was to the negative; e.g. Cheshire/North/Fawcett, Private International Law (14th ed. 2008) p. 768; Ample discussion by Boele-Woelki, Rec. des Cours 340 (2009), 3. A detailed overview on the academic projects regarding the Europeanisation of private law is presented e.g. by Riedl, Vereinheitlichung des Privatrechts in Europa – Wissenschaftliche Initiativen im Prozess der Privatrechtseuropäisierung (2004). European Economic and Social Committee, Opinion on the Proposal for a Regulation of the European Parliament and of the Council on the law applicable to contractual obligations (Rome I), OJ EU 2006 C 318/59 para. 3.2.3.

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majority of Member States in the Council.827 Only few supporters came forward,828 and not even all of them wholeheartedly.829 Comparatively greater support from the Parliament830 did not help the cause of the proposal. The proposal was eventually buried in the Council,831 and its disappearance was evidenced by the 2 March 2007 draft prepared by the German Presidency.832 That the Parliament still uttered some support833 did not alter the course taken by the Council and its German Presidency834 and resulted only in the addition of Recitals (13) and (14) as some sort of compromise between the legislative organs of the then EC.835 One might ask whether this was a missed opportunity836 – but at least equally well one can rejoice that Pandora’s box has been kept closed and sealed. 250 As to substance, sharp criticism arose837 and made the following points clear: Firstly, as far as

future EU Instruments were concerned, it will be for the respective EU instrument to clarify its relation to the Rome I system specifically and not for the Rome I system to introduce a general and necessarily abstract guideline;838 secondly, the world is wider and wilder than the envisaged sets of Principles, and the list of possible bed-fellows (with the important ramification who is in and who is not) is by no means conclusive or even clear.839 If evidence for the latter was needed the case of the FIFA Rules840 would provide ample. Principles designed by commissions consisting of the top notch of the academic profession like the Lando commissions creating the PECL, are quite something different from, and will easily earn more sympathy841 than the fundament of the dreaded and money-driven “System Blatter”. Obscure private codifications must not qualify in any event.842 Nothing promulgated by a socalled Global Players Union can be law in a properly understood sense.843

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For instance Italy (Council Doc. 13035/06 ADD = JUSTCIV 196 CODEC 948), Spain (Council Doc. 13035/06 ADD 18), and the United Kingdom (Council Doc. 13035/06 ADD 4). They were joined by Austria, Belgium, the Czech Republic, Estonia, France, Hungary, Luxembourg, the Netherlands, Portugal, Romania, Slovakia, and Slovenia. Germany (Council Doc. 13035/06 ADD 12 pp. 23–24), Latvia (Council Doc. 13035/06 ADD 14), Lithuania (Council Doc. 13035/06 ADD 3), Sweden (Council Doc. 13035/06 ADD 11). McParland para. 4.56. Amendment 1 Recital (7) and Article 3 (2), PE 374.427v01–00 pp. 5–6; Amendments 32–85, Draft Report prepared by Maria Berger (7 December 2006), PE 382.371v01–00 pp. 6–10. Council Doc. 5592/07 (25 January 2007). Council Doc. 6935/07 JUSTCIV 44 CODEC 168. European Parliament JURI Committee, Amendments 86–96, PE 386.328v01–00, PE 374.427v01–00. Council Doc. 8022/07 JUSTCIV 73 CODEC 306 (30 March 2007). See also Council Doc. 14222/07 ADD 1 (23 October 2007). McParland para. 4.66. See Kessedjian, Rev. dr. civ. 2007, 1470; see also Loquin, in: Corneloup/Joubert p. 119. E.g. Rozehnalová/Valdhans, Czech Yb. Int. L. 1 (2010), 3, 24; Symeonides, NIPR 2010, 201. Most comprehensively still Mankowski, in: Schmidt-Kessel, p. 389, 405. See in detail e.g. Nils Christian Ipsen, Private Normenordnungen als Transnationales Recht? (2009). See the sets of Rules and so called Laws referred to by the links under http://de.fifa.com/aboutfifa/ officialdocuments/doclists/laws.html. See only Mankowski, IPRax 2006, 101, 102; Jud, JBl 2006, 695, 702. Bogdan, NIPR 2009, 407. Schilf p. 382; Mankowski, in: Schmidt-Kessel, p. 389, 405.

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Democratic deficits844 and lack of state recognition hit even such benevolent projects like 251 PECL and UNIDROIT Principles.845 The own ambition of the UNIDROIT Principles to be a supplementary source of law for commercial contracts cannot prevail without state recognition.846 It can not topple the hurdle if only incorporation, but not a proper conflicts choice is permitted.847 The selection of a delocalised set of rules cannot be taken as the choice of the law of a certain State,848 but only as a mere incorporation, a materiellrechtliche Verweisung.849 That arbitration tribunals might possibly be at greater liberty does not amount to a cogent argument that state courts should necessarily follow their lead.850 As to substance, one could ask further how complete the non-State instrument must be in 252 order to become the permissible object of a choice and as to whether it must amount to a genuine Code including default rules and mandatory rules.851 Advocating special rules and negating the need for a comprehensive regime852 leads in the wrong direction. Party autonomy as the leading principle of the PIL of contracts must remain hard law and is inconsistent with however benevolent and seemingly modern experiments with soft law.853 The battle surrounding the question whether non-State law can be the possible object of a 253 proper choice of law at its core is a battle for retaining Regulation by States. It is part of a certain tendency to de-nationalise law and to admit privatisation of rule setting.854 Giving way to this tendency would enhance the legitimacy of “private rules”.855 That tendency is an attack on the monopoly of States and State institutions to set law.856 This relates to far more than technical details, namely to the self-emancipation of certain parties in international trade. To control the rationality of private sets of rules according to the usages prevailing in that particular industry857 still requires a legal, State-given framework. Transnational “law” might be a fascinating intellectual construct858 – but one must not 254 844 845

846 847 848 849 850 851 852 853 854

855

856

857 858

Admitted as a justified point of criticism by Vonken, NIPR 2014, 339, 341. Kessedjian, RCDIP 84 (1995), 641; Gardella, NLCC 2009, 611, 622. See for more detailed discussion Friederike Schäfer, GPR 2006, 54; Schinkels, GPR 2007, 106. Contra Götz Schulze, in: FS Bernd von Hoffmann (2011), p. 862. Cf. Lando, in: FS Willibald Posch zum 70. Geburtstag (Wien 2012), p. 393, 397. Plender/Wilderspin para. 6–014. See only Carrascosa González p. 133. But cf. Vonken, NIPR 2014, 339, 340–341. Boele-Woelki, in: FS Ingeborg Schwenzer (Bern 2011), p. 191, 197. Kessedjian, Rev. dr. civ. 2007, 1470, 1474; Loquin, in: Corneloup/Joubert p. 119, 130. Knöfel, ZEuP 2008, 888, 889. See only Hellwege, in: Basedow/Hopt/Zimmermann (eds.), Handwörterbuch des Europäischen Privatrechts, vol. II (2009), p. 1020, 1024. See in more detail e.g. Gregor Bachmann, Private Ordnung (2006); Senn, Non-State Regulatory Regimes (2010) Kansaku, in: Heinz-Dieter Assmann/Isomura/Kansaku/Kitagawa/Nettesheim (Hrsg.), Markt und Staat in einer globalisierten Wirtschaft (2010), p. 145. See only Nils Jansen/Michaels (eds.), Beyond the State – Rethinking Private Law (Tübingen 2008), the parallel contributions in 56 Am. J. Comp. L. 527 (2008) and Röthel, JZ 2007, 755; Schepel, The Constitution of Private Governance, Oxford 2006; Köndgen, AcP 206 (2006), 477. To this avail e.g. Andreas Maurer/Beckers, in: FS Gunther Teubner (2009), p. 811, 824. See only Eugen Langen, Transnationales Recht (1981); Fischer-Lescano/Teubner, 25 Mich. J. Int’l. L. 999

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overlook the underlying interests and must keep the self-emancipation of private parties at bay. The arbitration industry in particular is very good at lobbying, not in the least for the sake of its own earnings.859 255 Global Legal Pluralism860 is an auto-suggestive term, since to accept it would take for granted

what should be proven in the first instance: the existence of “law” in the specific sense outside the State sphere. Likewise, “natural justice” is not a convincing choice and might lead to severe trouble and uncertainties.861 bb) Conclusions from other conflict rules

256 To draw a conclusion from other conflict rules employing “law of a State” would be fallible.

Art. 4 uses “law of a State” – but this is necessarily so in the context of Art. 4. For an objective determination of the proper law the contract needs to be localised in the territory of certain State. Nobody has a relevant place of business where non-State law reigns, as non-State law does not have any territorial realm.

257 Nobody is habitually resident where non-State law reigns. That is why Art. 11 (1) does not

carry any conclusion to the opposite whilst in its wording “law” and “law of a State” appear to be two different things.862 This is already clear from the fact that in Art. 11 (1) 1st option the lex contractus (in the wording without the addition of “of a State”) necessarily must comprise an objectively determined lex causae which in turn, based on Art. 4, must be the law of a State.863 That Art. 4 Rome I Regulation employs “country”, “pays”, “land”, “paese”, “país” instead of “state”, “état”, “staat”, “stat”, “stato”, “estado”, does not give rise to a counter-argument,864 the more so, since the German version duly uses “Staat”. cc) Conclusions from Art. 20

258 Conclusions from Art. 20 (formerly Art. 15 Rome Convention)865 have a certain appeal,866

but are ambivalent at best. This rule states: “The application of the law of any country specified by this Regulation means the application of the rules of law in force in that country other than its rules of private international law […]”.867 This answers the question if a renvoi

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(2004); Fischer-Lescano/Teubner, Regime-Kollisionen (2006); Gralf-Peter Calliess, Grenzüberschreitende Verbraucherverträge (2006) pp. 214–284 et passim; Gralf-Peter Calliess, 14 Ind. J. Global Leg. Stud. 469 (2007); Broglia Mendes, in: FS Gunther Teubner (2009), p. 827; Nils Christian Ipsen, Private Normordnungen als transnationales Recht? (2009); Moritz Renner, Zwingendes transnationales Recht (2010); Gralf-Peter Calliess/Zumbansen, Rough Consensus and Running Code: A Theory of Transnational Private Law (2010); Goode, Transnational Commercial Law (2nd ed. 2012); Nueber, Transnationales Handelsrecht (Wien 2013); Gralf-Peter Calliess (ed.), Transnationales Recht – Stand und Perspektiven (2014); Halliday, Transnational Legal Orders (2015). See only Muir Watt/Radicati di Brozolo, 4 (1) Global Jurist advances art. 2 [4] (2004). On this topic e.g. Michaels, 51 Wayne L. Rev. 1209 (2005). See ICC Award 7710, Clunet 128 (2001), 1147; Ravillon, in: Corneloup/Joubert p. 67, 75. Mankowski, in: Schmidt-Kessel p. 389, 395. Mankowski, in: Schmidt-Kessel p. 389, 395; Woitge p. 87. Woitge p. 87. Wulf-Henning Roth, in: FS Erik Jayme (2004), p. 757, 758. In the result concurring Nygh, Autonomy in International Contracts (1999) pp. 61 et seq.; Schilf p. 370. Emphasis added.

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is admitted – but this question does not arise in the case of non-State law.868 In any event, the argument which one could have possibly869 drawn from the wording of Art. 7 (1) Rome Convention870 belongs to the past.871 It commenced: “When applying under this Convention the law of a country” or in German “Bei der Anwendung des Rechts eines bestimmten Staates”.872 Art. 9 does not contain this phrase anymore. dd) Conclusions from other rules on parties’ choice of law Art. 3 (3) is more telling.873 It refers to the law of the State which was chosen. Art. 5 (2) 259 subpara. 2 allows the parties only to choose the law of a State where one of the listed connecting factors materialises. In the event of a limited, non-free choice of law Art. 7 (3) subpara. 1 also continuously and unequivocally refers to the law of a State (if nor a Member State) where one of the listed connecting factors materialises. At least three times parties’ choice of law is expressly reduced to the choice of State law. Yet there are discernible objections.874 Firstly, the argument derived from Art. 3 (3) could be 260 regarded as weak as only a materiellrechtliche Verweisung, not a proper conflicts choice of law is at stake. Secondly, one could object that in the case of a limited choice it is only natural that the range of electable laws is limited to State laws, as the limitation is based on localisation.875 Thirdly, the argument is plausible that in the limiting instances the legislator is thinking of the ordinary case and does not expressly regulate the exception. All three objections are not to be dismissed lightly. But it cannot be denied that on not less 261 than three occasions the Rome I Regulation, when it comes to parties’ choice of law, expressly refers to State law and to State law only. This is a strong indication.876 ee) Black letter wording of Recital (13) The black letter wording of Recital (13), if read precisely, indicates the way the “choice” of a 262 non-State instrument has to be treated: It does not amount to a proper choice of law,877 but to a mere incorporation of the instrument by reference into the parties’ contract, thus to a mere materiellrechtliche Verweisung.878 The wording results in an express downgrading of this

868 869 870

871 872 873

874 875 876 877 878

Mankowski, in: Schmidt-Kessel p. 389, 395. Critical Schilf p. 369, but relying too much on the consequences of Art. 7 (1) Rome Convention. See only Halpern v. Halpern [2007] EWCA Civ 291, [2007] 2 All ER (Comm) 330, [2007] 3 All ER 478 [22] (C.A., per Waller L.J.); Wulf-Henning Roth, in: FS Erik Jayme (2004), S. 757, 758 and Schilf p. 368. Mankowski, in: Schmidt-Kessel p. 389, 396. Emphasis added. See Shamil Bank of Bahrain E.C. v. Beximco Pharmaceuticals Ltd. [2004] EWCA Civ 19, [2004] 1 WLR 1784 [48] (C.A., per Potter L.J.); Halpern v. Halpern [2007] EWCA Civ 291, [2007] 2 All ER (Comm) 330, [2007] 3 All ER 478 [22] (C.A., per Waller L.J.). See Mankowski, in: Schmidt-Kessel p. 389, 396; Mankowski, Interessenpolitik p. 30. See only Mankowski, in: v. Bar/Mankowski § 7 note 80. Mankowski, in: Schmidt-Kessel p. 389, 396; Mankowski, Interessenpolitik p. 30. See only Gardella, NLCC 2009, 611, 622. Mankowski, IHR 2008, 133, 136; Garcimartín Alférez, EuLF 2008, I-61, I-67; Rolf Wagner, IPRax 2008, 377, 380; Diedrich, RIW 2009, 378, 384; Pfütze, ZEuS 2011, 35, 51; Ringe, in: jurisPK Art. 3 note 38; Woitge pp. 88–89. Auxiliary constructions are discussed by Brödermann, NJW 2010, 807, 811.

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type of agreement.879 Arts. 3 (3) and 20 lend support as they both allow only a conflicts choice of State-made law.880 Due to the lack of a proper choice of law the applicable law, the lex contractus, as such must be determined objectively.881 263 The difference in the wordings of Recital (13) and Art. 3 (1) cl. 1 is remarkable and telling.

Recital (13) intentionally operates on a lesser level. Its terminology is more akin to that of Art. 3 (3) and typical for the technique of a materiellrechtliche Verweisung as far as incorporation into the contract is called for.882 Recital (14) in essence is only an indication that any future European instrument may be incorporated by reference into a contract rather than selected as the applicable law.883 264 A further argument is that Recital (14) is found besides, and in addition to, Recital (13).

Evidently, the EU legislator did not rely on Recital (13) alone but found it necessary to promulgate Recital (14). If Recital (13) alone carried a proper conflicts choice of law Recital (14) would be superfluous.884 Recital (14) makes it clear that is for the respective Act of EU legislation to provide for a proper opt-in opportunity in order to vest full conflicts force in an agreement by the parties.885 265 Art. 3 (2) Proposal was striving for some kind of compromise. In the background, the fear

concerning a possible Optional Instrument of the EU was evident. The Proposal wanted to keep the door open for such Optional Instrument and to allow the choice of such Instrument.886 But this fear has always been mistaken and unjustified: An Optional Instrument of EU law would pave its own way and would always be State law, namely law of the Member States.887 That an Optional Instrument of EU law would pave its own way is now explicitly confirmed by Recital (14), eliminating any possibly remaining doubts.888 b) PECL and PEICL 266 The Principles of European Contract Law (PECL)889 are the result of the work of the three

so-called Lando Commissions chaired by the Danish professor Ole Lando. They assembled some top notch players in European academia. There was a certain discontinuity between 879 880 881 882

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886 887 888

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Ragno, in: Ferrari, Art. 3 note 21. Diedrich, RIW 2009, 379, 384; Pfütze, ZEuS 2011, 35, 51. Gardella, NLCC 2009, 611, 621. Leible, in: Bonomi/Cashin Ritaine p. 61, 69; Mankowski, in: Schmidt-Kessel p. 389, 398; Mankowski, Interessenpolitik p. 31; see also Loquin, in: Corneloup/Joubert p. 119, 134. McParland para. 4.86. Mankowski, in: Schmidt-Kessel p. 389, 399. Mankowski, in: Schmidt-Kessel p. 389, 413–419; Leible, Rom I und Rom II: Neue Perspektiven im Europäischen Kollisionsrecht (2009) p. 38; Matthias Lehmann, EJCCL 2009, 173, 181. Proposal, COM (2005) 650 final p. 6. In detail Mankowski, in: Schmidt-Kessel p. 389, 413–419. Mankowski, in: Schmidt-Kessel p. 389, 416 et passim; Leible, Rom I und Rom II: Neue Perspektiven im Europäischen Kollisionsrecht (2009) p. 38; Matthias Lehmann, EJCCL 2009, 173, 181. Lando/Beale (eds.), Principles of European Contract Law Principles of European Contract Law, Parts I and II (The Hague 1999); Lando/Clive/Prüm/Reinhard Zimmermann (eds.), Principles of European Contract Law – Part III (The Hague 2003). French edition: Rouhette (dir.), Principes du droit européen du contrat (2003).

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the first two and the third Lando Commission, for the latter switched participants to a remarkable degree (as is evidenced by the differing editorship of the respective text editions). The choice of the PECL is a very rare phenomenon890 indeed since – just as the PECL are 267 celebrated and cherished in academia891 – in commercial practice the PECL are certainly overshadowed by the UNIDROIT Principles which are believed to be more appropriate for, and adapted to, the needs of commercial contracts. The PECL are regarded as Professorenrecht or, in a more polite and accurate fashion, wissenschaftliches Recht.892 A similar fate might occur to the Principles of European Insurance Contract Law (PEICL) which were developed by a Restatement grouped chaired by Fritz Reichert Facilides and after his death since 2003 by Helmut Heiss.893 The PEICL are designed as some opt-in kind of model legislation.894 c) UNIDROIT Principles The UNIDROIT Principles of International Commercial Contracts (also known as PICC) 268 have been published for the first time in 1994 and were replaced by a revised version in 2004895 and another revised and expanded version in 2010.896 Like the PECL they are the result of truly academic work, and have found strong promoters.897 In May 2012, Model Clauses for the Use of the UNIDROIT Principles of International Commercial Contracts 890

891

892 893

894

895

896

897

On the prospects of a choice of the PECL by contract parties e.g. Heiko Krüger, Rechtseinheit von unten? (2005). Especially by Blase, Die Grundregeln des europäischen Vertragsrechts als Recht grenzüberschreitender Verträge (2001). See e.g. Reinhard Zimmermann, in: Christian Bumke/Röthel (eds.), Privates Recht (2012), p. 21. Basedow/Birds/Vlarke/Cousy/Heiss (eds.), Principles of European Insurance Contract Law (München 2009). See only Brömmelmeyer, ERCL 2011, 445; Heiss, RabelsZ 76 (2012), 316; Wandt/Gal, in: 100 Jahre Rechtswissenschaft in Frankfurt (2014), p. 629. On the sphere of application of the UNIDROIT Principles especially Ferrari, 69 Tul. L. Rev. 1225 (1995); Teichert, Lückenfüllung im CISG mittels UNIDROIT-Prinzipien (2006). UNIDROIT Principles 2010. On these version in particular Bonell, Unif. L. Rev. 2011, 517; Bonell, Dir. comm. int. 2012, 795; Cosson, Unif. L. Rev. 2011, 537; Fontaine, Unif. L. Rev. 2011, 549; Reinhard Zimmermann, Unif. L. Rev. 2011, 563; Vogenauer, ZEuP 2013, 7; Vogenauer, Rassegna dir. civ. 2014, 246; Pablo-Romero Gil-Delgado, Negocios 270 (2013), 39; Vogenauer (ed.), Commentary on the UNIDROIT Principles on International Commercial Contracts (PICC) (2nd ed. 2015). In particular their spiritus rector Bonell, i.a. Bonell, RDAI 1988, 873; Bonell, RabelsZ 56 (1992), 274; Bonell, 40 Am. J. Comp. L. 617 (1992); Bonell, RDAI 1997, 145; Bonell, Unif. L. Rev. 1999, 651; Bonell, ICC Int. Ct. Arb. Bull. 2002 Spec. Supp. 29; Bonell, Unif. L. Rev. 2004, 5; Bonell, 2004 UCC L.J. 49; Bonell, An International Restatement of Contract Law (3rd ed. Irvington, NY 2005); Bonell, The UNIDROIT Principles in Practice, 2nd ed. Irvington, NY 2006; Bonell, Un “Codice” internazionale del diritto dei contratti (2nd ed. 2006); Bonell, Unif. L. Rev. 2012, 141, and Boele-Woelki, Rev. dr. unif. 1996, 652; Boele-Woelki, IPRax 1997, 161; Boele-Woelki, in: von Hoffmann (ed.), European Private International Law (1998), p. 67; Boele-Woelki, Rec. des Cours 340 (2009), 7; Vischer, Eur. J. Leg. Reform 1 (1998/1999), 210; Vischer, in: FS Peter Schlechtriem (2003), p. 445; Wichard, RabelsZ 60 (1996), 269; Jauffret-Spinosi, in: Liber amicorum Guy Horsmans (2004), p. 559; Toth, in: Cashin Ritaine/Lein (eds.), The UNIDROIT Principles 2004 (2007), p. 201; Fauvarque-Cosson, in: Mélanges à la memoire de Patrick Courbe (2012), p. 179; Bernard Audit, in: Mélanges Camille Jauffret-Spinosi (2013), p. 13; see also Vogenauer, Unif. L. Rev. 2014, 481.

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were promulgated.898 The ICC Model Contracts for certain types of contracts might also be combined with an at least alternative choice of the UNIDROIT Principles.899 They are advertised and promoted along the following lines:900 “The law of a certain State often does not provide the most appropriate legal environment for cross border contracts. National laws focus on national contracts. They do not necessarily provide rules that are sufficiently adequate for cross border contracts.901 International instruments such as the CISG, the CMR or the UPICC provide rules which are particularly made for international business. In many circumstances, it may be wiser to work with such an international instrument than with a national law.” Modern law tends towards combining a choice of the UNIDROIT Principles with an arbitration clause.902 269 It has been argued that the UNIDROIT Principles should not be subjected to limits by the

ordre public national of the applicable law.903 Yet this would give them too much weight as it would grant them overruling force despite not being a proper source of law.904 The UNIDROIT Principles are not part of the lex lata Communitatis anyway.905 They have to clarify their relation with mandatory rules anyway, from their perspective taking Art. 3. 3. 1 (1) UNIDROIT Principles as some kind of starting point. They can not escape the impact of lois de police.906 270 The present array is sufficient to pay appropriate regard to the parties’ intentions. In the

past, the materiellrechtliche Verweisung has not caused insurmountable problems, and the same will be true in presence and future.907 The most prominent example is provided by the UCP, the “commercial façon de parler”908 for Letters of Credit. The UCP is a set of rules first published by the ICC in 1933 and has since undergone a series of revisions culminating in the latest revision as UCP 600. That a true conflicts choice of law would be more attractive though having only slightly more effect than the materiellrechtliche Verweisung,909 is not to be expected. Legal and commercial efficiency do not demand otherwise.910 The UCP achieves a high level of harmonisation, enjoys widespread adoption and utilisation, is inter898

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905 906

907 908 909

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Published i.a. in: Unif. L. Rev. 2013, 630; Dir. comm. int. 2013, 713. See in more detail e.g. Bonell, Unif. L. Rev. 2013, 473. Bortolotti, Unif. L. Rev. 2014, 542. Concisely Brödermann, Hamburg L. Rev. 2016, 21, 25. E.g. Bonell, An International Restatement of Contract Law (2005) p. 12; Vogenauer, in: Vogenauer, Commentary on the Unidroit Principles of International Commercial Contracts (PICC) (2nd ed. 2015) Introduction note 5. Brödermann, Hamburg L. Rev. 2016, 21, 24. Marty, Rev. Lamy dr. aff. 1997, 100; Béraudo, in: Mélanges Paul Lagarde (2005), p. 93, 101. Seminal Oser, The UNIDROIT Principles of International Commercial Contracts: A Governing Law? (Leiden 2008). But see the discussion by Grundmann, in: FS Walter Rolland (1999), p. 145. Cuniberti, Unif. L. Rev. 2013, 490, 496; Bernard Audit, in: Mélanges Camille Jauffret-Spinosi (2013), p. 13, 24–26. Mankowski, ZEuP 2003, 483, 484 et seq.; Romano, Clunet 134 (2007), 473. Jens Nielsen, in: FS Siegfried Kümpel (2003), p. 411 (411 et seq.). See Glenn, in: Essays in Honor of Friedrich K. Juenger (2001), p. 53, 62; Weintraub, in: Essays in Honor of Friedrich K. Juenger (2001), p. 141, 153; Lando, in: FS Willibald Posch zum 65. Geburtstag (Wien 2012), p. 393, 402–403, 407–408.

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nationally recognised and accepted as the guiding standard,911 but does nonetheless not escape the fate of having to take second place where it conceivably collides with mandatory rules of the lex causae.912 Commercial practice does not evidence a genuine need for the recognition of the Principles 271 as object of a proper conflicts choice of law. In the arbitration practice of the ICC only in 0.8 % of all cases general rules of law or Principles were chosen,913 the UNIDROIT Principles were chosen for two contracts (!) each in 2011914 and 2013,915 three times in 2012,916 only once in 2014917 and none in 2010918 – and this on a law market where the Principles could have been chosen already in the past and compete with State law.919 Compared to the PECL (which are virtually non-existent there), the UNIDROIT Principles still have gained far greater relevance in commercial practice, though. They have grabbed a certain share of the contracting market, particularly so in Europe920 and sometimes as a kind of compromise in investment arbitration.921 The most recent statistics show that the UNIDROIT Principles have been applied in the strict sense 55 times by arbitration tribunals and 6 times by municipal courts.922 In addition, there were 33 and 25 instances respectively where the UNIDROIT Principles were used to support a solution already found on the basis of a national law,923 and 27 and 49 cases respectively where they were employed as a means of interpreting a national law.924 Over the years and decades 335 arbitral awards or court decisions unearthed which referred in one way or the other to the UNIDROIT Principles, as per 2013 inclusively according to UNILEX,925 a database run by UNIDROIT. The possibility to agree on arbitration and to choose the Principles there926 also evidences 272 that admitting only a materiellrechtliche Verweisung, as far as State recognition is concerned, is neither a genuine hindrance nor any kind of unfair towards parties.927 Even the existing

910

911

912 913 914 915 916 917 918 919 920

921 922 923 924 925 926 927

Tentatively Contra Bamodu, in: Peter Stone/Farah (eds.), Research Handbook on EU Private International Law (2015), p. 221, 229. See only Bamodu, in: Peter Stone/Farah (eds.), Research Handbook on EU Private International Law (2015), p. 221, 230. See Trans Meridian v. Empresa Nacional de Comercialización de Insumos 829 F. 2d 949 (9th Cir. 1987). Pierre Mayer, (2002) 13 ICC Int. Ct. Arb. Bull., Spec. Supp. 105, 108. Statistical Report 2011, ICC Bull. 23 (1) (2012), 5, 14. Statistical Report 2013, ICC Bull. 25 (1) (2014), 5, 14. Statistical Report 2012, ICC Bull. 24 (1) (2013), 5, 13. 2014 ICC Dispute Resolution Statistics, ICC Disp. Resolution Bull. 2015 (1), 7, 15. Statistical Report 2010, ICC Bull. 22 (1) (2011), 5, 14. Mankowski, in: Schmidt-Kessel p. 389, 401. Brödermann, Unif. L. Rev. 2006, 749; Piers/Erauw, (2012) 8 JPrIL 441; Klaus Peter Berger, Unif. L. Rev. 2014, 519. Cordero Moss/Behn, Unif. L. Rev. 2014, 570. Finazzi Agrò, Unif. L. Rev. 2011, 722, 723. Finazzi Agrò, Unif. L. Rev. 2011, 722, 726 et seq. Finazzi Agrò, Unif. L. Rev. 2011, 722, 729 et seq. Www.unilex.info. See only Lew, (2002) 13 ICC Int. Ct. Arb. Bull., Spec. Supp. 85. This is conceded even by Juenger, in: Liber amicorum Kurt Siehr (2000), p. 289, 306.

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exit option is not used.928 Why the UNIDROIT Principles are not chosen is a matter of speculation. This might be due to lacking the full quality of a codification,929 to the lack of experience or divergences from traditional rules.930 This is once again evidence against a pressing need of the practice for a proper conflicts choice of law of the Principles.931 The UNIDROIT Principles have not unduly suffered from the prevailing lack of an opportunity to choose them conflictually, but have established themselves in international dispute resolution932 (as far as that goes) even whilst being admitted to a materiellrechtliche Verweisung only.933 There simply are not so many internally mandatory rules in the domestic laws addressing (rather than truly regulating) commercial contracts as to make a significant difference.934 d) ACQP 273 The Acquis Principles (ACQP) can be described as some kind of Restatement of existing EU

rules with only very slight systematizing restructuring.935 They have never desired to serve in, and aspired to play, some supplementary role and had a self-understanding as a mere summarisation. They have never desired to slip into the role of an electable body of law. From another perspective one could feel tempted to ask whether any sound businessman should find it attractive to choose rules mainly based on the fundamental idea of consumer protection. e) DCFR 274 The Draft Common Frame of Reference (DCFR) is an ambitious attempt at defining a

Common European Law of Obligations.936 The Study Group on a European Civil Code 928 929 930 931 932 933 934 935

936

194

Mankowski, in: Schmidt-Kessel p. 389, 402. See Raeschke-Kessler, (2002) 13 ICC Int. Ct. Arb. Bull., Spec. Supp. 99 (99 et seq.). See Richard Hill, 13 (2) J. Int. Arb. 163, 169 (1996). Mankowski, in: Schmidt-Kessel p. 389, 402. Mankowski, in: Schmidt-Kessel p. 389, 402; Finazzi, Unif. L. Rev. 2011, 719. Mankowski, in: Leible p. 63, 90–92. Lando, in: FS Willibald Posch zum 70. Geburtstag (Wien 2012), p. 393, 408. See only Reiner Schulze, ZEuP 2007, 731. Critical i.a. Reinhard Zimmermann, EuZW 2007, 455; Nils Jansen/Reinhard Zimmermann, JZ 2007, 1113; Reinhard Zimmermann/Nils Jansen, (2008) 71 Mod. L. Rev. 505; Grigoleit/Tomasić, in: Basedow/Hopt/Reinhard Zimmermann (eds.), Handwörterbuch des Europäischen Privatrechts, vol. I (2009), p. 12; see also Reinhard Zimmermann/Eidenmüller/Faust/Grigoleit/Nils Jansen/Gerhard Wagner, Die Revision des Verbraucher-acquis (2011). von Bar/Clive (eds.), Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (Full ed. 2009) Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (Outline ed. 2009). For some discussion see e.g. the contributions in: Reiner Schultze/von Bar/Schulte-Nölke (eds.), Der akademische Entwurf für einen gemeinsamen Referenzrahmen (2009); Schmidt-Kessel (ed.), Der Common Frame of Reference (2009); Alpa (a cura di), Il draft common frame of reference del diritto privato europeo (2009); Somma (ed.), The Politics of Draft Common Frame of Reference (Alphen aan den Rijn 2009); Gerhard Wagner (ed.), The Common Frame of Reference: AView from Law and Economics (2009); Larouche/Chirico (eds.), Economic Analysis of the DCFR (2010); Antoniolli/Fiorentini (eds.), A Factual Assessment of the Draft Common Frame of Reference (München 2011); Kleineman (ed.), A Common Frame of Reference for European Contract Law (Stockholm 2011) Sagaert/Matthias Storme/Terryn (eds.), Draft Common Frame of Reference (Cambridge/Antwerpen 2012) and e.g. Pfeiffer, AcP 208 (2008), 227; Wolfgang Ernst, AcP 208 (2008), 248;

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did a brilliant and in every respect outstanding job. But as the “Draft” in its name clearly displays and evidences the Draft Common Frame of Reference only was an intermediate step whilst a Common Frame of Reference was the final goal. This final goal has not been reached. Parties to a contract might nonetheless want to avail them of the academic wisdom assem- 275 bled in the DCFR and might thus opt for the DCFR as the object of a materiellrechtliche Verweisung.937 More than a materiellrechtliche Verweisung appears not to be possible since the DCFR has not entered into force or legal effect of any kind.938 Whether such contractual incorporation of the DCFR is a commercially viable idea is another issue not easily to be answered.939 Furthermore, the question might be raised why it should be attractive for parties in contract 276 to opt into a mere draft. The ambition of the DCFR was and is different from the ambition of the PECL or the UNIDROIT Principles since its final goal was a political, not a legal one. Yet the DCFR might provide some neutral ground, thus reducing transaction costs and uncertainty.940 f) CESL As political bad fortune had it, the DCFR will not become a CFR in due course. Instead, after 277 an intermediate Feasibility Study941 the Common European Sales Law (CESL)942 was promulgated,943 a far less ambitious project restricted to cross-border sales contracts and related

937

938 939 940 941

942

943

Eidenmüller/Faust/Grigoleit/Nils Jansen/Gerhard Wagner/Reinhard Zimmermann, JZ 2008, 529 and (2008) 28 Oxford J. Leg. Stud. 659 and RTDeur 2008, 761 and An. Der. Civ. LXII (2009), 1461; Reinhard Zimmermann/Nils Jansen, NJW 2009, 3401; Reinhard Zimmermann/Nils Jansen, (2010) 69 Cambridge L. J. 98. Wolfgang Ernst, AcP 208 (2008), 248, 263–267; Mankowski, in: Schmidt-Kessel p. 389, 408; see also Lohri, Wählbarkeit nichtstaatlicher Regelwerke nach Art. 116 IPRG (2010) pp. 62–65, 84–85. Tentatively to another avail Vonken, NIPR 2014, 339. See e.g. Verheyen, EJCCL 2015, 82. See Brödermann, ZEuP 2007, 304, 309 et seq., 321; Wolfgang Ernst, AcP 208 (2008), 248, 266. A European contract law for consumers and businesses: Publication of the results of the Feasibility Study carried out by the Expert Group on European Contract Law for stakeholders’ and legal practitioners’ feedback (3 May 2011) http://ec.europa.eu/justice/contract/files/feasibility_study_final.pdf. Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law, COM (2011) 635 final (11 October 2011), reprinted i.a. in IHR 2012, 5 with introduction by Mankowski (IHR 2012, 1). Discussed e.g. by Walter Doralt, RabelsZ 75 (2011), 260; Eidenmüller/Nils Jansen/Kieninger/Gerhard Wagner/Reinhard Zimmermann, JZ 2012, 269; Eidenmüller/Nils Jansen/Kieninger/Gerhard Wagner/ Reinhard Zimmermann, (2012) 16 Edinburgh L. Rev. 301; Wendehorst/Zöchling-Jud (eds.), Am Vorabend eines Gemeinsamen Europäischen Kaufrechts (2012); Schmidt-Kessel (ed.), Ein einheitliches europäisches Kaufrecht? (2012); Remien/Herrler/Limmer (eds.), Gemeinsames Europäisches Kaufrecht für die EU? (2012); Schulte-Nölke/Zoll/Nils Jansen/Rainer Schulze (eds.), Der Entwurf für ein optionales europäisches Kaufrecht (2012); Rainer Schulze (ed.), Common European Sales Law (CESL) – Commentary (München/Oxford/Baden-Baden 2012); Astrid Stadler, AcP 212 (2012), 473; Grundmann, AcP 212 (2012), 502; Zöchling-Jud, AcP 212 (2012), 550; Looschelders, AcP 212 (2012), 581; Stephan Lorenz, AcP

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contracts for services.944 Furthermore, CESL is designed as an optional instrument only and requires the parties to opt in.945 Art. 4 Proposal CESL Regulation is unequivocal in its distinction between PIL matters dealt with in the CESL Regulation and matters of substantive law relegated to the CESL as such: “The Common European Sales Law may be used for cross-border contracts.” 278 The Commission did not intend to give CESL conflicts force. To the contrary, it explicitly

warned to confuse opting in to CESL with a proper choice of law.946 The choice of the CESL can only be implemented and sanctioned if it is in accordance with the lex causae.947 But in the first step Arts. 3 or 4 Rome I Regulation must lead to the law of a Member State.948 The Commission thus clearly intended a so-called Vorschaltlösung.949,950 279 This was reflected in Recital (10) Proposal CESL Regulation: “The agreement to use the

Common European Sales Law should be a choice exercised within the scope of the respective national law which is applicable pursuant to Regulation No 593/2008 or, in relation to the pre-contractual information duties, pursuant to Regulation No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Regulation (EC) No 864/2007), or any other relevant conflict of law rule. The agreement to use the Common European Sales law should therefore not amount to, and not be confused with, a choice of the applicable law within the meaning of the conflict-of-law rules and should be without prejudice to them. This Regulation will therefore not affect any of the existing conflict of law rules.” 280 The scope of application of CESL with regard to third States did not appear to be too

ambitious.951 CESL was in any event not a case as envisaged by Recital (14) Rome I Regulation since it did not supersede, but conversely gave way to, the general rules of PIL for contracts as contained in the Rome I Regulation. 281 CESL made rather slow, if any, progress in the European legislative process after the Pro-

posal had been tabled. There was even a gap of some eighteen months between the Council952 and the first reading in the European Parliament953 to which the Council responded in due course.954 The Parliament demanded to limit the project to distance selling contracts, including online contracts.955 Severe political opposition was articulated in a letter to the

944 945 946 947 948 949 950 951 952

953 954

196

212 (2012), 702; Magnus (ed.), CISG v. Regional Sales Law Unification (München 2012); Dannemann/ Vogenauer (eds.), The Common European Sales Law in Context (2013). Critical as to whether there is really a need for such an instrument in particular Mankowski, IHR 2012, 45. See only Mankowski, RIW 2012, 97, 98. Reasoning of the Commission, COM (2011) 635 final p. 9. Reasoning of the Commission, COM (2011) 635 final p. 9. See Staudenmayer, NJW 2011, 3491, 3495 and Schulte-Nölke, ZEuP 2011, 749, 754. The term was coined by Fornasier, RabelsZ 76 (2012), 401, 418 fn. 28 et passim. Comprehensively discussed by Bratvogel pp.289–604. See in detail Mankowski, RIW 2012, 97, 101 et seq. 3172nd Council Meeting Justice and Home Affairs, Brussels 7 and 8 June 2012, Press Release European Council PRES/ 12/241 (7 June 2012). TA 2014/159/P7 of 26 February 2014 (Reporters: Luigi Berlinguer; Klaus-Heiner Lehne). Council Meeting Home and Justice Affairs 20 May 2014.

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Commission jointly signed by the Minister of Justice of Austria, Finland, France, Germany, the Netherlands, and the United Kingdom.956 Eventually, the Commission even withdrew its Proposal957 and effectively buried CESL in its previous shape.958 This conforms to a change of policy.959 A modified Proposal might be put forward one day in order to fully unleash the potential of e-commerce in the Digital Single Market.960 But at present after a supplanting Strategy Paper961 a package of two new Proposals for Directives,962 accompanied by a Communication,963 exists which relate to a Digital Single Market in general without specifically revitalising CESL in any form and restoring it to the land of the living. The Rome I Regulation might get a new neighbour if the envisaged Directives on certain aspects of contracts for the supply of digital content and for the online and other distance sale of goods will be promulgated. At present only a full harmonisation (unification) of substantive law is aimed at, and neither Proposal contains conflict rules. On the contrary, Recitals (49) COM (2015) 634 final and (37) COM (2015) 635 final expressly state that the application of the Rome I Regulation shall not be prejudiced. g) Uniform Law as such That Uniform Law as such might not be the object of a proper conflicts choice of law can be 282 justified by the genesis of Art. 3 Rome I Regulation:964 The Green Paper of the Commission in 2003 tentatively went for a full conflicts choice of law in favour of Uniform Law.965 This was partially appreciated, but did not even make it into the Proposal,966 however wide Art. 3 (2) Proposal in general was. Only by the backdoor classifying Uniform Law as “general rules

955

956 957

958 959 960

961

962

963

964 965

966

Legislative Resolution of the European Parliament of 26 February 2014, P7_TA(2014)0159 Amendment 61. Letter 2014–393718 – SGAE JUD 710–14, reprinted in: ZEuP 2015, 433–435. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Commission Work Programme 2015: A New Start, COM (2014) 910 final of 16 December 2014, Annex 2 p. 13. See only Schelhaas, NZBT 2015, 231. Basedow, ZEuP 2015, 432. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Commission Work Programme 2015: A New Start, COM (2014) 910 final of 16 December 2014, Annex 2 p. 13. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – A Digital Single Market Strategy for Europe, COM (2015) 192 final of 6 May 2015. Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content, COM (2015) 634 final of 9 December 2015; Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the online and other distance sale of goods, COM (2015) 635 final of 9 December 2015. Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee “Digital contracts for Europe – Unleashing the potential of e-commerce”, COM (2015) 633 final of 9 December 2015. Rauscher/von Hein Art. 3 note 62. Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation, KOM (2002) 654 final. Without this being expressly mentioned in the reasoning, COM (2005) 650 final.

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of contract law”, it would have been possible to include Uniform Law.967 The failure of Art. 3 (2) Proposal has made any further discussion obsolete. In the practice of ICC arbitration, the CISG is the preferred option amongst non-state laws and has received the majority of 3 % overall968 in 2008,969 the majority of ten contracts in 2009,970 the absolute numbers of 7 contracts in 2010,971 5 contracts in 2011,972 11 contracts in 2012973 and 14 contracts (the majority of 3 % overall) in 2013.974 It is the relative giant amongst the dwarfs. Chinese counterparties are said to frequently prefer to opt for the CISG,975 and the CISG is believed to gather growing acceptance in the Asia-Pacific area.976 The CISG is not soft law in exactly the same sense as for instance the UNIDROIT Principles, but might benefit from the fact that it is actually also law binding its Contracting States in the confines of its scope of application and thus might mount case law, expertise, and efficiency gains.977 283 With regard to an express choice of the CISG in particular, such choice would not carry the

full advantages of a full application via Art. 1 (1) (a). The CISG is some kind of codex, but not a separate, independent body of law. It does not contain a direct possibility to opt in. There it can not be the object of a proper conflicts choice of law,978 but only of a materiellrechtliche Verweisung.979 It would be subject to the internally mandatory rules of the lex contractus. Insofar the “choice” of the CISG is different from an “ordinary” choice of law.980 But sales law 967

968 969 970 971 972 973 974 975 976 977

978

979

198

Lein, Yb. PIL 7 (2005), 393, 401; Kondring, IPRax 2007, 241, 245; Max Planck Institute for Comparative and Private International Law, RabelsZ 71 (2007), 225, 244 et seq. In this sentence “overall” ought to be read as “of all choices made, whether state or non-state law”. Statistical Report 2008, ICC Bull. 20 (1) (2009), 5, 13. Statistical Report 2009, ICC Bull. 21 (1) (2010), 5, 12. Statistical Report 2010, ICC Bull. 22 (1) (2011), 5, 14. Statistical Report 2011, ICC Bull. 23 (1) (2012), 5, 14. Statistical Report 2012, ICC Bull. 24 (1) (2013), 5, 13. Statistical Report 2013, ICC Bull. 25 (1) (2014), 5, 14. Spagnolo p. 123. UNCITRAL Secretariat, Technical Co-Operation and Assistance, UN Doic. A/CN.9/627 paras. 8–9. Spagnolo, in: Di Matteo (ed.), International Sales Law: A Global Challenge (Cambridge, Mass. 2014), p. 154; Spagnolo, pp. 20–22. This was overlooked by Hoge Raad Ned. Jur. 1992 Nr. 105; Hoge Raad Ned. Jur. 2001 Nr. 391; OLG Jena TranspR-IHR 2000, 25 with note Herber = IPRspr. 1999 Nr. 25 p. 59 et seq. To the same avail as here Trib. Padova CISG-online No. 967; Mankowski, RIW 2003, 2, 10; Looschelders, Internationales Privatrecht (2003) Art. 27 EGBGB note 13; Magnus, in: Staudinger, BGB, CISG (ed. 2013) Art. 6 CISG notes 64 et seq.; Ferrari, in: Schlechtriem/Schwenzer, CISG (6th ed. 2013) Art. 6 CISG note 43; Saenger, in: Ferrari/ Kieninger/Mankowski/Otte/Saenger/Ansgar Staudinger Art. 6 CISG Rn. 7; Martiny, in: Münchener Kommentar Art. 3 note 31; Rauscher/von Hein Art. 3 Rom I-VO note 63; Magnus, in: Staudinger, Art. 3 Rom I-VO note 62. Favoring a full conflicts choice of law Siehr, RabelsZ 52 (1988), 587, 612; Piltz, NJW 1989, 615, 617; Lindbach, Rechtswahl im Einheitsrecht am Beispiel des Wiener UN-Kaufrechts (1996) p. 203; Arnd Lohmann, Parteiautonomie und UN-Kaufrecht (2005) pp. 317–334. See only Herber, in: Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht (2nd ed. 1995) Art. 6 CISG Rn. 31; Magnus, in: Staudinger, Art. 6 CISG note 65; Schwartze, Europäische Sachmängelgewährleistung beim Kauf (2000) p. 598; Ferrari, in: Schlechtriem/Schwenzer (6th ed. 2013) Art. 6 CISG note 43 and generally Rigaux, Cah. dr. eur. 1988, 305, 316–319; Lagarde, RCDIP 80 (1991), 287, 300 et seq.; Mankowski pp. 228 et seq.; Strikwerda, in: Het NIPR geannoteerd – Annotaties opgedragen aan Mathilde Sumampouw, 1996, S. 124, 126 Nr. 8.

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is generally governed by private autonomy resulting in only a slight reduction of the effects which an agreement in favour of, and opting into, the CISG would have. h) “International Law” Parties sometimes opt for “international law” to be applied, particularly so in contracts 284 between States and private investors.981 The private investor wants to slip away from the grip of the State in which he is investing. The seemingly neutral “international law” shall become some kind of safeguard against this State legislating in its own favour.982 But “international law” is a dark horse and does not generate precise implications suited for a lex causae. “International law” most likely will not contain rules on the breach of contracts or on default.983 And some uncertainty as to whether the State concerned will honour and in practice accept the choice of law clause remains anyway. If it is willing to deprive the foreign investors, it will find a way to do so. Furthermore, international law traditionally is law between States, and positions at law which private subjects could enforce, are scarce at best.984 “Principles of international law”, achieving five scores in ICC arbitration in 2014,985 fares little if any better. So-called concurrent choice of law clauses,986 providing for the application of the law of the 285 respective State insofar as it is consistent with international law, fare little better if at all. “Internationalising” a contract provides only a small degree of protection against unilateral state action987 and does not immunise the contract enough. i) “European Law” “European Law” (or “EEC law” or “EU law”) is also a qualifier for a miscast agreement, for 286 there is nothing like a corpus of European law open for choice.988 The body of EU law is far from complete, and PECL, DCFR or ACQP are soft law, not part of EU law. Something like an official common private law of the EU Member States does not exist. The object of the intended choice thus cannot be identified, applying even the most benevolent standards of interpretation. Isolated choices of this kind can be detected in ICC arbitration, as singularities in 2008,989 2011,990 and 2013.991 2012 saw a record 4 choices of this kind.992 j) Religious Laws Choice of a religious law, if not tied to the legal order of a certain State (like Saudi-Arabia, 287

980 981 982 983 984 985 986 987 988 989 990 991 992

But see Magnus, in: Staudinger Art. 3 Rom I-VO note 62. Thorough discussion by Booysen, RabelsZ 59 (1995), 253. Jud, JBl 2006, 695, 696. Wenner para. 100. Carrascosa González p. 136. 2014 ICC Dispute Resolution Statistics, ICC Disp. Resolution Bull. 2015 (1), 7, 15. Born pp. 165–166. Born p. 166. Brödermann, in: FS Dieter Martiny (2014), p. 1045, 1063. Statistical Report 2008, ICC Bull. 20 (1) (2009), 5, 13. Statistical Report 2011, ICC Bull. 23 (1) (2012), 5, 14. Statistical Report 2011, ICC Bull. 25 (1) (2014), 5, 14. Statistical Report 2012, ICC Bull. 24 (1) (2013), 5, 13.

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Bahrain, Indonesia, or Israel), can constitute a materiellrechtliche Verweisung subject to, and in the framework of, the domestically mandatory rules of the applicable law.993 aa) Sharia 288 The most common example is a choice of the Sharia without nominating it as part of the

legal order of a certain Islamic State. It does not establish a valid conflicts choice of law.994 Even the materiellrechtliche Verweisung will have to cope with the difficulty of identifying those rather rare elements of the Sharia which are related to contracts; in fact issues might concentrate on the Riba, the interdiction to demand interest directly and the ensuing constructions to reach the same commercial results by other means, particularly by a system of crediting and re-lending a higher sum. 289 In the context of Islamic Banking995 or Islamic Finance996 the Sharia lurks around the

corner.997 There it potentially gains practical importance and some prominence.998 To ban religious rules from the realm of conflicts choice of law is a very important argument why non-State law should not be the object of a conflicts choice of law,999 the more so since they 993 994

995

996

997

998

200

See only Magnus, in: Staudinger, Art. 3 note 49. Shamil Bank of Bahrain v. Beximco Pharmaceuticals Ltd. [2004] 1 WLR 1784 (C.A.); noted i.a. by Bälz, IPRax 2005, 44; approvingly Sambugaro, EuLF 2008, I-126, I-128; McParland para. 4.89. On this phenomenon e.g. Kabir Hassan/Mervyn K. Lewis, Handbook of Islamic Banking (2007); Ashrati, Islamic Banking (2008); Bolsinger/Breschendorf, ZBB 2009, 460; Grieser, WM 2009, 586; Zerwas/Demgensky, WM 2010, 692; Momen, RIW 2010, 367; Casper, ZBB 2010, 345; Casper, in: FS Klaus J. Hopt (2010), p. 457; Casper, RWiss 2011, 251; Sorge, ZBB 2010, 363; Sacarcelik, SZW 2010, 10; Sacarcelik, ZBB 2010, 439; Yahya Baamir, Shari’a Law in Commercial and Banking Arbitration (2010); Lasserre Capdeville, Rev. dr. banc. fin. mars-avril 2011, p. 24; Achi/Forget, Rev. dr. banc. fin. mars-avril 2011, p. 27; Zeyyad Cekici, Rev. dr. banc. fin. mars-avril 2011, p. 31; Durand/Hazoug, Rev. dr. banc. fin. mars-avril 2011, p. 34; Storck/Zeyyad, Rev. dr. banc. fin. mars-avril 2011, p. 38; Riassetto, Rev. dr. banc. fin. marsavril 2011, p. 43; Colón, 46 Texas Int’l. L.J. 411 (2011); Aldohni, The Legal and Regulatory Aspects of Islamic Banking (2011); Masud, 32 U. Pa. J. Int’l. L. 1133 (2011); Charbonnier, Islam: droit, finance et assurance (Bruxelles 2011); Aldohni, The Legal and Regulatory Aspects of Islamic Banking (2011); Hart/ Childs, (2011) 26 JIBFL 425; Nethercott/David M. Eisenberg (eds.), Islamic Finance – Law and Practice (2012); Abdallah, Bull. Joly Bourse 2013, 374; Posch, in: FS Attila Fenyves (2013), p. 729; Rasyid, Arab L. Q. 27 (2013), 343; Sacarcelik, Rechtsfragen islamischer Zertifikate (Sukuk) (2013); Garba, (2014) 29 JIBLR 166; Rupert Reed, [2014] JIBFL 573; Scott Morrison, (2014) 29 JIBLR 417; Scott Morrison, (2015) 30 JIBLR 151; Al-Zarqā, Introduction to Islamic Jurisprudence (Kuala Lumpur 2014); Hashim Kamali/ Ainon Yussof, Islamic Transactions and Finance (Kuala Lumpur 2014); Malkawi, (2015) 30 JIBLR 143; Decock, TBH 2015, 160. On this e.g. Momen, RIW 2010, 367; Hans-Georg Ebert/Thiessen (eds.), Das islamkonforme Finanzgeschäft, 2010; El-Gamal, Finance islamique (Bruxelles 2010); Gassner/Wackerbeck, Islamic Finance (2n ed. 2010); Charbonnier, Islam: droit, finance et assurance (Bruxelles 2011); Hart/Childs, (2011) 26 JIBFL 425; Nethercott/David M. Eisenberg (eds.), Islamic Finance – Law and Practice, Oxford 2012; Abdallah, Bull. Joly Bourse 2013, 374; Posch, in: FS Attila Fenyves (2013), p. 729; Rasyid, Arab L. Q. 27 (2013), 343. See only Djaraouane/Serhal, RDAI/IBLJ 2009, 115, 119 et seq.; Aldohni, [2009] JIBFL 350; Luttermann, JZ 2009, 706; Lemeux, Euredia 2009, 387. Shamil Bank of Bahrain E.C. v. Beximco Pharmaceuticals Ltd. [2004] EWCA Civ 19, [2004] 1 WLR 1784 at [48] (C.A., per Potter L.J.); Halpern v. Halpern [2007] EWCA Civ 291, [2007] 2 All ER (Comm) 330, [2007] 3 All ER 478 at [22] (C.A., per Waller L.J.); Lemeux, Euredia 2009, 387.

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are inherently likely to find expression in archaic language and broad moral principles, the precise application of which to modern commercial disputes will be difficult.1000 Furthermore, there might be a quarrel between different schools of thinking, or the sources of law lack clarity.1001 The Sharia lacks two essentials of law in the modern sense, namely impartiality of its drafters and proper accessibility.1002 If courts in the Western world are called upon to resolve an ensuing dispute, the choice of the Sharia is a risky and not recommendable avenue.1003 A combination with a choice of State law appears generally feasible.1004 A clause “Subject to 290 the Principles of the Glorious Sharia’a, this Agreement shall be governed by and construed in accordance with the law of England.” thus should be recognised1005 and not invalidated for perplexity.1006 Too much respect for religious law is undue, the more so if this would lead to a State court rejecting even a materiellrechtliche Verweisung with the argument that it is not for State courts to control religious law.1007 The choice of the law of State which is based on the Sharia or compatible with the Sharia 291 does not pose similar problems, for it nonetheless is a traditional choice of State law, even if it produces the effect of an indirect choice of the Sharia.1008 But the supplemental regime is clear, and the hierarchy of sources is equally clear. bb) Jewish Law General Jewish law, the Halachah, as such and not as part of the legal order of Israel or any 292 other country which is religiously split referring to the law of the respective religious community, cannot be the object of a valid conflicts choice, either.1009 k) Private sets of rules (e.g. FIFA) If the parties agree to apply a given private set of rules (e.g. FIFA rules of the “law of Dubai 293 International Financial Centre”, as it was chosen one time in a contract subject to ICC arbitration in 2012)1010, this establishes a materiellrechtliche Verweisung and cannot deviate

999 1000 1001 1002 1003 1004 1005 1006 1007

1008

1009

1010

Briggs, para. 10.08; Briggs, (2009) 125 LQR 191 et seq. Briggs, para. 10.08. Wenner para. 86. Pillet/Bosković, in: Corneloup/Joubert p. 173, 197. Pillet/Bosković, in: Corneloup/Joubert p. 173, 201. Pillet/Bosković, in: Corneloup/Joubert p. 173, 197. Magnus, in: Staudinger, Art. 3 note 49. To this avail Briggs, para. 10.07; von Hein, in: Rauscher, Art. 3 note 60. As Shamil Bank of Bahrain v. Beximco Pharmaceuticals Ltd. [2004] 1 WLR 1784 (C.A.) does. One might speculate about the true reasons behind this decision which might be highly political on both levels of domestic and foreign policy. Who dares imagine what might happen if a State court in a western country declared the riba of the glorious Sharia’a unenforceable? See The Investment Dar Co. KSCC v. Blom Developments Bank SA [2009] EWHC 3545 (Ch); Pillet/ Bosković, in: Corneloup/Joubert p. 173, 198. Halpern v. Halpern [2007] 1 All ER 478 (C.A.) = ZEuP 2008, 618 with note Heidemann; von Hein, in: Rauscher, Art. 3 note 60; Magnus, in: Staudinger, Art. 3 note 49; McParland para. 4.90. Statistical Report 2012, ICC Bull. 24 (1) (2013), 5, 13.

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from the domestically mandatory rules of the applicable law.1011 However international the ambition of such a private set of rules and however far reaching the self-regulatory and selfsufficient the own understanding of such private set of rules, it can not escape being regulated by the lex contractus.1012 l) Lex mercatoria or New Law Merchant 294 The lex mercatoria is a brainchild primarily of the international arbitration community,1013

said to be “invented”, or better systematised, by Berthold Goldman1014 and his academic pupils, Philippe Kahn1015 and Philippe Fouchard,1016 the famous École de Dijon.1017 It is at its core a lex arbitri.1018 The notion1019 conceals with a thin veil what is really at stake: the 1011

1012 1013

1014

1015

1016

1017 1018 1019

202

See only Martiny, in: Münchener Kommentar zum BGB Art. 3 note 33; Magnus, in: Staudinger, Art. 3 note 57. BGE 132 III 285; in detail Kondring, IPRax 2007, 241. See only von Hoffmann, IPRax 1984, 106; von Hoffmann, in: FS Gerhard Kegel zum 75. Geb. (1987), p. 215; Lando, in: Liber amicorum Hélène Gaudemet-Tallon (2008), p. 747, 748–751. Goldman, Arch. phil. dr. 9 (1964), 177; Goldman, Clunet 106 (1979), 475; Goldman, Forum internationale 1983, 3; Goldman, in: Lew (ed.), Contemporary Problems in International Arbitration (1986), p. 113; Goldman, in: Études Pierre Lalive (Bâle 1993), p. 241. Philippe Kahn, La vente commerciale internationale (1961); Philippe Kahn, in: L’actualité de la pensée de Berthold Goldman (2004), p. 25. Fouchard, L’arbitrage commercial international (1965); Fouchard/Gaillard/Goldman, Traité de l’arbitrage commercial international (1996); Gaillard/Savage, Fouchard/Gaillard/Goldman on International Commercial Arbitration (1999). Dasser, RabelsZ 77 (2013), 449, 450; Klaus Peter Berger, in: FS Helmut Rüßmann (2013), p. 665, 669. Béraudo, in: Mélanges Paul Lagarde (2005), p. 93, 102. For further discussion e.g. Berman/Kaufman, 19 Harv. J. Int’l. L. 221 (1978); Dasser, Internationale Schiedsgerichte und lex mercatoria (1989); Dasser, in: Reinhard Zimmermann/Blaurock/Kirchner/Spellenberg (Hrsg.), Globalisierung und Entstaatlichung des Rechts, vol. II: Nichtstaatliches Privatrecht – Geltung und Genese (2008), p. 129; Weise, Lex mercatoria (1990); Osman, Les principes généraux de la lex mercatoria (1992); De Ly, International Business Law and Lex Mercatoria (Amsterdam/New York/Oxford 1992); Ursula Stein, Lex mercatoria – Realität und Theorie (1995); Gaillard, 10 ICSID Rev. 208 (1995); Pamboukis, La lex mercatoria en tant que droit applicable aux obligations contractuelles (1996); Carbonneau (ed.), Lex mercatoria and Arbitration (2nd ed. 1998); Seraglini, Lois de police et justice arbitrale internationale, 2001; Marrella, La nuova Lex Mercatoria (Padova 2003); Arzu Oğuz, Lex mercatoria (Ankara 2004); Marella, Sociologiá dir. 2005, 249; Calvo Caravaca/Carrascosa González, in: Calvo Caravaca/Carrascosa González (dir.), Estudios sobre contratación internacional (2006), p. 55; Calvo Caravaca (dir.), Nueva lex mercatoria y contratos internacionales (Bogotá 2006); Dalhuisen, 24 Berkeley J. Int’l. L. 129 (2006); Dalhuisen, Dalhuisen on Transnational Comparative, Commercial, Financial and Trade Law, vol. I (5th ed. 2013); Hans-Patrick Schroeder, Lex mercatoria arbitralis (2007); Karsten Schmidt, in: Murakami/Marutschke/Riesenhuber (eds.), Globalisierung und Recht – Beiträge Japans und Deutschlands zu einer internationalen Rechtsordnung im 21. Jahrhundert (2007), p. 153; Norbert Horn, in: FS Karsten Schmidt (2009), p. 705; Konradi, in: Gessner (ed.), Contractual Certainty in International Trade (2009), p. 49; Symeonides, in: FS Konstantinos Kerameus (2009), p. 1397; Thomas Schultz, Yb. PIL 10 (2008), 667; Galgano, Lex mercatoria (5th ed. Bologna 2010); Gimenez Corte, Usos comerciales, costumbre jurídica y nueva “lex mercatoria” en América Latina (Buenos Aires 2010); Mendes, Arbitragem, lex mercatoria e direito estatal (São Paolo 2010); Klaus Peter Berger, The Creeping Codification of the New Lex Mercatoria (2nd ed. Alphen 2010); Klaus Peter Berger, in: In Memoriam Thomas Wälde

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emancipation of arbitration from municipal law. This carries a certain pre-modern pedigree.1020 However, who decides against an application of legal rules should do this openly and opt for amiable composition. If he does not so, he has to bear the consequences.1021 That the lex mercatoria has been eliminated from the list of possible objects of choice under 295 Art. 3 has an impact on arbitration proceedings if the seat of the arbitration is located in a Member State. This certainly is a minority view at present, but on closer inspection and on taking the wording of Art. 1 (2) (e) seriously, the Rome I Regulation has to be applied by arbitration tribunals in Member States.1022 The best existing attempt to circumscribe the contents of lex mercatoria, the CENTRAL 296 Transnational Law Digest & Bibliography,1023 based on some surveys, compiles not less than one hundred thirty possible elements which come from very different sources and are sometimes at variance with each other. Sometimes the elements listed there even are contradictory to each other and thus mutually inconsistent, particularly where principles like the riba from Islamic law are included. The list lacks inner coherence and structures. Although it is the best one has for the time being,1024 it rather resembles a patchwork pattern from elements which are observed in some kind of cross-border commerce at least in some part of the world.1025 The ingredients are in a flow, indeterminable at last1026 (and at best). General maxims need at least some concretisation,1027 even if comprehensive completeness is not required.1028 To use the International Encyclopaedia of Comparative Law as another source1029 might only be a participating academic’s dream. Furthermore, it is completely unclear whether lex mercatoria means the same for one in- 297

1020 1021

1022

1023 1024

1025 1026 1027 1028 1029

(2011), p. 79; Klaus Peter Berger, in: Christian Bumke/Röthel (eds.), Privates Recht (2012), p. 119; Ayoğlu, Lex Mercatoria (Istanbul 2011); Campanale, Trasporti 110 (2010), 17; Cordero Moss, in: In Memoriam Thomas Wälde (2011), p. 45; Zumbansen, in: Christian Bumke/Röthel (eds.), Privates Recht (2012), p. 135; Shen Wei, Rethinking the New York Convention (2012) pp. 159–224; Gimenez Corte, (2012) 3 Trans. Leg. Theory 345; Nueber, Transnationales Handelsrecht (Wien 2013); Connerty, (2014) 30 Arb. Int. 701. Muir Watt, in: Mélanges Pierre Mayer (2015), p. 591, 603. Mankowski, in: Leible, p. 63, 101; Mankowski, Interessenpolitik p. 64. But see to a different avail Lando, in: Liber amicorum Hélène Gaudemet-Tallon (2008), p. 747, 748. See with extensive argumentation Mankowski, RIW 2011, 30; McGuire, SchiedsVZ 2011, 257; Czernich, wbl 2013, 554. For the prevailing opinion see Art. 1 note 11 (Calvo Caravaca/Carrascosa González) and Schmidt-Ahrendts/Höttler, SchiedsVZ 2011, 267, 268–272; Brödermann, Unif. L. Rev. 2011, 589, 598– 602; Hausmann, in: FS Bernd von Hoffmann (2011), p. 971, 977–979; Grimm, SchiedsVZ 2012, 189; Pfeiffer, NJW 2012, 1169, 1170–1171; Schilf, RIW 2013, 678; with some doubts Hermann Hoffmann/ Stegemann, JuS 2013, 207, 210; open as to the result and calling for caution Ostendorf, IHR 2012, 177, 178. Accessible under http://www.trans-lex.org and http://www.tldb.net. Fortier, Arb. Int. 17 (2001), 121, 127; Klaus Peter Berger, in: In Memoriam Thomas Wälde (2011), p. 79, 81; Dasser, RabelsZ 77 (2013), 449, 451 et seq. Diedrich, RIW 2009, 378, 380. Kessedjian, Rev. int. dr. comp. 1995, 373, 383. See only Jud, JBl 2006, 695, 702. Jud, JBl 2006, 695, 703. Lando, in: Liber amicorum Hélène Gaudemet-Tallon (2008), p. 747, 752.

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dustry as it means for the other. Some industries like, if not outrightly love, to claim their idiosyncratic and private lex mercatoria.1030 For instance, the ISDA Master Agreement1031 is said to be part, and a pivotal part at that, of the lex mercatoria in the financial industry.1032 298 The so-called lex mercatoria is and will ever be a mere pseudo-law,1033 an amorphous

phenomenon with unclear contents and of extremely dubitable quality.1034 At best, it can be called Esperanto of the law, a fascinating construct without any relevant market.1035 Tons and tons of academic writings by “mercatorists” have not been able to generate a likely enthusiast response in the practitioners’ world.1036 Even some of the fiercest and most ardent “mercatorists” have felt bound to concede that every attempt even remotely to codify the socalled lex mercatoria is doomed to fail utterly due to the informal, dynamic, and highly volatile nature of its object.1037 Already the alleged continuity with a medieval Law Merchant1038 or the renaissance of a New Law Merchant can be unveiled as a myth.1039 299 At least the very basic requirements, the cohesiveness and thoroughness needed to satisfy

the demand for justice, are lacking.1040 The most prominent example was a contract for the transfer of a professional football player between two clubs which was made subject to the Statute of the FIFA. Such contract does not live in its own, separate FIFA world, but the FIFA Rules are only applicable in the framework of the domestically mandatory rules of the applicable law.1041 300 That any so-called lex mercatoria cannot be chosen under the Rome I Regulation is no cause

for real concern since, such a choice appears only rarely, if ever, in practice.1042 The published 1030

1031

1032

1033

1034 1035 1036 1037

1038

1039

1040

1041 1042

204

See Dalhuisen, 24 Berkeley J. Int’l. L. 129 (2006); Vardi, Riv. crit. dir. priv. 2010, 473 (lex financiaria), Molineaux, 14 (1) J. Int. Arb. 55 (1997) (lex constructionis) or Andreas Maurer/Beckers, FS Gunther Teubner (2009), p. 811; Andreas Maurer, Lex maritima (2012) (lex maritima). Which stars amongst the few standard contracts which have attracted the blessing of own commentaries: Zobl, The 1992 ISDA Master Agreement (1995); Reiner, ISDA Master Agreement (2013). Wielsch, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 71, 85–86; Eidenmüller, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 1, 5. Rolf A. Schütze, Schiedsgericht und Schiedsverfahren (4th ed. 2007) para. 202; Mankowski, Interessenpolitik p. 29. Reimann, in: Verschraegen p. 1, 15; Mankowski, Interessenpolitik p. 29. Dasser, RabelsZ 77 (2013), 449, 450. Dasser, RabelsZ 77 (2013), 449, 450. Fortier, Arb. Int. 2001, 121, 126; Wasserstein Fassberg, 5 Chi. J. Int’l. L. 67, 82 (2004); Klaus Peter Berger, in: FS Helmut Rüßmann (2013), p. 665, 673. See only Horn, in: FS Karsten Schmidt (2009), p. 705. For the source of an alleged medieval lex mercatoria in England see Frank Eichler, Lex mercatoria – Das englische Marktrecht des Mittelalters (2008). Kadens, 90 Texas L. Rev. 1153 (2012); Cordes, in: Handwörterbuch zur deutschen Rechtsgeschichte (HRG), vol. 3 (2nd ed., 20th instalment 2014); Cordes, in: 100 Jahre Rechtswissenschaft in Frankfurt, 2014, S. 383. See only Béraudo, in: Mélanges Paul Lagarde (2005), p. 93, 102; Sendmeyer, Contratto e impresa/Europa 2009, 792, 797; Wegner p. 61. BGE 132 III 285; in detail Kondring, IPRax 2007, 241. In particular Reymond, in: L’arbitrato commerciale internationale in Svizzera e in Italia (1992), p. 5, 9.

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ICC Arbitration Awards showed not a single choice of lex mercatoria for the years 2000 to 2006.1043 The same holds true for 2008,1044 2009,1045 20101046 and 2013.1047 A single occurrence has to be noted in 20111048 and in 2015 respectively, the latter even believing the UNIDROIT Principles to reflect the lex mercatoria.1049 Business people (to be distinguished from their lawyers) do not know the lex mercatoria.1050 Transaction business in particular has effectively banned any notion of a lex mercatoria.1051 The lex mercatoria springs off the minds of learned lawyers and arbitrators, not business people.1052 To inhibit a choice of a lex mercatoria thus is no a problem germane to business practice.1053 The number of published awards claiming to apply a lex mercatoria is misleading since it is caused by path-dependency: Such awards are published with a higher probability than “ordinary” awards and are normally written by academic proponents of the lex mercatoria.1054 The policy of publication is potentially partisan. Generally, a “choice” of “the lex mercatoria” can be castigated as a bad choice without the necessary reflection.1055 m) Uniform usages of international commerce An unspecified reference to “uniform usages of international commerce” or like features 301 does not qualify as a proper choice of law. Its object is even so undetermined that it would not qualify as an incorporation, a materiellrechtliche Verweisung, either.1056 n) General principles of law Another classic is that parties opt for the application of “general principles of law”, most 302 times as some kind of escape route in state contracts, a desperate attempt of the private party to wrestle the competence to alter the rules away from the State party to a presumedly other level of law beyond the reach of that State.1057 The expression “general principles of law” is a 1043

1044 1045 1046 1047 1048 1049 1050

1051

1052

1053

1054

1055 1056

1057

Dasser, in: Zimmermann/Blaurock/Kirchner/Spellenberg (eds.), Globalisierung und Entstaatlichung des Recht, vol. 2 (2008), p. 129, 139. Statistical Report 2008, ICC Bull. 20 (1) (2009), 5, 13. Statistical Report 2009, ICC Bull. 21 (1) (2010), 5, 12. Statistical Report 2011, ICC Bull. 22 (1) (2011), 5, 14. Statistical Report 2013, ICC Bull. 25 (1) (2014), 5, 14. Statistical Report 2011, ICC Bull. 23 (1) (2012), 5, 14. Final Award ICC Case no. 16816, Yb. Comm. Arb. XL (2015), 236, 264. Dasser, in: Zimmermann/Blaurock/Kirchner/Spellenberg (eds.), Globalisierung und Entstaatlichung des Recht, vol. 2 (2008), p. 129, 147. Delaume, 63 Tul. L. Rev. 575, 609 et seq. (1989); Böhlhoff, in: Liber amicorum Thomas Bär und Richard Karrer (1997), p. 31, 37; Böhlhoff, in: FS Rolf A. Schütze (1999), p. 153, 157. Dasser, in: Zimmermann/Blaurock/Kirchner/Spellenberg (eds.), Globalisierung und Entstaatlichung des Recht, vol. 2 (2008), p. 129, 155. See Mustill, in: Liber amicorum Lord Wilberforce (1987), p. 149, 161, 179; Reymond, in: L’arbitrato commerciale internationale in Svizzera e in Italia (1992), p. 5, 9; Gaillard, Clunet 122 (1995), 5, 27; Poudret/Besson, Comparative Law of International Arbitration (2nd ed. 1997) para. 696. Poudret/Besson, Comparative Law of International Arbitration (2nd ed. 1997) para. 695; Mankowski, RIW 2011, 30, 41. Vidmar, ZfRV 2015, 219 (219). Giardina, RDIPP 1992, 461; Giardina, in: Hommage François Rigaux (1993), p. 223; Carrascosa González p. 165. See Neuhaus, GYIL 21 (1978), 60, 66.

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concept of international law and has found its most prominent place in Art. 38 (1) (c) of the Statute of the ICJ and formerly in Art. 38 (c) of the Statute of the Permanent International Court of Justice. It is understood by the prevailing doctrine as principles of international law, including international customary law or Treaties, or principles common to the municipal laws of the Member States.1058 Ascertaining a general principle1059 requires comparative research of a high degree1060 coupled with inductive reasoning.1061 In PIL, it might be theoretically possible to detect general principles of private law, but practically this is unworkable and untenable.1062 It is impossible to answer a question as simple as it is fundamental: How “general” must a principle be in order to become a proper source of law?1063 303 A variation sensible at first glance appears for instance in Art. 23 ICC Agency Model

Contract:1064 It refers to “the principles of law generally recognised in international trade as applicable to international agency contracts” with the exclusion of national laws. This comes close to the recognition of international uses as a source of law.1065

304 But for practical purposes, even this suffers from the second fundamental shortcoming of

any reference to general principles: They might lack the specificity required to solve particular legal issues.1066 When it comes to details, “general” might prove to be too general and unspecific. Recommendations read that it would be preferable for parties to agree on such principles as a concurrent body of rules, complementing, and being supplemented by, a national law only.1067 A reference purely to general principles must not amount to a conflictual choice of law anyway.1068 Such reference might result from a bad compromise or from careless drafting.1069 o) Inexistence of “self-regulatory contracts” or “contrats sans lois”

305 For some time it was discussed whether there could be something like a self-regulatory

contract or “contrat sans loi” which was complete, self-sufficient1070 and self-executory, so that it might not need any lex contractus to be determined.1071 Contracts were deemed to be part of a globalised law.1072 1058

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1060

1061 1062 1063 1064 1065 1066 1067 1068 1069 1070 1071

206

See in more detail e.g. Köck, in: FS 50 Jahre ZfRV (Wien 2013), p. 107; Gaja, General Principles of Law, in: Max Planck Encyclopedia of Public International Law (2013), electronic version. On the respective case of law of international courts Gaia, General Principles of Law, in: Wolfrum (ed.), Max Planck Encyclopedia of Public International Law (2013), electronic version paras. 7 et seq. See only Mosler, in: Bernhardt (ed.), Encyclopedia of Public International Law, vol. II (Amsterdam etc. 1995), p. 511, 517. See only Basedow, JZ 2016, 269, 271. See only Diedrich, RIW 2009, 378, 380. See only Diedrich, RIW 2009, 378, 380. ICC Publication No. 496. See Cass. D. 1995, 229 with note Gavalda; Béraudo, in: Mélanges Paul Lagarde (2005), p. 93, 100. Franz T. Schwarz/Konrad, The Vienna Rules (2010) para. 24–011. Franz T. Schwarz/Konrad, The Vienna Rules (2010) para. 24–011. Carrascosa González p. 136. Vidmar, ZfRV 2015, 219 (219). See only Hugh Collins (2004) 10 Eur. L.J. 787. See on the topic in particular Carbone, RDIPP 1983, 279; Béraudo, in: Mélanges Paul Lagarde (2005), p. 93; Gannagé, Rapport général, XVIIth Congress of the International Academy of Comparative Law

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In the extreme a clause was inserted into the contract that reads “The law between the parties 306 is the contract itself.”1073 In order to give full justice to the draftpersons’ ingenuity one should hasten to add that the next sentence reads: “Guinean law shall be used for the interpretation and implementation of this Agreement only accessorily and only in the case where the Agreement would leave a problem unsolved.”1074 Parties to a contract might adopt the American mode of drafting a contract striving for comprehensiveness in order to avoid the possible pitfalls of a yet undiscovered lex contractus.1075 But a contract cannot exist in a legal vacuum,1076 even if it aims at self-creating such vacuum. 307 A contract is a mere piece of paper devoid of any legal effects unless it is made by reference to some system of private law which defines the obligations assumed by the parties.1077 Still “self-regulation” can only prevail if and insofar as it is legitimised by State law.1078 Anything else would be blind trust in the supposedly superior wisdom of the contract parties.1079 Even such wisdom has its natural limits, and no contract is so complete that it could exist without default rules.1080 A “contract” without a backing base in a State-made lex causae would lack enforceability and would amount only to a Gentlemen’s Agreement not binding in a legal sense.1081 p) Negative choice of law The “contrat sans loi” must be clearly distinguished from the so-called negative choice of 308 law. The latter excludes only a certain law from application without positively designating any other law as the chosen law; its consequence is the search for the objectively applicable law.1082 Such clauses are generally admissible.1083 A negative choice might even be inferred if a reference to a certain law is deleted from an earlier draft and one of the parties was at least

1072

1073

1074

1075 1076

1077 1078

1079 1080 1081 1082 1083

(Utrecht 2006); Gannagé, Electr. J. Comp. L. 11.3 (2007) art. 1; Pauknerová, in: Liber amicorum Hélène Gaudemet-Tallon (2008), p. 775. Muir Watt, Rec. des Cours 307 (2004), 29, 119 et seq.; Loquin/Ravillon, in: Loquin/Kessedjian (dir.), Travaux du CREDIMI (2000), p. 91. Wenner, in: FS Ulrich Werner (2005), p. 39, 40 extracts this example from Maritime International Nominees Establishment (MINE) v. Republic of Guinea 693 F. 2d 1094 (D.C. Cir. 1982). As cited by Kodek, in: Verschraegen p. 85, 89 from Maritime International Nominees Establishment (MINE) v. Republic of Guinea 693 F. 2d 1094 (D.C. Cir. 1982). Kondring, IPRax 2006, 425 (425). Amin Rasheed Corp. v. Kuwait Insurance Co. [1984] A.C. 50, 65 (H.L., per Lord Diplock); Halpern v. Halpern [2007] 1 All ER 478 [28] (C.A., per Waller L.J.); Sambugaro, EuLF 2008, I-126, I-130; Dicey/ Morris/Collins, para. 23–081. Amin Rasheed Corp. v. Kuwait Insurance Co. [1984] A.C. 50, 65 (H.L., per Lord Diplock). See only Fouchard/Gaillard/Goldman, International Commercial Arbitration (1999) p. 800; Symeonides, in: FS Konstantinos Kerameus (2009), p. 1397, 1403; Carrascosa González p. 136 each with further references. Cordero Moss, in: In Memoriam Thomas Wälde (2011), p. 45, 73. Wegner p. 64. Rigaux, Cah. dr. eur. 1988, 306, 318; Carrascosa González p. 135. Magnus, in: Staudinger, Art. 3 note 67; Ringe, in: jurisPK Art. 3 note 11. See only Wenner, in: FS Ulrich Werner (2005), p. 39, 40; Wenner, para. 184. Contra Schwander, in: FS Max Keller (1989), p. 473, 480 et seq.

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content to allow the other party to continue in its belief that this law would not apply.1084 But the advisability and practicability of such negative choice is just another question.1085 In particular it is inadvisable if it excludes the very law which would be lex contractus pursuant to Art. 4.1086 q) INCOTERMS 309 The INCOTERMS as such and in their entirety cannot be chosen at all. The INCOTERMS as

promulgated by the ICC and regularly revised after some years consist of single clauses which are mutually exclusive and cannot be combined with each other. Two different modes to determine the place of performance cannot work simultaneously. And only one party can be under an obligation to provide for transport or customs clearance, not both simultaneously. One, and only one INCOTERM can be inserted for the same commercial transaction. A choice of “INCOTERMS” occurs in ICC arbitration once in a while, in two contracts in 20091087 and 20101088 respectively, in four contracts 20111089 and in one contract 2013.1090 r) Codes of Conduct 310 Codes of Conduct do not have the quality of law. This holds true even in the context of the

Internet.1091 There is nothing like a lex informatica, and mere Code of Conducts operate even below the level a lex informatica would have. s) Hague Principles on Choice of Law 311 The Hague Conference on Private International Law has promulgated the Hague Principles

on Choice of Law for International Contracts.1092 A Special Commission, chaired by Daniel Girsberger, has produced respective Draft Principles in 2012.1093 The Hague Conference was set to promulgate a final version after assent by its Council in April 2013,1094 and such a final version came forward on 19 March 2015. The Principles1095 are accompanied by an articleby-article commentary,1096 a welcome novelty in Hague work.1097 These Hague Principles 1084 1085 1086 1087 1088 1089 1090 1091 1092

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1095

208

Final Award ICC Case no. 16816, Yb. Comm. Arb. XL (2015), 236, 264. Gardella, NLCC 2009, 611, 626; Carrascosa González p. 141. Wenner, in: FS Ulrich Werner (2005), p. 39, 40; Wenner, para. 184. Statistical Report 2009, ICC Bull. 21 (1) (2010), 5, 12. Statistical Report 2010, ICC Bull. 22 (1) (2011), 5, 14. Statistical Report 2011, ICC Bull. 23 (1) (2012), 5, 14. Statistical Report 2013, ICC Bull. 25 (1) (2014), 5, 14. Discussed by Bussueil, in: Corneloup/Joubert p. 397, 408–412. The Hague Principles on Choice of Law in International Commercial Contracts, approved on 19 March 2015 http:///www.hcch.net/upload/conventions/txt40en.pdf. See in particular Consolidated Version of Preparatory Work Leading the to the Draft Hague Principles on the Choice of Law in International Contracts (Prel. Doc. No. 1), drawn up by the Permanent Bureau (Oct. 2012). Council on General Affairs and Policy of the Hague Conference 9–11 April 2013, Conclusions and Recommendations Adopted by the Council para. 7. See in more detail on the Hague Principles Lando, in: Essays in Honour of Hans van Loon (2013), p. 299; Dickinson, [2013] BJIBFL 151; Fauvarque-Cosson/Deumier, D. 2013, 2185; Symeonides, 61 Am. J. Comp. L. 873 (2013); Symeonides, RCDIP 102 (2013), 807; Neels, YBPIL 15 (2012/13), 45; Pertegás/Brooke Marshall, 39 Brooklyn J. Int’l. L. 975 (2014); Michaels, in: Liber amicorum Hans-W. Micklitz (2014), p. 43; Martiny, RabelsZ 79 (2015), 624.

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cannot be the object of a full parties’ choice of law, though, lacking the nature of substantive law. They are a conflict-of-laws-project and rather some kind of remote competitor to the Rome I Regulation1098 than a possible object of choice.1099 By their own Preamble they state as their aim and goal that they may be used to interpret, supplement and develop rules of private international law. They might serve as a framework for parties’ choice of law.1100 Hence, at their best, the Hague Principles might be chosen if one is prepared to admit a choice merely of conflict rules.1101 They might be best compared to a type of INCOTERMS for choice of law. The Hague Principles are deliberately and consciously drafted as soft law1102 and a non-binding instrument, precisely in order to avoid any risk of conflict of standards with regional binding instruments like the Rome I Regulation.1103 This is a first, namely the first time that the Hague Conference did not promulgate a binding instrument.1104 Neither are the Principles a Model Law in the formal sense.1105 The Comments ruminate that the Hague Principles will not directly interfere with the 312 Rome I Regulation, but brag out loudly that it is clear that the solutions used in them may influence the evaluation and eventual reform of the Rome I Regulation.1106 The most likely candidate for exerting such influence1107 might be Art. 6 (1) (b) Hague Principles, which deals with the battle of forms of competing choice law clauses,1108 an issue not expressly addressed1109 in the Rome I Regulation. Yet scepticism as to whether the Hague Principles will prompt any amendments to the Rome I Regulation and will get the revision machinery started appears to be the wiser course.1110 If the Hague Principles are understood and characterised as an attempt to install freedom of choice in international law (if only in soft law), it might even operate only where such freedom of choice has not been already established.1111

1096 1097 1098

1099 1100 1101

1102 1103 1104 1105

1106

1107 1108

1109 1110 1111

Http:///www.hcch.net/indes_en.php?act=conventions.text&cid=135. Symeonides, 61 Am. J. Comp. L. 873, 874 et seq. (2013). On the (few) differences between the Hague Principles on Choice of Law and the Rome I Regulation Pfeiffer, in: FS Ulrich Magnus (2014), p. 501, 502–511. See Lando, in: Essays in Honour of Hans van Loon (2013), p. 299, 301, 305. Pfeiffer, in: FS Ulrich Magnus (2014), p. 501, 502. Pfeiffer, in: FS Ulrich Magnus (2014), p. 501, 512. See on conflicts law as a feasible object of choice Art. 3 note 243–246 (Mankowski). See only Fauvarque-Cosson/Deumier, D. 2013, 2185. Pertegás, in: Essays in Honour of Michael Bogdan (Lund 2013), p. 461, 463. Girsberger, SZIER 2014, 545, 547. Introduction to the Hague Principles on Choice of Law in International Commercial Contracts para. I-8 http:///www.hcch.net/indes_en.php?act=conventions.text&cid=135. Consolidated Version of Preparatory Work Leading the to the Draft Hague Principles on the Choice of Law in International Contracts (Prel. Doc. No. 1), drawn up by the Permanent Bureau (Oct. 2012) para. 13. See Pertegás, in: Essays in Honour of Michael Bogdan (Lund 2013), p. 461, 467. In detail Garcimartín Alférez, in: Homenaje al Rodrigo Bercovitz (2013), p. 241; Kadner Graziano, Yb. PIL 14 (2012/13), 71. Yet more or less directly regulated; see Art. 3 notes 468–476 (Mankowski). Lando, in: Essays in Honour of Hans van Loon (2013), p. 299, 309. See Rühl, ERCL 2013, 61, 82.

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3. Partial choice of law a) Dépeçage as phenomenon 313 Dépeçage splits a formally uniform contract into two or more partial contracts.1112 It subjects

these partial contracts to different laws.1113 In contrast to a Teilfrage,1114 the characterisation remains the same for the entire contract. The partial contracts are not subject to different conflict rules. Hence, dépeçage is not identical with an issue approach.1115 314 Dépeçage aims at conflicts justice. It is concerned with the ideal notion of justice in PIL.1116

On the other hand, it enhances complexity1117 since the separated parts of the contract must fit together as an ensemble nonetheless. There must not be gaps or frictions. There must not be irreconcilable inconsistencies.1118 The partial contracts must be able to survive as separated contracts. Insofar they must be autonomous in relation to each other.1119 If these preconditions are not fulfilled the envisaged choice of law fails, and objective conflict rules become applicable.1120 b) Party autonomy and partial choice of law aa) General admissibility under (1) cl. 3 315 Art. 3 (1) cl. 3 expressly permits a partial choice of law: Parties may choose a certain law for a

part of their contract only.1121 Art. 3 (1) cl. 3 Rome Convention was the predecessor and remained both substantially and verbally unchanged.1122 Due to the reference in Art. 6 (1), not cherry-picking from Art. 3, this applies even for a choice of law in a consumer contract,1123 and the same is true due to the parallel Art. 8 (1) for a choice of law in a labour 1112

1113 1114

1115

1116

1117 1118

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1120 1121

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In particular Lagarde, RDIPP 1975, 649; Ekelmans, in: Mélanges Raymond Vander Elst, vol I (1986), p. 243; Jayme, in: FS Gerhard Kegel zum 75. Geb. (1987), p. 253; McLachlan (1990) 61 BYIL 311; Carrascosa González, El contrato internacional (fraccionamiento versus unidad) (1992); Cocteau-Senn, Dépeçage et coordination dans le règlement des conflits de lois (2001); Mankowski, in: FS Ulrich Spellenberg (2010), p. 261; Nourissat, in: Corneloup/Joubert p. 205. See only Kropholler, Internationales Privatrecht (6th ed. 2006) p. 131 (§ 18 I). See only Mankowski in: von Bar/Mankowski, Internationales Privatrecht I: Allgemeine Lehren (2nd ed. München 2003) § 7 note 185. Spellenberg, in: Münchener Kommentar zum BGB, vol. 10: Arts. 1–46 EGBGB; IPR (4th ed. 2006) Vor Art. 11 EGBGB note 22 (not reappearing in 5th ed. 2010 or 6th ed. 2015); Mankowski, in: FS Ulrich Spellenberg (2010), p. 261, 262. Spellenberg, in: Münchener Kommentar zum BGB, vol. 10: Arts. 1–46 EGBGB; IPR (4th ed. 2006) Vor Art. 11 EGBGB note 23. Mankowski, in: FS Ulrich Spellenberg (2010), p. 261, 262; see C. G. Stevenson 2003 Indiana L. Rev. 303. Marrella, in: Franzina (a cura di), La legge applicabile ai contratti nella Proposta di Regolamento “Roma I” (2006), p. 28, 32–33; Ragno, in: Ferrari, Art. 3 note 45. Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV u. MIC Operations BV (Case C-133/08), [2009] ECR I-9687 paras. 45 et seq. = TranspR 2009, 491 with note Mankowski. Report Giuliano/Lagarde, OJ EEC 1980 C 282/21; Nygh pp. 128–133; Carrascosa González p. 159. For the parties’ possible motivations see Carrascosa González, El contrato internacional (fraccionamiento versus unidad) (1992) pp. 257–270. Marrella, in: Boschiero p. 15, 32 et seq.; Nourissat, in: Corneloup/Joubert p. 205, 214. Seatzu, in: Boschiero p. 299, 315.

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contract.1124 The dépeçage as to parties’ choice of law completes and extends party autonomy.1125 Accordingly, it is subjected to the very limits to which party autonomy as such is subjected in the respective area.1126 Another factor to be taken into account by parties considering a partial choice of law is that the transactions costs incurred might rise substantially for acquiring information about a number of laws, be it only for limited subjects; this implies enhanced, if not outrightly multiplied costs.1127 A multiple partial choice of law is also possible.1128 If the respective parts are objectively 316 severable from each other, parties may split the contract into as many parts as they want and can choose a lex causae for each part respectively. Whether this makes sense is another question,1129 but such a total dépeçage by parties’ choice of law is admitted even if it does not feature expressly in the wording of (1) cl. 3.1130 It would be at least questionable to judge the issue of severability rather generous for parties’ choice of law,1131 since these would split yardsticks with the determination of the applicable law in lack of such choice of law. bb) Limits: severability of issues A partial choice of law must not lead to a law mix producing conflicting and inconsistent 317 results.1132 The consistence of the contract limits the opportunities open to the parties.1133 Severability of issues is the basic requirement for a partial choice of law. This has to be interpreted rather generously.1134 It covers, for instance, a severable agreement on interest due,1135 the indexation of an obligation, the split between formal and material validity of a

1124

1125

1126

1127 1128

1129

1130

1131

1132

1133 1134 1135

Arbeidshof Antwerpen RW 2003–2004, 821, 822; Mankowski, AP H. 5/2005 Nr 21 zu § 38 ZPO Internationale Zuständigkeit Bl. 3R, 5R. See only Carrascosa González, El contrato internacional (fraccionamiento versus unidad) (1992) pp. 50, 73 et passim. Carrascosa González, El contrato internacional (fraccionamiento versus unidad) (1992) pp. 88 et seq.; Mankowski, in: FS Ulrich Spellenberg (München 2011), p. 261, 263. Mankowski, RIW 2016, 457, 458. See only Lagarde RCDIP 80 (1991), 297, 302; Carrascosa González, El contrato internacional (fraccionamiento versus unidad) (1992) p. 220; Horlacher, 27 Cornell Int’l. L.J. 173, 178 (1994); Saravalle, NLCC 1995, 940, 949; Heiss in: Czernich/Heiss Art. 3 EVÜ note 32; Villani, La convenzione di Roma sulle legge applicabile ai contratti (2nd ed. Bari 2000) p. 71. Contra Ekelmans, in: Mélanges Raymond Vander Elst, vol. I (Bruxelles 1986), p. 243, 247 et seq. Critical De Nova, in: Enciclopedia del diritto, vol. XXIX (Milano 1979), p. 456, 469; Marrella, in: Franzina (a cura di) La legge applicabile ai contratti nella proposta di regolamento “Roma I” (2006), p. 28, 32. Carrascosa González, La ley aplicable a los contratos internacionales: el reglamento Roma I (2009) pp. 154 et seq. fn. 116; Mankowski, in: FS Ulrich Spellenberg (München 2010), p. 261, 264. Contra Ekelmans, in: Mélanges Raymond Vander Elst, vol. I (Bruxelles 1986), p. 243, 247 et seq. Contra Matthias Weller/Nordmeier, in: Spindler/Schuster, in: Spindler/Schuster, Recht der elektronischen Medien (3rd ed. 2015) Art. 3 note 6. Report Giuliano/Lagarde, OJ EEC 1980 C 282/17 Art. 4 Rome Convention note (8); Opinion of G-A Yves Bot in Case 133/08, [2009] ECR I-9690 para. 86; Heiss, in: Czernich/Heiss Art. 3 EVÜ note 34; Marrella, in: Boschiero p. 15, 33. Marrella, in: Boschiero p. 15, 33. Kondring, IPRax 2006, 425, 428. Magnus, in: Staudinger, Art. 3 Rom I-VO note 106.

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contract,1136 completion and performance of a contract1137 or the parties’ obligations to pay damages.1138 A partial choice of law must not be equated with a cumulative choice of law declaring two or more laws applicable to the same parts of the contract.1139 318 A partial choice of law is only permissible and possible insofar as the issue at stake is

severable and insofar as two partial contracts each in its own force can be identified. Proper object for partial choice can only be such part of the contract which does not have inseparable connections with other parts of the contract.1140 The object of a choice of law must have the inherent force to exist as an independent contract, hypothetically.1141 This might be the case in particular if one of the parties undertakes a majority of obligations.1142 Sale and subsequent services provide an example.1143 To separate the delivery as such from the ensuing erection might be possible in the event of a contract for the construction of a plant.1144 Another candidate, yet in the field of employment agreements, might be the discharge of employees.1145 In the same field, the employer’s promise for a pension to be paid after retirement is a likely candidate for separation and a partial choice of law.1146 Whether one law can be chosen for “equal work, equal pay” with regard to detached employees and another law for the other elements of the employment agreement appears questionable.1147 319 On the other hand, severability is not guaranteed quasi-automatically if performance takes

place in a number of jurisdictions.1148 The more a partial contract could exist independently of the others and the less important it is for the overall structure of the entire transaction, the more severability can be admitted.1149 320 A proper object for a partial choice of law could be the completion of the contract as opposed

to the performance of the contract.1150 If the parties want such a so-called kleine Vertrags1136

1137 1138

1139 1140

1141

1142 1143

1144 1145 1146 1147 1148 1149

1150

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Magnus, in: Staudinger, Art. 3 Rom I-VO note 109; see also OLG Hamm DWW 1996, 121; BGH RIW 2005, 144. Magnus, in: Staudinger, Art. 3 Rom I-VO note 109. OLG Frankfurt IPRax 1992, 314, 316; von Bar, vol. II, para. 426; Leible in: NomosKomm Art. 3 Rom I-VO note 40 and LG Aurich AWD 1974, 282. Kondring, IPRax 2007, 241, 244. Contra Bälz, IPRax 2005, 44, 46. Windmöller, Die Vertragsspaltung im Internationalen Privatrecht des EGBGB und des EGVVG (2000) p. 74; Leible in: NomosKomm BGB Art. 3 Rom I-VO note 39. Windmöller, Die Vertragsspaltung im Internationalen Privatrecht des EGBGB und des EGVVG (2000) p. 74; Leible in: NomosKomm BGB Art. 3 Rom I-VO note 39. Vgl A-G Yves Bot, Conclusions in Case Rs C-133/08, [2009] ECR I-9690 para. 115. A-G Yves Bot, Conclusions in Case Rs C-133/08, [2009] ECR I-9690 para. 84; Pierre Mayer/Heuzé, Droit international privé (9th ed. 2007) para. 710. Magnus, in: Staudinger, Art. 3 Rom I-VO note 106. Jacotot, RCDIP 102 (2013), 522, 527 et seq. Hessisches LAG IPRspr. 2012 Nr. 70 p. 135. More liberal Del Sol, Cah. dr. entrepr. N° 3, mai-juin 2013, 30, 31. Lagarde RCDIP 80 (1991), 287, 302. Mankowski, in: FS Ulrich Spellenberg (2010), p. 261, 264; Mankowski, AP H 5/2005 Nr. 21 zu § 38 ZPO Internationale Zuständigkeit Bl. 3R, 7. See only von Hoffmann, in: Soergel, Art. 27 EGBGB note 61; Magnus, in: Staudinger, Art. 3 Rom I-VO note 104; Leible in: NomosKomm BGB Art. 3 Rom I-VO note 40; Ferrari in: Ferrari/Kieninger/Man-

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spaltung,1151 they shall do so. A clear indication that the completion of the contract is a severable issue can be derived from Art. 10 which establishes its own rule of characterisation whereas Art. 12 is concerned with characterisation issues in the area of performance of the contract. A line can also be drawn between consensus on the one hand and validity on the other hand.1152 Generally, the rules on characterisation as contained in Arts. 10, 12 can serve as an important indication as to which issues can be regarded as separable.1153 A partial choice of law might also be an option in order to pay specific regard to certain local 321 rules for separable issues,1154 e.g. for the formalities of the sale of real property.1155 On the other hand, if in M & A transactions different choices are made for the main contract and the dispute resolution clause or for obligations and proprietary aspects, this does not amount to an example for partial choice of law under (1) cl. 2, for it disregards limits established by characterisation: Neither dispute resolution clauses nor proprietary aspects fall under the Rome I Regulation, and Art. 1 (1) or (2) (d) respectively decides the day.1156 A partial choice of law might also occur where the parties have chosen only certain rules or a 322 certain body of rules, and not a certain law of obligations in its totality and entirety. For instance, charter parties in the US trade regularly feature a clause opting for the “general maritime law of the United States”. The alternative systematisation of like clauses would lead to the rules referred to being incorporated into the contract and thus amount to a mere materiellrechtliche Verweisung. Insofar as a partial choice of law leads to inherently conflicting results which cannot be cured 323 by interpretation or adaptation, it is invalid due to perplexity.1157 Conflicting results might arise where inseparable connections exist. Inseparable connections exist for instance in the area of completing contract: Consensus is inseparable.1158 Likewise, the performance of the parties’ reciprocal obligations must not be subjected to different laws.1159 A so-called große

1151 1152

1153

1154 1155 1156 1157

1158

1159

kowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger Art. 3 Rom I-VO note 40 and Cass. soc. RCDIP 102 (2013), 518, 522. For instance Vischer, in: Liber amicorum Georges A.L. Droz (1996), p. 493, 501. See only OLG Frankfurt IPRax 1992, 314; OLG Hamburg NJW-RR 1996, 1145; Magnus, in: Staudinger, Art. 3 Rom I-VO note 109; Ferrari in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger Art. 3 Rom I-VO note 40. Jayme FS Gerhard Kegel zum 75. Geb (1987), p. 253, 263; Helmut Horn Internationales Vertragsrecht (Wien 1999) p. 81; Mankowski, in: FS Ulrich Spellenberg (2010), p. 261, 264–265. Magnus, in: Staudinger, Art. 3 Rom I-VO note 106. See OLG Hamm NJW-RR 1996, 1145. Overlooked by Wegen, in: FS Wilhelm Haarmann (2015), p. 233, 241. Windmöller, Die Vertragsspaltung im Internationalen Privatrecht des EGBGB und des EGVVG (2000) p. 74; Leible, in: NomosKomm BGB Art. 3 Rom I-VO note 39 sowie Ferrari, in: Ferrari/Kieninger/ Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger Art. 3 Rom I-VO note 39. von Hoffmann, in: Soergel, Art. 27 EGBGB note 58; Magnus, in: Staudinger, Art. 3 Rom I-VO note 109; Leible, in: NomosKomm BGB Art. 3 Rom I-VO note 40; Ferrari, in: Ferrari/Kieninger/Mankowski/ Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger Art. 3 Rom I-VO note 40. A-G Yves Bot Conclusions in Case C-133/08, [2009] ECR I-9690 para. 114; Jayme, in: FS Gerhard Kegel zum 75. Geb (1987), p. 253, 263; von Hoffmann, in: Soergel, Art. 27 EGBGB notes 59 et seq.; Heiss in: Czernich/Heiss Art. 3 EVÜ note 35; Di Blase, Guida alla giurisprudenza italiana e comunitaria di diritto

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Vertragsspaltung is inhibited even in the case of a parties’ choice of law. Such choice of law is not covered by the delegated competence vested in the parties by the PIL of the lex fori. But it should not be dismissed singlehandedly if a split between liability and limitation of liability is considered. Another idea ventilated is to have a partial choice for the standards of control to be applied to General Terms and Conditions. 324 In practice, partial choice of law occurs rather irregularly. Parties fear for hidden inconsis-

tencies or latent difficulties of ascertaining the ambit to which each of the laws chosen is applicable.1160 Complex contracts as contrasted to contractual ensembles might provide the main example for a partial choice of law.1161 A Bulgarian reference1162 to the CJEU which might have procured authoritative guidance, was declared inadmissible by the CJEU1163 because of insufficient information.1164 Generally, caution and a rather restrictive instrumentalisation of dépeçage should prevail.1165 Furthermore, it is a matter of interpretation in detail for which aspects of a contract parties might possibly have chosen a separate law.1166 A practical example for a partial choice of law might be found in Clause 19 Institute Cargo Clauses: There a split between the open cover or certificate on the one hand and the “insurance” as such, i.e. the contract clauses is believed to exist.1167 325 In some instances something at first glance looks as though parties had opted for a dépeçage,

but closer scrutiny reveals that this is not the case. Manifold examples might be found in sovereign bonds: In practice, where sovereign bonds are by express choice of law submitted to a law other than the law of the issuing State, it is often provided that the procedure whereby the securities are authorised and executed is governed by the law of the borrower.1168 However, such issue of possibly acting ultra vires (or, worse for the lender, leaving open a path for intervention) as a matter of administrative procedure and public law will likely fall outside the substantive scope of the Rome I Regulation by virtue of Art. 1 (1).1169 Another false friend conveying the impression of a partial choice at first glance are so-called

1160 1161 1162 1163 1164 1165 1166 1167

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1169

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internazionale privato (2004) p. 150; Ferrari in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/ Götz Schulze/Ansgar Staudinger Art. 3 Rom I-VO note 40; Marrella, in: Boschiero p. 15, 33 fn. 44. Contra Werner Lorenz, IPRax 1987, 269, 272; Lagarde, RCDIP 80 (1991) 297, 302; Windmöller, Die Vertragsspaltung im Internationalen Privatrecht des EGBGB und des EGVVG (2000) pp. 93 et seq.; Magnus, in: Staudinger, Art. 3 Rom I-VO note 109; Hohloch, in: Erman, Anh II Art. 26 EGBGB note 23. Ravillon, in: Corneloup/Joubert p. 67, 82. Nourissat, in: Corneloup/Joubert p. 205, 217. Case C-366/14 (Herrenknecht AG v. Hév-Sugdr Kft), OJ EU 2014 C 351/6. Herrenknecht AG v. Hév-Sugdr Kft (Case C-366/14), 6 November 2014. McParland para. 9.137. McParland para. 9.138. Centrax Ltd. v. Citibank NA [1999] 1 All ER (Comm) 557 (C.A.). Dunt, Marine Insurance Cargo (2nd ed. 2016) paras. 2.2, 2.9 with reference to Evialis SA v. S.I.A.T. [2003] EWHC 863 (Comm) [42], [2003] 2 Lloyd’s Rep. 377 (Q.B.D., Andrew Smith J.). Franzina, in: Studi in onore di Luigi Costato, vol. II (2014), p. 513, 521 illustrates this by reference to the following clause to be found in bonds issued by the Republic of Ghana: “The Agency Agreement, the Deed of Covenant and the Notes are governed by, and will construed in accordance with, English law, except for the authorisation and execution of the Notes, the Deed of Covenant and the Agency Agreement which will be governed by the laws of Ghana.” Franzina, in: Studi in onore di Luigi Costato, vol. II (2014), p. 513, 521.

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Country Agreements under umbrella contracts with parent companies: One must not confuse contact with transaction, and as a starting point, each Country Agreement has to be taken a separate contract.1170 cc) Tacit partial choice It is possible to combine partial and tacit choice of law. There can be something like a tacit 326 partial choice of law. But one has to be extremely careful and cautious in any concrete case and should not assume such a choice of law light-handedly. The consequences if the partial choice of law fails are too grave for such attempt. Partial choices of law are rather exceptional, and this should be the more the case if they can only be implied. dd) Consequences in the event of lacking severability If the parties make a partial choice in the event that the parts of the contract are in fact 327 inseverable, that partial choice of law is invalid and ineffective. This is simply because the consequences intended by the parties can not be implemented, and the premises for a valid choice of law are lacking. 4. Subsequent choice of law a) Generalities Parties are not restricted to choosing the applicable law until the contract is initially con- 328 cluded at the latest. Art. 3 (2) expressly permits them to choose “at any time”. This includes any time following the initial conclusion of the contract. A subsequent choice of law is feasible. No reasonable argument can be raised against this for if the parties agree to alter the law applicable to their contract they would be able to make it so by discharging the original contract and to make a new contract with its own governing law.1171 The subsequent choice of law is some kind of shortcut for this. A subsequent choice of law must not be accorded any lesser respect than an original choice of law.1172 There is a clear policy to permit parties to agree on a change of the governing law of their contract, and this policy is founded on the principle of party autonomy.1173 Even an express original clause inhibiting later alterations1174 might be lifted by a subsequent agreement. A subsequent choice of law might be seen e.g. in a novation of a contract including a choice of a law differing from the initial lex causae.1175 Consensus and consensual validity of a subsequent choice of law are to be governed by the law putatively chosen, pursuant to the bootstrap principle implemented in (5) in conjunction with Art. 10 (1).1176 A subsequent choice of law is only consented to if all parties to the initial choice of law consent to it; this can become an important issue in the instance of agreements between three or more parties. A very special case might be the 1170 1171 1172

1173

1174

1175 1176

See Brödermann, in: MünchHdb IWR § 6 notes 166–168. Briggs para. 10.17. Re Apcoa Parking Holdings GmbH [2014] EWHC 3849 (Ch) [248], [2015] 4 All ER 572 (Ch.D., Hildyard J.). Mauritius Commercial Bank Ltd. v. Hestia Holdings Ltd. [2013] EWHC 1328 (Comm) [30], [2013] 2 Lloyd’s Rep 131 (Q.B.D., Popplewell J.). See Re Apcoa Parking Holdings GmbH [2014] EWHC 3849 (Ch) [247], [2015] 4 All ER 572 (Ch.D., Hildyard J.). Rb. Gelderland NIPR 2014 Nr. 146 p. 274. Plender/Wilderspin para. 6–054.

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alteration of a choice of law in an English Scheme of Arrangement procedure under secs. 895–901 Companies Act 2006, imposed by a supermajority on dissenters and absentees.1177 329 A choice of law must not necessarily be made ex ante, but can be concluded ex post. There are

two sets of circumstances of a party-made change of the applicable law:1178 The first is when the parties have concluded a contract which contains a choice of law agreement,1179 and they then wish to alter that express choice, either prospectively or even retrospectively. The second is when the parties make no choice of law and then want to remedy that omission and choose a law different from the law that would be (and has been) otherwise objectively applicable absent a party choice. 330 The subsequent choice of law might lead to validation of a contract which was previously

invalid under its initial lex causae under the newly chosen law.1180 Conversely, it might have the rather unwarranted result that the subsequent choice selects a new lex causae which invalidates a previously valid contract.1181 Parties then have to bear the consequences of their unwise choice.1182 331 As to the advisability in any concrete case, prudent parties will be rather hesitant and think

twice before they really enter into a subsequent choice of law; this thinking twice simply is for avoiding, and preserving from, unnecessary switching cost.1183 Parties might want to correct and rectify a choice of law which turned out to be suboptimal, though.1184 They might opt for the switch in spite of the price which comes with it. There can be a variety of good commercial reasons why the parties wish to alter the lex contractus: There may be changes in the law first chosen which are unwelcome; or they may discover unwelcome aspects of that law only after conclusion of their contract; or commercial circumstances may change, for example with a change of control, by reason of which parties may wish to choose a new governing law with which they are more familiar.1185 Another motivation might be that the parties commonly want to invalidate a certain provision of the contract; this does not constitute any fraus legis.1186 332 A combination of subsequent and partial choice of law is admissible.1187 The best place to

provide for this in a contract is the modification of the salvatory clause.1188 1177

1178 1179

1180 1181 1182 1183 1184 1185

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216

Eventually endorsed, though, by Re Apcoa Parking Holdings GmbH [2014] EWHC 3849 (Ch) [251][253], [2015] 4 All ER 572 (Ch.D., Hildyard J.); Pilkington/Heverin, [2013] BJIBFL 708, 709; Carli/Weissinger, DB 2014, 1474, 1477–1478. Aubrey L. Diamond, (1979) 33 Current Legal Problems 155, 162–165; McParland para. 9.143. For an example see Aeolian Shipping SA v. ISS Machinery Services Ltd. [2001] EWCA Civ 1162 [27], [2001] CLC 1708 (C.A., per Potter L.J.). Plender/Wilderspin para. 6–055; Ragno, in: Ferrari, Art. 3 note 50. See only Ragno, in: Ferrari, Art. 3 note 50 with further references. Plender/Wilderspin para. 6–056. Druzin, 18 Tulane J. Int’l. & Comp. L. 131, 165 (2009). See Schwander, in: FS Ingeborg Schwenzer (2011), p. 1581, 1587. Mauritius Commercial Bank Ltd. v. Hestia Holdings Ltd. [2013] EWHC 1328 (Comm) [30], [2013] 2 Lloyd’s Rep 131 (Q.B.D., Popplewell J.). Kondring, IPRax 2006, 425, 426. Contra Lando, RabelsZ 57 (1993), 155, 165. See only Kondring, IPRax 2006, 425, 429; Schwander, in: FS Ingeborg Schwenzer (2011), p. 1581, 1587.

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A subsequent choice of law has only an ex nunc effect, not an ex tunc effect. It does not exert 333 a retroactive effect and does not alter the applicable law ex initio, but only with effect as of the time when it was concluded at earliest.1189 The new law applies from the moment of the validity of the new agreement.1190 To let the parties decide as to whether their new agreement shall have effect ex tunc or ex nunc1191 confuses direct absolute effect and relative effect. The parties may conclude a side agreement which treats the choice of law inter partes as if the subsequent choice of law had been an initial one. Such side agreement would oblige parties inter partes against each other to treat the matter as though the respective choice of law had already been made originally, i.e. as though it had an effect ex tunc. But without such side agreement retroactivity should not be imputed. Retroactivity would cause major problems with regard to applying Art. 10 (1). Retroactivity would be a mere fiction juridically imposed; in reality the subsequently chosen law cannot have exerted any guidance for the parties’ mindsets and intention before and until the contract was initially concluded. If either party had asked for legal guidance, such legal guidance would have to be derived from the initial lex causae. (2) cl. 2 does not constitute a counter-argument and cannot be used by way of argumentum e 334 contrario in favour of an ex tunc effect.1192 The rule can equally operate under the assumption that a subsequent choice of law has effect only ex nunc.1193 The lack of retroactivity also answers the question to which extent the choice of a new law 335 rendering the (main) contract invalid might work,1194 to which extent claims in unjust enrichment or restitution could arise, or whether a performance made before the choice was in accordance with the contract.1195 If the original contract contains a choice of law clause and admits the alteration of contract 336 clauses under certain circumstances, parties might battle after they have concluded a deviating subsequent choice of law as to whether the law originally chosen or the law subsequently chosen should govern the question whether the circumstances initially required for an alteration of the contract were fulfilled. The main contract and the choice of law agreements are separate agreements as is evidenced by (5) enshrining the principle of severability. Hence, a general clause dealing with future alterations of the contract might probably only relate to the main contract, the substantive issues of the ensemble. If it was believed to cover the choice of law agreement, too, parties would derogate from (2) partially by making their

1188 1189 1190

1191

1192

1193

1194 1195

Examples are provided by Kondring, IPRax 2006, 425, 431. See only Gardella, NLCC 2009, 611, 618. Re Apcoa Parking Holdings GmbH [2014] EWHC 3849 (Ch) [248], [2015] 4 All ER 572 (Ch.D., Hildyard J.). As proposed by Gert Reinhart, IPRax 1995, 365, 367; von Hoffmann, in: Soergel, Art. 27 EGBGB note 72; Martiny, in: Münchener Kommentar zum BGB Art. 3 Rome I-VO note 80. As advanced by Gert Reinhart, IPRax 1995, 365, 369; Pierre Mayer/Heuzé, Droit international privé (10th ed. 2010) para. 711. Ferrari, in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger Art. 3 Rom I-VO note 45. See Gardella, NLCC 2009, 611, 619. Overlooked by Bogdan, NIPR 2009, 407, 408 et seq.

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power to conclude a subsequent choice of law conditional. Yet parties lift this conditionality contractually imposed afterwards by concluding an unconditional subsequent choice of law. 337 To let it undecided whether parties concluded a choice of law initially or only subsequent-

ly1196 is only admissible if one is prepared to attribute effect ex tunc to a subsequent choice of law. If one is not so prepared but sticks with an effect merely ex nunc, there is a substantial difference between an initial and a subsequent choice of law with regard to the period before the subsequent choice of law as eventually concluded. b) Formal validity and Art. 11 338 The second clause of (2) expressly makes a reservation in favour of Art. 11 in the field of

formal validity if the parties change the chosen law subsequently. Formal validity is retained as it stood before the subsequent choice of law, even if the now chosen law renders the contract invalid for formal invalidity.1197 Conversely, the parties can make the contract formally valid by choosing a law with less formal requirements than the original lex contractus.1198 339 There are no autonomous EU requirements as to form for choice of law agreements per

se,1199 to be distinguished from formal requirements for the main contract. A reservation gains importance only in the rare instance that the chosen law establishes a specific form for the entire contract including the choice of law.1200 But such instances are very rare indeed, and if something can be detected which touches even remotely on the issue of form, it will mostly be phrased in terms resembling those of (1) cl. 2 that parties must make their choice of law expressly or clearly demonstrated by the terms of the contract or the circumstances of the case.1201 c) Rights of third parties 340 The second sentence of (2) also reserves the rights of third parties in the event of a sub-

sequent choice of law. Third parties shall trust in and rely on the position they had acquired under the law initially chosen. Normally, they are not parties of, and do not participate in, the negotiations leading to the subsequent choice of law. As they are not asked and invited their rights shall not be prejudiced. A subsequent choice of law thus has only effects inter partes.1202 This is by its very nature a mandatory rule and not a rule of doubt.1203 It does not 1196 1197

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As BAG RIW 2014, 530 [21] does. See only Report Giuliano/Lagarde, OJ EEC 1980 C 282/50; Martiny, in: Münchener Kommentar zum BGB Art. 3 note 82; von Hein, in: Rauscher, Art. 3 note 96; Magnus, in: Staudinger, Art. 3 note 126. See only Report Giuliano/Lagarde, OJ EEC 1980 C 282/50; Martiny, in: Münchener Kommentar zum BGB Art. 3 note 82; von Hein, in: Rauscher, Art. 3 note 96; Magnus, in: Staudinger, Art. 3 note 126. See only Pfütze, ZEuS 2011, 35, 52. Meyer-Sparenberg, RIW 1989, 347, 349; Stoll, in: FS Anton Heini (1995), p. 429, 438. Schwenzer/Tebel, in: FS Ulrich Magnus (2014), p. 319, 323. See only Ulrich Bauer, Grenzen nachträglicher Rechtswahl durch Rechte Dritter im Internationalen Privatrecht (1992) pp. 159 et passim; Möllenhoff, Nachträgliche Rechtswahl und Rechte Dritter (1993) pp. 133–139; Martiny, in: Münchener Kommentar zum BGB Art. 3 note 83; von Hein, in: Rauscher, Art. 3 notes 97 et seq.; Magnus, in: Staudinger, Art. 3 note 127; on the topic also Wałachowska, in: Księga dedykowana Profesorowi Dieterowi Martiny (2014), p. 367. Magnus, in: Staudinger, Art. 3 note 129.

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generate a redress or a right of withdrawal in favour of the third party.1204 The rule can be understood as a type of vested rights approach, though.1205 Third parties envisaged comprise third-party guarantors,1206 third parties benefiting from a 341 contract in the event of third party contracts, parties benefiting from a Vertrag mit Schutzwirkung für Dritte and the debitor cessus in the case of an assignment.1207 The notion does not comprise proper parties to a multiple party contract, e.g. a contracting party to a three- or four-sided contract. Third parties shall not be detrimentally affected, as to be judged from an objective perspec- 342 tive and rather not from the individual perspective of the concrete third party.1208 Accordingly, a subsequent choice enhancing the position of third parties should be permitted.1209 There is no sound justification to decide otherwise taking into account the ratio legis. To implement this result by adopting the techniques now to be found in Arts. 6, 8, namely the more favourable law principle, the Günstigkeitsvergleich, or the so-called datum theory appears overly complicated.1210 An understanding of (2) as a special expression of public policy1211 does not convince, either.1212 The wording of (2) only mentions the rights of third parties – but what about the obligations 343 and duties of third parties? Based on the most typical examples in this context, namely those of a third party providing an asset-based security or of a guarantor it should be clear that the obligations of third parties cannot be extended by a subsequent choice of law in which they have not actively participated.1213 From the guarantor’s perspective still an inadmissible contract to his detriment would result. Yet the case might be different if the consequences of the subsequent choice of law were to partially or entirely relieve the third party of its

1204

1205

1206

1207

1208

1209

1210

1211 1212 1213

Ulrich Bauer, Grenzen nachträglicher Rechtswahl durch Rechte Dritter im Internationalen Privatrecht (1992) pp. 92–98, 138–146. Ulrich Bauer, Grenzen nachträglicher Rechtswahl durch Rechte Dritter im Internationalen Privatrecht (1992) p. 107. See only Fudickar, Die nachträgliche Rechtswahl im internationalen Schuldvertragsrecht (1983) pp. 99– 105; Ulrich Bauer, Grenzen nachträglicher Rechtswahl durch Rechte Dritter im Internationalen Privatrecht (1992) pp. 67–69. Ulrich Bauer, Grenzen nachträglicher Rechtswahl durch Rechte Dritter im Internationalen Privatrecht (1992) pp. 10–28; Möllenhoff, Nachträgliche Rechtswahl und Rechte Dritter (1993) pp. 65–98; Magnus, in: Staudinger, Art. 3 note 127. See Ulrich Bauer, Grenzen nachträglicher Rechtswahl durch Rechte Dritter im Internationalen Privatrecht (1992) pp. 117–118. Ulrich Bauer, Grenzen nachträglicher Rechtswahl durch Rechte Dritter im Internationalen Privatrecht (1992) p. 127; von Hein, in: Rauscher, Art. 3 note 98; Magnus, in: Staudinger, Art. 3 note 128. But contra von Bar vol. II para. 481; von Hoffmann, in: Soergel Art. 27 EGBGB note 79. Discussed by Ulrich Bauer, Grenzen nachträglicher Rechtswahl durch Rechte Dritter im Internationalen Privatrecht (1992) pp. 83–91; Möllenhoff, Nachträgliche Rechtswahl und Rechte Dritter (1993) pp. 111– 123. To this avail Kropholler, RabelsZ 42 (1978), 634, 649. Möllenhoff, Nachträgliche Rechtswahl und Rechte Dritter (1993) pp. 123–133. Bogdan, NIPR 2009, 407, 408.

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respective obligations or duties. Then the third party would not be detrimentally affected but would, conversely, profit from such choice. d) Floating choice of law clauses 344 Floating choice of law clauses are not a rare but rather a common, if not a regular phenom-

enon. They appear in two kinds: the first one declares the respective plaintiff’s home law chosen when proceedings are commenced, the second one the respective defendant’s home law.1214 They regularly come in an alternative:1215 In the first alternative the law applicable at the seat1216 of the respective plaintiff is chosen.1217 In the second alternative it is the law applicable at the seat of the respective defendant. Economically, the distribution of comparative advantages and of the higher costs of a legal “away game” is at stake.1218 345 The two kinds of floating choice of law clauses provide quite different incentives, the first

one triggering potential plaintiffs to release their guns,1219 the second one consoling the defendant by giving him the advantage of a “home game” with regard to the applicable law whereas the plaintiff has the natural advantage to choose the forum.1220 The problems could be mitigated insofar as the parties delegate the power to concretise the options available to a third person.1221 346 A variation of a floating choice of law clause is a so-called saving clause as it is occasionally

observed in arbitration and has been endorsed at the level of national supreme courts1222: It calls for the application of the law of the seat of arbitration (or rather the arbitration tribunal) once either party has commenced arbitration.1223 Its main purpose is to preserve unity of forum and applicable law:1224 lex propria in foro proprio. 347 Floating choice of law clauses, insofar as they are referring to the filing of proceedings as

their precondition, pursue the legitimate goal to make the respective lex fori applicable, although parties were not able to agree on an exclusive choice of court agreement.1225 Which price is to be paid for this compromise?

1214 1215 1216

1217

1218 1219 1220 1221

1222 1223 1224 1225

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In more detail Rasmussen-Bonne pp. 34–49. In more detail Rasmussen-Bonne pp. 167–173; Jaspers pp. 192–195. Or at the seat of the respectively administrating subsidiary. In the following, however, this option is not again mentioned separately. On the contrary it remains imprecise and unclear at what point “the plaintiff’s law” (respectively “the defendant’s law”) is chosen because the objective connecting factor is not named; Wenner, in: FS Ulrich Werner (2005), p. 43, 44. Vidmar, ZfRV 2015, 219, 221. See Andrew Beck, [1987] LMCLQ 522, 527. Kodek, in: Verschraegen p. 85, 91; Mankowski, in: FS Dieter Martiny (2014), p. 449, 455–456. See Mankowski, in: Leible, p. 63, 105 et seq.; Mankowski, in: FS Dieter Martiny (2014), p. 449, 456; Staudinger/Magnus Art. 3 note 54. OGH SZ 71/26. Pörnbacher/Sebastian Baur, FS Rolf A. Schütze zum 80. Geb. (2014), p. 431, 435–436. Carrascosa González p. 163. Siehr, in: FS Max Keller (1989), p. 485, 500; Mankowski, in: Leible, p. 63, 105–106.

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Floating choice of law clauses have major disadvantages: Firstly, the parties’ choice of law 348 does not take effect until an actual dispute between the parties arises and until the parties’ respective roles as plaintiff and defendant within the proceedings have been assigned.1226 Prior to that, and in case of lack of a choice of law agreement, the applicable law may only be determined by objective connecting factors. Hence, floating choice of law clauses provide only rules of decision.1227 But perhaps (and with great probability) the contingency of an actual dispute will never arise.1228 Secondly, the parties will always have to calculate at least two possibilities and respectively 349 invest into legal information.1229 This causes an increase in time, effort, and legal costs for a well-prepared party.1230 Before a dispute is pending, they are not concretised, and the parties have to calculate either contingency.1231 Parties cannot be sure about their eventual respective rights and obligations.1232 This is unsuitable in particular for the exchange of complex performances.1233 Generally, it will burden legal opinions to be rendered with difficulties.1234 Thirdly, the first alternative (seat of the plaintiff) may suggest a generally undesirable in- 350 centive leading parties to sue quickly, may be even over-hastily, in order to gain the advantages of a substantive “home game”.1235 This alternative provokes a race to the courthouse, especially in interaction with a concurrent reciprocal choice of forum agreement.1236 Matters are even more muddled where one party is to choose the venue or dispute resolution institution whereas the other party is entitled to choose the applicable law, for this separates the siblings.1237 The suggestion of an asymmetric1238 or reciprocal choice of law, which at first sight appears 351 to be a reasonable compromise, might hide the attempt to implement a self-serving strategy. This may be the case where the likelihood of the parties taking the role of either the plaintiff or the defendant within a lawsuit is unequally allocated. Each party is interested in implementing a law which favours its role and which supplies a substantive “home match” at the same time. 1226

1227 1228 1229 1230 1231

1232 1233

1234

1235 1236

1237 1238

See only Jochen Schröder/Wenner paras. 150–153; Wenner, in: FS Ulrich Werner (2005), p. 43, 44; Pörnbacher/Sebastian Baur, FS Rolf A. Schütze zum 80. Geb. (2014), p. 431, 437. Kodek, in: Verschraegen p. 85, 91. Briggs para. 4.16; Mankowski, in: FS Dieter Martiny (2014), p. 449, 455. Mankowski, in: FS Dieter Martiny (2014), p. 449, 455; Brödermann, in: MünchHdb IWR § 6 note 134. Vidmar, ZfRV 2015, 219, 222. Wenner, in: FS Ulrich Werner (2005), p. 39, 44; Schütze, in: GS Manfred Wolf (2011), p. 551, 556; Vidmar, ZfRV 2015, 219, 222. Schütze, in: GS Manfred Wolf (2011), p. 551, 557 et seq. Wenner, in: FS Ulrich Werner (2005), p. 39, 44; Wenner, para. 178; Mankowski, in: FS Dieter Martiny (2014), p. 449, 455. Mankowski, in: FS Dieter Martiny (2014), p. 449, 455; see Cross/Oxvord, 48 South Tex. L. Rev. 125, 149 (2006). C. Schneider, BGH-Report 2002, 347, 348. Rasmussen-Bonne pp. 172, 233, 234; Jaspers pp. 194, 195; Mankowski, in: FS Dieter Martiny (2014), p. 449, 455. See Brödermann, in: FS Siegfried Elsing (2015), p. 53, 61; Brödermann, in: Hdb/WR § 6 II 5 c cc. Kodek, in: Verschraegen p. 85, 91.

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352 At first sight it may not be evident how much the probability calculus does in fact influence

the sympathy for a reciprocal choice of law. Sales contracts seem unsuspicious at first. This, however, changes abruptly if the seller has asserted letters of credit or bank guarantees as independent means of payment. It then does no longer depend on suing a reluctant buyer for payment, but may just relay on the Third-Party Guarantor.1239 Only disputes regarding defects, execution or repayment remain under the sales contract. In these disputes the buyer takes its natural role as the plaintiff. A seller that has succeeded in implementing a payment security is, therefore, interested in a reciprocal choice of law agreement in favor of the law applicable at the seat of the defendant. While attacks become less appealing to either party, as they are controlled from both sides, this may appear to be a defensive approach at first, whereas in reality it is a clever and subversive way of implementing one’s own interests.1240 353 Even further twists are added if a cross-claim is pending: With the chosen law depending on

the respective plaintiff’s or defendant’s characteristics, are initial claim and cross-claim then governed by different laws? In the event that a counterclaim is raised, difficulties in interpreting whether or not the formal role of the plaintiff is referring to the overall process or just to the concrete role of the counter-plaintiff will arise.1241 354 And if the choice is “for the law of the plaintiff” or “the law of the defendant”: How to

proceed in the event that there are a number of plaintiffs or defendants in the plural respectively? Which one is the relevant one? Perhaps the relevant plaintiff is the plaintiff initially filing his writ, whilst the relevant defendant could possibly be the defendant whose home jurisdiction is finally selected.1242 But these are only very tentative suggestions. Similar problems arise in the event of dual or multiple seats of arbitration.1243 Even the basic version of “the plaintiff’s law” or the “defendant’s law” carries some imprecision insofar as with this only seemingly clear wording the respective clause does not say whether it is the nationality or the seat of the respective party that matters.1244 355 If a dispute is never pending, there will not even be any choice of law so that the objectively

determined lex contractus under Art. 4 becomes the permanent solution.1245 Before a dispute is made pending, Art. 4 also steps in as a default rule in order to fill the gap which the parties left not concluding any choice of law effective for this period.1246 This is different from a subsequent choice of law altering matters where before such subsequent choice the lex contractus is unambiguously determined by the parties’ common intention.1247 Floating choice of law clauses do not constitute a subsequent choice of law since the choice of law 1239 1240 1241 1242 1243

1244 1245

1246

222

Graf von Bernstorff, RIW 2007, 88, 91, 92. Mankowski, in: FS Dieter Martiny (2014), p. 449, 456. Mankowski, in: FS Dieter Martiny (2014), p. 449, 457. Mankowski, in: FS Dieter Martiny (2014), p. 449, 457. The “Star Texas” [1993] 2 Lloyd’s Rep. 445, 448 (C.A., per Lloyd L.J.); Mankowski, in: FS Dieter Martiny (2014), p. 449, 457. Wenner, FS Ulrich Werner (2005), p. 39, 44; Mankowski, in: FS Dieter Martiny (2014), p. 449, 457. Martiny, in: Münchener Kommentar zum BGB Art. 3 notes 17 et seq.; Magnus, in: Staudinger Art. 3 note 54; Schütze, in: GS Manfred Wolf (2011), p. 551, 557; Mankowski, in: FS Dieter Martiny (2014), p. 449, 453. See only Dicey/Morris/Morse para. 32–087; Martiny, in: Münchener Kommentar zum BGB Art. 3 note 18; Magnus, in: Staudinger, Art. 3 note 54.

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agreement has been completed previously1248 and only its effect has been postponed and made subject to the precondition that proceedings are to be commenced.1249 This is admissible by virtue of Art. 3 (2) per analogiam. Generally, they can be given ex tunc effect.1250 Anyway, it is for the conflict rules of the lex fori and not for the objectively assessed lex 356 contractus to decide whether there is a choice of law or not.1251 Else, one would introduce some kind of renvoi in an area where there is none.1252 “Legal logic” does not require a choice of law by the parties to have effect from the very outset.1253 Likewise, the hierarchy of sources for the proper law of the contract has to be obeyed.1254 Parties are empowered to choose the applicable law subsequently changing the applicable law, and a maiore ad minus the same applies to constructions which have only similar effects.1255 Legal dogma should not take precedence over the parties’ will and should in particular not subject a floating choice of law to a content review by the original lex contractus.1256 Parties are entitled to contingency planning.1257 For a better understanding, it might be helpful to emphasize the strong connection of choice 357 of law with dispute resolution.1258 In practice, matters of choice of law ordinarily do not become all too virulent and pressing until a dispute actually arises. To some extreme, this is reflected in a floating choice of law. Choice of law clauses might not be a genuine, structural part of a dispute resolution agreement,1259 but a strong nexus between choice of law and dispute resolution cannot be denied at all.1260 One should not link choice of law to the performance of the main contract inextricably. Then it is much easier to explain why a post-contractual agreement or post-contractual nomination in accordance with a pre-contractual template should be given effect.1261

1247

1248

1249

1250 1251 1252

1253 1254 1255

1256 1257 1258 1259 1260

1261

Schütze, in: GS Manfred Wolf (2011), p. 551, 557. But see Pierce, (1987) 50 Mod. L. Rev. 174, 198; Plender/ Wilderspin para. 6–019. Rasmussen-Bonne pp. 106 et seq., 124 et seq.; Vidmar, ZfRV 2015, 219, 222. Imprecise insofar Mankowski p. 166. Siehr, in: FS Max Keller (1989), p. 485, 500; Rasmussen-Bonne pp. 121 et seq.; Jaspers pp. 136 et seq.; Mankowski pp. 165–166; Mankowski, in: Leible, p. 63, 105. Wenner para. 179; Vidmar, ZfRV 2015, 219, 222. Pierce, (1987) 50 Mod. L. Rev. 174, 182. But see Briggs, [1986] LMCLQ 508, 510–513. Andrew Beck, [1987] LMCLQ 522, 529; Briggs para. 3.55; Mankowski, in: FS Dieter Martiny (2014), p. 449, 453. Howard, [1995] LMCLQ 1, 3; Mankowski, in: FS Dieter Martiny (2014), p. 449, 453. Howard, [1995] LMCLQ 1, 5. Mankowski, in: Leible p. 63, 105–106; Martiny, in: MK Art. 3 note 18; von Hein, in: Rauscher Art. 3 note 72 and Dicey/Morris/Morse para. 32–087; Crawford, SLT 2006, 186, 188–189; Fawcett/Carruthers p. 700; Briggs para. 3.59. Briggs para. 3.55. Mankowski, in: FS Dieter Martiny (2014), p. 449, 453. Briggs para. 3.57. Insofar Contra Briggs para. 3.57. Premium Nafta Products Ltd. v. Fili Shipping Corp. [2007] UKHL 40, [2008] 1 Lloyd’s Rep. 254, [2007] 4 All ER 951 [26] (H.L., per Lord Hope of Craighead). Briggs para. 3.57.

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358 Whether a floating choice of law clause is a wise choice and does not generate more pro-

blems than it solves is a different question than the question as to whether a floating choice clause is legally admitted. The difference demarcates the fine line between advisability and admissibility.1262 Generally, Art. 3 strives for a maximum of party autonomy and can be taken to permit that which it does not forbid or inhibit expressly1263 it allows for a deferred choice of law.1264 359 A retrospective change of the applicable law which is wrongly alleged not to exist1265 is

permitted by Art. 3 (2) cl. 1.1266 The rights of third parties as limitation are preserved by Art. 3 (2) cl. 2.1267 If the parties really intend to have retrospective effect is matter of interpretation of the concrete choice of law clause.1268 The important part is not exercising the one-sided option,1269 but the previous completion of the agreement establishing the option.1270 360 Contracts subject to a floating choice of law clause are not subject to a legal vacuum.1271 The

proper law of the contract is clear at any given point of time, but might differ with regard to the relevant point of time.1272 In the extreme one could say that the parties can never be sure about that law to be applied until any law is actually applied by a court or arbitral tribunal.1273 Yet there is no retrospective effect.1274 If the parties do not contract a choice which produces effects from the time of its conclusion they must not be heard afterwards complaining that applying the objectively determined law does not conform with their intentions.1275 A “lawless” contract is anathema, anyway.1276 The issue as to whether there is an agreement of jurisdiction or arbitration is a different matter, the more so since Art. 1 (2) (d) Rome Convention, now replaced with Art. 1 (2) (d) Rome I Regulation, has entered into force.1277 1262 1263 1264

1265

1266 1267 1268

1269 1270 1271 1272

1273 1274

1275 1276

224

To a similar avail Pörnbacher/Sebastian Baur, FS Rolf A. Schütze zum 80. Geb. (2014), p. 431, 437. Plender/Wilderspin para. 6–020. Siehr, in: FS Max Keller (1989), p. 485, 500; Mankowski, in: FS Dieter Martiny (2014), p. 449, 452; Ragno, in: Ferrari, Art. 3 note 28; Vidmar, ZfRV 2015, 219, 222. To this avail Armar Shipping Co. Ltd. v. Caisse Algerienne d’Assurance et de Réassurance [1981] 1 WLR 207, 215 et seq. (C.A., per Megaw L.J.) and Briggs, (1986) LMCLQ 508, 514 et seq.; Beck, [1987] LMCLQ 523, 526. Mankowski p. 166; Briggs para. 3.59. See only von Hein, in: Rauscher Art. 3 note 72. Black Clawson International Ltd. v. Papierwerke Waldhof-Aschaffenburg AG [1981] 2 Lloyd’s Rep. 446 (456) (Q.B.D., Mustill J.); Danilowicz, 20 Int’l. Lawyer 1005, 1007 (1986); Mankowski p. 167; von Hein, in: Rauscher Art. 3 note 72; Vidmar, ZfRV 2015, 219, 222. But to this avail Howard, (1995) LMCLQ 1, 7. Mankowski, in: Leible p. 63, 106–107. Mankowski, in: FS Dieter Martiny (2014), p. 449, 454. Lando, in: International Encyclopaedia of Comparative Law, ch. 24 (1976) para. 63; Pierce, (1987) 50 Mod. L. Rev. 174, 191 et seq. Contra The “Armar” [1981] 1 WLR 207, 212, 215 (C.A., per Megaw L.J.); The “Iran Vojdan” [1984] 2 Lloyd’s Rep.380, 385 (Q.B.D., Bingham J.); Andrew Beck, [1987] LMCLQ 522 (522). Pierce, (1987) 50 Mod. L. Rev. 174, 195 et seq. The “Armar” [1981] 1 WLR 207, 215 et seq. (C.A., per Megaw L.J.); Briggs, [1986] LMCLQ 508, 514; Andrew Beck, [1987] LMCLQ 522, 525; Mankowski, in: FS Dieter Martiny (2014), p. 449, 454. Contra Wenner para. 181. Andrew Beck, [1987] LMCLQ 522 (522).

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e) Split choice of law clauses Adjacent to the reciprocal choice of law clause is the so-called split choice of law clause 361 which is another embodiment of choice of law clauses that can be encountered in practice:1278 either the obligor’s domestic law or the obligee’s domestic law is chosen for each obligation. This also bears characteristics of a compromise. Each party won and each party lost the game. Both parties are crowned with partial success. Again, one may refer to the Nash-Equilibrium here.1279 Split choice of law clauses are by some deemed legally effective and considerable within 362 European international private law.1280 The price for this could be high.1281 This is due to the fact which ought to be stated clearly at the outset as some kind of starting point: that single obligations within mutual contracts are synallagmatic towards each other. They affect each other and they are linked to one another. When splitting it into individual obligations one is separating what belongs together. Scholars of private international law have realized this a long time ago and have taken it into consideration when developing a standard for objective connecting factors. In the past, the main objective connecting factor was the place of performance.1282 This has been abolished a long time ago, at latest with the advent of Art. 4 Rome Convention. This should find a parallel under Art. 3 (1) insofar as necessary. In a first interpretation and analysis, a split choice of law could be understood as a partial 363 choice of law.1283 With regard to sales contracts under which the obligor’s law is applicable this means: the obligation to deliver and transfer ownership are subject to the law applicable at the seat of the buyer. In contrast the payment obligation is subject to the law applicable at the seat of the seller. Here, each party comes out on top as their own domestic law is applicable to their own obligations and as the other party has been granted the same privilege. Accordingly, insofar a split choice of law clause must respect the limits drawn to any partial 364 choice of law. The main limit which must not be overstepped is that a partial choice of law must not lead to a law mix and is not permitted to sever inseverables.1284 Insofar no parallel can be drawn to spilt choice of jurisdiction clauses where it is possible to create specific jurisdiction for single obligations. Splitting the contract into individual obligations is also known as the so called “small con- 365 tract split” (kleine Vertragsspaltung) and is more than only negatively stigmatized. Major disadvantages would be suffered from it. Especially the synallagmatic connection is split. The nexus between reciprocal obligations is being suspended. Performance and counterperformance may become subject to different laws. Namely, any right of retention would be 1277 1278 1279 1280

1281 1282 1283 1284

See Howard, [1995] LMCLQ 1, 7 et seq. See only Jochen Schröder/Wenner para. 137. Mankowski, in: FS Dieter Martiny (2014), p. 449, 459. See only Hof Gent TBH 2006, 984, 986; Werner Lorenz, IPRax 1987, 269, 272; Pertegás Sender, TBH 2006, 987, 988, 989. See only Jochen Schröder/Wenner paras. 141, 142. See only BGHZ 52, 239; BGHZ 73, 391; BGH RIW 1987, 148. Attesting more ambitious goals Vidmar, ZfRV 2015, 219, 222. Supra Art. 3 notes 317–318 (Mankowski).

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confronted with conflicts which are almost impossible to resolve satisfyingly. Attempts to reconcile obligations ascertained under different applicable laws come with a high cost.1285 366 Matters are decisively different under a second, different interpretation: If and insofar as

split choice of law clauses are not understood as a partial choice of law splitting the contract into its single obligations, but as establishing a uniform choice of a law for the contract in its entirety differentiating as to who is the debtor or the creditor of the concrete obligation at stake as a connecting factor only, the contract will not be split, but will be handled as a uniform item. Insofar the objections which can be posed in the way of a partial choice of law cannot be raised. 5. Other types of specific choice of law clauses a) Hierarchical choice of law clauses aa) Principal remarks 367 Hierarchical choice of law clauses constitute a subsidiary choice of law in the event that a

primary choice of law fails.1286 They develop a multiple-tier system within parties’ choice of law.1287 There is one and only one applicable law, and this is a law chosen by the parties. The objective determination of the lex contractus does not come into play. The parties avoid any gap or lacuna in their contract. In commercial contracts, this has some advantages.1288 368 At least, hierarchical choice of law clauses cannot be alleged to be too complex and even less

to be perplex. At any given point, they call for the applicability of exactly one law and not for a multiplicity of laws to be applicable simultaneously or to be combined.1289 The hierarchy is evident, and the second tier is only reached if the choice of law on the first tier fails. The consequences intended are clearly defined. The subsidiary choice of law is a reaction to the initial failure of the primary choice of law. The chosen law is never the primary, but always the subsidiary one (for per definitionem the primary choice is unsuccessful). This is not a subsequent choice of law, and the applicable law is not altered. Only in fact, parties might face a situation akin to that of a subsequent choice of law if they discover only ex post that the primary choice of law has failed whereas the parties shared the common intention that it was valid and effective. Parties are at liberty to establish their own Anknüpfungsleiter.1290 bb) Problems with defining the failure of the primary choice of law 369 Alleged “law-hopping” by the means of a hierarchical choice of law bears some inherent

problems.1291 Yet they are generally found with defining when exactly a primary choice of law fails.1292 The main instance appears to be lacking consensus. Insofar Art. 3 (5) in conjunction 1285 1286 1287 1288 1289

1290 1291 1292

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Vidmar, ZfRV 2015, 219, 222. See only Schwander, in: FS Ingeborg Schwenzer (2011), p. 1582, 1585. Schwander, in: FS Max Keller (1989), p. 473, 480; Wenner para. 169. The “Mariannina” [1983] 1 Lloyd’s Rep. 12, 15 (C.A., per Ackner L.J.). Schwander, in: FS Ingeborg Schwenzer (2011), p. 1582, 1585; Mankowski, in: FS Dieter Martiny (2014), p. 449, 460; Vidmar, ZfRV 2015, 219, 222. Vidmar, ZfRV 2015, 219, 222. Andrew Beck, [1987] LMCLQ 522, 530 f. Mankowski, in: FS Dieter Martiny (2014), p. 449, 460; Vidmar, ZfRV 2015, 219, 222–223.

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with Art. 10 (1) governs.1293 Regularly, consensus is lacking in the case of colliding Standard Terms and Conditions. But it is highly unlikely that this case is given where the parties agreed upon such an elaborate construct as a hierarchical choice of law clause.1294 The higher the intellectual effort employed by, and the more complex the primary choice of law, the more sensible a subsidiary choice of law might be in order to provide for inherent deficiencies of the primary choice of law and to provide for some safety net.1295 Another conceivable case of a failure of the primary choice of law is that it fails in a content 370 review (although such control is inadmissible under Art. 3)1296, be it under the chosen law, be it under the substantive law of the lex fori. A third case stems from an application of Art. 10 (2) via Art. 3 (5) (for B2B contracts only if they are generally subjected to any application of Art. 10 (2))1297. Finally, a primary choice of law might fail for a lack of the required formalities under Art. 3 (5) in conjunction with Art. 11 and the laws applicable insofar. Theoretically it might also be possible that an initial valid primary choice of law is voided ex 371 nunc afterwards. In practice, this is almost unconceivable, though. One might argue that Art. 3 (5) in conjunction with Art. 10 (1) does not fix the relevant point of time for judging a (primary) choice of law to the initial time of choice expressly and explicitly, which might give rise to an argumentum e contrario. b) Choice of law dependent on the outcome of a coin toss or a lottery Parties might go so far as to make their choice of law dependent on the outcome of a coin 372 toss. Which law is applicable might also depend on the outcome of a lottery, namely which lot is drawn.1298 Evidently, this is quite opposite to legal certainty and is pure gambling. The aleatory element might entice parties who like to play games, though. To make matters even worse, the coin toss or the lottery might take place only after the contract was concluded so that a swap of the lex contractus just like in the case of a floating choice of law clause is about to happen.1299 Generally, this avenue is not to be recommended, and only adventurous parties who skip legal certainty might go down with it. c) Alternative choice of law clauses Another kind of choice of law clauses are so-called alternative choice of law clauses, i.e. 373 clauses with two or more options between which the parties have to choose in order to establish a proper choice of law. If neither of these options is chosen, there will be no parties’ choice of law at all.1300 Parties have at least to tick one certain amongst several boxes in order to indicate that they have agreed on this one. The prime example for such a model clause needing completion is the standard text of Clause 19 Gencon 1994.1301 If offers three alter1293 1294 1295 1296 1297

1298 1299 1300 1301

Mankowski, in: FS Dieter Martiny (2014), p. 449, 461. Sceptical Vidmar, ZfRV 2015, 219, 223. But cf. Vidmar, ZfRV 2015, 219, 223. Vidmar, ZfRV 2015, 219, 223. In extenso Art. 3 notes 443–458 (Mankowski). Disapprovingly Sandrock, RIW 1986, 849, 850; Mankowski, TranspR 1993, 213, 218. Affirmatively e.g. z.B. Magnus, in: Staudinger Art. 3 note 173. Wenner para. 185. Wenner para. 185. Rb. Rotterdam NIPR 2013 Nr. 360 p. 589 = S&S 2014 Nr. 3 pp. 16–17. See Rb. Rotterdam NIPR 2013 Nr. 360 p. 589 = S&S 2014 Nr. 3 p. 16.

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natives (a): English law, (b) Title 9 U.S.C. and US Maritime Law, (c) laws of place indicated in Box 25. A footnote to Clause 19 explains: “(a), (b) and (c) are alternatives; indicate alternative agreed in Box 25”. Hence, parties are invited to fill in the said Box 25. If they do not do so, Clause (19) (d) Gencon 1994 as a default rule declares English law to be applicable. V. Incorporation mechanism in purely domestic cases, (3) 1. Generalities 374 In purely domestic cases the parties are not at liberty to choose. Else, they would be per-

mitted to contract out of the internal ius cogens of the respective State and would thus render any restrictions to contractual freedom imposed by that State nugatory. The escape device for clever drafters would be too readily at hand than it could be possibly permitted. Hence, in purely domestic cases a different mechanism with different effect is installed by (3): Parties may opt for adopting the law of a certain State, but this has only the effect of incorporating the content of the rules of the chosen law into their contract. These rules are not chosen as law with the force of law by virtue of the conflict-of-laws mechanism, but are only elevated to the level of contract terms. They serve as some kind of abbreviation and replacement for copying them word by word or letter by letter into the contract. 375 The basic idea is aptly and unmistakeably explained by Recital (15):

(15) Where a choice of law is made and all other elements relevant to the situation are located in a country other than the country whose law has been chosen, the choice of law should not prejudice the application of provisions of the law of that country which cannot be derogated from by agreement. This rule should apply whether or not the choice of law was accompanied by a choice of court or tribunal. Whereas no substantial change is intended as compared with Article 3 (3) of the 1980 Convention on the Law Applicable to Contractual Obligations (the Rome Convention), the wording of this Regulation is aligned as far as possible with Article 14 of Regulation (EC) No 864/2007. 376 Parties are prevented from escaping national regulation by a simple contract clause. To call

such attempts at evasive approaches fraudulent1302 or fraus legis1303 might be a little harsh, though.1304 (3) does not depend upon any showing of evasiness or bad faith in the choice of law.1305 Nonetheless, (3) provides an important safeguard calming concerns.1306 Parties cannot construe a cross-border contract by consensus where there is none by objective yardsticks. This applies not only to trying to construe a cross-border case by “choosing” a foreign law, but also to agreeing on a foreign forum or agreeing on a seat of arbitration abroad. Even a combination of a choice of law with a foreign forum or a foreign seat of arbitration does not

1302 1303 1304 1305

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COM (2005) 650 final p. 5. As e.g. Biagioni, NLCC 2009, 629, 631 states. See Ostendorf, SchiedsVZ 2010, 234, 239–240. Banco Santander Totta SA v. Companhia de Carris de Ferro de Lisboa SA [2016] EWHC 465 (Comm) [373] (Q.B.D., Blair J.); Briggs, Private International Law in English Courts (2014) para. 7.116. Aubrey L. Diamond, (1979) 33 Current Legal Problems 155, 159–160.

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fare better in purely domestic cases. Parties might attempt at evading and circumventing this by agreeing on a seat of arbitration outside the EU.1307 If the State at stake comprises several territorial units with contract laws respectively, Art. 22 377 (1) ought to be applied, and the single territorial unit must be treated as a separate country.1308 E.g., parties might not choose for English law if every relevant element of the contract is located in Scotland. 2. Provisions which cannot be derogated from by agreement Art. 3 (3) gives preference to internally, domestically mandatory rules of the State concerned 378 which can not be derogated from by virtue of the domestic law of that State. A truly domestic case is treated as any domestic case and cannot claim greater freedom in favour of the parties than they enjoy ordinarily under the law of this State. Attempts to incorporate a definition of internally mandatory rules1309 or, more modestly, to add “internally” before “mandatory”1310 were not successful eventually. It is for the respective State to give an internally mandatory character to the rules envi- 379 saged.1311 The Italian version of (3) is unambiguous and clarifying in this regard: “disposizioni alle quali la leggi di tale diverso paese non permetto di derogare convenzionalmente.” The English and the German versions unfortunately lack such clarity. Insofar they differ from the more precise wording of Art. 14 (2) Rome II Regulation. The parallel with Art. 14 (2) Rome II Regulation is legislatively wanted for and should serve as a maxim, or at least as a mark of orientation for interpretation.1312 “Provisions” must not be interpreted strictly as “statutory provisions”. The concept em- 380 ployed is more open. It includes, and embraces, also non-statutory rules. In particular, judge-made rules enjoy equal protection against their contractual derogation as statutory norms.1313 It is not even required that such judge-made rules have acquired the status and level of customary law. Else, common law rules would be excluded, and balance would be shifted one-sided in favour of civil law concepts relying on codification and statutes. This must not be, and it would never have been even remotely admitted by the Common Law States participating in negotiating the Rome Convention and the Rome I Regulation. But even in civil law systems, judge-made rules play an important and ever increasing part, for they adapt statutory norms introduced ages ago to the changing features of life. (3) must not become a battle-field for applied legal theory and is not about solving any issues of national

1307 1308

1309 1310

1311 1312 1313

Ostendorf, SchiedsVZ 2010, 234, 237. Matthias Weller/Nordmeier, in: Spindler/Schuster, in: Spindler/Schuster, Recht der elektronischen Medien (3rd ed. 2015) Art. 3 note 8. To this avail a Swedish proposal, Council Doc. 13035/06 ADD 11 (27 September 2006). Council Doc. 13035/06 ADD 6 (25 September 2006) (Portugal), ADD 16 (3 October 2006) (the Netherlands). See only Biagioni, NLCC 2009, 629, 632. Biagioni, NLCC 2009, 629, 632. Ferrari, in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saneger/Götz Schulze/Staudinger, Art. 3 Rom I-VO note 56; Ragno, in: Ferrari, Art. 3 note 55.

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understandings what constitutes a proper source of law and what does not. “Provisions” thus applies to rules stemming from all possible sources of law. 381 The restriction is that a mandatory nature is required. Mere soft law does not qualify in this

regard. Likewise, default rules as ius dispositivum do not qualify. The lex causae is at liberty to which rules of law it attributes a mandatory nature. Just like it may introduce dispositive statutory norms, on the contrary it might vest judge-made rules with a mandatory nature. What is required is ius cogens, not ius dispositivum as to be measured by the yardsticks established by the lex causae. Courts are charged with the task to identify the rules qualifying which might be the more burdensome the less explicit the respective rules are.1314 382 A further requirement is that the generally mandatory rule at stake is truly applicable in the

concrete case since (3) is not to attribute a more extensive effect to the mandatory rules of the “objective” applicable law than that law itself would attribute.1315 A rule not calling for its application in the concrete case must not be applied. 3. Location of relevant elements 383 The reference to “all other elements”1316 beyond the party choice should get proper atten-

tion, for it establishes a very important restriction to (3).1317 Its significance has been reinforced insofar as the final French version saw the restoration of “tous les autres”1318 compared to the French version of Art. 3 (2) Proposal where the “tous” was missing.1319 A country to which all the relevant elements lead might be that of the objectively determined lex causae.1320 But the reverse is not true: A country that has significant connections may qualify as the State of the lex causae, but unless that State has all relevant connections, its law may not be invoked to reduce the effects of the parties’ agreement as to the chosen law.1321 384 Every factor suited to serve as connecting factor in a conflict rule as contained in the Rome I

Regulation certainly constitutes a “connection” in the sense of (3).1322 The list of relevant connections comprises for sure: the domicile, habitual residence,1323 seat (whether effective or statutory)1324 or any place of business, which is related to the contract, of either party,1325 1314

1315 1316 1317 1318 1319 1320 1321 1322

1323 1324 1325

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Calliess, in: Calliess, Art. 3 Rome I Regulation note 55; Ragno, in: Ferrari, Art. 3 note 55; Banco Santander Totta SA v. Companhia de Carris de Ferro de Lisboa SA [2016] EWHC 465 (Comm) [465]–[554] (Q.B.D., Blair J.) provides a possibly extreme example. Plender/Wilderspin para. 6–070. Emphasis added. McParland para. 9.163. Emphasis added. McParland para. 9.163. See only Symeonides, in: Liber amicorum Kurt Siehr (2010), p. 513, 528. Symeonides, in: Liber amicorum Kurt Siehr (2010), p. 513, 528. Ferrari, in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger, Art. 3 Rom I-VO note 51; Ragno, in: Ferrari, Art. 3 note 53. See only Calliess, in: Calliess, Art. 3 Rome I Regulation note 53. Insofar Contra Calliess, in: Calliess, Art. 3 Rome I Regulation note 53. BGHZ 123, 380, 384; BGHZ 135, 124, 130; BGH NJW-RR 2005, 1071; Caterpillar Financial Services Corp. v. SNC Passion [2004] EWHC 569 (Comm) [23], [2004] 2 Lloyd’s Rep. 99 (Q.B.D., Cooke J.); The “Vine”

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the nationality of either party,1326 and any place of performance for any obligation generated by the contract1327 (but only if objectively determined, based on objective facts, and not if only contractually ascertained)1328. To this the place where the contract was concluded should be added,1329 for it features as a connecting factor in Art. 11 (1).1330 Furthermore it is relevant in the context of Art. 4 (3).1331 The foreign situs of the object of the contract matters, too,1332 particularly so if real property is at stake.1333 A connection with a proper cross-border contract as a so-called string contract might constitute an international element in itself,1334 and if the internationality required by international uniform law is complied with respectively, this should elevate above the threshold, too.1335 But the use of a certain language does not.1335a It should be noted that (3) does not refer to elements relevant to the contract (and even less 385 to the narrower notion of elements relevant to the mandatory rules of any country), but refers to “elements relevant to the situation”.1336 This is deliberately general.1336a But still it [2010] EWHC 1411, [2011] 1 Lloyd’s Rep. 301 (Q.B.D., Teare J.); Ferrari, in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger, Art. 3 Rom I-VO note 51. 1326 See only Magnus, in: Staudinger, Art. 3 Rom I-VO notes 131–132; Ferrari, in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger, Art. 3 Rom I-VO note 73; Martiny, in: Münchener Kommentar zum BGB, vol. 10, 6th ed. 2015, Art. 4 Rom I-VO note 292. But sceptical Siehr, RHDI 67 (2014), 801, 804; Banco Santander Totta SA v. Companhia de Carris de Ferro de Lisboa SA [2016] EWHC 465 (Comm) [409] (ii) (Q.B.D., Blair J.) (incorrectly) even considers the mere assignability to a foreign subsidiary or third party as a relevant foreign element. 1327 von Bar, para. 419; Biagioni, NLCC 2009, 629, 631; Nourissat, Procédures janvier 2014, p. 14, 15; Mankowski, EWiR 2014, 231, 232; see also Dexia Crediop SpA v. Commune di Prato [2015] EWHC 1746 (Comm) [209] (Q.B.D., Walker J.). 1328 von Hein, in: Rauscher, Art. 3 note 115; Magnus, in: Staudinger, Art. 3 note 133. 1329 BGHZ 135, 124, 130; OLG Celle RIW 1991, 421; LG Stade IPRspr. 1989 Nr. 39; LG Koblenz IPRspr. 1989 Nr. 43; LG Hildesheim IPRax 1993, 173; Taupitz, RIW 1990, 642, 648; Mankowski, RIW 1993, 453, 454; von Hein, in: Rauscher, Art. 3 note 111; Magnus, in: Staudinger, Art. 3 note 139. Contra OLG Frankfurt IPRax 1990, 236, 238; LG Hamburg IPRax 1990, 238, 239; see also BGH NJW 2000, 1487. 1330 Mankowski, RIW 1993, 453, 454; Magnus, in: Staudinger, Art. 3 note 139; Ragno, in: Ferrari, Art. 3 note 53. 1331 Magnus, in: Staudinger, Art. 3 note 139. 1332 Ferrari, in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger, Art. 3 Rom I-VO note 51. 1333 Ragno, in: Ferrari, Art. 3 note 53. 1334 Boschiero, in: Boschiero p. 67, 93–94; Dicey/Morris/Collins/Morse para. 32–087; Martiny, in: Münchener Kommentar, Art. 3 Rom I-VO note 93. 1335 Ferrari, in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger, Art. 3 Rom I-VO note 53; Ragno, in: Ferrari, Art. 3 note 53. 1335a Banco Santander Totta SA v. Companhia de Carris de Ferro de Lisboa SA [2016] EWHC 465 (Comm) [399] (Q.B.D., Blair J.). 1336 Caterpillar Financial Services Corp. v. SNC Passion [2004] EWHC 569 (Comm) [19], [2004] 2 Lloyd’s Rep. 99 (Q.B.D., Cooke J.); Banco Santander Totta SA v. Companhia de Carris de Ferro de Lisboa SA [2016] EWHC 465 (Comm) [395] (Q.B.D., Blair J.). 1336a Banco Santander Totta SA v. Companhia de Carris de Ferro de Lisboa SA [2016] EWHC 465 (Comm) [396] (Q.B.D., Blair J.); Pillai/Glover, [2016] BU/BFZ 401, 402.

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should not matter whether either party hedged internationally.1336b The relevant point of time fixing that situation is the time not of the conclusion of the main contract, but of the conclusion of the choice of law agreement to be judged,1337 which could make a difference in the case of a subsequent choice of law. 386 For instance, a contract between two parties both resident in Germany for the transport of

goods in the Netherlands is not a purely domestic contract and is thus not covered by (3).1338 Or a traveller living in Austria books a trip to Egypt with an Austrian travel agency.1339 387 Commercial convenience might be added under certain circumstances as a relevant foreign

element if it is clear, known to both parties and the commercial background of the transaction that the creditor of the characteristic performance will export the result of that performance to customers abroad.1340 Legal Certainty has a certain value.1340a But the mere use of an international standard form (e.g. the ISDA Master Agreement) does not per se add a foreign element to a contract.1340b 388 The general principle under (3) can be stated as follows: A relevant foreign element must be

an objective element. A mere contractual element based entirely on the stipulation by the parties is not sufficient. Parties’ intentions, even if expressed as contractual stipulations, alone do not make a contract international.1341 This is consistent with the requirement of cross-border elements in Art. 1 (1), which in turn must be interpreted in the light of (3).1342 Or to formulate the maxim from another perspective: Factors that would indicate a tacit or implicit choice of law are not constituting internationality and cross-border elements in the context of (3). 389 Parties must not escape regulation by inserting a certain clause in their contract. This relates

in particular to the choice of a foreign forum and to an abstract agreement for a foreign place of performance.1343 Just like a choice of law clause is a mere agreement which cannot, per se, seen in isolation, transform a domestic contract into an international one, they cannot accomplish the same feat. Art. 3 (3) Rome Convention expressly mentioned that the choice of a foreign forum did not elevate the contract to an international nature. This express provision has not been retained in the wording of (3), but that does not give rise to an argumentum e contrario. On the contrary, Recital (15) cl. 2 does not leave room for doubts: (3) should apply whether the choice of law is accompanied by a choice of court or tribunal.

1336b Dexia

Crediop SpA v. Comune di Prato [2015] EWHC 1746 [211] (Q.B.D., Walker J.) Caterpillar Financial Services Corp. v. SNC Passion [2004] EWHC 569 (Comm) [19], [2004] 2 Lloyd’s Rep. 99 (Q.B.D., Cooke J.). 1338 OLG Köln TranspR 2005, 263, 264. 1339 See Michael Müller, EuZW 2014, 34, 35; Mankowski, EWiR 2014, 231, 232. 1340 See Calliess, in: Calliess, Art. 3 Rome I Regulation note 54. 1340a Banco Santander Totta SA v. Companhia de Carris de Ferro de Lisboa SA [2016] EWHC 465 (Comm) [400] (Q.B.D., Blair J.). Less enthusiastically Pillai/Glover, [2016] BU/BFZ 401, 402. 1340b Dexia Crediop SpA v. Comune di Prato [2015] EWHC 1746 [211] (Q.B.D., Walker J.). 1341 Magnus, in: Staudinger, Art. 3 note 133. 1342 Magnus, in: Staudinger, Art. 3 note 133. 1343 von Hein, in: Rauscher, Art. 3 note 115; Magnus, in: Staudinger, Art. 3 note 133. 1337

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This holds even true in the (rather unlikely) event that parties designate the law of A, but agree on a forum in B. The currency of any obligation to pay under the contract and the language of the contract 390 operate somewhere in a kind of grey zone and in twilight.1344 Either of them is open to stipulation by the parties. If two parties resident in France in a contract for the exchange of performances entirely in France agree on a price in US$, this cannot elevate this “French” contract into a proper international, cross-border contract. If parties both resident in Greece conclude a contract in English, should the contract be regarded a cross-border contract simply for its language? Can national regulation really be avoided at such cheap cost? 4. Application of the law initially chosen The law designated by the parties does have effects: At least insofar as the objectively 391 determined lex causae allows so, the rules as contained in the designated law are the relevant ones for the contractual relationship between the parties. Whether the law initially chosen gains greater importance, is a question of interpreting the consequence flowing from (3). 5. Proper choice of law or materiellrechtliche Verweisung as consequence? The nature of the consequence flowing from (3) is the matter of discussion: Does it only 392 amount to a so-called materiellrechtliche Verweisung effectively relegating the content of the chosen law to the rank or dignity of mere contract clauses and thus within the confined limits of the domestically not derogable rules of the law otherwise applicable,1345 or does it constitute a generally proper choice of law (at conflicts law) only restricted by the rules of the law otherwise applicable from which parties could not derogate on the level of substantive law?1346 The former approach ought to be preferred. It conforms better with the wording of (3), the 393 systematic structure of Art. 3 in its entirety and the purpose pursued by (3). The alternative approach obviously tries to limit the effect of (3) as far as possible and to adhere to the principle enshrined in (1) cl. 1 wherever feasible. Incidentally, it tries to permit businesses to insert uniform, unmodified choice of law clauses in all of their contracts, be these contracts objectively international or objectively domestic. Standardisation and cost reduction shall prevail. But these goals are to the same extent served and better explained under the former approach.1347 6. Relevant point of time The relevant point of time is the conclusion of the agreement designating the initially chosen 394 law. From the very beginning and at the earliest there must be the possibility to evaluate and 1344 1345

1346

1347

Comp. Calliess, in: Calliess, Art. 3 Rome I Regulation note 54. To this avail e.g. Mankowski, IHR 2008, 133, 134; Leible/Matthias Lehmann, RIW 2008, 528, 534; Maultzsch, RabelsZ 75 (2011), 60, 67–70; Boele-Woelki, in: FS Ingeborg Schwenzer (Bern 2011), p. 191, 197. To this avail e.g. Jacquet, Trav. Com. fr. dr. int. pr. 1993–94, 23; Heiss, in: Ferrari/Leible p. 1, 2; Kondring, RIW 2010, 181, 185 et seq.; Briggs, Private International Law in English Courts (2014) para. 7.116. Carrascosa González p. 148.

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to judge as to whether the concrete agreement is governed by (3) or not. Later changes in the factual circumstances do not affect and set aside the initial judgment. 395 The relevant point of time is the time when the choice of law agreement is concluded. The

circumstances prevailing at this very point of time are the ones on which the parties to the contract can base their expectations. They are accessible, they do not deal with outdated but with timely information, and they do not entail any speculation or any necessity of a prognosis leaping into the future. Either party could ask the other party about that other party’s whoabouts or whereabouts. The contractual program is fixed at this point of time, and if anything was going according to plan, there would not be any need to reconsider it. Neither party can be surprised badly. Quite accordingly, the wording (3) expressly refers to the time when the choice of law is made as the relevant point of time. 396 The conceivable alternatives would be either the point of time when the contract is per-

formed or the point of time when the contract is up for judicial review, e.g. when a court is seised with the matter. None of these alternatives is convincing. On the contrary, either of them suffers from inherent defects. Firstly, performance might stretch over a long period. Just imagine long-term contracts. Furthermore, which part of the performance should be the relevant one? The first in time, the last in time, the part of the characteristic performer? Secondly, circumstances might have changed, and elements might have been relocated, between the formation of the contract and the court being seised. It would surprise at least one party if the latter point in time would be regarded as the relevant one. 397 Art. 17 (3) Brussels I Regulation endorses a jurisdiction agreement which is entered into by

the consumer and the other party to the contract, both of whom are at the time of conclusion of the contract domiciled or habitually resident in the same Member State, and which confers jurisdiction on the courts of that Member State, provided that such an agreement is not contrary to the law of that Member State. In the present context of Art. 3 (3) Rome I Regulation this confirms that the relevant point of time is the conclusion of the contract safe for express legislative intervention to the contrary. Such intervention will only happen rarely and very exceptionally as evidenced by the lack of a provision mirroring Art. 17 (3) Brussels I Regulation in Art. 21 Brussels I Regulation. VI. “Intra-EU cases”, (4) 1. Generalities 398 A novelty in Art. 3 is (4), but not a complete one, since it at least partially refers to the conflict

rules in the directives on consumer protection.1348 All third States will very closely and with some degree of mistrust examine it. The basic idea shifts away from the traditional principles and idea of nationality. The EU is treated as if the EU were a State.1349 The vicinity to (3) is not accidental. Conversely, (4) wants to borrow the approach employed by (3). This fits the extension of the consequences, namely protecting all mandatory rules as contained in EU legislation. Some regard (4) as the most significant novelty of Art. 3 compared to its pre1348 1349

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See Wulf-Henning Roth, in: FS Ulrich Spellenberg (2010), p. 309, 314. See only Leible, in: Cashin Ritaine/Bonomi p. 61, 73; Mankowski, IHR 2008, 133, 135; Magnus, IPRax 2010, 27, 34; Bratvogel p. 205 with further references.

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decessor, Art. 3 Rome Convention,1350 insofar as it basically analogizes the territory of the EU to the territory of a single State.1351 (4) erects some kind of “Fortress Europe”.1352 It inhibits evasion of EU law and ought to be regarded as combating the fraus legis Europeae.1353 The parenthesis in the wording gives the answer to the else intricate question what should be 399 applied when dealing with Directives. This answer reads: the national rules of the lex fori implementing the respective Directives.1354 This holds true irrespective whether the Forum State belongs to the Member States connected with elements of the case.1355 To a certain extent, this might entice forum shopping.1356 Choosing Swiss law as a “neutral” law does not relieve from the chains of mandatory EU law. There would have been two alternatives: firstly to apply the law of the Member State to which the contract has the closest connections,1357 or secondly, to apply the law which would be objectively applicable absent a choice of law by the parties.1358 Yet EU law regards all Member State laws as equivalent, and for the sake of saving tertiary costs pragmatism prevails over strict observance of intrasystematic coherence. It is not required that the rules at stake are of fundamental importance for EU law as a whole 400 or protect the fundamental freedoms or unrestricted competition in the Internal Market.1359 (4) is not a kind of specific case of public policy (which it would be if the contention was correct), but a parallel to (3). That every case falling under (3) also falls under (4), but that (3) is lex specialis in purely domestic cases, should only be mentioned in passing.1360 “Mandatory” has to be read as “nationally mandatory” or “domestically mandatory”, at the 401 level of substantive law beyond the parties’ choice, the mildest kind of mandatory character with the lowest threshold. In B2B relations, mandatory rules in this sense are a rarity in EU law so that (4) might not put all too severe a hindrance in the way of the parties’ choice.1361 An example in B2C relations is for instance provided by Art. 5 (3) Directive 1999/44/EC.1362 (4) does not collide with Art. 9 (1) effectively. If it did, superiority favouring EU standards for EU cases is claimed over mere national Eingriffsnormen (lois de police).1363 1350 1351

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Ragno, in: Ferrari, Art. 3 note 8. Rossolillo, Riv. dir. int. 2004, 695, 708; Boschiero, in: Boschiero p. 67, 101, 120; Mankowski, IHR 2008, 133, 135; Ragno, in: Ferrari, Art. 3 note 5. Magnus/Mankowski, ZvglRWiss 103 (2004), 131, 132–133; Carrascosa González p. 152. Lagarde, RCDIP 95 (2006), 331, 337; Carrascosa González p. 152. Criticising this Kieninger, in: FS Jan Kropholler (2008), p. 499, 513–515. Mankowski, IHR 2008, 133, 135. d’Avout, D. 2008, 2165, 2167. Leible/Matthias Lehmann, RIW 2008, 528, 534 tend to this solution. To the affirmative Leible, in: Ferrari/Leible p. 41, 51. But see Clausnitzer/Woopen, BB 2008, 1798, 1799. Raising the question but any the less not giving a conclusive answer Bogdan, NIPR 2009, 407, 409. Mankowski, IHR 2009, 133, 135; Ostendorf, IHR 2012, 177, 179; Briggs, Private International Law in English Courts (2014) para. 7.239. See Froukje Faber v. Autobedrijf Hazet Ochten BV (Case C-497/13), ECLI:EU:C:2015:357 paras. 49–56; Leonhard Hübner, NJW 2015, 2241. Valdini, Der Schutz der schwächeren Vertragspartei im Internationalen Vertriebsrecht (2013) pp. 350– 351.

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2. Relevant elements a) Definition 402 The term “elements”, in principle, stretches beyond “connections”.1364 But every “connec-

tion” suited to serve as connecting factor in a conflict rule as contained in the Rome I Regulation certainly constitutes an “element”.1365 What else could sensibly be treated as an “element” calls for an answer. But to synchronize “elements” and “connections” keeps (4) in line with (3) on which (4) is modelled, and acknowledges the peculiarities of the surrounding PIL context. 403 Thus, relevant elements could be: the domicile, habitual residence, seat or any relevant place

of business of either of the parties; the place where the contract is concluded; any place where the contract ought to be performed, even if only partially.1366 b) Location 404 The location of the relevant elements should also follow the yardsticks of locating estab-

lished under (3),1367 the role model for (4). 3. “Member State” 405 It should not be missed that “Member State” in (4) has a different meaning than the one it

has in the remainder of the Rome I Regulation: Ordinarily “Member State” by virtue Art. 1 (4) cl. 1 would be every Member State of the EU with the exception of Denmark (since the United Kingdom has opted in). Art. 1 (4) cl. 2, which has been added in the course of the negotiations, expressly clarifies that for the limited purposes of (4) “Member State” means every Member State of the EU, including Denmark.1368 The inclusion of Denmark is quite logical and consistent since the protected mandatory provisions of EU law are also in force and effective in Denmark.1369

406 Member States of the EEA (i.e. Iceland, Liechtenstein and Norway) are not included,

though,1370 unless they have implemented the respective Directive from the acquis communataire when the extension is guaranteed by the EEA Agreement.1371 An analogy to (4)1372 appears to be methodologically both not hundred percent perfect and unnecessary.

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Johannes Hoffmann, EWS 2009, 254, 255. Johannes Hoffmann, EWS 2009, 254, 255. See supra Art. 3 notes 384–390 (Mankowski). Supra Art. 3 notes 384–390 (Mankowski). Leible/Matthias Lehmann, RIW 2008, 528, 534; Mankowski, EuZ 2009, 2, 14; Schinkels, in: Michael Stürner (ed.), Vollharmonisierung im Europäischen Verbraucherrecht? (2010), p. 113, 119 et seq.; Ragno, in: Ferrari, Art. 3 note 58. Bogdan, NIPR 2009, 407, 409. Leible/Matthias Lehmann, RIW 2008, 528, 534. Calliess, in: Calliess Art. 3 note 56. As advocated for by Heiss, in: Ferrari/Leible p. 1, 9; Calliess, in: Calliess Art. 3 note 56.

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4. Provisions of EU law a) Definition “Provisions of EU law” includes both Regulations which are directly applicable in all Mem- 407 ber States by virtue of Art. 288 (2) TFEU, and Directives which generally require their implementation into national law by the Member States by virtue of Art. 288 (3) TFEU.1373 It is not limited to Directives as such but includes the rules of the national law of the Member 408 States implementing Directives. The only material requirement is that such rules are internally mandatory.1374 EU rules have to establish a minimum standard from which parties cannot derogate contractually.1375 Whether a national implementation going beyond the requirements of the respective Di- 409 rective is also covered remains a tricky question.1376 Insofar as full harmonisation is the dish of the day the problem might be reduced.1377 But insofar as only minimum harmonisation is required by the respective Directive, Member States are on the other hand entitled to implement better protection. Principle might dictate that only the minimum standard would be recognised as truly European. Yet the consequence expressly called for in (4) is the application of the national version of the Directive as implemented in the Forum State. Exceeding elements are not expressly excluded. That should cast the die.1378 More threatening is, in any event, a belated or else insufficient implementation of Directives 410 into national law, a scenario which arose in the now almost legendary Gran Canaria-cases with Spain not implementing the Door Step Contracts Directive in time (but then with Spanish law as the chosen law). b) No limitation to B2C contracts Art. 3 (4) is not limited to the field of consumer protection, but also covers B2B contracts. 411 Admittedly internationally mandatory rules of EU origin are rare birds in the field of B2B contracts. Yet there is the Commercial Agents Directive1379 as a very prominent and crucial exception. The famous, if not notorious case of Ingmar1380 is lurking around the corner.1381 1373 1374 1375 1376

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Carrascosa González p. 151. Johannes Hoffmann, EWS 2009, 254, 256. Siehr, RHDI 67 (2014), 801, 809. Johannes Hoffmann, EWS 2009, 254, 257; Schinkels, in: Michael Stürner (ed.), Vollharmonisierung im Europäischen Verbraucherrecht? (2010), p. 113, 121 et seq. Schinkels, in: Michael Stürner (ed.), Vollharmonisierung im Europäischen Verbraucherrecht? (2010), p. 113, 127. Plender/Wilderspin para. 6–065. Directive 86/653/EEC of the Council of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, OJ EC 1986 L 382/17. Ingmar GB Ltd. v. Eaton Leonard Technologies, Inc., Case C-381/98, [2000] ECR I-9305; annotations i.a. by Reich, EuZW 2001, 51; Thume, RIW, 4/2001, I; Jayme, IPRax, 2001, 190; Raynard, JCP E, 2001 supp. n°. 2 p. 12; Idot, RCDIP 90 (2001), 112; van Hoek, SEW, 2001, 195; Freitag, EWIR § 89 b HGB 4/2000, 1061; Michaels/Kamann, EWS 2001, p. 301; Leible/Freitag, RIW 2001, 287; Simon Schwarz, ZVglRWiss 101 (2002), 45; Ofner, ecolex 2001, 715; Nourissat, Les petites affiches N° 124, 22 juin 2001, p. 14; WulfHenning Roth, (2002) 39 CML Rev. 369; Verhagen, (2002) 51 ICLQ 135; Nemeth/Rudisch, ZfRV 2001,

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412 A specific problem is posed by the redress in the supply chain preceding consumer sales. In

this regard Art. 4 Consumer Sales Directive leaves some discretion to the Member States and does not impose a strict rule of EU law, but makes only a general point for the laws of the Member States relating to self-employed commercial agents.1382 413 Yet (4) is more limited than Ingmar.1383 Ingmar1384 stretches beyond (4) since (4) positively

requires case purely within the EU without any relevant element relating to non-Member States,1385 whereas Ingmar rules upon a factual setting where the principal was located in California, thus containing clearly relevant elements related to non-Member States. Codifying and revitalising Ingmar simultaneously might be one complication too much.1386 It even gives rise to ruminations as to whether Ingmar is still good law or has ceased to exert impact after the introduction of (4).1387

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179; Höller, RdW 2001, 396; Ansgar Staudinger, NJW 2001, 1974; Jacquet, RTDcomm 2001, 1067; Font i Segura, EuLF 3–2000/01, 179; Font i Segura, Rev. der. com. eur. 9 (2001), 259; Adobati/Giangrossi, Dir. comm. int. 2001, 725; Bitterich, VuR 2002, 155; Schwartze, in: FS Wolfgang Kilian (Baden-Baden 2004), p. 783; Schurig, in: FS Erik Jayme (München 2004), p. 837; Ezquerra Ubero, in: Calvo Caravaca/Areal Ludeña (dir.), Cuestiones actuales del derecho mercantil internacional (Madrid 2005), p. 193. See to a similar avail only Althammer, JA 2008, 772, 775; Rutgers, in: Offerhauskring vijftig jaar (2012), p. 129, 131. In the context of the Directives demanding the Member States to alter their PIL, for a negative answer Ansgar Staudinger, in: Götz Schulze/Schulte-Nölke (eds.), Die Schuldrechtsreform vor dem Hintergrund des Gemeinschaftsrechts (Tübingen 2001), p. 295, 311 et seq.; Staudinger, ZGS 2002, 63; Staudinger, RIW 2000, 416, 419; Freitag/Leible EWS 2000, 342, 344; Bitterich, JR 2004, 485, 489 et seq.; Olaf Johannsen, ITRB 2006, 112, 114 and tentatively also Bairlein, IHR 2014, 1, 9 and for an affirmative answer Palandt/ Heldrich, BGB (67th ed. München 2008) Art. 29 EGBGB note 2. Further discussion by Stephan Lorenz, in: FS Erik Jayme (2004), p. 533; Dutta, ZHR 171 (2007), 79; Sendmeyer, Der Unternehmerregress nach Maßgabe der §§ 478; 479 BGB (2008) pp. 304–343; Kölmel, Das Regressrecht bei internationalen Lieferketten (2008) pp. 176–194. See Martiny, ZEuP 2008, 79, 88, 105; Ofner, ZfRV 2008, 13, 22; Clausnitzer/Woopen, BB 2008, 1798, 1799 Fn. 15; d’Avout, D. 2008, 2165, 2166; Calliess, in: Calliess Art. 3 note 56 and also Wulf-Henning Roth, in: FS Ulrich Spellenberg (2010), p. 309, 313; Rutgers, in: Offerhauskring vijftig jaar (2012), p. 129, 131. Ingmar GB Ltd. v. Eaton Leonard Technologies, Inc., Case C-381/98, [2000] ECR I-9305; annotations i.a. by Reich, EuZW 2001, 51; Thume, RIW, 4/2001, I; Jayme, IPRax, 2001, 190; Raynard, JCP E, 2001 supp. n°. 2 p. 12; Idot, RCDIP 90 (2001), 112; van Hoek, SEW, 2001, 195; Freitag, EWIR § 89b HGB 4/2000, 1061; Michaels/Kamann, EWS 2001, p. 301; Leible/Freitag, RIW 2001, 287; Simon Schwarz, ZVglRWiss 101 (2002), 45; Ofner, ecolex 2001, 715; Nourissat, Les petites affiches N° 124, 22 juin 2001, p. 14; WulfHenning Roth, (2002) 39 CML Rev. 369; Verhagen, (2002) 51 ICLQ 135; Nemeth/Rudisch, ZfRV 2001, 179; Höller, RdW 2001, 396; Ansgar Staudinger, NJW 2001, 1974; Jacquet, RTDcomm 2001, 1067; Font i Segura, EuLF 3–2000/01, 179; Font i Segura, Rev. der. com. eur. 9 (2001), 259; Adobati/Giangrossi, Dir. comm. int. 2001, 725; Bitterich, VuR 2002, 155; Schwartze, in: FS Wolfgang Kilian (2004), p. 783; Schurig, in: FS Erik Jayme (2004), p. 837; Ezquerra Ubero, in: Calvo Caravaca/Areal Ludeña (dir.), Cuestiones actuales del derecho mercantil internacional (2005), p. 193. Kieninger, in: FS Jan Kropholler (2008), p. 499, 503; Bogdan, NIPR 2009, 407, 410. Wulf-Henning Roth, in: FS Ulrich Spellenberg (2010), p. 309, 320–321. van Wechem, MedNedIVR 136 (2008), 1, 21 et seq.; Sonnenberger, in: FS Jan Kropholler (2008), p. 227, 232; Strikwerda, De overeenkomst in het IPR (3rd ed. 2010) para. 211a; Wulf-Henning Roth, in: FS Ulrich

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Further caution might be prompted as (4) in its actual version differs substantially from 414 Art. 3 (5) Proposal. Art. 3 (5) Proposal reads: “Where the parties choose the law of a nonMember State, that choice shall be without prejudice to the application of such mandatory rules of Community law as are applicable to the case”.1388 This contention was dropped having been massively criticised,1389 particularly attacking its rueful and mysterious final clause. Thus, it can only serve by contrast what legislatively is not wanted any more, but not as a positive illustration. The final wording of (4) is more transparent and more intelligible. (4) copies a generally proven role model and is set to extend it. Its purpose is to avoid that the parties can elusively evade strict rules of EU law by a simple choice of law.1390 It is limited to “EU cases” which only have relevant elements within the EU and strives for coherence with Art. 14 (2) Rome II Regulation.1391 5. Choice of the law of a Third State (4) becomes only operative where the parties have chosen the law of a non-Member State. 415 “Member State” for the purposes of (4) is also Denmark, so that a choice of Danish law does not trigger (4).1392 Part of “Member States” are also the so-called autonomous areas of Member States for which EU law is in full force and effect pursuant to Arts. 349; 355 TFEU (ex-Art. 299 EC Treaty).1393 If this requirement is not fulfilled, as for instance with the Channel Islands Guernsey and Jersey and the Isle of Man by virtue of Art. 355 (5) (c) TFEU (ex-Art. 299 (6) (c) EC Treaty), the choice e.g. of Manx law must be treated as the choice of the law of a third State.1394 The law of an EEA State is a Member State law, insofar as the EEA Accession Act provides for an automatic transfer of the respective acquis standard but else the law of a nonMember State; again consistency within (4) must be the guideline as in the case of Denmark.1395 If in an “Intra-EU case” parties choose the law of a Member State, (4) is not applicable. Any 416 malign intention to exploit deficits in the chosen law with regard of the implementation of EU Directives (like businesses tried in the notorious Gran Canaria cases in the late 1980s or early 1990s) does not alter this outcome.1396 Member State remains Member State, and there are other instruments in EU law to call negligent Member States to order,1397 most prominently the Francovich type State liability.

1388 1389

1390 1391 1392

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Spellenberg (2010), p. 309, 320–321; Rutgers, in: Offerhauskring vijftig jaar (2012), p. 129, 131; Johannes Schilling, ZEuP 2014, 843, 855–857. COM (2005) 650 final p. 15. Mankowski, IPRax 2006, 101, 102 et seq.; Leible, in: Ferrari/Leible, p. 41, 52–54; Thorn, in: Ferrari/Leible (eds.), Ein neues Internationales Vertragsrecht für Europa (2007), p. 129, 141–143; Cannone, in: Il nuovo diritto europeo di contratto (Milano 2007), p. 199. Solomon, 82 Tul. L. Rev. 1709, 1729 (2008). Rolf Wagner, IPRax 2008, 377, 380; Althammer, JA 2008, 772, 775. See only Garcimartín Alférez, EuLF 2008, I-61, I-65; Martiny, in: Münchener Kommentar zum BGB Art. 3 note 98. Magnus, in: Staudinger Art. 3 note 155. Magnus, in: Staudinger Art. 3 note 155. See supra Art. 3 note 405 (Mankowski). Magnus, in: Staudinger Art. 3 note 157; Plender/Wilderspin para. 6–066. Contra Schinkels, in: Michael Stürner (ed.), Vollharmonisierung im Europäischen Verbraucherrecht? (2010), p. 113, 130 et seq. Magnus, in: Staudinger Art. 3 note 157.

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6. Relevant point of time 417 The relevant point of time is the conclusion of the agreement designating the initially chosen

law. From the very beginning and at the earliest there must be the possibility to evaluate and to judge as to whether the concrete agreement is governed by (3) or not. Later changes in the factual circumstances do not affect and set aside the initial judgment. The same arguments valid with regard to (3)1398 apply here. 418 Just as with regard to (3),1399 there is no parallel to Art. 17 (3) Brussels I Regulation which

states an express change of consequence in the event that an originally purely domestic contract turns cross-border by one of the parties relocating its domicile in another state in the aftermath of the conclusion of the contract. The lack of such parallel carries a strong argumentum e contrario. 7. Consequences 419 (4) does not render the choice of law invalid. In general, the chosen Third State law remains

applicable, but is combined in some kind of law mix with the law designated by (4).1400 According to the parenthesis in (4), the lex fori shall apply. Against natural expectation,1401 it is not for the law of the other Member State, which in the absence of a valid choice of law ought to be applied, to apply. This follows the path of Art. 14 (3) Rome II Regulation. 420 This approach might produce differences as to the degree to which EU Directives have been

implemented. The ensuing potential for forum shopping1402 must not be overestimated, though.1403 421 But which result to arrive at if the lex fori contains elements going beyond the Directive and

leaving even the widest margin of discretion as permitted by the Directive? Should such elements be disregarded1404 or should they be recognised avoiding a split within the applicable law?1405 The goal pursued by (4) is to protect the standard set by EU law against its contractual derogation. Nowhere is it expressed that the goal is to protect national laws of the Member States in their idiosyncrasies and particularities insofar as they go beyond merely implementing and transforming EU law. The case is clear cut in the event that the EU has promulgated a Regulation. A Regulation does need transformation into national law but is directly applicable. Any measure by national legislators, even if benevolently extending the standard set by the Regulation to other instances not originally covered by it, is 1398 1399 1400 1401

1402 1403 1404

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Supra Art. 3 notes 394–397 (Mankowski). See supra Art. 3 note 397 (Mankowski). See only Rühl, in: FS Jan Kropholler (2008), p. 187, 204; Rühl, p. 499; Bratvogel p. 206. Kieninger, in: FS Jan Kropholler (2008), p. 499, 513 et seq.; Leible/Matthias Lehmann, RIW 2008, 528, 534; Biagioni, NLCC 2009, 629, 635; Ringe, in: jurisPK Art. 3 note 52. Lagarde/Tenenbaum, RCDIP 97 (2008), 727, 737; Sendmeyer, Contratto e impresa/Europa 2009, 792, 799. Carrascosa González p. 152. To this avail Pfeiffer, EuZW 2008, 622, 625; Martiny, in: MK BGB Art. 3 note 102; Matthias Weller/ Nordmeier, in: Spindler/Schuster, in: Spindler/Schuster, Recht der elektronischen Medien (3rd ed. 2015) Art. 3 note 9; Ringe, in: jurisPK Art. 3 note 52. To this avail Kieninger, in: FS Jan Kropholler (2008), p. 499, 506 et seq.; Bogdan, NILR 2009, 407, 409.

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beyond the object of protection, namely the EU Regulation. EU Directives should not prompt differences and should be kept to their own aim and goal. Of course, drawing a split within the lex fori is sometimes not the easiest task. But who if not judges and lawyers trained in the lex fori should be up to this task? In any event, deviations from the implementation of the Directive in the Member State to 422 which the closest objective connection exist cannot justify the application of (3) as lex specialis to the detriment of (4).1406 The application of Art. 6 (2) as some kind of lex specialis has to be ruled out, either.1407 8. Relationship with still existing Directives in the field of PIL The Rome I Regulation did not abolish the rules related to PIL in Directives still existing at 423 the time when it entered into force. Indirectly, Art. 27 (1) lit. b confirms this by obliging the Commission to submit a report concerning the application of Art. 6 with particular regard to consistency in the field of consumer protection within the overall system of EU law.1408 The normative background for the survival of those rules is Art. 23.1409 In contrast to Art. 22 (a) Proposal, Art. 23 does not refer to an Annex listing which Acts of EU law are concerned. Nonetheless, the respective Annex of the Proposal still gives a first orientation.1410 The reason for not repealing the rules in the Directives may be found in the distribution of internal competences inside the Commission: General Directorate Home and Justice was only responsible for the Rome I Regulation whereas consumer protection rested with other General Directorates, in particular SanCo.1411 Recital (40) of the Rome I Regulation might pronounce a general policy of reducing the number of rules to which regard ought to be paid, but obviously this has its (political) limits. The overall system is not simplified but gets an additional twist.1412 (4) at its core serves a residual function and is a default rule for such Acts of EU law which do not themselves contain (unilateral) conflict rules.1413 Accordingly, (4) is, by no means, comprehensive, but only the first step.1414 The rules in the 424 Directives still exist unless they are repealed in another Act of EU law. Insofar as they still exist they even enjoy precedence as leges specialis. Therefore, one still has to judge for each 1406 1407

1408 1409

1410 1411 1412 1413 1414

Calliess, in: Calliess Art. 3 note 56; Ringe, in: jurisPK Art. 3 note 53. Contra Schinkels, in: Michael Stürner (ed.), Vollharmonisierung im Europäischen Verbraucherrecht? (2010), p. 113, 129 et seq. Mankowski, EuZ 2009, 2, 15. Referentenentwurf für ein Gesetz zur Anpassung der Vorschriften des Internationalen Privatrechts an die Verordnung (EG) Nr. 593/2008 (8 September 2008) p. 9 sub A I 5; Garcimartín Alférez, EuLF 2008, I-61, I-66 no. 29; Ubertazzi p. 27; Pellegrini, Rev. Lamy dr. aff. N°. 29, juillet/août 2008, p. 69, 76; Boskovic, D. 2008, 2175, 2178; Heiss, in: FS Jan Kropholler (Tübingen 2008), p. 459, 477; Kieninger, in: FS Jan Kropholler (Tübingen 2008), S. 499, 502; Johannes Hoffmann, EWS 2009, 254, 257; Wulf-Henning Roth, in: FS Ulrich Spellenberg (2010), p. 309, 315 et seq.; Schinkels, in: Michael Stürner (ed.), Vollharmonisierung im Europäischen Verbraucherrecht? (2010), p. 113, 116. Leible/Matthias Lehmann, RIW 2008, 528, 531. Mankowski, EuZ 2009, 2, 15. Mankowski, IHR 2008, 133, 135. Boschiero, in: Boschiero p. 67, 113. See Wulf-Henning Roth, in: FS Ulrich Spellenberg (2010), p. 309, 316 et seq.

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surviving Directive when this particular Directive wants to be applied in third country relations.1415 Directives still rule where a close connection with the EU is given; but additionally genuine links with a third country exist which would prevent the application of (4).1416 If one regarded the active consumer as falling outside the protection granted by the Directives,1417 the ambit of PIL in the Directives would be very limited.1418 If one regarded the harmonised regime as the object of protection and did not erect such a precondition,1419 that ambit would be wider.1420 A simultaneous application of both Directive rules and (4)1421 would contradict Art. 23. 425 Recital (58) cl. 2 Consumer Rights Directive1422 – at least partial deviation and reversal of

Recital (10) Proposal Consumer Rights Directive1423 – now clarifies matters: “Where the law applicable to the contract is that of a third country Regulation (EC) No. 593/2008 should apply, in order to determine whether the consumer retains the protection granted by this Directive.” But of course the Consumer Rights Directive (despite its title which is wrongly suggesting conclusiveness) only repeals the Door-Step Sales Directive and the Distance Sales Directive and amends the Unfair Terms Directive and the Consumer Sales Directive. The Consumer Credit Directive in particular is not touched by it. In addition there is hope that future Directives in the field of consumer protection will not contain conflict rules.1424 The very fact of the insertion of (4) may in future incite the Union legislature not to enact rules which cut across the normal operation of the conflict of laws.1425

426 (4) does not even overrule the judicial rules set in Ingmar1426 since Ingmar is not originally

rule-setting, but only a judicial interpretation of the content of the respective Directive and thus benefits from the precedence of the respective Directive as lex specialis: Ingmar only reveals the unwritten conflict rule which has been contained in the respective Directive from its becoming effective and thus ab initio.1427 Still the principal sitting in a third country must be aware that the commercial agent is protected by the Commercial Agents Directive1428 (and its Arts. 17; 18 in particular) where he employs a commercial agent within the EU, and 1415 1416 1417 1418 1419

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Mankowski, EuZ 2009, 2, 15. Kieninger, in: FS Jan Kropholler (2008), p. 499, 503. Mankowski, ZvglRWiss 105 (2006), 120, 140 et seq. Kieninger, in: FS Jan Kropholler (2008), p. 499, 505. To this avail Stefan Klauer, Das europäische Kollisionsrecht der Verbraucherverträge zwischen Römer EVÜ und EG-Richtlinien (2003) pp. 89 et seq. Mankowski, EuZ 2009, 2, 15; similar Kieninger, FS Jan Kropholler (2008), p. 499, 505. As envisaged by Ragno, in: Ferrari, Art. 3 note 59. Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on Consumer Rights, amending Council Directive 93/13/EEC and Directive 99/44/EC and repealing Council Directive 85/577/EEC and Directive 97/7/EC, OJ EU 2011 L 304/64. See on this Schinkels, in: Michael Stürner (ed.), Vollharmonisierung im Europäischen Verbraucherrecht? (2010), p. 113, 114. Boskovic, D. 2008, 2175, 2179. Plender/Wilderspin para. 6–068. Cf, only Johannes Hoffmann, EWS 2009, 254, 258. Mankowski, EuZ 2009, 2, 15; see also Garcimartín Alférez, EuLF 2008, I-61, I-65 no. 23. Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, OJ EEC 1986 L 382/17.

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still he must be aware that not even a choice of court in favour of his home court in his home country can avoid this result (at least insofar as this home court does not apply substantive yardsticks of protection equivalent to those of the EU standard1429 and where a forum derogatum in the EU would exist)1430.1431 Not even arbitration clauses are safe.1432 Any statement that Art. 6 Rome I Regulation redefines the required connections1433 is a bold but unproven statement. VII. “Bootstrap principle”, (5) 1. Generalities Choice of law agreements are agreements. They need consensus of all parties concerned. 427 They are contracts, if only particular ones. But from their general nature as contracts, it follows that they have to fulfil certain contractual features. They need to be concluded, and amongst the issues of conclusion consensus features as the most prominent. Error, mistake, duress, and rights of withdrawal follow suit. The respective issues are not subjected to the substantive law of the lex fori, for this would 428 undermine the uniformity of the Rome I regime.1434 It would possibly lead to different evaluations and different results in different Member States. To jump back, if the evaluation of the choice of law clause resulted in a negative result would be a replication and would lead into severe problems if the objective lex contractus, i.e. the law applicable absent a valid choice of law, now judged the choice of law agreement as valid. The issue is not subjected to the law that would be objectively applicable absent a party 429 choice, either. In the event of a positive result under this objective lex causae, such an approach would entail double research and information costs because parties would have to inquire about the content of two laws, firstly that objective lex causae and secondly the chosen law. Furthermore it would be odd and would raise a distortion if the objective lex causae could dictate that a law should govern the contract which would not regard itself as applicable to the contract in question.1435 A positive result under the objective lex causae as to 1429

1430 1431 1432

1433 1434 1435

BGH 5 September 2012 – VII ZR 25/12 [6]-[7]; OLG München IPRax 2007, 322; OLG Stuttgart 29 December 2011–5 U 126/11 [23]-[31]; Mankowski, in: Hopt/Tzouganatos (eds.), Europäisierung des Handels- und Wirtschaftsrechts (2006), p. 131, 149 et seq.; Mankowski, in: Calvo Caravaca/Rodríguez Rodrigo (eds.), Parmalat y otros casos de derecho internacional privado (2007), p. 413, 425–430; Mankowski, (2008) 11 Yb. PIL 19, 49–50. For further discussion see Rühl, IPRax 2007, 294; Rühl, ERPL 2007, 891; Emde, EWiR § 89b HGB 1/06, 621; Antomo, IHR 2013, 225. Mankowski, (2008) 11 Yb. PIL 19, 50–51. Mankowski, EuZ 2009, 2, 15. OLG München IPRax 2007, 322; Bollée, Rev. arb. 2006, 718, 724; Mankowski, in: Hopt/Tzouganatos (eds.), Europäisierung des Handels- und Wirtschaftsrechts (2006), p. 413, 430 et seq.; Mankowski, (2008) 11 Yb. PIL 19, 53–55; Rühl, IPRax 2007, 294, 300 et seq.; Rühl, ERPL 2007, 891, 900 et seq.; Antomo, IHR 2013, 225. Critical Quinke, SchiedsVZ 2007, 246. This aspect is overlooked by CA Paris Rev. arb. 2006, 717. Johannes Hoffmann, EWS 2009, 254, 260. Gardella, NLCC 2009, 611, 628. Morse, (1982) 2 Yb. Eur. L. 107, 119; McParland para. 9.193.

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consent would squarely fit with the putatively chosen law reaching a negative result. It begs explanation why the law that would be applied should be disregarded when it comes to its own applicability, the more so since a lack of consensus with regard to the choice of law agreement under the putatively closer law would in most instances be accompanied by a lack of consensus with regard to the main contract under that law. 430 In the footsteps of Art. 3 (4) Rome Convention, (5) decided against a genuine substantive

law being incorporated in Art. 3 and opted for a reference to the putative applicable law.1436 Art. 2 (2) Pre-Draft 1972 and Art. 2 (3) Pre-Draft 19761437 attempted at establishing such a substantive rule at least partially,1438 but were not maintained and have been dropped after discussions in the Working Group at least since 1978.1439 431 “Bootstrap principle” is a very illustrative and convenient denomination. But it is not the

parties who are able to pull themselves out of the swamp by their own bootstrap (like the proverbial liars’ king, the Baron von Münchhausen), but rather the conflicts law of the forum opting for a particular solution.1440 (5) might look circular, but only at first glance. Conversely, it breaks through the circulus vitiosus and does so better than any alternative solution.1441 Any allegation that it constitutes a circulus vitiosus, as it has been raised time and again,1442 misses crucial points. The lex causae of the main contract is not determined by itself, but by the choice of law agreement1443 which, in turn, needs to be ascertained as consented and valid in the first place. Furthermore, if there are different bodies of rules to govern different types of contract within the law referred to in the choice of law agreement, it is for this law to sort out which of its parts is the relevant one. This applies in particular to the choice between truly national contract law and Arts. 14–24 CISG. If parties opt out of the CISG by virtue of Art. 6 CISG,1444 this is fully compatible with the operation of (5) in conjunction with Art. 10 (1).1445 432 Choice of law agreement and main contract are two different issues regardless whether

formally the former appears as clause X in a uniform document and might convey the impression to be one of the consecutive issues of the main contract. There might not be a “make or fail” approach if the choice of law agreement is added with the help of a Standard 1436 1437 1438

1439

1440

1441

1442

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Stankewitsch p. 468. Doc. XI/111/76-D. Reprinted in: Lando/von Hoffmann/Siehr (eds.), European Private International Law of Obligations (Tübingen 1975), p. 220, 230–231. Pocar, AWD 1979, 385, 388; Gaudemet-Tallon, Rev. trim. dr. eur. 1981, 215, 274; Stankewitsch pp. 468– 469. Not differentiating enough North/Fawcett/Carruthers, Private International Law (14th ed. 2008) pp. 745; Stoll, in: FS Anton Heini (1995), p. 429, 434. Kühn, in: Spickhoff (ed.), Symposium Parteiautonomie im Europäischen Internationalen Privatrecht (2014), p. 9, 12. For instance by Kuipers, EU Law and Private International Law (2012) p. 48; Ragno, in: Ferrari, Art. 3 note 14. Schacherreiter/Thiede, ÖJZ 2015, 598, 602. On such opting-out e.g. Mankowski, in: FS Ulrich Magnus (2014), p. 255; Spagnolo, CISG Exclusion and Legal Efficiency (Alphen aan den Rijn 2014). But doubting Vorwerk, in: FS Wolfgang Schlick (2015), p. 373, 378–379.

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Term or that, conversely, the parties first negotiated which law shall be applicable and made this the integrative basis of their contract. Neither constellation makes the choice of law agreement and the main contract intertwine to such an extent that they could not be extricated and separated from one another.1446 The choice of law agreement is an independent contract genuinely choosing the substantive 433 law.1447 One could call this a principle of severability. Like jurisdiction clauses, for which this principle now is enshrined and codified in Art. 25 (5) Brussels Ibis Regulation, choice of law clauses follow their own yardsticks independent from those applicable to the main contract. The choice of law agreement is a pactum de lege utenda1448 and owns a quality which the main contract as a legal institution purely based on substantive law cannot have. But it can be safely assumed that ordinary parties’ minds would tend to subject the choice of 434 law agreement to the same law as the main contract. Both are issues separated from each other, but only rarely parties would cater for really different treatment as to substance if considering the matter. There is an inner nexus between the two of them.1449 Neither (5) nor its predecessor, Art. 3 (4) Rome Convention, have given rise to any concerns in operation.1450 That might be the best testimony for the soundness and reasonability of the bootstrap principle. The very existence of (5) destroys any expectation that either party could be granted protection following from the rules concerning validity and formation of contracts in the objectively applicable law. Allegations to the contrary1451 are inherently circular: They disregard and ignore that (5) constitutes the basis on which expectations have to be built. Eventually, the bootstrap principle might not constitute an absolute optimum, but it at least reaches a relative optimum, being superior to any alternatives theoretically conceivable. It is the parties’ risk and fault if they choose a law which regards their choice of law as invalid 435 for reasons covered by (5) in conjunction with Art. 10 (1).1452 It the law putatively chosen invalidates the choice of law for lack of necessary consensus or allows either party to vitiate it due to mistake, fraud or duress, so be it. There is not something like a lex validitatis approach which would make it the paramount aim to uphold the choice of law. 2. Object of regulation (5) has only a limited ambit. Its object of Regulation is only the consent and the material 436 validity of the choice of law agreement. The heading of Art. 10 (1) the rule referred to, 1446 1447 1448

1449

1450 1451

1452

Contra Schwander, in: FS Eugen Bucher zum 80. Geb. (2009), 711, 714. Wulf-Henning Roth, in: FS Apostolos Georgiades (2005), p. 905, 906. See only Curti Gialdino, Rec. des Cours 137 (1972 III), 743, 778–784; Holleaux/Foyer/de Geouffré de La Pradelle, Droit international privé (1987) pp. 593–595; Carrascosa González p. 143. Freitag, in: Rauscher, Art. 10 Rom I-VO note 1; Kühn, in: Spickhoff (ed.), Symposium Parteiautonomie im Europäischen Internationalen Privatrecht (2014), p. 9, 13; Spellenberg, in: Münchener Kommentar zum BGB Art. 10 Rom I-VO note 7. McParland para. 9.194. As raised by Siesby, in: Lando/von Hoffmann/Siehr (eds.), European Private International Law of Obligations (Tübingen 1975), p. 206, 208. Jacquet, Clunet 118 (1991), 679; Jacquet, Le contrat international (1992) pp. 55–59; Carrascosa González p. 146.

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clarifies this. The English version of (5) itself is very precise: It ascertains as its object the “existence and validity of the consent of the parties as to the choice of the applicable law”.1453 The German version aligns with that (“Zustandekommen und die Wirksamkeit der Einigung”) as do the versions in French (“L’existence et la validité du consentement”), Italian (“L’esistensa et la validità del consento”), Spanish (“existencia y la validez del consentimiento”), Portuguese (“existência y a validade do consentimento”), Swedish (“förekomsten och gildigheten av paternas samtycke”), Romanian (“Existenţa şi valabilitatea consimţământului părţilor”), and Polish (“istnienia i ważności porozumienia”).1454 The specific point on which a strong argument can be based is the genitive after “validity” etc., which is a common feature recurring in all these versions.1455 437 The substantive scope of application comprises:1456 mistake; consensus, fraud, deception,

coercion, or economic duress and materially whether one party’s freedom of contract was undermined by the other; rights to withdraw or to rescind. One should be cautious to transfer any doctrine of clausula rebus sic stantibus or Wegfall or Störung der Geschäftsgrundlage into the realm of parties’ choice of law, though.1457 Yet it is for the law referred to in the choice of law clause to determine the level and preconditions for consensus required, particularly so with regard to Standard Terms and Conditions.1458 Nonetheless, it is not free to impose a requirement that a choice of law may be made in Standard Terms and Conditions only expressly,1459 since this question has already been decided by (1) cl. 2 and is not a matter left to (5). 438 Whether a choice of law agreement was entered into due to fraud, deception, coercion, or

economic duress and materially one party’s freedom of contract was undermined by the other is sometimes alleged to be subjected to a substantive rule supposedly to be found in the Rome I system.1460 But proper yardsticks for such substantive rule which under the present regime would be unwritten cannot be discerned and cannot be borrowed from comparative law, either. 3. Fact of choice 439 The parties’ intention to contract on the fundament of a certain law is quintessential part of

their consensus ad idem.1461 The fact of the choice cannot be wiped out and denied even if the choice fails.1462 The parties convey the impression that they have concluded choice of law 1453 1454 1455

1456

1457 1458 1459 1460

1461

246

Emphasis added. Emphasis added respectively. The Dutch version begs to differ slightly in its linguistical structure: “De kwestie of er overeenstimming tussen de partijen is to stand gekomen over het keuze van het toepasselijke recht en of deze overeenstemming geldig is”. Art. 10 note 3 (Ferrari); Mankowski, RIW 1996, 382, 384 et seq.; Mäsch, IPRax 1995, 371, 372; Stankewitsch pp. 300–309, 312–319; Carrascosa González p. 145; Magnus, in: Staudinger, Art. 10 notes 13–25. Tentatively Contra Stankewitsch pp. 310–311. See e.g. Rb. Rotterdam S&S 2016 Nr. 32 p. 233. Contra Vorwerk, in: FS Wolfgang Schlick (2015), p. 373, 380–381. Stoll, in: FS Anton Heini (1995), p. 429, 442 et seq.; see also Wengler, in: Mélanges Pierre Lalive (1993), p. 211. Stoll, in: FS Anton Heini (1995), p. 429, 435.

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agreement, and this fact and impression is sufficient enough to serve as a connecting factor for determining the law according to which consensus and validity of the choice of law agreement have to be judged.1463 This is not a petitio principii. Charges that the bootstrap principle is impractical and offends 440 logic1464 are unjustified. Firstly, the connecting factor is not the parties’ choice of law as such but the mere factual completion of this agreement, the fact of choice.1465 The connecting factor is not the choice of law, but the putative choice of law. That marks a fundamental difference. Secondly, the scope of application of (5) in conjunction with Art. 10 (1) is very limited. (5) in conjunction with Art. 10 (1) does not set out to determine the lex contractus for the main contract in particular. Thirdly, in the event that the law designated in the choice of law agreement regards the 441 choice of law agreement as invalid, the choice of law agreement for the main contract fails.1466 To put it in drastical terms, the “bootstrap” can strangulate the choice of law agreement. The parties can, to a certain extent, employ special devices in order to protect themselves against further consequences of such unfavourable result: On the one hand, they can provide for a default solution and agree on a back-up choice of another law.1467 On the other hand, they can make the choice of law agreement itself object of a separate choice of law agreement of the second degree.1468 There might be exceptional cases where it might not be that clear which law was chosen 442 factually. The external impression might be unclear, veiled or even contradictory. An example (however rare) is provided by the parties simulating a certain choice of a law in a contract veiling and concealing the “real” deal whereas the “real” deal intended contains a different choice of law.1469 4. No review of content as to substance Art. 3 itself governs comprehensively and exclusively any permissible content of a choice of 443 law clause, i.e. the question as to which content a choice of law clause is permitted to have. The principle of party autonomy and free choice of law is cemented by (1) cl. 1. A material review of the contents of a choice of law clause as to its substance is not per- 444

1462 1463

1464

1465 1466 1467 1468

1469

Stoll, in: FS Anton Heini (1995), p. 429, 435. See OLG Celle ZIP 2001, 1724; von Hein, in: Rauscher, Art. 3 note 40; Wulf-Henning Roth, IPRax 2013, 515, 520 et seq.; Martiny, in: Münchener Kommentar zum BGB, Art. 3 note 105. To this avail e.g. Cavers, 48 So. Cal. L. Rev. 603, 609–611 (1975); Nadelmann, 24 Am. J. Comp. L. 1, 8–9 (1976). Martiny, in: Münchener Kommentar zum BGB, Art. 3 note 105. Wenner, para. 67. Schwander, in: FS Max Keller (1989), p. 473, 480; Wenner, para. 68. Wenner, para. 69; Amstutz/Vogt/Wang, in: Basler Kommentar Internationales Privatrecht (3rd ed. 2014) Art. 166 [Swiss] IPRG note 35. Freitag, in: Rauscher, Art. 10 Rom I-VO note 13 fn. 11; Kühn, in: Spickhoff (ed.), Symposium Parteiautonomie im Europäischen Internationalen Privatrecht (2014), p. 9, 13.

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mitted,1470 neither according to the standards of the lex fori1471 nor according to standards of the law designated in the choice of law agreement.1472 An evaluation of the contents of choice of law clauses is, genuinely, a conflict of laws question to be answered by the PIL of the deciding court. The validity of a choice of law clause is only to be decided by the PIL of the lex fori.1473 Notably, the European PIL does not allow for a content review even according to the standards of the chosen law.1474 (5) in conjunction with Art. 10 (1) is not applicable insofar.1475 This is because there is no need for a deferral as the question is answered by the European Private International Law in (1) itself. The European International Law of Obligations decided on a free choice of law without a review of the clause’s content. Insofar as there is the need for protection of certain groups of people, this is not achieved through forbidding of choice of law clauses or the requirement of certain objective connecting factors to the applicable law. (1)-(4) lay down a complete code of what laws may be chosen1476 and which conflictual consequences any choice triggers. A supporting argumentum e contrario ought to be drawn from Arts. 5 (2); 7 (3): Where the Rome I Regulation intends to restrict free choice, it expressly implements such restrictions. The absence of restrictions implies that a policy of free choice has been adopted. 445 Good faith is institutionalised where, and only where, it shall prevail. Hence, it can not carry

an application of the law against unfair contract terms to choice of law clauses.1477 Recital 1470

1471

1472

1473

1474

1475 1476

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Mankowski, RIW 1993, 453, 455 et seq.; Mankowski, RIW 1994, 421; Mankowski, VuR 1999, 138; Mankowski, in: v. Bar/Mankowski, Internationales Privatrecht I: Allgemeine Lehren (2nd ed. 2003) § 7 notes 84 et seq. Stoll, in: FS Anton Heini (1995), p. 429, 440; Joustra, De internationale consumentenovereenkomst (1997) p. 228; Spellenberg, in: MK BGB Art. 10 note 166; Thüsing, in: Graf v. Westphalen, Vertragsrecht und AGB-Klauselwerke (28th ed. 2010) Rechtswahlklauseln note 23; Thode, NZBau 2011, 449, 453; Ostendorf, IHR 2012, 177, 179; Wulf-Henning Roth, IPRax 2013, 515, 521. Contra Heiss, RabelsZ 65 (2001), 634, 638. Propagated by OLG Düsseldorf ZIP 1994, 288 = RIW 1994, 420 with opposing note Mankowski; OLG Düsseldorf WM 1995, 1349; see also LG Hamburg MMR 2012, 96, 98; Schütze, GS Manfred Wolf (2011), p. 551, 553. Propagated by KG VuR 1999, 138; OLG Köln RdTW 2015, 136, 138; LG Limburg NJW-RR 1989, 119 et seq.; LG Hamburg NJW-RR 1990, 695, 697; LG Hildesheim IPRax 1993, 173; Matthias Weller/Nordmeier, in: Spindler/Schuster, Recht der elektronischen Medien (3rd ed. 2015) Art. 3 Rom I-VO note 11; see also BGH NJW 1994, 26. See only Siehr, FS Max Keller (1989), p. 485, 486; Mankowski, RIW 1996, 382, 383; Baumert, RIW 1997, 805, 809; Diedrich, RIW 2009, 378, 379; Martiny, in: Münchener Kommentar zum BGB, Art. 3 Rom I-VO note 8; Spellenberg, in: Münchener Kommentar zum BGB, Art. 10 Rom I-VO note 166; von Hein, in: Rauscher, Art. 3 Rom I-VO note 43; Freitag, in: Rauscher, Art. 10 Rom I-VO note 12, Ferrari, in: Ferrari/ Kieninger/Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger Art. 3 Rom I-VO note 10, Art. 10 Rom I-VO note 36; Thorn, in: Palandt, Art. 3 Rom I-VO note 9 as well as BGHZ 135, 124, 137. Meyer-Sparenberg, RIW 1989, 347, 350; Grundmann, IPRax 1992, 1, 2; Mäsch, Rechtswahlfreiheit und Verbraucherschutz (1993) p. 116; Mankowski, RIW 1993, 453, 455; Mankowski, RIW 1994, 421, 422; Mankowski, VuR 1999, 140, 141; Mankowski, in: v. Bar/Mankowski, § 7 notes 84 et seq.; Kost, Konsensprobleme im internationalen Schuldvertragsrecht (1995) p. 27; von Hoffmann, in: Soergel, Art. 31 EGBGB note 11; Martiny, ZEuP 1997, 107, 116; Joustra, De internationale consumentenovereenkomst (1997) p. 238; Junker, RIW 1999, 809, 817; Jochen Schröder/Wenner, para. 2 note 52. Wulf-Henning Roth, IPRax 2013, 515, 519. Plender/Wilderspin para. 6–074.

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(10) cl. 2 Directive 93/13/EEC is not to the opposite avail1478 for it evidently does not relate to conflictual choice of law but to the types and categories of contracts covered. In Germany, the former § 10 pt. 8 AGBG required for a choice of law clause in Standard 446 Terms and Conditions to be valid a relationship between the circumstances of the case and the chosen law. It was duly deleted on 1 September 1986 without any substitute taking its place when the German version of the Rome Convention entered into force. Yet §§ 307 et seq. BGB are still not applicable to choice of law clauses as this would contravene (1).1479 If and insofar as the Rome I Regulation recognises the necessity of restricting party auton- 447 omy for reasons of conflicts justice, it does so expressly, namely in Arts. 3 (3), 3 (4), 5, 6, 8 and 9. In all other instances a strong conclusio e contrario prevails.1480 There is no gap in the system; only an express rule on the issue is missing,1481 deplorably and unfortunately. Recital (16) does not lead to an opposite result for it does not give courts discretion to intervene with a choice of law by the parties, but is solely concerned with the objective determination of the applicable law if such choice of lack is lacking, under Art. 4.1482 A basic content review might be some demand of justice but its precise form is shaped and governed by the Rome I system.1483 That the line between control as to consensus (which (5) submits to the designated law) and content review is not clearly drawn in every aspect and does leave room for some grey areas cannot be used as a justification for the introduction of a content control of choice of law clauses.1484 A general content review might be in accordance with one’s own personal sense of justice, 448 however, its precise form is governed by the system of the Rome I Regulation.1485 But one has to distinguish clearly between an evaluation merely as to whether consensus and agreeement exist which evaluation has to be done according to the chosen law as set forth by (5) in conjunction with Art. 10 (1) on the one hand and a proper review as to content on the other hand. The European legislator protects the consumer against unfair clauses through the use of private international law, not through the consumer protection regimes of the lex fori or the lex causae. In European PIL, the protection of typically weaker parties, i.e. the groups most deserving of, 449 and dependent on, protection, is achieved through Arts. 6 (2); 8 (1) by testing the substantive protective measures of the law applicable without a choice of law clause against those of the 1477 1478 1479

1480 1481 1482 1483 1484

1485

Contra Pfeiffer, in: FS Egon Lorenz zum 80. Geb. (2014), p. 843, 854–855. Contra Pfeiffer, in: FS Egon Lorenz zum 80. Geb. (2014), p. 843, 855. OLG Hamm IHR 2016, 30, 32; Wurmnest, in: Münchener Kommentar zum BGB, vol. II: §§ 241–432 BGB (7th ed. 2016) § 307 BGB note 236. See only Mankowski, VuR 1999, 138, 140. Contra Heiss, RabelsZ 65 (2001), 634, 642–644. Imprecisely Pfütze, ZEuS 2011, 35, 64. That is overlooked by Pfütze, ZEuS 2011, 35, 64. Tentatively to a different avail Pfütze, ZEuS 2011, 35, 68. Contra Heiss, RabelsZ 65 (2001), 634, 639; Pfütze, ZEuS 2011, 35, 69; see also Renate Schaub, in: Riesenhuber/Karakostas (eds.), Inhaltskontrolle im nationalen und europäischen Privatrecht (2009) p. 197; Thüsing, in: Graf v. Westphalen, Vertragsrecht und AGB-Klauselwerke (28th ed. 2010) Rechtswahlklauseln note 6. Tentatively Contra Pfütze, ZEuS 2011, 35, 68.

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substantive law chosen and applying the more favourable rules. This constitutes an alternative model to the restriction of choice of law clauses that would be part of a content evaluation of choice of law clauses.1486 Art. 6 (2), specifically, does not render the choice of law clause invalid,1487 but actually requires its validity to conduct the test.1488 It allows for the possibility of “double protection”, i.e. under the chosen law and the law which would be applicable absent a parties’ choice of law.1489 Extending this evaluation of the more favourable law to an evaluation of choice of law clauses would constitute a major systematic inconsistency, though.1490 The principle of the more favourable law can negate some effects of a choice of law, but not negate the choice of law as such.1491 The choice of law as such is left to Art. 3, in particular (5) in conjunction with Art. 10, and is not subjected to a more favourable law principle, a Günstigkeitsvergleich.1492 450 An evaluation of the content of choice of law clauses according to the standards of the

chosen law would, where leading to negative results, result in a paradox, as the law chosen would attest itself to have an inadequate content.1493 An evaluation of the content of a choice of law clause could never be achieved by measuring it solely against the standards of substantive law because choice of law limiting rules can only be found in the private international law of the chosen law. This would present a conflict with Art. 20 setting forth that choice of law clauses cannot be directed at a state’s private international law (unless the parties expressly agreed upon it).1494 The European PIL has chosen a direction and will not authorise the chosen substantive law to change that very direction.1495 The European PIL’s final verdict does not depend upon the chosen law’s hypothetical answer to a question never asked.1496 451 Even if one was generally inclined to control the choice of law as to substance, it would have

to be held in accordance with the boni mores that a party strives for a legal “home game” and a comparative advantage.1497 (5) in conjunction with Art. 10 (1) by its very modus operandi gives some edge to the party claiming that a certain law has been chosen. This is a price coming with (5) in conjunction with Art. 10 (1) establishing a way out of an impasse which would otherwise ensue.1498 1486

1487 1488 1489 1490 1491 1492 1493

1494

1495 1496 1497

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Jayme, FS Werner Lorenz zum 70. Geb. (1991), p. 435, 438; Mankowski, RIW 1993, 453, 456; Mankowski, RIW 1994, 421, 422 et seq.; Mankowski, RIW 1996, 1001, 1002; Stoll, in: FS Anton Heini (1995), p. 429, 439 et seq.; Baumert, RIW 1997, 805, 809; similarly Bröcker, Verbraucherschutz im Europäischen Kollisionsrecht (1998) pp. 56 et seq. See only Briggs, (2009) 125 LQR 191, 192; Lambrecht, RIW 2010, 783, 788. Mankowski, RIW 1994, 421, 422; Mankowski, EWiR Art. 29 EGBGB 1/98, 455 et seq. Symeonides, in: Essays in Honour of Spyridon Vl. Vrellis (2014), p. 909, 919. Pfeiffer, LMK 2013, 343552; Pfeiffer, in: FS Egon Lorenz zum 80. Geb. (2014), p. 843, 846. Pfeiffer, in: FS Egon Lorenz zum 80. Geb. (2014), p. 843, 846. Pfeiffer, in: FS Egon Lorenz zum 80. Geb. (2014), p. 843, 847. See only Mankowski, RIW 1995, 364, 366; Christiane Rühl, Rechtswahlfreiheit und Rechtswahlklauseln in Allgemeinen Geschäftsbedingungen (1999) p. 205. See only Mankowski, RIW 1993, 453, 455; Christiane Rühl, Rechtswahlfreiheit und Rechtswahlklauseln in Allgemeinen Geschäftsbedingungen (1999) pp. 201 et seq. Mankowski, VuR 1999, 140, 141. Martiny, ZEuP 1997, 107, 116. Schütze, in: GS Manfred Wolf (2011), p. 551, 553.

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Likewise, the choice of a “neutral” law in a Standard Term should not be banned and 452 disregarded as surprising or non-transparent in every instance.1499 A clear express choice of law unambiguously stating what is intended is transparent. “This contract is subject to Irish law” is as clear as it gets and even as it could possibly get.1500 It is not prone to any misunderstandings. It unmistakeably asserts that, firstly, a choice of law takes place and, secondly, which law is chosen. A choice of law complying with the requirements which (1) throws its way ought not to be subjected to stricter control and stricter yardsticks by Art. 5 cl. 1 Directive 93/13/EEC.1501 Furthermore, rules like § 305c (1), (2) or § 307 (1) cl. 2 BGB, calling for transparency of 453 Standard Terms and Conditions on the level of substantive law, must be read in the light of (1), insofar as choice of law clauses are at stake.1502 A choice of law clause in a consumer contract should not fall victim to them only for the reason that it would not reiterate Art. 6 (2),1503 the more since it could appear questionable whether a clause repeating the wording of Art. 6 (2) with all its complexities could be even possibly transparent.1504 The party proposing and drafting a choice of law clause would find itself in a catch-22. That should be solved by recognising a clause merely copying the wording of Art. 6 (2) since the natural consequence of an invalidation of such a clause would be that Art. 6 (2) stepped in.1505 Judged correctly, Art. 6 (2) conveys (inter alia) the message that the more favourable law 454 principle, the Günstigkeitsvergleich, is not deemed to be so complicated that it could not be legislatively forced upon consumers.1506 Furthermore it avoids that a consumer could justifiedly trust solely and exclusively in the law of his habitual residence being applicable.1507 Art. 6 (2) defines the ramifications and establishes the points of reference.1508 1498 1499

1500 1501 1502

1503

1504 1505

1506 1507 1508

See Briggs paras. 10.32–10.33; Plender/Wilderspin para. 6–080. Contra Pfeiffer, in: Pfeiffer, Handbuch der Handelsgeschäfte (1999) § 21 note 81. Matthias Weller/Nordmeier, in: Spindler/Schuster, Recht der elektronischen Medien (3rd ed. 2015) Art. 3 note 11. Mankowski, RRa 2014, 118, 122; see also Pfeiffer, LMK 2013, 343552. Mankowski, RRa 2014, 118, 122. Contra Pfeiffer, in: FS Egon Lorenz zum 80. Geb. (2014), p. 843, 855. Comp. LG Hamburg MMR 2012, 96, 97 = IPRspr. 2011 Nr. 22 p. 53. But cf. BGH IPRax 2013, 557, 561; OLG Köln RdTW 2015, 136, 138; Wulf-Henning Roth, in: FS Dieter Martiny (2014), p. 543, 547; Pfeiffer, in: FS Egon Lorenz zum 80. Geb. (2014), p. 843, 857–858. But cf. OLG Oldenburg WRP 2014, 1507; LG Oldenburg WRP 2014, 1504. See also Faber, MMR 2013, 594. Mankowski, RRa 2014, 118, 122. Compare at the level of (German) substantive law without recourse specifically to Art. 6 (2), but hinting towards (now) § 306 (2) BGB BGH NJW 1993, 1061, 1063; BGH NJW 2005, 2919, 2920; OLG Stuttgart 23 January 2014 – Case 2 U 57/13 sub B 3 a cc; Thüsing, in: Graf von Westphalen (ed.), AGB-Klauselwerke und Vertragsrecht (looseleaf) Vertragsrecht (Transparenzgebot) note 2; Pfeiffer, in: Manfred Wolf/Lindacher/Pfeiffer, AGB-Recht (6th ed. 2013) § 307 BGB note 331; Armbrüster, DNotZ 2004, 437, 443–444; Grüneberg, in: Palandt, BGB (74th ed. 2015) § 307 note 50; Robert Koch, VersR 2015, 133 (133). Contra Andreas Fuchs, in: Peter Ulmer/Brandner/Hensen/Harry Schmidt, AGB-Recht (11th ed. 2011) § 307 GB note 35; Hubert Schmidt, in: Bamberger/Herbert Roth, BGB (3rd ed. 2012) § 307 BGB note 72; Coester, in: Staudinger, BGB, §§ 305–310 BGB (2013) § 307 BGB note 309. Mankowski, RRa 2014, 118, 122. See also BGH IPRax 2013, 557, 561. KG MMR 2013, 591, 592. Mankowski, RRa 2014, 118, 122; see also KG MMR 2013, 591, 592.

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455 A choice of law which is unconditional if read on its face must be read in the light of, and

subject to, Art. 6 (2) or Art. 8 (1). Contrary to Amazon,1508a the party drafting the choice of law clause is not requested to import Art. 6 (2) or Art. 8 (1) in the very wording of the clause. Nothing in these rules puts a burden on that party to inform the consumer or the employee about the existence or the content of these rules. Given the structural importance which a duty to inform would have (and a duty to inform about something as complex as the more favourable law principle, the Günstigkeitsvergleich, at that)1509 such a duty must be implemented expressly if it was to be at all.1510 Furthermore, a duty to inform is a protective instrument separate from the semi-mandatory nature of the regime enshrined in Art. 6 (2) or 8 (1).1510a And would it not be required to inform about Arts. 3 (3), 3 (4) and 9, too?1510b 456 On its face the clause might imply that the law chosen is the only law applicable that solely

and exclusively the law chosen would apply.1511 But read in the light of, and in conjunction with, the Günstigkeitsvergleich (the more favourable law principle) it becomes clear that such implication would not withstand scrutiny. It must be called back to attention yet again that neither Art. 6 (2) nor Art. 8 (1) renders the parties’ choice of law invalid but, conversely, refers to Art. 3 without any restriction added to this reference. The reference is unconditional and does not contain any modification of Art. 3.1512 Art. 3 in turn does not distinguish between, and does not establish, different requirements, for choice of law clauses in consumer or employment contracts on the one hand and “ordinary” contracts, particularly B2B contracts on the other hand. In consumer and employment contracts, invalidating the choice of law agreement would destroy the ground for the more favourable law principle1512a – and in turn the ground for a duty to inform and review.1512b 457 The less, such choice of law clauses can be rendered invalid if they do not expressly preserve

the application of European uniform law as it is most prominently provided by the EU Passengers’ Rights Regulations.1513 458 It is a different issue as to whether the scope and ambit of the concrete choice of law clause is

worded transparently enough, for instance if it calls for the application of the law chosen to all disputes between the parties or all claims arising out of the relationship between the parties.1514

1508a Verein für Konsumenteninformation v. Amazon EU Sàrl (Case C-191 15), ECLI:EU:C:2016:612 paras. 71,

69 with reference to Nemzeti Fogyasztóvédelmi HatósAEg v. Invitel TAEvközlési Zrt (Case C-Y72/10), ECLI:EU:C:242 para. 29, a very particular case; A-G Saugmansgaard Øe, ECLI:EU:C:2016:388 para. 95 fn. 56; Mankowski, NJW 2016, 2705, sub V 2. 1509 On duties to inform about the applicable law see Wulf-Henning Roth, in: FS Dieter Martiny (2014), p. 543. 1510 Mankowski, RRa 2014, 118, 122. 1510a Mankowski, NJW 2016, 2705, sub IV. 1510b Mankowski, NJW 2016, 2705, sub V 4. 1511 See Faber, MMR 2013, 594. 1512 Mankowski, RRa 2014, 118, 122. 1512a Mankowski, in: FS Wulf-Henning Roth (2015), p 361, 367; Mankowski, NJW 2016, 2705, sub III, V 2. 1512b Mankowski, NJW 2016, 2705, sub V 2. 1513 Mankowski, RRa 2014, 118, 123; Pfeiffer, in: FS Egon Lorenz zum 80. Geb. (2014), p. 843, 859–860. 1514 Pfeiffer, in: FS Egon Lorenz zum 80. Geb. (2014), p. 843, 860.

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5. Reservations in favour of other Articles a) Reservation in favour of Art. 10 The first reservation is in favour of Art. 10 (1). It is crucial and pivotal for determining the 459 scope of (5). Related aspects have already been dealt with.1515 But (5) refers not only to Art. 10 (1), but also to Art. 10 (2), since it does not exclude anything but makes a wholesale reference to Art. 10 in its entirety.1516 This is the attempt at an answer in particular to the (controversial)1517 question to which extent silence on one party’s side can gain relevance. Art. 10 (2) has only a limited field of applicability. It does not stretch to issues of the validity of the agreement, but refers solely to the existence of the agreement or, more precisely: to the lack of consent on the side of the party alleging such lacking consent. The law of this party’s habitual residence might regard the necessary consent as lacking where a choice of law clause is intransparent or deemed an unfair surprise.1518 But one should be cautious and hesitant to introduce by the backdoor of (5) in conjunction with Art. 10 (2) a requirement that in consumer contracts the chosen law must be the law which would be objectively applicable absent a choice of law or the law of the habitual residence of either party;1519 such a requirement would collide with the freedom of choice granted by (1) cl. 1 and the conscious decision against establishing a necessity to prove objective relations between the chosen law and the circumstances of the case. The concrete applicability of Art. 10 (2) appears to be doubtful insofar as a choice of law 460 clause is a common feature in a certain industry and forms part of a contract between commercial parties, though.1520 Commercial parties are bound to know about the art of their trade. They cannot hide behind ignorance. They must keep their eyes open and must be alert. They have to keep their own watch in order to protect their own interests. This applies even to small and medium enterprises. That cross-border contracts might have a lex contractus different from the law of the jurisdiction where an enterprise is habitually resident, must not be admitted to come as any kind of surprise. That a respective choice of law is made does not come as a surprise, either, even if it is made in Standard Terms and Conditions.1521 In particular, a business which nurtures a choice of law clause in its own boilerplate stuff cannot claim to be truly surprised if its counterpart attempts at playing the same trick. Only an enterprise which is ordinarily trading only in one jurisdiction might be unfamiliar 461 with the international dimension of a cross-border contract. But even such an enterprise has to accept that it impliedly has submitted to the additional features of cross-border trades by

1515 1516

1517

1518 1519 1520

1521

Supra Art. 3 notes 427–442 (Mankowski). Pfeiffer, IPRax 2015, 320, 323. Doubting the conceptual wisdom of the reference to Art. 10 (2) from a purposive perspective Stankewitsch pp. 470–482. See Art. 2 (4) Pre-Draft 1972 in its two alternatives; Giuliano/Lagarde/van Sasse van Ysselt, RDIPP 1973, 198, 219; Danièle Mayer, RCDIP 62 (1973), 373, 376, 378; Lando, RabelsZ 38 (1974), 1, 22; Foyer, Clunet 103 (1976), 555, 625; Gaudemet-Tallon, Rev. trim. dr. eur. 1981, 215, 273. Pfeiffer, IPRax 2015, 320, 323. But cf. LG Hamburg IPRax 2015, 348, 349; Pfeiffer, IPRax 2015, 320, 323. Otto Sandrock, RIW 1986, 847, 850; Mankowski, TranspR 1993, 211, 218. Contra Magnus, in: Staudinger Art. 3 note 173. OLG Hamm ZVertriebsR 2015, 235, 237.

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voluntarily stepping into the broader theatre of international contracts. When in Rome you have to do as the Romans do – and you cannot plead ignorance of Roman law successfully. b) Reservation in favour of Art. 11 462 The formal aspects of a choice of law clause are subject to Art. 11 by virtue of (5). Insofar (5)

refers to Art. 11 and does not restrict formal validity to be judged solely by the lex causae. The full spectre opened by Art. 11 is available. Formal aspects have to be judged separately following their own, more generous conflict rule, only subject to (2) cl. 2 in the event of a subsequent choice of law. Art. 3 refrains from establishing any formal requirements of its own, quite unlike Arts. 25 (1) cl. 3 Brussels Ibis Regulations 23 (1) cl. 3 Brussels I Regulation/ 2007 Lugano Convention for jurisdiction agreements.1522 But this should not be taken as an argument that oral agreements are valid under all and any circumstances,1523 for such an approach would disregard (5) in conjunction with Art. 11.1524 The European legislator simply refrained from laying down uniform formal requirements.1525 Furthermore, the formal validity of the choice of law agreement has not been made dependent upon the formal validity of the main contract.1526 463 Side by side with the lex causae, the lex loci (or more precisely: the lex loci completionis

contractus) as defined by Art. 11 including its paragraphs 2 and 3 decides on the formal validity of a choice of law clause. 464 Most Member State laws do not establish formal requirements for choice of law agreements.

This applies for instance to German law.1527 If the law of a Member State is either the lex causae or the lex loci, it should be derived from (1) cl. 1 that a choice of law agreement does not require a certain form, even if the main contract is subject to formal requirements.1528 Transferring formal requirements from a substantive law context in a conflict of laws context is at least very challenging and regularly meets insurmountable difficulties.1529 Choice of law agreement and main contract have to be judged on their respective own merits. This can become a very interesting point insofar as the documentation of a choice of law agreement by a notary triggers additional costs for an additional subject as it is the case under § 104 (3) GNotKG in Germany. Then it could be highly advisable to refrain from documenting the choice of law agreement and to keep it separate from the main contract if the latter is subject to formal requirements.1530 Preparing Letters of Intent are recommended as possible escape 1522

1523

1524 1525

1526

1527 1528

1529

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Derek Oakley v. Ultra Vehice Design Ltd. [2005] EWHC 872 (Ch) [60] (Ch.D., Lloyd L.J.); Plender/ Wilderspin para. 6–022. Tentatively to this avail Derek Oakley v. Ultra Vehice Design Ltd. [2005] EWHC 872 (Ch) [60], [66] (Ch. D., Lloyd L.J.); Calliess, in: Calliess, Art. 3 Rome I Regulation note 30; Loacker, in: Calliess, Art. 11 Rome I Regulation note 31. Plender/Wilderspin para. 6–023. Beaumont/McEleavy, Anton’s Private International Law (3rd ed 2012) paras. 10.122–10.123; Plender/ Wilderspin para. 6–081. Ferrari, in: Ferrari/Kieninger/Mankowski/Karsten Otte/Saenger/Götz Schulze/Ansgar Staudinger, Art. 3 Rome I-VO note 11; Ragno, in: Ferrari, Art. 3 note 17. See only BGH WM 1997, 1713, 1715; Christof Schneider/Korn, WM 2015, 62, 63. See only BGH WM 1997, 1713, 1715; Martiny, in: Münchener Kommentar zum BGB Art. 3 note 112; von Hein, in: Rauscher Art. 3 note 44; Magnus, in: Staudinger Art. 3 note 180. Stankewitsch pp. 567–589.

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devices, too.1531 Another escape route outlined is to resort to tacit and implied choices of law.1532 (1) cl. 2 already permits a tacit or implicit choice of law. The die is cast in this aspect. (5) does 465 not vary this since (5) only steps in where (1)-(4) leave a gap to fill.1533 If a matter is already addressed in (1)-(4), (5) is inoperable, and, consequentially, so is Art. 11, which can only become operable via (5). (5) does not extend the ordinary scope of application of Art. 11. Hence, the exception for 466 consumer contracts as contained in Art. 11 (4) bears relevance and takes precedence also in the context of choice of law agreements. The formal aspects of choice of law agreements in consumer contracts have to be judged solely and exclusively according to the law of the jurisdiction where the consumer is habitually resident.1534 Consumer protection trumps the favor validitatis. A like rule does not appear with regard to employment agreements or insurance contracts. c) Reservation in favour of Art. 13 The last reservation in (5) is the one preserving the application of Art. 13. Art. 13 deals with 467 incapacity or more precisely: with protection against incapacity. By virtue of Art. 13, in a contract concluded between persons who are in the same country, a natural person who would have capacity under the law of that country may invoke his incapacity resulting from the law of another country, only if the other party to the contract was aware of that incapacity at the time of the conclusion of the contract or was not aware thereof as a result of negligence. The reservation in (5) is a mere safeguard signalling that in spite of any doctrine of severability, Art. 13 also applies to choice of law agreements and not solely to the main contract. If the main contract and the choice of law agreement are concluded at different points in time, for the latter only the circumstances surrounding its own conclusion are relevant, not those surrounding the conclusion of the main contract. Legal capacity or incapacity as such is excluded from the material scope of the Rome I Regulation pursuant to Art. 1 (2) (a). 6. Conflicting or colliding choice of law clauses An issue that will often arise but will only rarely be addressed and taken up in practice are 468 conflicting choice of law clauses. One has only to imagine each party contracting on the ground of that party’s set of Standard Terms and Conditions, which in turn contain a choice of law clause in favour of that party’s “own” law, i.e. the law of the respective party’s seat or 1530

1531 1532

1533 1534

OLG Nürnberg NJW-RR 1997, 1484; Krasauskaite/Philipp Schwarz, DZWIR 2014, 51, 56–57; Blumenthal, BB 2014, 1612, 1614; Christof Schneider/Korn, WM 2015, 62, 64–65; see also (before even the Rome Convention) BGH NJW 1970, 999, 1000–1001; BGHZ 57, 337. But critical Begemann/Nölle, BB 2016, 137, 140. Blumenthal, BB 2014, 1612, 1614. Krasauskaite/Philipp Schwarz, DZWIR 2014, 51, 56; see also Engelstädter/Lubberich, NZG 2014, 564, 568. But critical Begemann/Nölle, BB 2016, 137, 139. In detail Egon Lorenz, RIW 1992, 697. See only Martiny, in: Münchener Kommentar zum BGB Art. 3 note 112; Magnus, in: Staudinger Art. 3 note 181.

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relevant place of business.1535 This clash of standard forms, the feared “battle of forms”, is the usual and most common scenario.1536 It might be that standardisation is implemented in downstream rather than in upstream relations.1537 Generally, a choice of law in Standard Terms and Conditions does not carry less legitimacy than a mutually negotiated choice of law agreement.1538 469 Why do conflicting choice of law clauses occur? They stem from the constellation that either

party quasi-automatically introduces its own Standard Terms and ignores the other party’s Standard Terms.1539 At the level of contract conclusion this does not result in an open conflict all too often. Regularly there will not be any contradiction against a single clause or any demand to alter single clauses.1540 Ordinary business does not leave time and space for such demands, and on the other hand the dealers and traders who are at a rather low level in the hierarchy of their employing firm do not have the respective competences.1541 Even if a dealer has the respective competences, he cannot rely on finding a counterpart with like competences.1542 Dealers are interested in making deals and concluding contracts. They only provide for the core issues of the contract and leave the nitty-gritty and its preparation to the in-house legal staff or to external legal advisers who in turn will not take notice of the other party’s Standard Terms.1543 There would even be a contradiction to the very standardisation purpose of Standard Terms and the ensuing reduction of transaction costs if parties negotiated individually every single clause in every contract.1544 470 A particular interest in the content of Standard Terms arises only if an actual controversy

ensures.1545 Business managers across the world put their faith in the reliability of contracts entered into with foreigners. They simply believe that the clauses are there because they generally work; if their advisers have told them that this is so, it is because that is what experience has shown.1546 Conflicting choice of law clauses are not investigated upon in the 1535 1536 1537 1538 1539

1540 1541

1542

1543

1544

1545

1546

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See only Mankowski, Interessenpolitik p. 19. Fountoulakis, Eur. J. Leg. Reform 7 (2005), 303, 305. Basedow, in: Basedow/Kono p. 57, 70. See only Schwander, in: FS Ingeborg Schwenzer (2011), p. 1582, 1582. van der Velden, in: Contributions in Honour of Jean Georges Sauveplanne (1984), p. 241, 242; Burkart, Interpretatives Zusammenspiel von CISG und UNIDROIT Principles (2000) p. 224; Kröll/Hennecke RIW 2001, 736, 739. Burkart, Interpretatives Zusammenspiel von CISG und UNIDROIT Principles (2000) p. 224. Ben-Shahar, John M. Olin Working Paper 32 (2004), pp. 17 et seq.; Ben-Shahar, Int. Rev. L. & Econ. 25 (2005), 350, 364 with reference to Keating, 98 Mich. L. Rev. 2678, 2699 et seq. (2000). Ben-Shahar, John M. Olin Working Paper 32 (2004), p. 18; Ben-Shahar, Int. Rev. L. & Econ. 25 (2005), 350, 364. Ben-Shahar, John M. Olin Working Paper 32 (2004), p. 19; Ben-Shahar, Int. Rev. L. & Econ. 25 (2005), 350, 365; Wildner, 20 Pace Int’l. L. Rev. 1, 28 (2008). Ben-Shahar, John M. Olin Working Paper 32 (2004), p. 21; Ben-Shahar, Int. Rev. L. & Econ. 25 (2005), 350, 366 f. See only Lando/Beale (eds.), The Principles of European Contract Law Parts I and II (2000) p. 181; Forte, in: MacQueen/Zimmermann (eds.), European Contract Law: Scots and South African Perspectives (2006) p. 98; Magnus, in: Commercial Challenges in the 21st Century – Jan Hellner in memoriam (2007), p. 185, 187; Wildner, 20 Pace Int’l. L. Rev. 1, 28 (2008). Jan Paulsson, J. Int. Arb. 30 (2013), 345, 347.

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vast majority of contracts because no relevant controversy arises.1547 Even when a controversy arises, sorting and even worse fighting it out might not appeal to many businessmen’s minds, and the will settle for commercial solutions.1548 Five cases or approaches for a legal solution of the battle of forms concerning choice of law 471 clauses can be distinguished. The matrix runs as follows: Firstly, the parties both have their respective places of business in the State of the chosen law 472 or for whatever reason both favour the same law as applicable in their respective sets of Standard Terms and Conditions. This is the simple one: In fact both choice of law clauses happen to coincide and do not collide.1549 Secondly, in the first place (5) is applied individually, to each of the both choice of law 473 clauses, and it is judged for each choice of law clauses separately as to whether it is consensually valid according the law designated in it; the respective law designated provides its Regulation of Standard Terms and Conditions, and here “Knock out” rule or “Theory of the last (uncontested) word” aka “Last shot” rule bear relevance.1550 Such separate judgment leads to the result that each of the choice of law clauses does not hold up to the Regulation of the law designated in it respectively. In the next step, an unwritten tie-breaker rule is introduced into (5) denying any conflicting choice of law clauses for lack of validity.1551 Thirdly, in the first place (5) is applied, to each of the two choice of law clauses individually, 474 and it is judged for its choice of law clauses separately as to whether it is consensually valid according to the law designated in it; the respective law designated provides its Regulation of Standard Terms and Conditions, and here “Knock out” rule or “Theory of the last (uncontested) word” gain their relevance.1552 Such separate judgments lead to the result that only one of the choice of law clauses is valid according to the Regulation of the law designated in it respectively. In the next step an unwritten tie-breaker rule is introduced into (5) appreciating the choice of law in the only “surviving” choice of law clause.1553 Fourthly, in the first place (5) is applied individually, to each of the two choice of law clauses, 475 1547 1548 1549

1550

1551 1552 1553

See only Mankowski, Interessenpolitik p. 21. See only Mankowski, Interessenpolitik p. 21. See only Mankowski, pp. 30 et seq.; Mankowski, in: Spindler (eds.), Vertragsrecht der Internet-Provider (2nd ed. 2004) Part III note 12; Pfeiffer, in: Gounalakis (ed.), Handbuch E-Business (2003), § 12 note. 53; Matthias Weller/Nordmeier, in: Spindler/Schuster, Recht der elektronischen Medien (3rd ed. 2015) Art. 3 note 12 and also Hill, (2004) 53 ICLQ 325, 326. To this avail Meyer-Sparenberg, RIW 1989, 347, 348; Stefan Tiedemann, IPRax 1991, 424, 425; Egeler, Konsensprobleme im internationalen Schuldvertragsrecht (1994) pp. 202–208; Mankowski pp. 30 et seq.; Mankowski, Interessenpolitik p. 21; Oliver Sieg, RIW 1997, 811, 817; Schwander, SZIER 1998, 408, 420; Dannemann, in: Lex Mercatoria – Essays in Honour of Henry Merryman (2000), p. 199, 210. To the same avail Carrascosa González p. 147. To this avail consistently yet again the authors cited in the preceding footnote. Mankowski pp. 30 et seq.; Mankowski, Interessenpolitik p. 21; Carrascosa González p. 147; Matthias Weller/Nordmeier, in: Spindler/Schuster, Recht der elektronischen Medien (3rd ed. 2015) Art. 3 note 12; Magnus, in: Staudinger Art. 3 note 174; Wenner para. 74; see also Lando, RabelsZ 38 (1974), 388, 391; Kaczorowska, Rev. dr. int. dr. comp. 1991, 294.

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and is judged for each choice of law clauses separately as to whether it is consensually valid according to the law designated in it.1554 The respective law designated provides its Regulation of Standard Terms and Conditions, and here “Knock out” rule or “Theory of the last (uncontested) word” gain relevance. Such separate judgment leads to the result that each of the choice of law clauses holds up to the Regulation of the law designated in it respectively. In the next step an unwritten tie-breaker rule is introduced into (5) which declares the law applicable that would be applicable in the absence of consensually valid choice with regard to the question of consensual validity.1555 This would militate against the principle that Art. 20 excludes renvoi and consequentially the private international law rules of any other law do not have any sway whatsoever.1556 476 Fifthly, the parties are assumed to forsake any impression of a choice of law, and the law

objectively determined applies.1557 It can be very well put forward that this approach protects the unity with the eventually applicable law.1558 But it disrespects and neglects (5). It does not even attempt at giving (5) a proper ambit, but immediately reverts to some kind of tiebreaker rule which cannot be found in (5). A rule remains a relevant rule even if it does not lead to immediate results. 477 Art. 6 (1) (b) Hague Principles on Choice of Law attempts a partial solution by distinguish-

ing between genuine conflict cases on the one hand and no-conflict cases on the other hand. In non-conflict cases the laws designated by the competing choice of law of clauses happen to coincide as to their material content with regard to consensus issues. A tie-breaker rule is introduced indicating a lack of consensus and thus progressing to the application of the default rule, the objectively applicable law.1559 Yet this should not be taken as a model for interpreting Art. 3 (5) in conjunction with Art. 10 (1).1560 Firstly, it requires a potentially enormous and costly effort to solve the case according to two laws and to compare their respective results.1561 Secondly, it deletes some intermediate steps and holds direct recourse to substantive laws concerned, introducing an own tiebreaker rule out of the blue.1562 Thirdly, neither party can truly rely on its own Standard Terms in the event of conflicting choice of law clauses.1563

1554 1555

1556

1557

1558 1559

1560 1561 1562 1563

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To this avail Dutta, ZvglRWiss 104 (2005), 461, 471–477. Mankowski pp. 30 et seq.; Matthias Weller/Nordmeier, in: Spindler/Schuster, Recht der elektronischen Medien (3rd ed. 2015) Art. 3 note 12; Magnus, in: Staudinger Art. 3 note 174; Wenner para. 74. Egon Lorenz, RIW 1992, 697, 698–700; Heinrich Dörner, LM H. 9/2000 Art. 27 EGBGB 1986 Nr. 8 fol. 4; Mankowski, EWiR Art. 27 EGBGB 1/2000, 967, 968; Hohloch/Kjelland, IPRax 2002, 30, 31; see also BGH NJW-RR 2000, 1002 = IPRax 2002, 37. Von Bar, IPR II para. 475; von Hoffmann, in: Soergel, Art. 27 EGBGB note 10; von Hein, in: Rauscher Art. 3 note 43; Thorn, in: Palandt, Art. 3 note 9. von Hein, in: Rauscher Art. 3 note 43. See Garcimartín Alférez, in: Homenaje al Rodrigo Bercovitz (2013), p. 241; Kadner Graziano, Yb. PIL 14 (2012/13), 71. Pfeiffer, in: FS Ulrich Magnus (2014), p. 501, 508. Pfeiffer, in: FS Ulrich Magnus (2014), p. 501, 508. Martiny, RabelsZ 79 (2015), 624, 643. Pfeiffer, in: FS Ulrich Magnus (2014), p. 501, 508.

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VIII. Extension to third parties 1. General remarks Even a choice of law clause with a wording as wide as “all claims arising of the relation 478 between the parties” covers only claims inter partes, between the parties of the concrete contract. In contrast, it does not cover claims by or against third parties which are not formally privy to the contract. But to include relations with third parties or at least to take such relations into account can be rather sensible. The European legislator recognised this, if only in a limited way, in (2) cl. 2 with regard to a subsequent choice of law. On the other side, any extension of parties’ choice of law towards third parties requires caution: To make a choice of law which third parties were possibly not aware of binding calls for justifying reasons. Minimum requirement thus should be that the relevant third party at least could have known about the choice of law and could have calculated its relevance for the relation between this third party and either party to the contract. 2. Cases of a possible extension to third parties In the contractual arena third parties often have rather vital interests in the contract and 479 monitor the parties and their dealings closely. In particular they might have provided for the financing and have secured interests of some kind. Banks, investors, or major creditors more often than not are well aware of the shape and content of the choice of law clause contained in a contract for which they financially or even legally take some risk. In fact, in many cases the financial lenders are the driving force behind the choice of a certain law.1564 Insofar, an assent or a submission to the choice of law can be imputed. At least the relation with the third party should be governed by the same law that governs the contract. Insofar as the applicable law has to be determined objectively, an akzessorische Anknüpfung under Art. 4 (3) cl. 2 comes into force.1565 Another possible scenario concerns other parts of a chain of contracts,1566 be it up-stream or 480 down-stream, auxiliary personnel or sub-contractors, for instance in the sector of transportation, particularly so if they have consented to their sub-contract being on back-to-back terms with the main contract governing.1567 Such assent and submissions substitute for actual awareness.

1564

1565

1566 1567

Eisenberg/Geoffrey P. Miller, 30 Cardozo L. Rev. 1475 (2009); Vogenauer, in: Eidenmüller (ed.), Regulatory Competition in Contract Law and Dispute Resolution (München/Oxford/Baden-Baden 2013), p. 227, 261. See Mankowski, IPRax 2003, 464, 471; Kreytenberg, Die individuelle Schwerpunktbestimmung internationaler Schuldverträge nach der Ausweichklausel des Artikel 4 Absatz 5 Satz 2 EVÜ (2007) pp. 149–161; Martiny, in: Münchener Kommentar zum BGB, Art. 4 Rom I-VO note 253; Martiny, in: FS Ulrich Magnus (2014), p. 483, 488. See Martiny, in: FS Ulrich Magnus (2014), p. 483, 487–488. See The “Pioneer Container” [1994] 2 AC 324 (P.C.); The “Jian He” [2000] 1 Sing. LR 8 (Singapore C.A.); Mankowski, IPRax 1996, 10; Briggs, para. 10.59.

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3. Overarching transactions 481 A transaction in the economic sense can encompass contracts between different partners,

and differing parties to the formally separate contracts. Overarching transactions provide for the common bond tying the contracts together. It can carry the extension of a choice of law clause towards a third party not formally party to the contract containing the choice of law clause.1568 This appears feasible in particular if the contracts are concluded with different members of a group of companies, a network or other kind of more or less instituationalised co-operation, since then a master plan might be behind the beavy of contracts.1569 Moreover, an extension appears even advisable if contracts are almost identical but for the person of one partner.1570 482 This leaves but one question: Which contract should be aligned to which other contract? The

commercial nexus does not answer this conclusively, but serves only as some minimum precondition. The starting point is clear: No alignment if the contract possibly to be aligned contains its own choice of law clause. Generally, a choice of law formally separate for each contract within a transaction is to be preferred, and advisors or in-house lawyers should take care of it.1571 Accessoriety has to overcome high stakes and high hurdles if there are differing contracting partners to the single contracts.1572 4. Tortious conduct by third parties 483 Tortious conduct by third parties should not be subjected to the choice of law clause in the

contract.1573 This might not be an automatism, but should serve as a rule of doubt at least.1574 5. Multipartite contracts 484 Any party to a multipartite contract is not a third party, but a proper party to the contract.

They enjoy the formal position of a contracting party. The multilateral character of the contract does not alter this basic fact. Choice of law clauses are binding upon such parties simply because of their formal position.1575 Idealiter all parties to a multipartite contract participate in negotiating the choice of law clause. At least each such party consents to the choice of law clause even if they do not participate actively in the drafting and negotiating, else it would not be party to the contract at all.1576 1568

1569 1570 1571 1572

1573

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Mankowski, in: Leible, p. 63, 81. Sceptically Wulf-Henning Roth, in: FS Apostolos Georgiades (2005), p. 907, 917. Mankowski, in: FS Dieter Martiny (2014), p. 449, 471. BAG NZA 2003, 339, 340; Mankowski, in: Leible, p. 63, 81. Mankowski, in: FS Dieter Martiny (2014), p. 449, 471. Martiny, in: Münchener Kommentar zum BGB, Art. 4 Rom I-VO note 255; Kreytenberg, Die individuelle Schwerpunktbestimmung internationalerSchuldverträge nach der Ausweichklausel des Artikel 4 Absatz 5 Satz 2 EVÜ (2007) p. 188. Briggs, para. 5.88; but cf. ET Plus SA v. Welter [2005] EWHC 2115 (Comm), [2006] 1 Lloyd’s Rep. 251 (Q. B.D., Gross J.). Comp. Credit Suisse First Boston (Europe) Ltd. v. MLC (Bermuda) Ltd. [1999] 1 All ER (Comm) 237 (Q.B. D.); Briggs, para. 5.90. Mankowski, in: FS Dieter Martiny (2014), p. 449, 472.

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IX. Remedies for breach of a choice of law agreement 1. Contractual arena A choice of law clause establishes a contractual promise. It might be enforced directly, but 485 this appears to be a rather theoretical issue, even more so in States which do not acknowledge specific performance as the primary remedy. Yet the question as to whether the breach of a choice of law agreement makes the breaching party liable for damages, might arise.1577 In the first step any approach relying on damages would have to define or at least circum- 486 scribe what constitutes the breach of a choice of law agreement.1578 Pleading claims on the basis of another law than the one agreed upon appears to be the prime example for such a breach, openly voiding the preceding contractual promise. Filing a writ with a court which would foreseeably apply another law than the chosen one, preferably the lex fori, is another example.1579 Generally, as a matter of construction, it must be answered whether the concrete choice of 487 law agreement does not only express the parties’ common intention but also establishes a contractual promise to implement that very choice of law when disputes are resolved.1580 The choice of the law of X might not only be a positive choice of that very law but also a negative stipulation that no other law shall be applied.1581 A promise not to bring an action in a country which would not give effect to the choice of law clause can make commercial sense to the contracting parties.1582 A choice of law clause as a contractual provision can be framed in a manner as to contain an unambiguous promise to do nothing that might result in some other law becoming applicable.1583 But it might require very clear language to infer such promissory content.1584 This may conflict heavily with a right to access courts in other states as guaranteed particu- 488 larly by the Brussels Ibis Regulation, though.1585 Insofar as the application of the “wrong” law by a court in a foreign State enjoys the force of res iudicata, which requires that the reasons on which the judgment is founded participate in the force of res iudicata, as a matter of recognition and enforcement that application might stand.1586 Besides that, a choice of law does not automatically carry a necessary implication of an obligation not to bring an action

1576 1577

1578 1579 1580 1581 1582 1583 1584 1585 1586

Mankowski, in: FS Dieter Martiny (2014), p. 449, 472. Ace Insurance Ltd. v. Moose Enterprise Pty Ltd. [2009] NSWC 724 (NSW High Ct., Brereton J.); Britton, [2008] Int. Construction L. Rev. 347, 355; Briggs paras. 11.46–11.71; Yeo, [2010] LMCLQ 194. See on the parallel question for choice of forum agreements Mankowski, IPRax 2009, 23. See Briggs para. 11.48. See Briggs paras. 11.51, 11.54–11.55, 11.62. Briggs para. 11.53; Yeo, [2010] LMCLQ 194, 200. Briggs para. 11.30. Yeo, [2010] LMCLQ 194, 201. Ace Insurance Ltd. v. Moose Enterprise Pty Ltd. [2009] NSWC 724 [47] (NSW High Ct., Brereton J.). Ace Insurance Ltd. v. Moose Enterprise Pty Ltd. [2009] NSWC 724 [51] (NSW High Ct., Brereton J.). Harris, [2009] LMCLQ 537, 554. Briggs para. 11.57; Harris, [2009] LMCLQ 537, 553.

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in a possibly deviating court.1587 There is more than only a little speculative element as to which extent a court might disregard a contractual choice of law, too, the more so where there is a concurring choice of forum clause vesting jurisdiction in another court. 489 Calculating damages and monetary remedies would follow in the next step if one is prepared

to go the first step, and problems abound.1588 Should the courts accessed for awarding damages calculate the loss suffered by the allegedly aggrieved party by determining which laws they would have applied if they had been charged with deciding the primary matter and what the outcome would have been?1589 They may themselves not have given unbridled effect to the chosen law, and may have imposed upon it provisions which cannot be derogated from by agreement, of another law by virtue of the Rome I Regulation.1590 The alternative is to consider that the result had the chosen law alone been applied, albeit that there may not obviously be any State with jurisdiction which would have applied that law alone.1591 Both alternatives exert not too much appeal and are cumbersome.1592 490 A contractual penalty clause is advocated as some kind of solution since a contractual

promise to pay which is conditional might only depend on the precision with which the condition is drafted.1593 2. State liability for incorrect judicial application of the Rome I Regulation 491 In the wake of the controversial1594 judgments in Köbler1595 and Traghetti Mediterraneo1596

which established state liability under EU law for judicial misapprehensions of EU rules by national courts, some provoking thoughts and ruminations might be tentatively ventilated: Member States could possibly be held liable if its courts misapprehended and misapplied the Rome I Regulation by not granting proper force to a choice of law agreement and applying another law than the chosen one. 492 Yet two restricting conditions must be met: The final judgment must be by a court of last

instance whose decisions are not subject to further appeal,1597 and the misapprehension of EU rules must be obvious and evident.1598 1587 1588 1589 1590 1591 1592 1593 1594

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Ace Insurance Ltd. v. Moose Enterprise Pty Ltd. [2009] NSWC 724 [47] (NSW High Ct., Brereton J.). Harris, [2009] LMCLQ 537, 554. Harris, [2009] LMCLQ 537, 554. Harris, [2009] LMCLQ 537, 554. Harris, [2009] LMCLQ 537, 554. Harris, [2009] LMCLQ 537, 554. Briggs para. 5.52. See the lively discussion e.g. by Obwexer, EuZW 2003, 726; Schwarzenegger, ZfRV 2003, 236; Breuer, BayVBl 2003, 586; Grune, BayVBl 2003, 673; Frenz, DVBl 2003, 1522; Gundel, EWS 2004, 8; Kremer, NJW 2004, 480; von Danwitz, JZ 2004, 301; Streinz, Jura 2004, 425; Wegner/Held, Jura 2004, 479; Kluth, DVBl 2004, 393; Rademacher, NVwZ 2004, 1415; Heike Krieger, JuS 2004, 855; Götz Schulze, ZEuP 2004, 1049; Machado, RLJ 2015, 246. Comprehensively Marten Breuer, Staatshaftung für judikatives Unrecht (2011) pp. 378–520. Köbler v. Republik Österreich (Case C-224/01), [2003] ECR I-10239. Traghetti del Mediterraneo SpA v. Repubblica Italiana (Case C-173/03), [2006] ECR I-5177. Köbler v. Republik Österreich (Case C-224/01), [2003] ECR I-10239, I-10310 para. 50.

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The damage due would be the damage resulting from the ensuing necessity to file the 493 application arguing on the basis of the law the court wants to be seen applied or to file such application applicable possibly elsewhere1599 (plus the costs of an eventual dismissal of the first case insofar as the parties ought to bear such costs). Article 4: Applicable law in the absence of choice 1. To the extent that the law applicable to the contract has not been chosen in accordance with Article 3 and without prejudice to Articles 5 to 8, the law governing the contract shall be determined as follows: (a) a contract for the sale of goods shall be governed by the law of the country where the seller has his habitual residence; (b) a contract for the provision of services shall be governed by the law of the country where the service provider has his habitual residence; (c) a contract relating to a right in rem in immovable property or to a tenancy of immovable property shall be governed by the law of the country where the property is situated; (d) notwithstanding point (c), a tenancy of immovable property concluded for temporary private use for a period of no more than six consecutive months shall be governed by the law of the country where the landlord has his habitual residence, provided that the tenant is a natural person and has his habitual residence in the same country; (e) a franchise contract shall be governed by the law of the country where the franchisee has his habitual residence; (f) a distribution contract shall be governed by the law of the country where the distributor has his habitual residence; (g) a contract for the sale of goods by auction shall be governed by the law of the country where the auction takes place, if such a place can be determined; (h) a contract concluded within a multilateral system which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments, as defined by Article 4(1), point (17) of Directive 2004/39/EC, in accordance with non-discretionary rules and governed by a single law, shall be governed by that law. 2. Where the contract is not covered by paragraph 1 or where the elements of the contract would be covered by more than one of points (a) to (h) of paragraph 1, the contract shall be governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence. 3. Where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. 4. Where the law applicable cannot be determined pursuant to paragraphs 1 or 2, the contract shall be governed by the law of the country with which it is most closely connected.

1598 1599

Köbler v. Republik Österreich (Case C-224/01), [2003] ECR I-10239, I-10312 para. 56, I-10329 para. 120. Tsikrikas, ZZP Int. 9 (2004), 123, 132; Magnus/Mankowski, in: Magnus/Mankowski, Brussels IIbis Regulation (2012) Introduction note 142.

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Bibliography (For specific contracts see first note in the text on the respective contract.) Ancel, La loi applicable à défaut de choix, in: Cashin Ritaine/Bonomi (eds.), Le nouveau règlement européen “Rome I” relative à la loi applicable aux obligations contractuelles (2008) 77 Aubart, Die Behandlung der dépeçage im europäischen internationalen Privatrecht (2013) Azzi, La loi applicable à défaut de choix selon les articles 4 et 5 du règlement Rome I, D. 2008, 2169 Bairlein, Internationales Vertragsrecht für Freie Berufe (2009) Bonomi, The Rome I Regulation on the Law Applicable to Contractual Obligations, Yb. PIL 10 (2008) 165 Corneloup, Choix de loi et contrats liés, in: Corneloup/Joubert (eds.), Le règlement communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011) 285 Ferrari, Objektive Anknüpfung, in: Ferrari/Leible (eds.), Ein neues Internationales Vertragsrecht für Europa (2007) 57 Ferrari, The Applicable Law in the Absence of Choice: Some Remarks on Article 4 of the Rome I Regulation (and Where it Comes from), in: Studi in onore di Aldo Frignani (2011) 217 Hartley, The Proposed “Rome I” Regulation – Applicable Law in the Absence of Choice (Article 4), Mélanges Hélène Gaudemet-Tallon (2008) 717 Magnus, Article 4 Rome I Regulation: The Applicable Law in the Absence of Choice, in: Ferrari/Leible (eds.), Rome I Regulation. The Law Applicable to Contractual Obligations in Europe (2009) 27 Magnus, Rom I und der EuGH – für die Auslegung der Rom I-VO bereits relevante EuGH-Rechtsprechung, in: FS Coester-Waltjen (2015) 555 Mankowski, Gemischte Verträge, objektive dépeçage, Handhabung der Ausweichklausel und Auslegungsmethodik im internationalen Schuldvertragsrecht, IHR 2010, 89 Mankowski, Dépeçage unter der Rom I-VO, in: FS Spellenberg (2010) 261 Mankowski, The Principle of Characteristic Performance Revisited Yet Again, in: FS Siehr (2010) 433 Martiny, Objektive Vertragsanknüpfung und Form,

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in: Leible (ed.), Das Grünbuch zum Internationalen Vertragsrecht (2004) 109 Martiny, Neues deutsches internationales Vertragsrecht, RIW 2009, 737 Martiny, Die objektive Anknüpfung atypischer und gemischter Schuldverträge, in: FS von Hoffmann (2011) 283 Martiny, Zur Einordnung und Anknüpfung der Ansprüche und der Haftung Dritter im Internationalen Schuldrecht, in: FS Magnus (2014) 483 Martiny, Die Haager Principles of Choice of Law in International Commercial Contracts – Eine weitere Verankerung der Parteiautonomie, RabelsZ 79 (2015) 624 Neubert, Die objektiven Anknüpfungen von Schuldverträgen gem. Art. 4 Rom I-Verordnung – Vergleich zur vormals geltenden Regelung des Art. 28 EGBGB aF, EWS 2011, 369 Nourissat, Le dépeçage, in: Corneloup/Joubert (eds.), Le règlement communautaire “Rome I” et le choix de loi dans les contract internationaux (2011) 205 Okoli, The Significance of the Doctrine of Accessory Allocation as a Connecting Factor Under Article 4 of the Rome I Regulation, JPIL 9 (2013) 449 Okoli/Arishe, The operation of the escape clauses in the Rome Convention, Rome I Regulation and Rome II Regulation, JPIL 8 (2012) 513 Ostendorf/Kluth (eds.), Internationale Wirtschaftsverträge (2013) Pfeiffer, Die Haager Prinzipien des internationalen Vertragsrechts – Ausgewählte Aspekte aus der Sicht der Rom I-VO, in: FS Magnus (2014) 501 Remien, Engste Verbindung und Ausweichklauseln, in: Leible/Unberath (eds.), Brauchen wir eine Rom O-Verordnung? (2013) 223 Siehr, Objektive Anknüpfung im Internationalen Vertragsrecht, in: Reichelt (ed.), Europäisches Gemeinschaftsrecht und IPR (2007) 69 Tang, Law Applicable in the Absence of Choice – The New Article 4 of the Rome I Regulation, JPIL 4 (2008) 785 M. Taschner, Vertragliche Schuldverhältnisse der Europäischen Union – Zuständigkeit und anwendbares Recht, in: FS Magnus (2014) 531 R Wagner, Der Grundsatz der Rechtswahl und das mangels Rechtswahl anwendbare Recht

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Chapter II: Uniform Rules (Rom I-Verordnung). Ein Bericht über die Entstehungsgeschichte und den Inhalt der Artikel 3 und 4 Rom I-Verordnung, IPRax 2008, 377. Still relevant writings on the former law Carillo Pozo, El contrato internacional: la prestación caracteristica (1994) Geisler, Die engste Verbindung im Internationalen Privatrecht (2001) Gunst, Die charakteristische Leistung: zur funktionellen Anknüpfung im internationalen Vertragsrecht Deutschlands, der Schweiz und der Europäischen Gemeinschaft (1994) von Hoffmann, General Report on Contractual Obligations, in: Lando/von Hoffmann/Siehr (eds.), European Private International Law of Obligations (1975) 1 Juenger, Parteiautonomie und objektive Anknüpfung im EG-Übereinkommen zum Internationalen Vertragsrecht. Eine Kritik aus amerikanischer Sicht, RabelsZ 46 (1982) 57 Kaufmann/Kohler, La prestation caractéristique en droit international privé des contrats et l’influence de la Suisse, SchwJBIntR 45 (1989) 195 Kassis, Le nouveau droit européen des contrats internationaux (1993) Kaye, The New Private International Law of Contract of the European Community (1993) Lagarde, Le nouveau droit international privé des contrats après l’entrée en vigueur de la Convention de Rome du 19 juin 1980, Rev. crit. 80 (1991) 287 Magagni, La prestazione caratteristica nella Convenzione di Roma del 19 giugno 1980 (1989) Contents and purpose . . . . . . . . . . . . . . . . . . . . . . . . 1 History of the Article . . . . . . . . . . . . . . . . . . . . . . . . . 8 Scope and preconditions of application 1. General scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2. No valid choice of law . . . . . . . . . . . . . . . . . . 18 3. No more specific conflicts rule . . . . . . . . . 19 4. No depeçage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 IV. Foundations and structure . . . . . . . . . . . . . . . . . 22 V. Order of application . . . . . . . . . . . . . . . . . . . . . . . . 26 VI. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 VII. Applicability of general provisions and rules 1. Renvoi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2. Ordre public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

I. II. III.

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Article 4 Martiny, Das Römische Vertragsrechtsübereinkommen vom 19.6.1980, ZEuP 1993, 298 Martiny, Internationales Vertragsrecht zwischen Rechtsgefälle und Vereinheitlichung, ZEuP 1995, 67 Martiny, Europäisches internationales Vertragsrecht – Erosion der Römischen Konvention?, ZEuP 1997, 107 Martiny, Europäisches internationales Vertragsrecht – Ausbau und Konsolidierung, ZEuP 1999, 246 Martiny, Internationales Vertragsrecht im Schatten des Gemeinschaftsrechts, ZEuP 2001, 308 Martiny, Europäisches Internationales Vertragsrecht vor der Reform, ZEuP 2003, 590 Martiny, Neue Impulse im Europäischen Internationalen Vertragsrecht, ZEuP 2006, 60 Martiny, Europäisches Internationales Vertragsrecht in Erwartung der Rom I-Verordnung, ZEuP 2008, 79 Meeusen/Pertegás/Straetmans (eds.), Enforcement of International Contracts in the European Union (2004) Patocchi, Characteristic Performance: A New Myth in the Conflict of Laws?, in: Études de droit international en l’honneur de Pierre Lalive (1993) 113 Plender/Wilderspin, The European Private International Law of Obligations (4. ed. 2015) Schultsz, Fixity and flexibility in the objective choice of law rules regarding contracts, in: vBar (ed), Perspektiven des internationalen Privatrechts nach dem Ende der Spaltung Europas (1993) 97 Vischer, The Concept of the Characteristic Performance Reviewed, in: Liber amicorum Droz (1996) 499.

3. Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 4. Relevant point in time . . . . . . . . . . . . . . . . . . 32 5. Intertemporal questions . . . . . . . . . . . . . . . . . 36 6. Applicability of a state’s law . . . . . . . . . . . . 37 VIII. Specific contracts (par. 1) 1. General considerations a) The reasons for the catalogue of par. 1 38 b) The relationship between the provisions of the par. 1 catalogue . . . . . . 41 c) Habitual residence: the mainly used common connecting factor . . . . . . . . . . . . . 47 d) Priority of par. 1 . . . . . . . . . . . . . . . . . . . . . . . . . 48 e) Limited collection of contract types in par. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

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Article 4 2. Sale of goods (lit. a) a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 b) Sale of goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 aa) Covered contracts . . . . . . . . . . . . . . . . . . . . . . . 54 bb) Form irrelevant . . . . . . . . . . . . . . . . . . . . . . . . . . 59 cc) Definition of goods . . . . . . . . . . . . . . . . . . . . . . 60 3. Service contracts (lit. b) a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 b) Definition of service contracts . . . . . . . . . 69 4. Land contracts (lit. c) a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 b) Scope of the provision aa) Distinction between contractual and property aspects . . . . . . . . . . . . . . . . . . . . . . . . . 82 bb) Immovable property contracts (1) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 (2) Immovable property . . . . . . . . . . . . . . . . . . . . . 86 (3) Rights in rem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 (4) Covered contracts . . . . . . . . . . . . . . . . . . . . . . . 90 cc) Tenancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 c) Relevant point of time . . . . . . . . . . . . . . . . . . 99 d) International jurisdiction . . . . . . . . . . . . . 100 5. Certain short-term tenancies (lit. d) a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 b) Requirements of lit. d aa) Tenancy of immovable property . . . . . 107 bb) Private use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 cc) Temporary use for not more than six months . . . . . . . . . . . . . . . . . . . . . . . . 109 dd) Parties’ habitual residence in same state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 ee) Natural person as tenant . . . . . . . . . . . . . . 116 6. Franchise contracts (lit. e) a) Definition of franchise contracts . . . . . 117 b) Unification and harmonisation . . . . . . 120 c) Applicable law . . . . . . . . . . . . . . . . . . . . . . . . . 123 d) Mandatory provisions . . . . . . . . . . . . . . . . . 127 7. Distribution contracts (lit. f) a) Definition of distribution contracts . . 129 b) Unification and harmonisation . . . . . . 131 c) Applicable law . . . . . . . . . . . . . . . . . . . . . . . . . 133 d) Exclusive distribution contract . . . . . . . 139 e) Mandatory provisions . . . . . . . . . . . . . . . . . 140 8. Auction sales (lit. g) . . . . . . . . . . . . . . . . . . . 142 9. Specific financial contracts (lit. h) a) Aim of the provision . . . . . . . . . . . . . . . . . . 148 b) Covered contracts . . . . . . . . . . . . . . . . . . . . . 149 c) Applicable law . . . . . . . . . . . . . . . . . . . . . . . . . 154

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Rome I Regulation d) Consumer protection . . . . . . . . . . . . . . . . . . Exclusion of dépeçage . . . . . . . . . . . . . . . . . . . . . The default rule (par. 2) 1. In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Scope of the default rule a) Contracts outside par. 1 . . . . . . . . . . . . . . . b) Contracts falling under more than one lit. of par. 1 . . . . . . . . . . . . . . . . . . . . . . . . c) Other contracts . . . . . . . . . . . . . . . . . . . . . . . . 3. The concept of the characteristic performance a) Justification and criticism . . . . . . . . . . . . . b) Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The contents of the characteristic performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Territorial connection of the characteristic performance . . . . . . . . . . . . e) The relevant date . . . . . . . . . . . . . . . . . . . . . . XI. The escape clause (par. 3) 1. In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Criteria of the closer connection . . . . . 3. Relevant point of time . . . . . . . . . . . . . . . . 4. Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . XII. The closest connection (par. 4) 1. In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Scope of application . . . . . . . . . . . . . . . . . . . 3. Indicators of the closest connection a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Statutory connecting factors aa) Habitual residence . . . . . . . . . . . . . . . . . . . . . bb) Situs of contract object . . . . . . . . . . . . . . . . cc) Place of performance . . . . . . . . . . . . . . . . . . c) Further relevant circumstances aa) Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Place of conclusion of the contract, contract language, currency . . . . . . . . . . cc) Place of certification; involvement of third persons . . . . . . . . . . . . . . . . . . . . . . . . dd) Flag, home port, place of registration ee) State as contract partner . . . . . . . . . . . . . . ff) Conduct during legal proceedings . . . gg) Choice of court-clauses, arbitration agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . hh) Reference to a specific law; related or combined contracts . . . . . . . . . . . . . . . . . . . . ii) Favor negotii; market connection . . . . 4. Relevant point of time . . . . . . . . . . . . . . . . 5. Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . IX. X.

155 156 157 158 159 164

166 173 175 179 182 184 190 196 197 199 202 205 211 212 213 215 216 219 221 222 223 224 225 227 229 230

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Chapter II: Uniform Rules XIII. Procedural questions 1. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . 231 2. Revisibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 XIV. Law applicable to different contract types 235 1. Sales contract a) Sale of immovables . . . . . . . . . . . . . . . . . . . . 236 b) Sale of movables (aa)Uniform substantive law (1) UN Sales Convention of 1980 (CISG) 246 (2) Hague Uniform Sales Law . . . . . . . . . . . . 248 (3) UN Limitation Convention of 1974 251 (4) UNIDROIT Agency Convention of 1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 (bb) Uniform conflict rules on sales contracts (1) Hague Convention on applicable sales law of 1955 . . . . . . . . . . . . . . . . . . . . . . . 255 (2) Hague Convention on applicable sales law of 1986 . . . . . . . . . . . . . . . . . . . . . . . 257 (3) European Sales Law, CESL and further European initiatives . . . . . . . . . . 258 (4) Uniform contract terms . . . . . . . . . . . . . . . 260 c) Law applicable to sales contracts of movables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 d) Sale of an enterprise; sale of a practice 267 aa) Share deal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268 bb) Asset deal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 e) Sale of claims and rights . . . . . . . . . . . . . . 281 f) Sale of vessels . . . . . . . . . . . . . . . . . . . . . . . . . . 283 g) Sale of other things . . . . . . . . . . . . . . . . . . . . 285 h) Sale of goods to be manufactured . . . . 286 i) Consumer sale . . . . . . . . . . . . . . . . . . . . . . . . . 287 2. Barter/exchange contract . . . . . . . . . . . . . 289 3. Donation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293 4. Rent, tenancy a) Tenancy of immovable or room . . . . . . 300 b) Other kinds of rent . . . . . . . . . . . . . . . . . . . . 306 c) Effects towards third parties . . . . . . . . . . 308 5. Usufructuary rent . . . . . . . . . . . . . . . . . . . . . . 309 6. Gratuitous loan . . . . . . . . . . . . . . . . . . . . . . . . 311 7. Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312 8. Timeshare contract . . . . . . . . . . . . . . . . . . . . 319 a) EU Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . 320 b) Conflict rules . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 c) Consumer protection . . . . . . . . . . . . . . . . . . 328 9. Credit contract, loan . . . . . . . . . . . . . . . . . . 329 10. Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 11. Service contract

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Article 4 a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 b) Contract between lawyer and client . 349 c) Contract between doctor and patient 358 d) Contract for teaching or training . . . . 360 e) Contract for performance as artist etc. 366 12. Brokerage contract . . . . . . . . . . . . . . . . . . . . 367 13. Commission contract . . . . . . . . . . . . . . . . . 373 14. Commercial agency contract a) Unification of law . . . . . . . . . . . . . . . . . . . . . 375 b) Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 c) Applicable law aa) Subjective choice . . . . . . . . . . . . . . . . . . . . . . . 379 bb) Objective choice . . . . . . . . . . . . . . . . . . . . . . . 381 d) Mandatory law . . . . . . . . . . . . . . . . . . . . . . . . . 384 e) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 15. Distribution contract . . . . . . . . . . . . . . . . . . 387 16. Franchising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388 17. Sponsoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389 18. Contract for work a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390 b) Construction contract . . . . . . . . . . . . . . . . . 396 c) Turnkey contract . . . . . . . . . . . . . . . . . . . . . . . 404 d) Contract with architect . . . . . . . . . . . . . . . 408 e) Rating contract . . . . . . . . . . . . . . . . . . . . . . . . . 411 19. Travel contract . . . . . . . . . . . . . . . . . . . . . . . . . 415 20. Accommodation contract . . . . . . . . . . . . . 422 21. Mandate; contract for the management of the affairs of another a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429 b) Contract for building supervision . . . . 435 c) Management contract; business management contract . . . . . . . . . . . . . . . . . 440 d) Consulting contract . . . . . . . . . . . . . . . . . . . 442 e) Contract with an arbitrator . . . . . . . . . . . 444 f) Trust contract . . . . . . . . . . . . . . . . . . . . . . . . . . 449 g) Contracts for the care for another . . . 453 22. Gratuitous services in general . . . . . . . . 454 23. Storage and warehousing contract; deposit contract . . . . . . . . . . . . . . . . . . . . . . . . 455 24. Insurance contract . . . . . . . . . . . . . . . . . . . . . 460 25. Contracts for the provision of security a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 b) Suretyship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467 c) Guarantee contract aa) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474 bb) Uniform law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478 cc) Applicable law . . . . . . . . . . . . . . . . . . . . . . . . . 480

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Article 4 d) Comfort letter . . . . . . . . . . . . . . . . . . . . . . . . . . 486 e) Promise of debt; acknowledgment of debt aa) Promise of debt . . . . . . . . . . . . . . . . . . . . . . . . 488 bb) Acknowledgment of debt . . . . . . . . . . . . . 491 26. Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492 27. Waiver contract . . . . . . . . . . . . . . . . . . . . . . . . 495 28. Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496 29. Banking contracts a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499 b) Deposit business . . . . . . . . . . . . . . . . . . . . . . . 508 c) Credit contract . . . . . . . . . . . . . . . . . . . . . . . . . 511 d) Discount business . . . . . . . . . . . . . . . . . . . . . 512 e) Factoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 f) Forfaiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 518 g) Giro business . . . . . . . . . . . . . . . . . . . . . . . . . . . 522 h) Documentary credit . . . . . . . . . . . . . . . . . . . 529 i) Collection business . . . . . . . . . . . . . . . . . . . . 541 j) Securities business . . . . . . . . . . . . . . . . . . . . . 544 k) Investment business . . . . . . . . . . . . . . . . . . . 546 l) Custody business . . . . . . . . . . . . . . . . . . . . . . 550 m) Swap transactions . . . . . . . . . . . . . . . . . . . . . . 553 n) Information contract . . . . . . . . . . . . . . . . . . 554 o) Other kinds of banking contracts . . . . 555 30. Stock exchange and financial market transactions a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556 b) Futures transactions . . . . . . . . . . . . . . . . . . . 559 31. Lottery, game and bet contracts . . . . . . 563 32. Promise of a reward, prize competition, prize notification a) Promise of a reward; prize competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569 b) Prize notification . . . . . . . . . . . . . . . . . . . . . . 572 33. Contracts on intellectual property rights a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577

Rome I Regulation b) Copyright contracts . . . . . . . . . . . . . . . . . . . 583 c) Publishing contracts . . . . . . . . . . . . . . . . . . . 592 d) Licence contracts . . . . . . . . . . . . . . . . . . . . . . 596 e) Other exploitation contracts aa) International transmission contracts 605 bb) International film production contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606 cc) International film distribution contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608 dd) Collection and rights administration contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610 34. Knowhow contracts; technology transfer contracts . . . . . . . . . . . . . . . . . . . . . . 611 35. Company contracts . . . . . . . . . . . . . . . . . . . . 615 36. Cooperation contracts; joint ventures a) Cooperation contracts . . . . . . . . . . . . . . . . . 622 b) Joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . 624 37. Life annuity and other care contracts 628 38. Family contracts . . . . . . . . . . . . . . . . . . . . . . . 631 39. Internet contracts a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634 b) Unification of internet law . . . . . . . . . . . . 636 c) Special conflict of laws rules? . . . . . . . . . 638 d) Choice of the applicable law . . . . . . . . . . 643 e) Objectively applicable law . . . . . . . . . . . . 645 f) Consumer contracts over the internet 647 g) Provider contracts . . . . . . . . . . . . . . . . . . . . . 649 h) Internet auctions . . . . . . . . . . . . . . . . . . . . . . . 652 i) Internet tenders . . . . . . . . . . . . . . . . . . . . . . . . 655 j) Internet and teleservices . . . . . . . . . . . . . . 657 k) Contracts on internet advertising . . . . 660 l) Contracts on domain registration . . . . 661 m) Internet bettings . . . . . . . . . . . . . . . . . . . . . . . 662 n) Cloud computing contracts . . . . . . . . . . . 663 40. Organ donation contracts . . . . . . . . . . . . 664 41. Contracts with the state . . . . . . . . . . . . . . . 667

I. Contents and purpose 1 The Article is the general default rule which determines the applicable contract law where

the parties did not make a valid choice of law and where no more specific international treaties (like the CISG, CMR etc) or special conflict rules, in particular Articles 5–8 Rome I Regulation for transport, consumer, insurance and employment contracts, apply. In the absence of a subjective choice by the parties the determination of the governing contract law must be based on objective elements. For this purpose Art. 4 follows in principle the concept of the closest connection (lien le plus étroit, engste Verbindung) which must exist between

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the contract and the law of a specific country.1 In general, this connection is fixed by a substantial territorial element like the seat of a party or the location of the contract object in the respective country. But other than territorial elements (language, currency etc) may also play a role in order to establish the closest connection. Art. 4 (1) specifies for certain frequent and important contract types the applicable law on 2 the assumption that the designated law usually is the most closely connected law. The conflict rules of par. 1 must be followed in the first place; they form the ordinary starting point and constitute regular presumptions of the law that has to be applied.2 Nonetheless, par. 1 does not establish rigid rules which prohibit any deviation.3 As Art. 4 (3) shows, the application of another law is possible under the condition that a manifestly closer connection to this other law exists. Art. 4 (1) thus establishes strong, but not irrebuttable presumptions.4 Where none of the contract types of Art. 4 (1) is involved or where the contract covers more 3 than one of those types, par. 2 determines the applicable law. This provision is based on the well-known concept of characteristic performance: the law of the country applies where the party required to effect the characteristic performance of the contract is seated (has its habitual residence or its central administration, see Art. 19). Again, a manifestly closer connection can override this rule (par. 3). The escape clause of Art. 4 (3) injects the necessary flexibility though the condition of a 4 manifestly closer connection sets a rather high threshold which is higher than under the preceding Art. 4 Rome Convention which merely required a closer connection. The amendment serves the aim of better foreseeability of the applicable law. There remain – rather rare – cases where neither par. 1 applies nor a characteristic per- 5 formance can be identified, as for instance often in case of barter contracts or joint ventures. For those contracts Art. 4 (4) refers directly to the law with which this contract is most closely connected. In sum, by rather precisely fixing the applicable law for certain standard cases and by 6 allowing an exception only under rather restricted conditions, Art. 4 aims at a reasonable and fair balance between certainty and foreseeability of the applicable law on the one hand and flexibility in the concrete case on the other.5 In order to grant legal certainty, the provision follows the policy that “the conflict-of-law rules should be highly foreseeable.”6 This serves the general objective of the Regulation, namely “legal certainty in the European judicial area.”7 Nevertheless, the principle that the most closely connected law should apply 1 2

3

4 5 6 7

See Art. 4 (3) and (4); also Recital 16. In this sense also Hohloch, in: Erman Art. 4 Rom I note 2; Spickhoff, in: Beck Online Art. 4 Rom I note 1; Thorn, in: Palandt Art. 4 Rom I note 2. Brödermann/Wegen, in: PWW Art. 4 Rom I note 7; Plender/Wilderspin note 7–030; Thorn, in: Palandt Art. 4 note 2; slightly differently: Staudinger, in: Hk-BGB Art. 4 note 1 (“relativ starr” [“relatively rigid”]). Thorn, in: Palandt Art. 4 note 2. See Recital 16. Recital 16. Recital 16.

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allows the courts a deviation from the basic conflicts rules of Art. 4 (1) and (2),8 though any deviation should not too easily be accepted. For this purpose par. 3 sets a rather high threshold. 7 Together with Art. 5–8, Art. 4 Rome I Regulation forms a complex and differentiated net of

conflict rules for international contracts. Art. 4 is the most fundamental provision which, however, fulfills only a subsidiary function9 because it is applicable only if there is no more specific rule designating the applicable law. II. History of the Article 8 Art. 4 had its predecessor in Art. 4 Rome Convention of 1980.10 When the revision of the

Rome Convention was conceived, the Proposal for the Rome I Regulation of 200511 suggested considerable modifications not only of the form but also of the substance of that provision. However, the final version which is now Art. 4 Rome I Regulation accepted the formal changes but leaves the substance of the former provision almost unchanged. Art. 4 Rome Convention started with the principle of the closest connection (par. 1); its par. 2 then introduced as general conflicts rule the characteristic performance concept; the present catalogue of Art. 4 (1) Rome I Regulation was still lacking; Art. 4 (3) and (4) Rome Convention contained specific rules for land contracts and transport contracts; par. 5 formulated an escape clause where the contract was more closely connected with another law than that designated by the characteristic performance concept or by the specific conflict rules for land and transport contracts. 9 The Draft of the Rome I Regulation of 2005 proposed largely the present catalogue of Art. 4

(1) Rome I Regulation, conceived, however, as rigid rules from which no deviation should be possible. The escape clause was omitted. This inflexibility was strongly criticized.12 The final version of the Article therefore accepted the catalogue of par. 1 (and even enlarged it by the present lit. g and h) but resumed the escape clause in a stricter form than in the Rome Convention: “manifestly more closely connected” instead of “more closely connected.” This must influence the interpretation of the escape clause. 10 Despite the evident discrepancy that Art. 4 Rome Convention contained no catalogue as is

now enshrined in Art. 4 (1) Rome I Regulation, in substance this makes no real difference: most of the conflicts rules of the catalogue follow the concept of characteristic performance and are therefore identical with the former general solution. Even for franchise and distribution contracts the present rule13 can be inferred from the characteristic performance concept, although under the former law it was disputed whether the franchisee and the

8 9

10 11 12

13

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See also Recital 16. Magnus, in: Staudinger Art. 4 note 16; Ringe, in: jurisPK-BGB Art. 4 note 2 et seq.; Staudinger, in: Hk-BGB Art. 4 note 1. See in depth thereon McParland Art. 4 note 1 et seq. COM (2005) 650 fin. See, e.g., European Economic and Social Committee, Off Bull No. C 318 of 23 Dec. 2006, p. 56 et seq.; Max-Planck-Institute RabelsZ 71 (2007) 257 et seq.; Mankowski IPRax 2006, 101, 104 et seq. Art. 4 (1) (e) and (f) Rome I Regulation.

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distributor effected the characteristic performance (see further infra note 117 et seq. and 129 et seq.). A theoretically significant modification concerns the deletion of the former possibility of 11 dépeçage. Whereas Art. 4 (1) sent. 2 Rome Convention entitled to apply different laws to severable parts of the contract, Art. 4 Rome I Regulation no longer provides for such a split. This should be understood as an exclusion of a depeçage by the judge;14 however, the parties may still subject severable parts of their contract to different laws.15 In practice, the depeçage ordered by the court never played any visible role. The Draft of the Rome I Regulation also provided for a special conflicts rule for contracts on 12 immaterial property rights: it suggested the law of the country should decide where the person transferring or assigning the right was seated.16 This rule was criticized as too undifferentiated17 and for this reason it was deleted from the final version. In consequence, intellectual and industrial property contracts fall under the general conflicts rules of Art. 4 (2)-(4) Rome I Regulation (as to the governing law for those contracts see infra note 577 et seq.). Like Art. 4 (4) Rome Convention the par. 1 catalogue of the Proposal of 2005 contained a 13 special conflicts rule for transport contracts. This has become – in an enlarged form – Art. 5 Rome I Regulation. Moreover, the text of the conflicts rule on land contracts in Art. 4 (3) Rome Convention was brought fully into line with the formulation in Art. 22 no. 1 Brussels I Regulation18 by adding a special rule on short-term leases for private use.19 Before the conclusion of the Rome Convention of 1980 the rules on the designation of the 14 applicable contract law, where the parties had not made a valid choice of law, varied considerably among the countries that now form the EU – and not only with respect to the theoretical foundation. The Common Law countries (UK, Ireland, Malta) followed a proper law approach. The proper law of contract had to be determined on a case to case basis. All relevant circumstances of the individual case had to be taken into account. The result was hardly foreseeable. Similarly, in France the judge had to infer the objectively applicable contract law from “the economy of the contract and the circumstances of the case”.20 (West-)Germany formally determined the applicable law according to the hypothetical intention of the parties which, however, was in fact “a reasonable balancing of interests on a purely objective basis”.21 (East)Germany as well as other former socialist countries like Poland or Hungary adopted in the 1960ies and 1970ies private international law statutes that already contained catalogues rather similar to the present Art. 4 (1) Rome I Regulation 14

15 16 17 18 19 20 21

Staudinger, in: Hk-BGB Art. 4 note 1; Thorn, in: Palandt Art. 4 note 1; Magnus, in: Staudinger Art. 4 note 10; evidently also Plender/Wilderspin note 7–030; but contra Mankowski IHR 2009, 89 et seq. who regards an objective depeçage as still admissible. See art. 3 (1) sent. 3. Rome I Regulation and the commentary thereto (Mankowski). Art. 1 (1) (f) Proposal for the Rome I Regulation. See in particular Max-Planck-Institute, RabelsZ 71 (2007) 263 et seq. From 10 January 2015 on: Art. 24 no. 1 Brussels Ibis Regulation. Art. 4 (1) (d) Rome I Regulation. Cass. Civ. 6 July 1959, RCDIP 1959.708 with note Batiffol. BGHZ 7, 235.

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(though without any escape clause).22 In Spain, the applicable law was regulated in 1974 by a new Art. 10.5 Codigo civil. Absent any choice of law by the parties, Spanish courts had to apply the law that was common to the parties, first, in regard of their citizenship, secondly, in regard of their habitual residence or, in default of these elements, the law of the country where the contract was concluded.23 Thus, the approaches varied between very flexible and very rigid rules. III. Scope and preconditions of application 1. General scope 15 Art. 4 applies to all contractual relations falling within the scope of the Rome I Regulation.

This includes one-sided voluntary promises. Art. 4 is also applicable as far as Art. 10 (1), Art. 11 (1) and Art. 12 (1) Rome II Regulation refer to the Rome I Regulation. However, the exclusions in Art. 1 Rome I Regulation, in particular for contracts on family, succession and company matters and on negotiable instruments need to be observed. 16 The material scope of Art. 4 is further defined by Art. 10, 12 and 18 Rome I Regulation. 17 Art. 4 applies without restriction to e-commerce contracts, that is contracts concluded via

electronic means, in particular by email. Although Art. 3 (1) E-Commerce Directive24 could be understood to oblige the Member States to introduce a specific conflicts rule for these contracts designating always the law of the country of origin of the electronic service (principle of origin, principe d’origine, Herkunftslandprinzip),25 the CJEU has clarified that this is not the case.26 The general conflict rules continue to apply to e-commerce contracts. 2. No valid choice of law 18 As a first condition Art. 4 requires that the parties made no or no valid choice of the

applicable law. Art. 4 (1) refers to a choice of law “in accordance with Art. 3”. This must not be understood too verbally to refer only to choices under Art. 3 Rome I Regulation. Where the choice was validly made still under Art. 3 Rome Convention, the predecessor of Art. 3 Rome I Regulation, or under an even prior or other law, such choice also prevails and leaves no room for Art. 4.27 However, Art. 4 applies where the parties merely excluded a certain law (purely negative choice) or where the chosen law remains uncertain (for instance choice of “American law”).28 22

23

24

25

26 27 28

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See for instance § 12 (1) Rechtsanwendungsgesetz (RAG, Application of Law Act) of 5 December 1975 of the former German Democratic Republic. To the history of Spanish international contract law see Calvo Caravaca/Carrascosa González Cap. XXV par. 9. Directive 2000/31/EC on certain aspects of information society services, in particular electronic commerce, in the Internal Market. See extensively thereon Sonnenberger, in MünchKomm Einl. Note 192 et seq.; Martiny, in: MünchKomm Art. 9 Anh. III. ECJ [2011] ECR I-10269 (C-509/09 and 161/10, eDate Advertising and Martinez). Equally Spickhoff, in: Beck Online Art. 4 note 1. Also Ringe, in: jurisPK Art. 4 note 7.

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3. No more specific conflicts rule Further, to the extent that the specific conflict rules on transport contracts (Art. 5), on 19 consumer contracts (Art. 6), on insurance contracts (Art. 7) or on employment contracts (Art. 8) are applicable, they prevail over Art. 4. The respective scope of those provisions has always to be observed precisely. If, for instance, the specific situation required for Art. 6 (“directs […] activities” to the country of the consumer) is not met, Art. 4 even applies to consumer contracts. Also, other specific conflict rules laid down by Community law29 or by those international 20 conventions which have to be respected according to Art. 25 Rome I Regulation, have to be given preference. 4. No dépeçage The judge can no longer split a single contract into parts and designate different laws for the 21 parts.30 This possibility which existed under the Rome Convention31 has been abolished. In practice it played no role. Yet, the parties still may subject severable parts of their contract different laws (Art. 3 (1) sent. 3).32 IV. Foundations and structure The central element of Art. 4 is the general principle of all modern private international law, 22 namely that the legal relationship shall be governed by the most closely connected law. In particular Art. 4 (3) and (4) express this idea that is the basic fundament of the whole Regulation. However, this very general formula is not left to be filled by the judge in each concrete case. For the sake of certainty of law Art. 4 provides for certain more precise subrules. Art. 4, like Art. 4 Rome Convention, realises the principle of the closest connection in the 23 first line by expressly stating the regularly applicable law for certain important and frequent contract types (par. 1). This catalogue of specific conflict rules ensures a high degree of certainty and foreseeability. The primary rule is that contracts are governed by the law of the place where the party obliged to effect the characteristic performance is located. Most of the specific conflicts provisions of the catalogue of Art. 4 (1) follow this principle33 that is generalised by par. 2 for all other contracts. Nonetheless, the seat of the characteristically performing party does not always signal the closest connection. For general land contracts and auction sales it is the location of the land and the place of the auction that prevails and constitutes the closer connection (Art. 4 (1) lit. c and g). A similar rule applies to financial 29 30

31 32

33

See Art. 23 Rome I Regulation. Brödermann/Wegen, in: PWW Art. 4 note 6; Gebauer, in: Calliess Art. 4 note 8; Plender/Wilderspin note 7–030; Thorn, in: Rauscher Art. 4 note 21; contra Mankowski IHR 2009, 89 et seq. Art. 4 (1) sent. 2 Rome Convention. See Art. 3 note 313 et seq. (Mankowski); to the requirements of such a depeçage though still under the Rome Convention see ECJ [2009] ECR I-9687 (C-133/08, Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV. MIC Operations BV). Namely lit. a, b, d, e and f.

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contracts concluded within a specific multilateral system, in fact in a stock market, where the law governing this system governs those contracts (lit. h, see infra note 148 et seq.). 24 The set of rather clear cut and firm conflict rules in Art. 4 (1) and (2) needs a necessary

addition which in the interest of justice in the concrete case allows a flexible determination of the applicable law: where the standard solution does not lead to the most closely connected law, nonetheless the court must be entitled to apply the latter. Thus, the general objective of legal certainty and predictability of the applicable law is complemented by the principle of flexibility. Art. 4 creates a reasonable balance between these two conflicting targets; the standard determination of the applicable law enjoys clear priority but is corrected in exceptional cases.34 25 Not expressly mentioned but inherently enshrined in par. 1 is the further principle of

speciality (lex specialis derogat legi generali). It is almost self-understanding that Art. 4 (1) lit. g (auction sale) prevails over lit. a (general sale), lit. d (short term land rent) over lit. c (general land contracts) and lit. e and f (franchise and distribution contracts) over lit. b (general services contracts). In such cases Art. 4 (2) does not apply although the respective contract may be regarded as one which is covered by more than one of the points (a) to (h) of par. 1. But evidently auction sales, short term land rents and franchise or distribution contracts shall be governed by their special conflict rule (see further infra note 102 et seq., 117 et seq., 129 et seq. and 142 et seq.). V. Order of application 26 From the structure of Art. 4 consequences follow for its application. While the reciprocal

relationship of the single paragraphs of former Art. 4 Rome Convention was not uniformly adjudicated in the Member States, under Art. 4 Rome I Regulation it is clear that, when the provision applies, a strict sequence of examination must be observed.35 First, it must be clarified whether the case falls under uniform law that enjoys priority or under the Art. 5–8 (“without prejudice to Articles 5 to 8”). They always prevail. Furthermore, the conflict rules in EU Directives36 take precedence (Art. 23). Only if no such priority can be determined, then, secondly, it is necessary to examine whether the case falls under one of the special rules of para. 1. They principally prevail over the other paras. of Art. 4.37 Only if the special rules of the catalogue in par. 1 do not apply or if more than one of them is affected, par. 2 comes into play. In that case, the law of the country must be determined where the characteristically performing party has its habitual residence in the sense of Art. 19. As a third step, both for Art. 4 par. 1 or 2 it always must be considered whether the case in the light of all circum34 35 36

37

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In the same sense Spickhoff, in: Beck Online Art. 4 note 1. See also R Wagner IPRax 2008, 381 et seq.; Kindler 19 et seq. Presently (April 2014) the following special conflicts rules in EU Directives exist: Art. 6 (2) Unfair Contract Terms Directive 1993, Art. 12 (2) Timeshare Directive 2009, Art. 12 (2) Distance Consumer Contracts Directive 1997, Art. 7 (2) Consumer Sales Directive 1999, Distance Consumer Financial Services Directive 2002, Art. 22 (4) Consumer Credit Directive 2008; also Art. 9 Return of Cultural Objects Directive 1993. On the other hand, Art. 3 Directive on electronic commerce 2000 is not a typical conflicts rule; see eDate Advertising GmbH v. X, Martinez v. MGN Ltd. [2011] ECR I-10269 (C-509/09 and C-161/10) para. 68. Recital 19 sent 1 and 2.

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stances is manifestly more closely connected with another law which then applies (par. 3). If neither par. 1 nor par. 2 leads to an applicable law, in particular where there is no single characteristic performance of the contract like in many exchange contracts, the most closely connected law must directly be determined. VI. Interpretation In particular with respect to Art. 4 it has to be reminded that this provision with its numer- 27 ous legal terms must be interpreted in an autonomous and uniform European way.38 Formulations such as “contract for the sale of goods” or even “goods” alone etc. must be understood without redress to any specific national law. For their meaning the whole body of the EU law but also relevant international conventions have to be taken into consideration.39 Moreover, court decisions on Art. 4 Rome Convention, in particular of the CJEU, can still be used as well as decisions on identical formulations in other European acts like the Brussels I and Ibis Regulation.40 In case of doubt about the interpretation of Art. 4 the national court may refer the case to the 28 CJEU and must do so if it is a national court of final appeal.41 VII. Applicability of general provisions and rules 1. Renvoi The law designated by Art. 4 is the substantive national law. Art. 20 excludes any renvoi. 29 Where the state whose law is applicable comprises different territorial units with different contract law, as for instance the United States, Canada, United Kingdom, Australia etc., then according to Art. 22 (1) the law of the relevant unit has to be applied directly. Special conflict rules of that state for interlocal conflict cases need not be taken into account.42 It is therefore decisive in which unit the seat of the characteristically performing party, the contracted land etc. is situated or to which unit the manifestly closer or closest connection exists.43 2. Ordre public Art. 21 allows to disregard the applicable law if it is “manifestly incompatible with the public 30 policy (ordre public) of the forum.” Thus, national public policy considerations of the forum state can overturn the law that is actually applicable under Art. 4. This is and must remain the rare exception in international contract law because already Art. 5–8 take account of

38 39

40 41 42 43

See further Introduction note 71 et seq. (Magnus). The ECJ followed the same pattern in [2010] ECR 1255 (C-381/08, Car Trim GmbH v. KeySafety Systems Srl) where the court when interpreting Art. 5 (1) (b) Brussels I Regulation referred to the CISG and the UN Limitation Convention in order to interpret the term “sale of goods” in a case where the seller had to manufacture the sold goods. See for instance ECJ [2010] ECR 1255 (C-381/08, Car Trim GmbH v. KeySafety Systems Srl). See Art. 267 TFEU. Leible, in: NK-BGB Art. 4 note 10. See also comment on Art. 22 (Franzina); Leible, in: NK-BGB Art. 4 note 10.

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specific policy considerations; in addition, Art. 9 enables the forum to give priority to own fundamental mandatory provisions. 3. Qualification 31 Art. 4 (1) can raise qualification problems, in particular concerning the distinction between

different contract types (goods sale – land sale, goods sale – auction sale, sale – service etc.). Like the interpretation of the Regulation the qualification must follow an autonomous European method which also takes account of relevant international conventions.44 A qualification merely according to the national perspective is no longer permitted. 4. Relevant point in time

32 Art. 4 does not indicate at which time the factors necessary for the determination of the

applicable law must exist and whether a later change of those factors, for instance of the seat of the relevant party, has to be taken into account. However, Art. 4 refers several times to the habitual residence of one party. The provision which defines the habitual residence expressly provides that “the relevant point in time shall be the time of the conclusion of the contract” (Art. 19 (3)). It should be inferred from this provision that Art. 4 follows this principle in general even where the connecting factor is not the habitual residence of a party. In consequence, the law applicable to a contract is fixed by the relevant factors at the time when the parties conclude the contract. Later changes of those factors, for instance a change of the seat of the relevant party, do not affect the law applicable to the contract.45 33 Whenever the most closely connected law has to be determined, in principle also the time of

the conclusion of the contract is decisive. However, later developments which shed light on the real connection of the contract to a specific law – how the parties lived their contract and for this reason probably understood it already at the time when they entered into the contract – may be taken into account, too. This does not mean to recognize a subsequent change of the applicable law but only to take a holistic view on all the circumstances.46 34 In case of long-standing contract relations it should be considered whether a change of

connecting factors should result in a change of the applicable law,47 for instance where a supplier of a long-term supply contract moved its seat to another country from which he is now delivering goods since years. 35 Where after long negotiations the relevant party changes its seat shortly before the conclu-

sion of the contract only in order to influence the applicable law, the situation can be covered by Art. 4 (3).48 In the light of the circumstances the contract may be more closely connected with the law of the prior seat of that party. Conversely, if it is clear among the parties that the relevant party at the time of conclusion of the contract intends to move its seat to another country, this later seat may be taken as the relevant one. 44 45 46 47 48

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See Magnus, in: Staudinger Art. 4 note 26; Spickhoff, in: Beck Online Art. 4 note 92. Equally Ferrari, in: Ferrari Art. 4 note 67; Martiny, in: MünchKomm Art. 4 note 156. See Magnus, in: Staudinger Art. 4 note 26; for the Rome Convention: Giuliano/Lagarde 52. In this sense Martiny, in: MünchKomm Art. 4 note 157. See also Spickhoff, in: Beck Online Art. 4 note 91.

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5. Intertemporal questions The Rome I Regulation became applicable to international contracts on 17 December 2009 36 (Art. 28). Contracts concluded before that date are governed by the conflict rules that were then in force in the respective country. Most but not all EU Member States were Contracting States of the Rome Convention with its very similar conflict rules. Therefore, the switch from the Convention to the Regulation created no differences for the basic objective determination of the applicable contract law, even for long-term contracts.49 For the latter, too, the date of conclusion of the contract remains decisive. For EU Member States which had not ratified the Rome Convention the respective prior national conflict rules have to be applied.50 6. Applicability of a state’s law The law that Art. 4 designates is always the state set law of the respective country, be it statute 37 law or judge-made law.51 This follows from the expression “law of a country” throughout used in Art. 4 and a fortiori from Art. 3 where non-state law cannot be chosen as governing law.52 Art. 4 does, thus, not allow to apply non-state law like the lex mercatoria, a religious law (unless ordered applicable by the state), private codifications or habits of minorities as the governing law though it may be applied like standard contract terms. VIII. Specific contracts (par. 1) 1. General considerations a) The reasons for the catalogue of par. 1 The catalogue of par. 1 states the conflict rules for eight specific contract types. There are 38 different reasons for including these types in the list: Lit. a and b exemplify the general concept of characteristic performance for the most common contracts, namely sales of goods and services contracts; the two rules shall in particular guide the less experienced practitioner how to handle this concept.53 They allow an easy answer in many cases although for sales it must be borne in mind that many restrictions of lit. a apply.54 Lit. e and f put an end to the former dispute of who effects the characteristic performance in 39 franchise and distribution contracts. The rules can – and should – be understood to clarify that regularly the franchisee and the distributor are the characteristic performers. The other provisions of the par. 1 catalogue deviate from the concept of characteristic 40 performance and needed for this reason their inclusion into the list. b) The relationship between the provisions of the par. 1 catalogue Art. 4 par. 1 does not expressly address the relationship between the listed contract types but 41 49 50 51 52 53 54

See further infra the comments on Art. 24 (Mankowski). See further supra Introduction note 29 et seq. (Magnus). Also Spickhoff, in: Beck Online Art. 4 note 91. See supra Art. 3 note 247 et seq. (Mankowski). Mankowski IHR 2008, 136 et seq.; Thorn, in: Rauscher Art. 4 note 19; R Wagner IPRax 2008, 362. See infra note 50 et seq. and 236 et seq.

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seems to assume that the relationship explains itself because each contract type sufficiently differs from the others. Nonetheless, some problems exist. 42 It has already been mentioned that the principle of speciality evidently governs the relation-

ship between the different contract types of par. 1. Thus, it seems more or less self-understanding that auction sales of goods fall only under lit. g, although they always meet the requirements of lit. a as well. And apparently they shall not fall within the ambit of par. 2 although formally they fulfill the requirements of more than one of the points (a) to (h) of par.1. Yet, par. 2 provides that the concept of characteristic performance applies “where the elements of the contract would be covered by more than one of the points (a) to (h) of paragraph 1”. What the formulation appears to mean is a contract mixed of elements of different of the listed contract types. An auction sale remains, however, an inseparable auction sale that does not consist of different elements. In the same way lit. d must be understood as a specifically regulated case of lit. c to which only lit. d applies. Also franchise and distribution contracts fall only under lit. f and g, although they are services contracts which are covered by lit. b.55 And franchise contracts are exclusively caught by lit. e although they are a kind of distribution contracts and thus are actually covered also by lit. f. As far as the principle of specialty can avoid any overlap between the different contract types, this principle has to be applied whereas Art. 4 (2) is not applicable.56 43 Another problem is posed where an inseparable contract contains only minor elements of

another contract type and the conflict rules for both lead to different laws. Understood strictly, then Art. 4 (2) would apply because the contract contains elements of more than one of the contracts on the list of Art. 4 (1). To apply different law to different parts of the contract (objective dépeçage) is no longer admitted.57 However, this interpretation of Art. 4 (2) could lead to strange results: If for instance the seller of an immovable accepts the additional obligation to remove also some waste on the land (or do some other minor service with respect to the land), par. 1 lit. c would lead to the law of the country where the land is located while par. 2 would lead to the law of the seller’s seat which may differ from the lex situs. A strict application of par. 2 would thus have the result that the minor accessory obligation determines the applicable law. This runs counter the intention of Art. 4, that the specifity of the characteristic and central obligation must be decisive. Therefore, in order to avoid unconvincing consequences the classification as a specific contract type must depend on the prevailing character of the obligations, on the centre of the contract.58 In this sense, Recital 19 requires that “(i)n the case of a contract consisting of a bundle of rights and obligations capable of being categorized as falling within more than one of the specified types of contract, the characteristic performance of the contract should be determined having regard to its centre of gravity”. Thus, minor additional obligations do not change the character of the main obligation and do not bring par. 2 into play.59 The dominant

55

56 57 58 59

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See also Recital 17: “Although franchise and distribution contracts are contracts for services, they are the subject of specific rules.” Also Martiny, in: FS von Hoffmann 290 et seq.; Magnus, in: Staudinger Art. 4 note 30. See supra note 11. Thorn, in: Rauscher Art. 4 note 22. See already Magnus, in: Ferrari/Leible, Rome I Regulation 46 et seq.; in accord Martiny, in: FS von Hoffmann 291; Thorn, in: Palandt Art. 4 note 4; similarly Ringe, in: jurisPK Art. 4 note 50.

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obligation, its “centre of gravity” decides and its conflict rule must apply. In the example therefore Art. 4 (1) lit. c remains applicable.60 It can be problematic to decide when an additional obligation is merely minor. The money 44 value of each part may help to determine the question; the additional obligation should count only for a smaller percentage of the overall contract value. However, the guiding principle should be whether the main obligation prevails so much that the contract should follow the conflict rule for this contract. Otherwise, par. 2 has to be applied. Similar problems can arise where a franchise or distribution contract is coupled with sales 45 elements or vice versa a sales contract contains franchise or distribution elements. Under Art. 4 (1) lit. e/f the law at the seat of the franchisee or distributor is applicable whereas under lit. a the law of the seller/franchisor/principal applies. Thus, the conflicts rules may lead to different laws. In a first step, again it has to be examined whether the sales element or the franchise/distribution element clearly constitutes the prevailing obligation and the other only a minor addition. Then, the specific conflict rule for the central obligation applies. Only where there is a relative balance between the different obligations, Art. 4 (2) applies. In that situation, however, the policy decisions in Art. 4 (1) lit. e and f should be respected and the law at the seat of the franchisee or the distributor be applied.61 This avoids contradicting solutions under par. 1 and par. 2 and takes account of the intended protection of franchisees and distributors in par. 1 lit. e and f. It is not infrequent that two or more separate contracts are closely connected – for instance a 46 main contract and an accompanying guaranty or insurance, a distribution contract and the single deliveries under it etc. In principle, the law for each of these contracts has to be determined separately. Yet, the main contract can ‘infect’ the connected other contract so that the law of the main contract applies to the other contract as well.62 The basis for this result is Art. 4 (3) or, as the case may be, Art. (4). However, a close relationship between separated contracts is only one element in determining the applicable law. For instance, international sales executed under an international distribution contract regularly follow their own law which is often the CISG even if the distribution contract is governed by another law.63 c) Habitual residence: the mainly used common connecting factor Most of the special conflict rules of Art. 4 (1) – and also Art. 4 (2) – use the habitual residence 47 as connecting factor. Art. 19 defines the term more precisely;64 this definition has to be taken into account whenever the habitual residence – or for the sake of brevity: the seat of a party – plays a role in Art. 4. In short, the habitual residence of a natural person is generally his or her principal place of business where the person is acting in the course of his or her business and, if not so acting, the place where the person regularly lives. For companies and other juristic persons their habitual residence is the place of their central administration. 60 61 62

63 64

See also Martiny, in: FS von Hoffmann 298. Magnus, in: Staudinger Art. 4 note 32; cautiously also Martiny, in: FS von Hoffmann 298 et seq. See Recital 20 and 21 which mention “a very close relationship with another contract or contracts” as an element which, inter alia, should be taken account of when determining the applicable law. BGH NJW 1997, 3309. See the comments on Art. 19 (de Lima Pinheiro).

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d) Priority of par. 1 48 Art. 4 (1) enjoys priority over the other paragraphs of the Article.65 Par. 1 is applicable even if

par. 2 would lead to the same law. Any application of Art. 4 therefore has to start with the examination whether the case falls under one of the listed conflicts rules of par. 1. e) Limited collection of contract types in par. 1 49 Art. 4 (1) covers but a limited collection of contract types even though in particular lit. b with

its wide notion of services has a tremendously broad range. For this reason the following part discusses the single conflicts rules of par. 1. However, from note 235 on, there follows a complete survey over the applicable law on all contracts that can fall under Art. 4. 2. Sale of goods (lit. a) a) In general 50 The sale of goods as the most frequent and important contract type is placed at the top of the

catalogue of par. 1. Lit. a determines as regularly applicable the law at the seat66 of the seller. The rule exemplifies that the seller is the party that effects the characteristic performance. However, contrary to the first glance, the provision applies far less often than one would expect. First, the CISG, where applicable, takes priority over lit. a. The same is true for the – less often applicable – UN Convention on Limitation.67 Secondly, consumer sales will in most cases fall under Art. 6. Thirdly, auction sales are exclusively covered by lit. g. Fourthly, where sales contracts contain significant parts of other contract types, in particular service elements, Art. 4 (2) applies.68 Fifthly, according to Art. 12 (2) “the law in the country in which performance takes place” can supersede the law designated by lit. a as far as “the manner of performance and the steps to be taken in the event of defective performance” is concerned. Sixthly, those EU Member States which ratified the Hague Convention of 1955 on the law applicable to international sales of goods still apply the conflicts rules of this Convention.69 51 Rather often it will not matter whether the contract qualifies as a sale of goods in the strict

sense of lit. a because the alternatively applicable conflicts rule, in particular par. 2, will lead to the same result as lit. a. 52 For the law applicable to all kinds of sales see infra note 236 et seq.

b) Sale of goods 53 Lit. a deals only with sales of goods. According to Recital 17 the term “sale of goods” must be

understood in the same sense as in Art. 5 (1) (b) Brussels I Regulation. There, the CJEU70 interpreted the term drawing in the first line on European statute law, in particular on the 65 66 67 68 69

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See Recital 19 sent. 2. In the sense of Art. 19. See infra note 251 et seq. See supra note 42 et seq. This is in accordance with Art. 25 which gives priority to international conventions in force both in EU Member States and third states. The Hague Convention of 1955 is in force both in some EU Member States (Denmark, Finland, France, Italy, Sweden) and in third states (Niger, Norway, Switzerland). CJEU [2010] ECR 1255 (C-381/08, Car Trim GmbH v. KeySafety Systems Srl).

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Consumer Sales Directive,71 secondly on international law, namely the CISG and the UN Limitation Convention, and thirdly on CJEU case law.72 The Court inferred its interpretation from the combined essence of these sources. aa) Covered contracts A sales contract obliges the seller to transfer the property title and, unless otherwise agreed, 54 also the possession of the contracted good. The buyer has the obligation to pay a sum of money. Lit. a covers any kind of sale: installment sales, conditional sales (in particular with reservation of title), hire-purchase contracts, sale by sample or description, sale on approval etc. Also, contracts for the supply of goods to be manufactured or produced are sales unless the purchaser supplied all or most of the materials for the manufacture or product.73 Single deliveries within a distribution relationship generally remain independent sales con- 55 tracts to which lit. a applies. However, in the light of special circumstances the sale may be so closely linked to the distribution contract that the law applicable to the latter also applies to the single sale. Exchange or barter contracts, contracts of donations, also mixed contracts where these 56 elements prevail fall clearly outside the range of lit. a.74 The frequent case that a buyer of a car pays partly in cash and partly by transferring the old car to the seller is still a sale and no barter contract because the sales element regularly – not only in value – prevails.75 On the other hand, countertrade transactions can be exchange contracts that fall under Art. 4 (4) – if no single party effects the characteristic performance. However, not infrequently these transactions constitute two combined though still independent sales contracts to each of whom lit. a applies. This leads to the application of two different laws. Sales contracts with elements of other contract types, which are not only insignificant, have 57 to be dealt with by par. 2. Sales by way of execution where the state with its authority finally transfers the property 58 stand outside the Regulation because of their public law character. They are governed by the law of the forum or authority that executes the sale. bb) Form irrelevant The form how the sales contract is concluded does not matter. Electronically concluded sales 59 are covered as well as traditionally concluded contracts.

71 72 73

74 75

Further, the Proposal on a Common European Sales Law (CESL) has to be added. CJEU [2009] ECR I-4779 (C-300/07, Hans & Christophorus Oymanns). CJEU [2010] ECR 1255 (C-381/08, Car Trim GmbH v. KeySafety Systems Srl) para. 40, 43. The Court uses in fact rather closely the definition of Art. 3 (1) CISG which classifies supply contracts as sales “unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production.” See also Thorn, in: Rauscher Art. 4 note 24. In the same sense Thorn, in: Rauscher Art. 4 note 24.

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cc) Definition of goods 60 Goods are “any tangible, movable item.”76 In contrast to the CISG77 the European term of

goods includes ships78 and aircrafts even if these are registered in a special register. Animals, plants and microorganisms classify as goods as well as for instance prostheses. The same is true for standard software or other digital products79 that can be bought like books (even ebooks), whereas the purchase of pure data, for instance addresses or other information, is not covered by lit a,80 but by par. 2. Software that is specifically produced according to the individual wishes and needs of the client does not fall under lit a, but under lit. b because this is a contract for work that constitutes a service in the sense of lit. b.81 61 Instead of lit. a lit. c is applicable if land is the subject of the sales contract. Whether fixtures

or accessories to land constitute separate movables or part of the land should be determined according to the lex situs of the land.82 62 Also, the sale of rights – claims, choses in action, negotiable instruments, securities, imma-

terial property rights, shares, even the purchase of tv-time or broadcasting time83 etc. – falls outside lit. a and is covered, unless by lit. h, by par. 2. Thus, the sale of a company by way of a share deal must be adjudicated in accordance with par. 2, if not lit. h applies. The sale of a company or enterprise by way of asset deal falls also under par. 284 since regularly both movable goods and rights, sometimes in addition immovable property, constitute the assets.

63 The purchase of money (currency) to use it as a means of payment is likewise no sale of

goods but only of the right to a certain money value. Where on the contrary coins are bought for the purpose to collect them or their true (metal) value, this remains a sale of goods.85 64 Electricity as such is not regarded as a movable good.86 Its sale falls under Art. 4 (2). The

same holds true for water and natural gas unless “they are put up for sale in a limited volume or set quantity”.87 The delivery of oil, however, falls under lit. a88 as well as that of nuclear fuel material.

76

77 78 79

80 81 82

83 84 85 86

87 88

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CJEU [2010] ECR 1255 (C-381/08, Car Trim GmbH v. KeySafety Systems Srl) para. 35. This is the expression taken from Art. 1 (2) (b) Consumer Directive which recurs in Art. 2 lit. h CESL. Art. 2 lit. e CISG. Also Martiny, in: MünchKomm Art. 4 note 11. In this context it is telling that the Proposal for a Common European Sales Law expressly covers digital content and treats its purchase as sale. Thorn, in: Rauscher Art. 4 note 23. Leible, in: NK-BGB Art. 4 note 21. In accord Mankowski, in: Magnus/Mankowski Art. 5 Brussels I note 83; but contra – for an autonomous European definition of fixtures – Leible, in: NK-BGB Art. 4 note 26. In accord Leible, in: NK-BGB Art. 4 note 21. Also Hohloch, in: Erman Art. 4 note 11 (par. 2 for both kinds of deal). See also Mankowski, in: Magnus/Mankowski Art. 5 Brussels I note 80. See Art. 1 (2) (b) Consumer Sales Directive, Art. 2 lit. h (1) CESL, Art. 2 lit. f CISG. But batteries which store electricity are of course movable goods. Art. 1 (2) (b) Consumer Sales Directive, Art. 2 lit. h (1) CESL. In the same sense for Art. 5 (1) (b) Brussels I Regulation: Mankowski, in: Magnus/Mankowski Art. 5

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All sales contracts that do not fall under lit. a because they concern other than tangible, 65 movable items – though not immovable property in the sense of lit. c – are covered by Art. 4 (2) which also leads to the law at the seller’s seat. Therefore, in most cases the correct classification of goods will play no role. Only the distinction between movables and immovable property can become relevant because lit. c does not lead to the law at the seller’s seat but to the law of the country where the immovable is situated. Thus the governing law under lit. a and lit. c can differ. 3. Service contracts (lit. b) a) In general Of all conflicts rules of the catalogue of par. 1, lit. b has theoretically the broadest range of 66 application. In principle, it covers all types of services – from transport to building contracts, from medical treatment to legal mandates etc. Under lit. b the regularly applicable law is the law at the seat89 of the service supplier. Like in lit. a, the rule gives an example of how the concept of characteristic performance works. It ensures that the service supplier is the party that effects the characteristic performance. However, similar to lit. a, many, more special regulations must be given priority over lit. b: 67 first, all international conventions, in particular on transports but also all other conventions on services enjoy priority (as far as they are applicable and as far as Art. 25 allows); secondly, Art. 5 is the special conflicts rule for all transport contracts; thirdly, Art. 6 takes priority, if the service is provided for a consumer and is not rendered exclusively in another country than that of the consumer’s habitual residence (Art. 6 (4) (a)); fourthly, for insurance and employment contracts Art. 7 and 8 prevail over lit. b; fifthly, franchise and distribution contracts fall exclusively under lit. e and f. Finally, the general restrictions imposed by Art. 4 (2) and (3) must be observed where the service contract also contains relevant elements of still another contract type or where a manifestly closer link to another law exists than that designated by lit. b. A full account of the law applicable to the different kinds of service contracts is given infra at 68 note 346 et seq. b) Definition of service contracts Lit. b does not define the term “service contract”. Yet, the precise definition can often be left 69 open because in many cases the otherwise applicable provision of par. 2 leads to the same law as lit. b: the law at the seat of the person who effects the characteristic performance of the respective contract, be it a service or another contract type. However, in some cases the clear classification remains relevant, for instance, where it is doubtful which side is the characteristic performer as in case of licence contracts90 or even credit contracts.91 If these contracts were to be classified as service contracts, lit. b probably designates the law of the licensor and creditor as decisive because the licensee and the debtor can hardly be regarded as the

89 90 91

Brussels I note 85. Where an oil source is “sold” this is generally a licence contract to exploit the source. The law at the seat of the licensor or, where this is a state, the law of this state is applicable. In the sense of Art. 19. See thereto infra note 596 et seq. To credit contracts see further infra note 511.

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provider of the ‘service’ of a licence or credit. If, on the other hand, these contracts are to be qualified as other than service contracts, par. 2 applies and leaves wider discretion to regard even the licensee or the debtor as the party effecting the characteristic performance. 70 The precise qualification plays also a role when Art. 6 (4) (a) has to be taken into account.

Only service contracts – exclusively rendered in another country than that of the consumer’s habitual residence – are excluded from the specific consumer protection under Art. 6, whereas the provision covers most other contracts.

71 The formulations “contract for the provision of services” in Art. 4 (1) (b) and “contract for

the supply of services” in Art. 6 (4) (a) mean the same and are to be interpreted in the same sense. Moreover, the term “service contract” needs the usual European autonomous interpretation which takes account of other European instruments and even of relevant international conventions. In particular, Art. 7 (1) (b) Brussels Ibis Regulation and the CJEU case law to the preceding provision (Art. 5 (1) (b) Brussels I regulation) is helpful. According to Recital 17 Rome I Regulation “the concept of ‘provision of services’ […] should be interpreted in the same way as when applying Art. 5 (Brussels I Regulation) […]”. 72 In interpreting this provision the CJEU held in Falco Privatstiftung, Rabitsch v. Weller-

Lindthorst92 that the term “contract of services” can have different meanings in different Community law contexts depending on the specific purpose of the respective provision.93 In particular, the very broad interpretation that the legislation and the Court have given the concept and definition of services in Art. 50 TEC (now Art. 57 TFEU) or in Community directives on VAT does not necessarily apply to Art. 5 (1) (b) Brussels I Regulation.94 This latter provision – as an exception to the general rule on jurisdiction at the place of performance in Art. 5 (1) (a) Brussels I Regulation – requires distinguishing service contracts from those other contracts for which the general rule remains applicable.95 For this reason Art. 5 (1) (a) Brussels I Regulation has a narrower scope than Art. 57 TFEU whose purpose it is to extend the freedom to provide services within the EU to the widest possible range of service contracts. Therefore, a licence contract which grants the mere right to use an intellectual property right does not constitute a service contract.96

73 The CJEU circumscribed service contracts in Falco Privatstiftung, Rabitsch v. Weller-Lind-

thorst97 in the following way: “(T)he concept of service implies, at least, that the party who provides the service carries out a particular activity in return for remuneration.”98 With activity the CJEU evidently means more than merely granting the other party the right to use a thing or right.99 This definition and reasoning of the CJEU also applies to Art. 4 (1) (b) Rome I Regulation where the special conflicts rule for service contracts also requires a

92 93 94 95 96 97 98 99

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CJEU [2009] ECR I-3327 (C-533/07). CJEU ibid. para. 33 et seq. CJEU ibid. para. 38. If Art. 5 (1) (b) Brussels I Regulation does not apply then lit. c of Art. 5 (1) refers back to lit. a. CJEU ibid. para. 44. CJEU [2009] ECR I-3327 (C-533/07). CJEU ibid. para. 29. CJEU ibid. para. 30.

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distinction of this contract type from other contracts. Insofar, but only insofar, lit. b requires a restrictive interpretation. Regular licence contracts thus do not fall under lit. b.100 Nonetheless, the provision still covers a wide range of contracts, namely, as Art. 57 TFEU 74 lists, contracts concerning activities of an industrial or commercial character as well as activities of craftsmen or of the free professions. The latter includes contracts of lawyers, medical doctors, architects, accountants etc. with their clients, patients, etc. for legal advice or representation, for medical treatment and so forth. They are service contracts in the sense of lit. b.101 Lit. b also applies to agency contracts or contracts for work like contracts for repair, for installation etc.102 All areas of imaginable activities are covered unless they are no longer of a civil or commercial but of a public law nature. This can be the case with contracts with notaries public if and when they execute their activities in a formal public law capacity.103 It is disputed whether lit. b covers contracts for gratuitous activities, for instance a mandate 75 contract without remuneration. Some authors104 infer from the CJEU definition of “service contract” in Falco Privatstiftung, Rabitsch v. Weller-Lindthorst105 (“a particular activity in return for remuneration”) that gratuitous service contracts do not fall under lit. b. However, the CJEU did not expressly deal with the problem. Moreover, the characteristic of a service contract is the positive activity which a party is obliged to execute. Whether or not the activity is free of charge does not alter the character of the service and should therefore not matter.106 Anyway, if Art. 4 (1) (b) Rome I Regulation would be inapplicable, the fall-back position under Art. 4 (2) would lead to the same result that the law of the country applies where the supplier of the gratuitous service has the habitual residence because he is the person who effects the characteristic performance. Contracts which oblige a party to let the use of a thing or a right to another party, for instance 76 lease or rental contracts,107 are no service contracts.108 Their objectively applicable law follows from Art. 4 (2) unless they are covered by Art. 4 (1) (c) or (d).

100 101

102

103 104 105 106

107 108

See infra note 597. See Calvo Caravaca/Carrascosa González XXV note 135 et seq.; Leible, in: NK-BGB Art. 4 note 30 et seq.; Martiny, in: MünchKomm Art. 4 Rom I-VO note 36; Thorn, in: Rauscher Art. 4 note 36.; in the same sense for Art. 5 (1) (b) Brussels I Regulation: Mankowski, in: Magnus/Mankowski Art. 5 Brussels I note 89. See Calvo Caravaca/Carrascosa González XXV note 135 et seq.; Martiny, in: MünchKomm Art. 4 Rom I-VO note 36; Thorn, in: Rauscher Art. 4 note 36. See also Thorn, in: Rauscher Art. 4 note 40. Leible, in: NK-BGB Art. 4 note 30 et seq.; Thorn, in: Rauscher Art. 4 note 36. CJEU [2009] ECR I-3327 (C-533/07) para. 29. In this sense also Bairlein 123; Martiny, in: MünchKomm Art. 4 Rom I-VO note 28; identical for Art. 5 Brussels I Regulation Berlioz Clunet 135 (2008) 714 et seq.; Mankowski, in: Magnus/Mankowski Art. 5 Brussels I note 90. See to these contracts infra note 300 et seq. Martiny, in: MünchKomm Art. 4 Rom I-VO note 30; also – for Art. 5 (1) (b) Brussels I Regulation – Mankowski, in: Magnus/Mankowski Art. 5 Brussels I note 95. Explicitly for licence contracts: CJEU [2009] ECR I-3327 (C-533/07, Falco Privatstiftung, Rabitsch v. Weller-Lindthorst).

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4. Land contracts (lit. c) a) In general 77 Lit. c provides a specific conflicts rule for contracts which concern contractual rights in rem

in immovable property and tenancies of such property. The lex rei sitae or lex situs of the immovable is applicable. It is not the seat of the party granting the right that determines the applicable law but the place where the property is located. This law is considered most closely connected with the contract, at least in regular cases. It also ensures the almost complete synchronization with the general conflicts rule on immovable property law aspects for which the lex rei sitae rule is more or less accepted worldwide. The lex situs is regarded most apt because, besides the aspect that generally land is unalterably fixed at a certain place,109 the rule allows the application of the specific provisions on land transactions (special form, registration, transfer provisions etc.) which states normally enact and usually enforce for the land of their territory and which the parties must observe anyway for the valid transfer of immovable property. 78 However, Art. 4 (3) may in special cases lead to another than the situs law. A manifestly

closer connection with another country may exist where, e.g., both parties have the same nationality and conclude their land contract in their home state involving a domestic notary, whereas the land is situated in another country. For certain short term tenancies of immovable property lit. d provides for a special conflicts rule which enjoys priority over lit. c.110 79 If a consumer is involved in a land contract, Art. (4) (c) remains applicable because Art. 6 (4)

(c) excludes contracts relating to a right in rem in immovable property or a tenancy of immovable property from the specific consumer protection under this provision. The purchase or rent of an immovable by a consumer is thus governed by the lex situs and not by the law at the consumer’s habitual residence. The only exception are timeshare contracts in the sense of the Timeshare Directive; they fall under Art. 6111 unless they are concluded in the form of a membership in a club, company or association.112 The general exclusion in particular of tenancies from the consumer protection which the Rome I Regulation normally grants is problematic. Tenants, at least for their private use, generally need and deserve protection by the law, also by private international law rules. In most states they enjoy protection by the substantive law on tenancies. Moreover, it is inconsistent that timeshare buyers get consumer protection under Art. 6 while normal tenants not. The provisions which protect tenants at their habitual residence can be taken into account only under the conditions of Art. 9 Rome I Regulation. 80 The terms used in lit. c should be interpreted as far as possible in an autonomous European 109

110 111

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Though there may be very rare exceptions where land is washed on or washed away by the sea or rivers or even artificially. Leible, in: NK-BGB Art. 4 note 36. If the further requirements of Art. 6 (1) are met, in particular that the timeshare seller directed its activity to the buyer’s country. See also Mankowski, in: Reithmann/Martiny note 4332. They fall outside the Rome I Regulation and are governed by the law applicable to the companies and bodies corporate or unincorporated.

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way. In particular, the CJEU case law on the interpretation of Art. 22 (1) Brussels I Regulation (now Art. 24 (1) Brussels Ibis Regulation) should be taken into account because the lawgiver has adapted the wording of Art. 4 (1) lit. c Rome I Regulation to the Brussels provision. For the Brussels (Convention) provision the CJEU demanded an autonomous interpretation: “[…] in order to ensure that the rights and obligations arising out of the Convention for the Contracting States and for individuals concerned are as equal and as uniform as possible, an independent definition must be given in Community law to the phrase’ in proceedings which have as their object rights in rem in immovable property’”.113 Only where an autonomous European interpretation appears impossible because of too wide national differences, redress to the lex situs of the respective piece of land can be used to determine the applicable law.114 81

See also further on the law applicable to land contracts infra note 236 et seq. b) Scope of the provision

aa) Distinction between contractual and property aspects Lit. c covers contracts “relating to a right in rem in immovable property or to a tenancy of 82 immovable property.” The provision applies only to contractual agreements. It does not concern the pure property aspects, in particular the passage of title. As far as possible the distinction between the contractual aspects and the property aspects should be drawn in the normal autonomous European way.115 Thus, lit. c extends only to agreements that oblige a party towards the other party with 83 respect to rights in rem or tenancies concerning immovables. Lit. c centers on the obligation which exists only between the parties and creates rights only between them.116 Further, it is not necessary that the contract immediately transfers the respective property right with effect towards third persons, although it may have this effect. However, lit. c does not deal with these direct property effects. It deals exclusively with the contractual obligations the parties have agreed upon. This distinction between the contractual obligations on the one hand and the property effects of the transaction on the other will normally not lead to different law because the lex situs rule generally applies to both. However, differences may occur where, as for instance in Germany, the parties are not allowed to choose the law applicable to the property aspects117 while they can do so with respect to the contractual obligations. bb) Immovable property contracts (1) In general Contracts on in rem rights in immovables only fall under lit. c if the right is the main object 84 113 114 115

116

117

CJEU [1990] ECR I-27 (C-115/88, Reichert v. Dresdner Bank I) para. 8. Also Martiny, in: MünchKomm Art. 4 Rom I-VO note 95. Martiny, in: MünchKomm Art. 4 Rom I-VO note 95; Magnus, in: Staudinger Art. 4 note 44; generally for the qualification according to the lex situs Thorn, in: Rauscher Art. 4 note 60. For a rather similar distinction between contractual obligations and immediate property effects: CJEU [1994] ECR I-2535 (C-292/93, Lieber v. Göbel); further Ringe, in: jurisPK-BGB Art. 4 note 28. See Hohloch, in: Erman Art. 43 EGBGB note 6; Thorn, in: Palandt vor Art. 43 EGBGB note 2.

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of the contract. Additional contractual obligations, e.g. for the seller to do also some repair of the sold house, do not matter as long as they are not of almost the same weight as the obligation regarding the in rem right.118 Then Art. 4 (2) applies. This is also the case if the connection with land is a mere side aspect; Art. 4 (2) applies unless one of the other conflicts rules of par. 1 is applicable. This is for instance the case where in an asset deal an enterprise is purchased that owns among other assets immovable property.119 The same applies where a receivable is bought that is secured by a mortgage.120 In both cases the connection with land is not the main object of the contract. This does, however, not preclude that a manifestly closer connection may even lead to the law where the immovable property is located. 85 If the contract concerns immovable property in different countries – and the contract is a

single one – the centre of gravity of the contract, if there is any, should decide,121 since an objective dépeçage of the contract is no longer allowed122 and the centre of gravity plays a role where the direct application of one of the catalogue rules of Art. 4 par. 1 is not possible.123 In order to determine the centre of gravity the value of the different pieces of land can be taken into account. If there is no such centre the closest connection (Art. 4 (4)) must be determined.124 (2) Immovable property

86 The notion “immovable property” should also be given an autonomous European inter-

pretation.125 It means the same as in Art. 24 (1) Brussels Ibis Regulation and comprises land as well as parts of land, houses,126 flats or rooms for private or professional use.127 The fixation on land is essential. If no autonomous interpretation appears possible, whether movable items, fixtures etc. belong to, or become part of, the land, the question has to be determined in accordance with the lex rei sitae of the respective immovable property.128 87 Even where a legal system treats ships and/or airplanes on the same footing as immovables

they remain movables in the sense of lit. c und do not fall under this provision.129 This is also true for hotel ships or ships that are used as flats. (3) Rights in rem 88 The first alternative of lit. c covers contracts on in rem rights in immovable property. The 118 119 120

121

122 123 124 125

126 127 128 129

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Calvo Caravaca/Carrascosa González XXV note 144. As to the sale of enterprises see infra note 267 et seq. BGH NJW-RR 2005, 206 (209) under the Rome Convention; Martiny, in: MünchKomm Art. 4 note 163; Staudinger, in: Hk-BGB Art. 4 note 5; Thorn, in: Palandt Art. 4 note 16. Martiny, in: MünchKomm Art. 4 note 97; Staudinger, in: Hk-BGB Art. 4 note 5; Thorn, in: Rauscher Art. 4 note 63; but contra Ringe, in: jurisPK-BGB Art. 4 note 29. See supra note 21. See Recital 19 sent. 3. Thorn, in: Rauscher Art. 4 note 63. Martiny, in: MünchKomm Art. 4 note 95; Ringe, in: jurisPK-BGB Art. 4 note 27; in the same sense for Art. 22 (1) Brussels I Regulation Lima Pinheiro, in: Magnus/Mankowski Art. 22 note 25. Mobile homes, unless fixed to land, remain movables. Martiny, in: MünchKomm Art. 4 note 94. Martiny, in: MünchKomm Art. 4 note 95. See Mankowski, in: Rauscher Art. 22 Brüssel I-VO note 7a (in the context of the Brussels I Regulation).

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concept of in rem rights must be given an autonomous European meaning.130 They include the rights conferred by full ownership but comprise also limited property rights concerning the immovable estate like for instance mortgages or timeshare rights which grant property for a certain period every year. The characteristic of in rem rights is that they render protection against everybody and can be enforced against everybody, not only against the contract partner as in personam claims do.131 However, whether a right has an absolute in rem effect or only a limited in personam effect is 89 regulated by the national law. This law grants the respective effect. The in rem effect is governed by the lex rei sitae. Contracts which transfer full ownership concern always in rem rights. Also co-ownership, condominium, charges, encumbrances, mortgages, servitudes, easements, ground leases, residential property, usufructs, rights of abode, life estates, rights of preemption132 are rights in rem if and insofar as the applicable national law clothes them with absolute effect against everybody. (4) Covered contracts Sales of land are the most important contracts that fall under lit. c but they are by far not the 90 only ones. Also exchange contracts and gifts that oblige to transfer the ownership in land or parts of land, in particular flats, are covered. This is equally true for contracts executing the title transfer because they as well create obligations merely between the parties.133 All contracts which oblige to create or create limited in rem rights in immovable property (as 91 listed supra in note 89) and contracts which oblige to transfer or directly transfer such rights also fall under lit. c: for instance a contract for the hypothecation of land or the creation of a life estate on a residential property (provided it has effect against everybody).134 Contracts which relate to land but do not confer in rem rights or tenancies are not covered by 92 lit. c. They fall under one of the other contract types of Art. 4 (1) or under par. 2. The applicable law may nonetheless be that of the country, where the land is situated, via par. 3 if there is a manifestly closer connection to that law. Thus, contracts merely for the construction or repair of buildings regularly fall under lit. b,135 even if the contract grants a mortgage as security for the supplier because the mortgage is not the main object of the contract. Also house or land management contracts do not confer a right in rem nor is the right to use the immovable their main object.136 On the contrary, according to the prevailing view lit. c still covers property development contracts (Bauträgerverträge) where the buyer purchases from 130 131

132 133

134

135 136

CJEU [1990] ECR I-27 (C-115/88, Reichert v. Dresdner Bank I) para. 8. In that sense CJEU [1990] ECR I-27 (C-115/88, Reichert v. Dresdner Bank I) para. 11: rights which “determine the extent, content, ownership or possession of immovable property or the existence of other rights in rem therein and (to) provide the holders of those rights with the protection of the powers which attach to their interest”. Calvo Caravaca/Carrascosa González XXV note 145. Contra Brödermann/Wegen, in: PWW Art. 4 note 12; Staudinger, in: Hk-BGB Art. 4 note 5 (both arguing with the German conflicts rule on these contracts). See also Calvo Caravaca/Carrascosa González XXV note 145; Hohloch, in: Erman Art. 4 note 24; Martiny, in: MünchKomm Art. 4 note 97. Calvo Caravaca/Carrascosa González XXV note 146; Thorn, in: Rauscher Art. 4 note 64. Leible, in: NK-BGB Art. 4 note 39; Spickhoff, in: Bamberger/Roth Art. 4 note 36.

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the seller a piece of land on which the seller promises to erect a building.137 The value ratio between land and construction work is regarded as immaterial for the application of the lex rei sitae to the whole contract. 93 Timeshare contracts are covered by lit. c (first alternative) if they grant a property right for a

certain period of time each year (unless Art. 6 (4) (c) applies which brings these contracts under the umbrella of that Article).138 Moreover they must not be in the form of membership in a club, company or association.139 cc) Tenancies 94 Lit. c (second alternative) designates the lex situs for “tenancies” (“bail”, “Miete oder Pacht”,

“arrendamiento de un bien inmeuble”) unless it is a specific short-term tenancy that falls under lit. d. The Regulation does not define the term tenancy. Taken verbally, the use of “tenancy” is a deviation from Art. 4 (3) Rome Convention which used the expression “a right to use immovable property”. This formulation included any kind of land use, even the gratuitous one. The new formulation “tenancy” is owed to the adaptation of the wording to Art. 22 (1) Brussels I Regulation (now Art. 24 (1) Brussels Ibis Regulation). The CJEU interpreted this formulation in a restrictive sense – though in a jurisdictional context – and denied the tenancy character of a lease of a retail business carried on in immovable property which, however, the lessor had rented from a third person.140 For the jurisdictional context a restrictive interpretation of exclusive jurisdiction provisions is convincing.141 Whether the adaptation of the text should indicate a material deviation from the former formulation is doubtful. Some authors infer from the alteration that lit. c no longer covers all kinds of contracts for the use of an immovable property.142 This would probably exclude a contract that allows the gratuitous use of an immovable. Others argue that no material deviation from the former provision was intended and that contracts for the gratuitous use (rent or lease) of an immovable should be covered by lit. c as well because they are as closely related to the lex situs as such contracts for remuneration. This latter view is preferable. Thus, for Art. 4 (1) (c) Rome I Regulation a wider understanding is appropriate.143

95 Lit. c second alternative covers normal rent and lease contracts of any kind of immovable

property irrespective whether a private or professional use is intended. This includes the rent of a whole building, of a flat, of a single room, of a garage, even of a parking lot144 as well as for instance the lease of farmland. The sub-rent, in particular of a flat or room, too, is a contract for rent of an immovable to which lit. c and, as the case may be, lit. d extends. 96 However, a package tour contract which combines transport, catering and accommodation 137

138 139 140 141

142 143 144

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Martiny, in: MünchKomm Art. 4 Rom I note 120; PWW/Brödermann/Wegen Anh. Art. 4 Rom I note 10; Schäuble BWNotZ 2015, 1 et seq. Staudinger, in: Hk-BGB Art. 4 note 5. See supra note 79 and infra 98, 323. CJEU [1977] ECR 2383 (73/77, Sanders v. van der Putte) para. 18. Because exclusive jurisdiction deprives the parties of the possibility to choose the forum: Art. 25 (4) Brussels Ibis Regulation. Calvo Caravaca/Carrascosa González XXV note 146; Plender/Wilderspin note 7–038. Leible, in: NK-BGB Art. 4 note 39; Magnus, in: Staudinger Art. 4 note 48. See Leible, in: NK-BGB Art. 4 note 39; Magnus, in: Staudinger Art. 4 note 49.

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falls neither under lit. c nor under lit. d because the rent element is only one aspect.145 Also a contract for the accommodation in a hotel or boarding house is normally no pure rent contract of the booked room because generally further services (room cleaning and service, at least breakfast, caring for the safety of guests etc.) are owed which are not only insignificant. The rent of a holiday home or flat, on the contrary, has as its main object the mere use and falls under lit. c or lit. d. As mentioned supra (note 94) gratuitous rent or lease contracts are covered by lit. c respec- 97 tively by lit. d. There is no reasonable ground to exclude them from the scope of these provisions. Where a timeshare contract grants no property right but merely a contractual right to use an 98 immovable for a certain period of time over a continuing number of years nonetheless lit. c is applicable.146 However, where the timeshare contract is in the form of a club membership which entitles among other advantages to the use of an immovable, the CJEU has excluded it from the tenancies falling under Art. 22 (1) Brussels I Regulation (now Art. 24 (1) Brussels Ibis Regulation).147 Indeed, if the membership is the central objective of the contract the conflicts rules governing companies must apply.148 For lit. c (and lit. d) this should be decided in the same way.149 Moreover, two other provisions may prevail over lit. c: first, if the conditions of Art. 6 (1) are present this Article takes priority.150 Even if those conditions are not met, Art. 4 (1) (d) prevails over lit. c if the yearly timeshare period is less than six months and the further conditions of lit. d are given. It might appear doubtful whether lit. d enjoys priority because the recurring use over a number of years which is typical for timeshare contracts of immovables may not easily be qualified as “temporary” use as required by lit. d. However, the objective of lit. d to apply the law with which the parties are more closely connected than with the location of the immovable militates in favour of an application of this provision. Moreover, it can be inferred from Art. 6 (4) (c) that the Regulation regards timeshare contracts which allow the mere contractual use of immovable property as tenancies. Otherwise timeshare contracts need not be mentioned as an exception to tenancies in Art. 6 (4) (c) (“[…] a tenancy […] other than a contract relating to […] a timeshare […]”). c) Relevant point of time Because of the immobility of land immovable property normally does not change the law 99 applicable to it and the relevant point of time does not play a role for the determination of the governing law. Only in the rare cases where the borders of a state territory change or where land is washed on or off the question may arise at which point of time the immovable must belong to a specific country. In analogy to Art. 19 (3) the time of the conclusion of the contract should decide.

145 146

147 148 149

150

Also Mankowski, in: Reithmann/Martiny note 1705. Leible, in: NK-BGB Art. 4 note 40; Spickhoff, in: Bamberger/Roth Art. 4 note 36; Thorn, in: Rauscher Art. 4 note 68. CJEU [2005] ECR I-8667 (C-73/04, Klein v. Rhodos Management). Mankowski, in: Reithmann/Martiny note 4332. In the same sense Plender/Wilderspin note 7–039, although in note 7–040 they appear to exclude timeshare contracts from lit. c and d altogether. See Art. 6 (4) (c); see also Thorn, in: Rauscher Art. 4 note 69.

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d) International jurisdiction 100 “(I)n proceedings which have as their object rights in rem in immovable property or tenan-

cies of immovable property” Art. 24 (1) Brussels Ibis Regulation (Art. 22 (1) Brussels I Regulation) confers exclusive jurisdiction on “the courts of the Member State in which the property is situated.” As mentioned, Art. 4 (1) (c) Rome I Regulation as a universally applicable rule (Art. 2) synchronised the governing law with the jurisdiction rule of Art. 24 (1) Brussels Ibis Regulation although the latter merely deals – and can merely deal – with the jurisdiction of the EU Member States. And whereas the exclusive jurisdiction provision makes a choice of jurisdiction impossible, under the Rome I provision the parties are not hindered to choose the applicable law which thus can be another than the situs law. 101 The Brussels Ibis provision also provides for an additional jurisdiction for certain short-term

tenancies for which Art. 4 (1) (d) Rome I Regulation determines the applicable law under identical conditions (see infra note 103). 5. Certain short-term tenancies (lit. d) a) In general 102 Lit. d creates a special conflicts rule for a very special case of tenancies of immovables,

primarily for the rent of holiday homes abroad while landlord and tenant live in the same state. In such a case, in contrast to lit. c, the applicable law is not the lex situs of the immovable but – under quite a number of further requirements – the law at the common habitual residence of the parties. The objective is to bring to bearing the law with which the parties and the dispute are closer connected than with the situs law. The law of the parties’ common legal environment shall govern. The provision can be regarded as a model case for the application of the principle of the closest connection.151 103 With respect to the applicable law lit. d mirrors the rule of Art. 24 (1) par. 2 Brussels Ibis

Regulation (the former Art. 22 (1) par. 2 Brussels I Regulation). The Brussels provision owed its existence to the fact that under the preceding provision the CJEU forced two Berliners to institute their dispute over a rented holiday home in Italy at the place of that home.152 In order to allow a suit in Berlin at the common domicile of the parties the present formulation was inserted into the Brussels provision and taken over by Art. 4 (1) (d) Rome I Regulation. While it is very understandable that parties with their seats in the same country should be able to sue there, if not very compelling reasons require otherwise, it is not visible that there was an urgent necessity to include the rule into the Rome I Regulation and transpose it into the applicable law. Art. 4 (3) would in all probability lead to the preferable result that the law of the common seat of the parties becomes applicable. Art. 4 (3) would also more easily allow applying the lex domicilii communis to analogous cases, for instance where the use is not for private but for professional purposes or for a slightly longer period than six months.153 The

151 152 153

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Similarly Azzi D. 2008, 2169 (2170); Mankowski, in: Reithmann/Martiny note 1677. CJEU [985] ECR 99 (241/83, Rösler v. Rottwinkel). Critical on the provision also Mankowski IHR 2008, 139; Mankowski, in: Reithmann/Martiny note 1674 (“partiell überflüssig und systemfremd” [“partially superfluous and inconsistent with the system”]); Plender/Wilderspin note 7–041 (“unnecessarily rigid”); Thorn, in: Rauscher Art. 4 note 72 (exclusion of professional tenancies’ “erscheint unsinnig” [“appears absurd”]).

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exclusion of these cases from lit. d makes it more difficult to treat them via par. 3 in the same way as those expressly mentioned in lit. d. Lit. d as the more special provision takes priority over lit. c.154 This is also indicated by the 104 introducing words of lit. d: “not withstanding point (c)” which means that lit. c has to be disregarded if the conditions of lit. d are met.155 If consumers are involved, in most cases lit. d remains applicable; Art. 6 does not apply due 105 to the exclusion of tenancies of immovable property in Art. 6 (4) (c) unless a timeshare contract in the sense of this provision grants a contractual right to use the immovable.156 In this latter case Art. 6 supersedes lit. d. Although lit. d appears as a legislative example of the principle of the closest connection, 106 Art. 4 (3) remains applicable even if all preconditions of lit. d are met.157 If there exists a manifestly closer connection to another country, this country’s law has to be applied. This can be also the law of the country where the immovable is located. b) Requirements of lit. d aa) Tenancy of immovable property The term tenancy of immovable property has to be understood in the same sense as in lit. c 107 (see supra note 94 et seq.). It therefore includes rent and lease contracts concerning immovables as well as timeshare contracts that grant the use of an immovable and are not based on the membership model. Also gratuitous rent, lease and timeshare contracts are covered. In contrast to lit. c, contracts which imply a transfer of ownership (sale, exchange, donation) fall outside lit. d. Yet, via Art. 4 (3) and in a certain analogy to Art. 4 (1) (d) they may be governed by the lex domicilii communis instead of the lex situs of lit. c. bb) Private use Lit. d further requires that the immovable is privately used. The typical case will be the rent 108 of a holiday flat or house for recreation purposes.158 But the case that a (natural) person rents a flat in order to work or study at that town, too, falls under lit. d because to live in a flat still serves personal purposes and is thus private use. Only if the flat or room is rented or let as office or workshop, for organizing an exhibition or the like, lit. d is no longer applicable.159 It is likewise no private use where, e.g., a business rents a flat or room in order to let it for a short period to an employee.160

154

155 156 157

158 159 160

Brödermann/Wegen, in: PWW Art. 4 note 13; Ferrari, in: Ferrari Art. 4 note 41; Leible, in: NK-BGB Art. 4 note 36; differently – discretion of the judge to apply either lit. c or lit. d – Mankowski, in: Reithmann/ Martiny note 1683. Different understanding by Mankowski, in: Reithmann/Martiny note 1683. Evidently in the same sense Thorn, in: Rauscher Art. 4 note 73. Ferrari, in: Ferrari Art. 4 note 43; Hohloch, in: Erman Art. 4 note 25; Martiny, in: MünchKomm Art. 4 note 115. Leible, in: NK-BGB Art. 4 note 39; Martiny, in: MünchKomm Art. 4 note 115. Magnus, in: Staudinger Art. 4 note 58; Mankowski, in: Reithmann/Martiny note 1678. Also Ferrari, in: Ferrari Art. 4 note 42; Thorn, in: Palandt Art. 4 note 17.

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cc) Temporary use for not more than six months 109 The provision establishes a time limit: the use of the immovable must not last longer than six

consecutive months. Where the tenancy contract ends after five months and is immediately renewed for further five months the period is exceeded and lit. d no longer applies. However, if the parties conclude separate tenancy contracts, each running no longer than six months, with a break of one or two months between them (e.g., a student rents the same room only for the time of the semester not for the holidays), lit. d still applies. 110 In order to determine the length of the tenancy period primarily the agreement of the parties

counts. However, where the contract is finished earlier or prolonged the real duration should count.161 111 The aim of the provision is to restrict the rule to short-term tenancies. Yet, its underlying

consideration that the closer connection of the parties should determine the applicable law applies to slightly longer tenancies as well although it can be admitted that the longer the tenancy lasts the stronger is the connection to the lex situs. Fortunately, the rigidity of the rule can still be overcome by par. 3. 112 Where a timeshare contract, however none of the club model, grants a right to use an

immovable for a certain period of time over a continuing number of years and the yearly timeshare period is less than six months, lit. d is probably also applicable (except where Art. 6 applies).162 The objective of lit. d, to apply the law with which the parties are more closely connected than with the location of the immovable, militates in favour of an application of lit. d although the recurring use over a number of years which is typical for timeshare contracts of immovables may not easily be qualified as “temporary” use. dd) Parties’ habitual residence in same state 113 Lit. d comes into play only if the parties have their habitual residence (in the sense of Art. 19)

in the same state. In contrast to Art. 24 (1) par. 2 Brussels Ibis Regulation the parties need not have their common seat in the EU. If the landlord is an enterprise its habitual residence is generally the place of its central administration (Art. 19 (1)). 114 The habitual residence of the parties in the same state suffices to supersede the lex situs

which would be otherwise applicable under lit. c. Neither the same nationality nor any other connecting factor, common to both parties, is necessary. 115 The common habitual residence must exist at the time when the parties conclude the con-

tract.163 A later change of a party’s seat to another country does not affect the application of lit. d, but may, together with other factors, lead via par. 3 to the application of another law than that of the former common habitual residence. ee) Natural person as tenant 116 The tenant must be a natural person whereas it is irrelevant whether the landlord is also a

natural or legal person. Thus, if a lawyer rents a room for a short term in the own name for a 161 162 163

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Magnus, in: Staudinger Art. 4 note 60. See supra note 98. Also Hohloch, in: Erman Art. 4 note 25.

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professional stay abroad, the requirements of lit. d are met (because the living in a room is private use; see supra note 108). If the lawyer rents the room in the name of the law office being a body corporate or unincorporated, lit. c applies. 6. Franchise contracts (lit. e) a) Definition of franchise contracts Lit. e does not define the franchise contract.164 Franchising is a specific method of marketing 117 or manufacturing with a broad range of variations. The necessary autonomous European definition can eventually be drawn from the former Regulation (EEC) No 4087/88 of 30 November 1988 on the application of Article 85 (3) of the Treaty to categories of franchise agreements165 as well as from the DCFR and the UNIDROIT Model Franchise Disclosure Law. Although the Regulation was repealed already in 1999,166 its definition of franchise agreements in its Art. 1 (3) (b) is still not outdated and corresponds also to Art. IV.E – 4:101 DCFR and Art. 2 UNIDROIT Model Franchise Disclosure Law of 2002 which define franchise contracts in rather similar terms. A definition distilled from these instruments should be used.167 This leads to the following features of a franchise contract: Primarily, a franchise contract allows and obliges the franchisee to market a product or 118 service of the franchisor (product or service franchising) or to apply a manufacturing method developed or designed by him (industrial franchising)168 by using the franchisor’s name, know-how, intellectual property rights or business method, actually by using the specific ‘system’ that the franchisor has developed. Generally, the franchisee must observe rather strict specifications of the franchisor, which secure the uniformity of the franchise net, and has to pay for the permission to exploit the ‘system’. However, where the contract is limited to merely permit the use of intellectual property rights of the other party the agreement classifies as a license contract to which Art. 4 (2) Rome I Regulation applies. Lit. e covers all franchise contracts of the indicated kind irrespective whether they are simple 119 franchise contracts, where the franchisee directly contacts the end user, or whether it is a

164

165 166

167 168

Bibliography (franchise contracts): Bairlein, Die Rechtswahl bei Masterfranchiseverträgen und mehrstufigen internationalen Liefer- und Vertriebsverträgen, IHR 2014, 1; García Gutiérrez, Franchise Contracts and the Rome I Regulation on the Law Applicable to International Contracts, Yb. PIL 2008 (2009) 233; Konigsberg, International Franchising (3rd ed. 2008); Krümmel, Franchising und internationales Privat- und Prozessrecht, in: Giesler/Nauschütt (eds.), Franchiserecht (2nd ed. 2007) 1089; Oechsler, Internationales Vertriebsrecht, in: Martinek/Semler/Habermeier/Flohr (eds.), Handbuch des Vertriebsrechts (4th ed. 2014); Winkler von Mohrenfels, Franchise- und Vertriebsverträge im internationalen Privatrecht, ZVertriebsR 2014, 281; on a comparative basis: Bueno Diaz, Franchising in European Contract Law (2008). OJ L 359 of 28 December 1988, p. 46. And replaced by Commission Regulation (EC) No. 2790/1999, OJ L 336 of 29 December 1999, p. 221 which in turn was replaced by Commission Regulation (EU) No. 330/2010, OJ L 102 of 23 April 2010, p. 1. Both Regulations do no longer define franchise contracts but use the wider term “vertical agreement”. Dicey/Morris/Collins (eds) note 33–064 refers to the Regulation of 1988 alone. These franchise contracts were excluded from the scope of Regulation No 4087/88; see Recital 4.

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master franchising where the master franchisee concludes further franchise contracts with sub-franchisees.169 b) Unification and harmonisation 120 So far no directly applicable uniform law for franchise contracts exists. Although franchise

contracts may include sales elements the CISG is not applicable because the central object of franchising is not sale but specific permissions and obligations concerning the use and exploitation of rights of the franchisor.170 Single sales within the franchise relationship may, however, fall under the CISG.171 121 The Directive on Commercial Agents172 is likewise not applicable to franchise contracts.

Franchisees, though often dependent on the franchisor rather in the same way as a commercial agent, do not negotiate or conclude contracts for a principal (as the Directive requires) but in their own name. 122 However some soft law instruments pave the way for an approximation of franchising

laws.173 Among them are the DCFR which provides for a Regulation of franchising contracts174 and the UNIDROIT Model Franchising Disclosure Law of 2002 which attempts to secure fair pre-contractual information of franchisees. c) Applicable law 123 The parties of a franchise contract can freely choose the applicable law. The general limits of

a choice of law remain however unaffected. In purely internal cases the choice does not override the mandatory domestic law (Art. 3 (3)) even if this is judge-made. Mandatory Community law that had to be observed in pure Common Market cases (Art. 3 (4)) does not yet exist. An eventual choice of law is also not restricted because of specific protective considerations – neither under Art. 6 and 8 by the principle of the more favourable law nor under Art. 5 and 7 by limiting the number of laws that can be chosen.175 These Articles do not apply to franchise contracts. 124 According to lit. e franchise contracts are generally governed by the law of the habitual

residence (in the sense of Art. 19) of the franchisee where the parties have not chosen the applicable law. Lit. e can be understood as fixing the franchisee as the party who effects the characteristic performance whereas under the Rome Convention it was uncertain and disputed whether the franchisor or the franchisee was the characteristically performing party176 169 170

171 172 173 174 175 176

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See Art. 1 (2) (c) Regulation No 4087/88. BGH NJW 1997, 3304 and 3309; Dutta, in: Reithmann/Martiny note 2087 (though arguing with Art. 3 (2) CISG that labour and services on the part of the franchisor exceed the sales element; however, generally the franchisee is obliged to undertake specific services; the franchisor primarily allows the use of its rights); Magnus, in: Staudinger CISG Art. 1 note 39. BGH NJW 1997, 3309. Directive No. 86/653/EEC, OJ L 382 of 31 December 1986, p. 17. See also Dutta, in: Reithmann/Martiny note 2083 et seq. Art. IV.E – 4:101 et seq. DCFR. See also Dutta, in: Reithmann/Martiny note 2089 s. In favour of the law of the franchisor for instance French Cour cass Rev crit. DIP 91 (2002) 148; LG Düsseldorf IPRspr 2002 no.31; Bräutigam WiB 1997, 899; in favour of the law of the franchisee, e.g.,

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or whether this had to be decided case by case.177 The new provision aims also at the protection of franchisees who are regarded as the generally weaker party of a franchise contract.178 Therefore ‘their’ law shall apply. The present conflicts rule has partly been critizised as too undifferentiated;179 partly the necessity of a specific protection of franchisees has been doubted.180 In any event, lit. e states a clear rule which normally governs the franchise contract and which allows forecasting the applicable law when the contract is concluded and no choice of law has been made. Yet, in rare cases Art. 4 (3) may still lead to another applicable law. The fact alone that the 125 franchisor has its seat in another country, as will be regularly the case, and fulfills the contractual duties from there does certainly not indicate a manifestly closer connection to this country.181 However, the place of business of the franchisor, the degree of integration of the franchisee into the franchisor’s concept, the latter’s interest in the application of one single law to all franchisees are circumstances which have to be taken into account but which each alone cannot constitute a manifestly closer connection to another country than that of the franchisee’s seat. To the circumstances which are relevant it also belongs where the franchisee shall make use of eventual immaterial property rights.182 Yet, this circumstance alone does equally not suffice to correct the conflicts rule of Art. 4 (1) lit. e. Lit. e takes precedence over the general conflicts rule for services (lit. b) but leads to the same 126 applicable law since the franchisee is deemed to be the characteristically performing party. Being a typical commercial contract the franchise contract is not governed by Art. 6 even if purely private persons are becoming franchisees; they do not act for private purposes. Also Art. 8 is not applicable. However, alleged franchisees may in fact be employees. Then, exclusively Art. 8 applies. Does the franchise contract contain sales elements of more than irrelevant importance the contract no longer falls under lit. e but under Art. 4 (2). Even under the latter provision the principle should be maintained that the franchisee effects the characteristic performance. The protection of franchisees which lit. e intends should be continued under Art. 4 (2).183 d) Mandatory provisions Franchise contracts, which have an effect in the territory of the EU or the EEA, fall, like 127 distribution contracts, under Art. 101 TFEU and Art. 53 TEEA. Art. 101 TFEU is directly

177

178

179 180 181 182

183

Hohloch, in: Erman11 Art. 28 EGBGB note 53; Martiny, in: MünchKomm3 Art. 28 EGBGB note 161; Verschraegen, in: Rummel Art. 4 EVÜ note 76. In this sense von Hoffmann, in: Soergel Art. 28 EGBGB note 275; Leible, in: AnwK-BGB Art. 28 EGBGB note 111. See Explanatory Memorandum to the Rome I Proposal (COM (2005) 650 p. 6); also R Wagner IPRax 2008, 377 (383). Kenfack JDI 2009, 22. Leible/Lehmann RIW 2008, 535. Also Dicey/Morris/Collins (eds) note 33–068; Martiny, in: MünchKomm Art. 4 note 117. Probably contra Dutta, in: Reithmann/Martiny note 2099; under the former law courts tended to apply the law for which the immaterial property right was granted: OGH IPRax 1988, 242 with note Schlemmer IPRax 1988, 252. However for determining the applicable law in accordance with the centre of the contract: Plender/ Wilderspin note 7–056.

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applicable and prevails over national law. Franchise agreements which typically provide for numerous obligations of the franchisee on the subordinate trade level are however exempted from the antitrust rules if they meet certain conditions. This follows from Regulation no. 330/2010 of 20 April 2010 on the application of Article 101 (3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices.184 The Regulation remains in force until 31 May 2022. The conditions which must be met are further specified by Guidelines on Vertical Restraints which the Commission published on 19 May 2010.185 The Guidelines follow closely the Guidelines to the former Block Exemption Regulation no. 2790/1999.186 National antitrust law may be additionally, and in pure domestic cases exclusively, applicable as internationally mandatory in the sense of Art. 9 (2) Rome I Regulation. 128 It may be argued that the claim commercial agents have in cases where the principal un-

justifiedly terminates the agency contract must by analogy also be granted to franchisees.187 Since there is, in contrast to commercial agency contract, no statutory provision to this effect the analogy is hardly to uphold. However, if the analogy argument is accepted it could further be asserted that the respective provision (as implemented from the Agency Directive) has an internationally mandatory character as the CJEU held in Ingmar.188 Then it would have overriding effect in the sense of Art. 9 Rome I Regulation. 7. Distribution contracts (lit. f) a) Definition of distribution contracts 129 The Regulation does not define the term distribution contract189 (contrat de distribution,

contrato de distribución, Vertriebsvertrag). It has to be fixed in an autonomous European way. Some support can be drawn from the definition in Art. IV.E – 5:101 DCFR. The term usually comprises frame contracts which serve the distribution of goods. Respective contracts oblige the manufacturer/supplier to provide a dealer with products on a continuing basis and oblige the dealer to take them and to promote their further sale. Although being somewhat integrated into the distribution organisation of the supplier the dealer is legally independent and acts in the own name and for the own account.190 Often the parties agree in 184 185 186

187 188 189

190

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Off. J. no. L 102 p. 1 et seq. of 23 April 2010. See Off. J. no. C 130 p. 1 et seq. of 19 May 2010. The former Regulation is published in Off. J. no. L 336 p. 21 et seq. of 29 December 1999 and its Guidelines in Off. J. 2000 no. C 291 p. 1 et seq. See thereto Bairlein IHR 2014, 5. Ingmar GB Ltd. v. Eaton Leonard Technologies Inc. [2000] ECR I-9305. Bibliography (distribution): Ancel, Les contrats de distribution et la nouvelle donne du règlement “Rome I”, J.D.I. 2008, 561; Ancel, The Rome I Regulation and Distribution Contracts, Yb. PIL 2008 (2009) 221; Kenfack, “Rome I” et contrats de distribution: protéger les intérêts des distributeurs sans léser les fournisseurs, JCP G 2006, act. 127; Kindler, Handelsvertreterrichtlinie und Rom I, in: FS von Hoffmann (2011) 198; Oechsler, Internationales Vertriebsrecht, in: Martinek/Semler/Habermeier/Flohr (eds.), Handbuch des Vertriebsrechts (4th ed. 2014); W-H Roth, Handelsvertreterverträge und Rom I-Verordnung – eine Skizze, in: FS Spellenberg (2010) 309; Thume, Grenzüberschreitende Vertriebsverträge, IHR 2009, 141; Winkler von Mohrenfels, Franchise- und Vertriebsverträge im internationalen Privatrecht, ZVertriebsR 2014, 281. See also Leible, in: NK-BGB Art. 4 note 47; Magnus, in: Ferrari/Leible, Rome I Regulation 42.

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addition on an exclusive right either to supply only to one distributor or to purchase only from one supplier.191 The term “distribution contract” does not cover all kinds of contracts which serve the aim of marketing products. The agency contract, the brokerage contract and the commission contract do not fall under lit. f, but under the general rule for service contracts (lit. b).192 For the determination of the applicable law lit. b and lit. f lead however to the same law because it is anyway the intermeddler of the further marketing of products who effects the characteristic performance and whose seat is therefore decisive. Sometimes, the demarcation line between distribution contracts and franchising contracts 130 may not be easy to determine; yet, the demarcation does not matter for the outcome since lit. e and f lead to the same law. However, because of the different conflicts rules the demarcation towards pure sales or supply contracts is relevant in practice.193 Under lit. a the seat of the seller determines the applicable law; under lit. f the seat of the distributor (the ‘buyer’) decides. The obligation of the dealer to further the distribution of the supplier’s products and to promote (also) the latter’s interests stamps a contract as distribution contract and distinguishes it from a pure sales contract. In addition, the distribution contract as a frame contract does regularly not contain already precisely fixed delivery duties but only general specifications. It is usual that the individual sales contracts are concluded only afterwards in execution of the distribution contract. Therefore, the frame contract and the single contracts which perform it are principally each governed by their own law.194 Yet, the law governing the single contracts may follow the law of the frame contract or vice versa in accordance with Art. 4 (3); Recital 20, although not having the same force as the Articles of the Regulation, appears to request a “very close relationship with another contract or contracts”. The mere co-existence of the frame (distribution) contract and the single supply contracts does therefore not suffice to apply the same law to them. Where the frame contract merely permits the use of intellectual property rights of the principal the agreement has to be qualified as a license contract to which Art. 4 (2) Rome I Regulation applies.195 b) Unification and harmonisation Also for distribution contracts binding and prevailing uniform law is still lacking. Dealer 131 contracts as such only rarely fall within the scope of the CISG, namely only if they contain direct and precise sales obligations which surmount in value the other obligations.196 The single contracts afterwards concluded in performance of the distribution contract are governed by the CISG if this Convention’s further requirements of applicability are met. EU law does not yet provide for instruments harmonising the law of distribution contracts. 132 191 192

193 194 195 196

See also Art. IV.E – 5:101 (2) and (4) DCFR. Calvo Caravaca/Carrascosa González XXV.150 s.; Ferrari/Ferrari/Bischoff Art. 4 n. 50; Martiny, in: MünchKomm Art. 4 note 118; Leible, in: NK-BGB Art. 4 note 47; Roth, in: FS Spellenberg 310 s.; also Art. IV.E – 3:101 ss. clearly distinguishes between “commercial agency” and “distributorship”; however contra Thorn, in: Rauscher Art. 4 note 55 ss.; Thorn, in: Palandt Art. 4 note 19 (commercial agency contract falls under lit. f). See also Plender/Wilderspin note 7–047. Magnus, in: Staudinger Art. 4 note 72; Martiny, in: MünchKomm Art. 4 note 130. See Mankowski, in: Leible/Ohly, Intellectual Property 37 s.; see further infra para. 596 et seq. See BGH 23 July 1997, NJW 3304 and 3309 (Benetton I and II); Ferrari, in: Schlechtriem/Schwenzer Art. 1 note 31; Magnus, in: Staudinger Art. 1 CISG note 37.

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The Block Exemption Regulation on vertical agreements of 1999 and its successor Regulation of 2010 (Regulation (EU) Nr. 330/2010) do not define distribution contracts but merely exempt ‘vertical agreements’ from the cartel prohibition.197 The Commercial Agency Directive of 1986 does not expressly cover distributors and dealers. Whether national courts apply the Directive’s implemented provisions to them is a matter of the applicable substantive law which the EU Member States answer differently.198 Thus far, only the non-binding DCFR contains a full Regulation of distribution contracts (Art. IV.E – 5:101 ss.). c) Applicable law 133 The free choice of the applicable law is admitted for distribution contracts although, as

always, the usual limits of such a choice have to be observed. In pure domestic cases the choice cannot supersede the mandatory domestic law (Art. 3 (3)) even if this is mere judgemade law. Mandatory EU law that prevails in pure EU-internal cases (Art. 3 (4)) may follow from Art. 101 et seq. TFEU. Other prevailing EU law does not yet exist. Unlike in Art. 5–8 Rome I the choice is not further restricted in order to specifically protect distributors and dealers. 134 Also for the choice of the applicable law the principal independence of the frame contract

and the single executing contracts must be observed. A choice for the one does not necessarily concern the other. However, if clearly so formulated the choice in the frame contract may also apply to the single performing contracts; moreover, in connection with further indicia a choice in the frame contract may militate for an implicit choice for the single contracts.199 Vice versa, the steady choice of a specific law in the single contracts can point – with other indicia – to an implicit choice of the same law in the frame contract.200 135 With respect to the objectively applicable law Art. 4 (1) lit. f sets forth an own conflicts rule

according to which the law at the distributor’s seat is applicable. The motives for this rule were the same as for lit. e: clarification of a formerly disputed conflicts rule and protection of the weaker party.201 In some countries, for instance Germany, this was the already prevailing view.202 In others, in particular in France, the courts applied the law at the manufacturer’s/ supplier’s seat.203 Art. 4 (1) lit. f now authoritatively fixes the performance of the distributor as the characteristic performance. Former deviating views are now outdated. Only in exceptional cases can the escape clause of par. 3 lead to another law. Like in the case of franchise contracts also in distribution contracts the weaker party is only insofar protected as ‘its law’ is preferred. The Regulation provides for no further protection, as Art. 5–8 do for consumer, transport, insurance and employment contracts. 197 198 199 200

201

202

203

300

See infra para. 140. See thereto Kocher RIW 2003, 512 ss.; Thume IHR 2009, 143 s. See, e.g., OLG Hamburg TranspR-IHR 1999, 37; Martiny, in: MünchKomm Art. 4 note 128, 130. See also Thume IHR 2009, 145 s. who suggests that in case of doubt the same law governs both the frame contract and the single contracts. See the reasoning to the same provision in the Rome I-Draft of 15 December 2005: COM (2005) 650 final, p. 6. See BGHZ 127, 368; Martiny, in: MünchKomm4 Art. 28 EGBGB note 227; Magnus, in: Staudinger (2002) Art. 28 EGBGB note 288. Cour de cass., Rev. crit. dr. int. pr. 2002, 86 with note Lagarde (arrêt Optelec); Cour de cass., Rev. crit. dr. int. pr. 2004, 102 with note Lagarde (arrêt Ammann-Yanmar).

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The objective connection must also take account of the principal independence of the frame 136 contract and the single contracts for its performance. Lit. f only applies to the actual distribution contract, the frame contract. The single contracts are generally governed by lit. a; the law at the seat of the seller/supplier is applicable to them.204 Only rarely will par. 3 lead to another result.205 If the frame contract and the single contracts shall be governed by the same law the parties can safeguard this outcome only by a choice of law. The objectively applicable law is independent of the fact whether the distributor acts in one 137 or more countries, for instance through his branches there.206 It merely matters where the main ‘seat’ of the distributor is located. This has to be determined in accordance with Art. 19. Like lit. e also lit. f is the special rule which enjoys priority over the general conflicts rule on 138 service contracts (lit. b). However, both lead to the same result since the distributor is deemed to be the provider of the characteristic performance (see Recital 17 and 19). As a typical commercial contract which does not serve private purposes the distribution contract does not fall under Art. 6. And although the distribution contract always contains rules on the supply of goods and thus elements of a sale this does not qualify the contract to fall under Art. 4 (2). Only if the distribution contract also provides for directly binding sales obligations of more than insignificant importance for the whole contract, Art. 4 (2) should be applicable instead of Art. 4 (1) lit. f. However, even in such a case the law at the distributor’s seat should govern. Otherwise, the protection of the distributor intended by lit. f would be frustrated. d) Exclusive distribution contract The law applicable to exclusive distribution contracts where the distributor is granted an 139 exclusive right of supply and marketing for certain goods in a certain area has to be determined in the same way as for ‘simple’ distribution contracts.207 e) Mandatory provisions Transborder distribution contracts and in particular exclusive distribution contracts which 140 can affect trade between Member States and restrain competition fall, independently of the applicable contract law, directly under Art. 101 TFEU (former Art. 81 TEC). They are invalid unless a block exemption Regulation or Art. 101 (3) TFEU directly applies to them.208 The situation is identical in regard of contracts which affect the European Economic Area (EEA).209

204

205 206

207 208

209

See Magnus, in: Ferrari/Leible, Rome I Regulation 42; in the same sense under the prior law: BGHZ 74, 136 (single contracts were governed by the Hague Uniform Sales Law); OLG Düsseldorf RIW 1996, 958 (CISG applied to single contracts); Reithmann/Martiny/Häuslschmid note 2046 s.; von Hoffmann, in: Soergel Art. 28 EGBGB note 269. See thereto infra para. 184 et seq. In this sense already under the prior law: Czernich/Heiss/Czernich Art. 4 EVÜ note 177; von Hoffmann, in: Soergel Art. 28 EGBGB note 266;/Schulze (eds) note 895. Ferrari/Ferrari/Bischoff Art. 4 note 49; Reithmann/Martiny/Häuslschmid note 2045 ss.; also Kaye 183. For those Regulations see in particular Regulation (EU) Nr. 330/2010 (OJ L 102/1) and Regulation (EC) Nr. 1400/2002 (OJ L 203/7). See Reithmann/Martiny/Häuslschmid note 2077.

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141 Besides the directly applicable European antitrust law also the national antitrust law can

constitute internationally mandatory law in the sense of Art. 9 Rome I Regulation if the requirements for its applicability are fulfilled.210 In case of contradictions between the European and the national antitrust law (that has been harmonised and aligned to European law) the European law prevails.211 8. Auction sales (lit. g) 142 The Rome I Regulation introduced in lit. g separate conflicts rules on contracts for the sale of

goods by auction. Where an – always possible – choice of law is lacking the law at the place of the auction governs these contracts if such a place can be determined. The rule deviates from the concept of the characteristic performance. The reasons behind are that generally special local regulations apply to auctions – like to stock exchanges – which shall safeguard fair auctions.212 Auctions constitute regulated markets where identical conditions shall apply to all participants.213 The often present participants are regularly aware that specific conditions must be observed. Further, generally the sale is executed where the auction takes place. It would also be problematic if the law of a ‘seller’ would be applicable who need not be present and whose seat the buyer at an auction could neither know nor find out.214 Therefore, the closest connection (Art. 4 (4)) is given precedence which exists with the place of the auction. In the past, before the Rome I Regulation, the same rule was followed.215

143 The formulation “sale of goods” has the same (autonomous) meaning as in lit. a.216 Less

definite is the – again autonomous – term “auction”. For the sake of international uniformity the term should be understood in the same sense as used in Art. 3 (3) Hague Convention on the law applicable to international sales of goods of 1955 and in Art. 2 (b) CISG. This would avoid qualification and demarcation problems, in particular with the CISG.217 In these Conventions “auction” means the public and publicly announced sale by acceptance of the highest bid through the auctioneer.218 This includes private auctions only. Judicial or other auctions by state officials which follow sovereign compulsory measures such as seizure or confiscation are not covered.219 Acta jure imperii are no “civil and commercial matters” 210

211 212 213

214

215

216 217 218

219

302

See Martiny, in: MünchKomm Art. 9 Rom I-VO note 72; Thorn, in: Palandt Art. 9 Rom I note 7. E.g., in Germany the national antitrust law is applicable if the restraint of trade affects the domestic market: § 130 GWB (Act on Restraint of Trade). See CJEU [1969] ECR 1 (case 14/68, Walt Wilhelm). Magnus, in: Ferrari/Leible, Rome I 43. Garcimartín Alférez EuLF 2008, I-68; also Calvo Caravaca/Carrascosa González note XXV-154; Tang Mod. L. Rev. 2008, 790. Leible, in: NK-Komm Art. 4 note 49; Martiny, in: MünchKomm Art. 4 Rom I note 131; R Wagner IPRax 2008, 384. See e.g., OLG Düsseldorf NJW 1991, 1492; Mankowski, in: Spindler/Wiebe, Internet-Auktionen (2nd ed. 2005) G note 56; Merschformann 214 ss.; Martiny, in MünchKomm4 Art. 28 EGBGB note 140; Reithmann/Martiny/Martiny note 770; Magnus, in: Staudinger (2002) Art. 28 note 176. See supra para. 53 et seq. In the same sense Ferrari/Ferrari/Bischoff Art. 4 note 52. See Ferrari, in: Schlechtriem/Schwenzer Art. 2 note 28; Leible, in: NK-Komm Art. 4 note 50; Magnus, in: Staudinger Art. 2 CISG note 33. Ferrari/Ferrari/Bischoff Art. 4 note 52; Leible, in: NK-Komm Art. 4 note 50; Thorn, in: Rauscher Art. 4

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and fall outside the scope of the Regulation.220 Whether or not the seller of the goods is personally present at the auction is irrelevant. For the participation in the auction and for the application of the law at the auction’s place it is sufficient that a bidder bids on the telephone or on the internet.221 It is likewise irrelevant whether the seller merely supplies the goods to the auctioneer or is him- or herself the auctioneer. In both cases the law applies where the auction takes place. It is on the contrary no auction where the goods are sold against the highest bid or where an internet platform merely serves as a place for the exchange of contract declarations. In these cases both the person of the auctioneer and the acceptance of the bid (fall of the hammer or the like) is lacking. For those cases lit. a remains applicable and also, as the case may be, Art. 6.222 Lit. g may conflict with other provisions. It prevails as lex specialis over lit. a but is in turn 144 supplanted by Art. 6 if the successful bidder is a consumer and the seller a business.223 Because the sale is concluded between the seller and the bidder, the latter’s capacity as business is relevant, not the auctioneer’s acting in a private or commercial capacity. Lit. g and the CISG do not overlap since the CISG excludes sales by auction from its scope (Art. 2 (b) CISG). However, the EU Member States which have ratified the Hague Convention of 1955 on the applicable sales law apply this Convention instead of lit. g. The special conflicts rule of lit. g applies only if the place of the auction can be determined. If 145 this is impossible – as for instance with auctions which exclusively take place on the internet – another connection to the applicable law must be found. Insofar lit. a should be applied and the law at the real seller’s seat governs.224 Also for lit. g Art. 4 (3) must be taken into account. Where the circumstances show a 146 manifestly closer connection to another country than that of the auction this other law is to be applied. This may be the case where, for instance, both parties of the auction sale are seated in the same country while the auction takes place in another country (or on the internet). Par. 3 can play a role also in cases where the place of the auction is indeterminable and generally the law of the seller is applicable. If the auction concerns other than (movable) goods – namely, rights or immovables – 147 neither lit. g nor lit. a is applicable. For immovables Art. 4 (1) (c) should be applied.225 For the auction of rights, Art. 4 (2) applies: the seller of the right is the party effecting the characteristic performance; the law at his seat governs the contract. However, in both cases also Art. 4 (3) may lead to the application of another manifestly more closely connected law.

220 221 222 223

224

225

Rom I note 33. See also the explicit exclusion of sales “on execution or otherwise by authority of law” in Art. 2 (c) CISG. See the comment on Art. 1. See also Garcimartín Alférez EuLF 2008, I-68; Martiny, in: MünchKomm Art. 4 Rom I note 131. See further infra para. 144. See Martiny, in: MünchKomm Art. 4 Rom I note 131; Thorn, in: Rauscher Art. 4 Rom I note 31; R Wagner IPRax 2008, 384. Also Calvo Caravaca/Carrascosa Conzález note XXV-154; Ferrari/Ferrari/Bischoff Art. 4 note 53; Leible/ Lehmann RIW 2008, 535; Magnus, in: Ferrari/Leible, Rome I Regulation 43; Thorn, in. Palandt Art. 4 Rom I note 20; R Wagner IPRax 2008, 384; in result also Plender/Wilderspin note 7–048. In this sense also Leible, in: NK-BGB Art. 4 Rom I note 51.

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9. Specific financial contracts (lit. h) a) Aim of the provision 148 Lit. h226 is the most complicated provision of Art. 4. In essence the rule is based on the simple

and also convincing idea that in the absence of a choice of law to the contrary transactions at stock exchanges should be governed by the law at the place of the stock exchange.227 The reasons that militate for the application of one single law to such transactions resemble very much those which are advanced for the application of the law at the auction place to auctions.228 Stock exchanges are regulated markets. For the rapidity, smoothness, legal certainty and the easy functioning of transactions it is indispensable that the transactions are governed by one single law.229 In order to achieve this goal it is the regular practice that the organiser of the stock exchange agrees with participants who are admitted to trade at the stock exchange that the law at the place of the stock exchange is applicable. Since stock exchange transactions are conducted less and less at a specific place but more and more in electronic trading systems it is necessary to safeguard the application of one law also within these systems. This is the objective of lit. h which was introduced into the Regulation only at a very late stage.230 However, it is difficult to infer this underlying purpose still from the formulation of the present lit. h which in addition restricts its application to transactions of financial instruments. Moreover, lit. h must be seen in connection with Art. 6 (4) (e). This latter provision excludes transactions covered by Art. 4 (1) (h) from the scope of Art. 6 and exempts them from the protection generally granted to consumers for the reasons mentioned above.231 b) Covered contracts 149 Art. 4 (1) (h) covers contracts “concluded within a multilateral system which brings together

or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments, as defined by Article 4 (1), point (17) of Directive 2004/39/EC, in accordance with non-discretionary rules and governed by a single law.” The referred Directive 2004/39/EC contains a definition of “financial instruments” which shall be used under the Rome I Regulation.232 Meanwhile this Directive has been repealed and replaced by Directive 2014/65/EU233 with effect as of 3 January 2017; however references to provi226

227 228 229

230

231 232

304

Bibliography (lit. h): Biermann/Struycken, Rome I on Contracts Concluded within Multilateral Systems, NIPR 2009, 416; Einsele, Auswirkungen der Rom I-Verordnung auf Finanzdienstleistungen, WM 2009, 289; Garcimartín Alférez, New issues in the Rome I Regulation: The Special Provisions on Financial Market Contracts, Yb. PIL 2008 (2009) 245; Garcimartín Alférez, The Rome I Regulation: Exceptions to the Rule on Consumer Contracts and Financial Instruments, JPIL 2009, 85; Lehmann, Financial Instruments, in: Ferrari/Leible, Rome I Regulation (2009) 85; Mankowski, Finanzverträge und das Internationale Verbrauchervertragsrecht des Art. 6 Rom I-VO, RIW 2009, 98; M Müller, Finanzinstrumente in der Rom I-VO (2011). R Wagner IPRax 2008, 384; see also Lagarde/Tenenbaum Rev. Crit. dr. int. pr. 2008, 739. See supra para. 142. Garcimartín Alférez JPIL 2009, 98 s.; R Wagner IPRax 2008, 384; extensively Lagarde/Tenenbaum Rev. crit. dr. int. pr. 2008, 751 ss. To the legislative history see Mankowski RIW 2009, 100 s.; M Müller, Finanzinstrumente in der Rom I-VO 222 ss.; also Lagarde/Tenenbaum Rev. crit. dr. int. pr. 2008, 750 ss. As to this aspect also M Müller, Finanzinstrumente in der Rom I-VO 349 s. See also Recital 30 Rome I Regulation.

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sions in Directive 2004/39/EC shall be construed as references to the comparable provision in the new Directive.234 The definition of financial instruments will now be found in Art. 4 (1) point (15) of Directive 2014/65/EU. The definition both in the old and in the new Directive refers only further to Annex I Section C of the Directives which lists the following financial instruments that fall under the Directive and thus also under Art. 4 (1) (h) Rome I Regulation: “Section C: Financial instruments (1) Transferable securities; (2) Money-market instruments; (3) Units in collective investment undertakings; (4) Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, emission allowances or other derivative instruments, financial indices or financial measures which may be settled physically or in cash; (5) Options, futures, swaps, forwards and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties other than by reason of default or other termination event; (6) Options, futures, swaps, and any other derivative contracts relating to commodities that can be physically settled provided that they are traded on a regulated market, a MTF, or an OTF, except for wholesale energy products traded on an OTF that must be physically settled; (7) Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled not otherwise mentioned in point 6 of this Section and not being for commercial purposes, which have the characteristics of other derivative financial instruments; (8) Derivative instruments for the transfer of credit risk; (9) Financial contracts for differences; (10) Options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties other than by reason of default or other termination event, as well as any other derivative contracts relating to assets, rights, obligations, indices and measures not otherwise mentioned in this Section, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market, OTF, or an MTF; (11) Emission allowances consisting of any units recognized for compliance with the requirements of Directive 2003/87/EC (Emissions Trading scheme).” The list shows that the term “financial instruments” is to be understood in a broad sense 150 which includes all transferable securities, most kinds of options, futures, swaps and derivatives as well as contracts for differences and some further financial instruments. Also transactions which secure such contracts fall under the definition.235 Most likely most stock 233

234 235

Directive 2014/65/EU on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU of 15 May 2014, OJ L 173/349. See Art. 94 Directive 2014/65/EU. Garcimartín Alférez YBPIL 2008, 249 s.; Martiny, in: MünchKomm Art. 4 Rom I note 160.

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exchange transactions with financial products are covered. However, the definition does not extend to transactions at a commodity exchange with real goods.236 For these transactions the most closely connected law (Art. 4 (4)) is applicable which generally will be the law at the place of that exchange.237 151 Less clear is what the term “multilateral system” means. According to Recital 18 “multila-

teral systems should be those in which trading is conducted, such as regulated markets and multilateral trading facilities as referred to in Article 4 of Directive 2004/39/EC.” This Directive defined in Art. 4 point (14) the “regulated market” and in point (15) the “multilateral trading facility (MTF)” but omitted a definition of the wider term “multilateral system” which Art. 4 (1) (h) Rome I Regulation uses.238 Now the replacing Directive 2014/65/EU explicitly defines also “multilateral system” as “any system or facility in which multiple third-party buying and selling interests in financial instruments are able to interact in the system”.239 The “regulated market” and the “multilateral trading facility (MTF)” are now defined in Art. 4 (1) point (21) and (22) Directive 2014/65/EU. A “regulated market” is a “multilateral system operated and/or managed by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments – in the system and in accordance with its non-discretionary rules – in a way that results in a contract, in respect of the financial instrument admitted to trading under its rules and/or systems, and which is authorised and functions regularly and in accordance with Title III of this Directive.” The regulated market and the multilateral system must enable that the interests of a multitude of third parties in the sale and purchase of financial instruments can meet under even conditions and can lead to contracts. In essence a multilateral system is thus a regulated market organised in the kind of a stock exchange where under non-discretionary conditions financial instruments can be sold and bought through the means of contracts. The traditional floor trading at stock exchanges belongs to those multilateral systems but also and in particular the trading on electronic trading platforms as for instance the system Xetra originally developed in Frankfurt/Germany but now used at other stock exchanges, too. 152 Multilateral systems in the sense of Directives 2004/39/EC and Directive 2014/65/EU re-

quire an authorisation by the state and are under the control and supervision of the state.240 The system must further function according to rules which provide for the equal, nondiscretionary treatment of all participants. It may be questioned whether these two requirements (authorisation and equal treatment rules) are indispensable for the application of Art. 4 (1) (h) Rome I Regulation. Even if both preconditions are lacking the solution which lit. h provides for – namely that the law of the multilateral system shall govern the contracts concluded under the system – is probably more apt than the application of the law of the respective seller. At least where a market for the trade with financial instruments was organised according to certain rules and where the sellers and buyers regularly do not know each other it would be surprising if the law of the respective seller would govern the contract.

236 237 238 239 240

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Leible/Lehmann RIW 2008, 535; Thorn, in: Palandt Art. 4 Rom I note 21. See further infra para. 199 et seq. See thereto Mankowski RIW 2009, 108. Art. 4 (1) point 19 Directive 2014/65/EU. See now Art. 44 ss. Directive 2014/65/EU.

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Lit. h covers only those contracts which were concluded within a multilateral system. 153 According to the somewhat enigmatic Recital 18 it is irrelevant whether or not “regulated markets and multilateral trading facilities … rely on a central counterparty.” Evidently it does not play a role whether or not there is a single supplier of financial instruments. However, lit. h does not cover the bilateral trade of securities between individual parties nor the case that a client mandates a bank to buy securities for him or her. Only contracts concluded within the system where multiple interests concur fall under lit. a.241 c) Applicable law According to lit. h, if a valid choice of law is lacking contracts which have been concluded 154 within a multilateral system shall be governed by the law that applies to the system. Actually, lit. h presupposes that the “multilateral system …(is) governed by a single law”. In most cases the rules of the system will expressly provide that the contracts of those who are admitted to trade within the system are governed by a certain law and that the participants have to agree to that.242 Then this law is applicable due to Art. 3 Rome I Regulation which the participants have at least impliedly consented to by their participation in the system. However, for the objective determination of the applicable law it is just the question which law applies to the system. Neither lit. h nor the Directives 2004/39/EC and 2014/65/EU say a word thereto although Art. 44 (4) Directive 2014/65/EU provides that the applicable public law for regulated markets “shall be that of the home Member State of the regulated market.”243 Yet, it is the almost commonly shared opinion that the law of the state is applicable which regulates the multilateral system that falls under lit. h.244 More precisely, it is the law of the state where the multilateral system is registered or on whose territory it is essentially run.245 In case of electronic trading systems this will be the state where the organiser of the system is seated and is operating the system. d) Consumer protection Purchasers of the financial instruments covered by lit. h may also be consumers. They do not 155 enjoy the consumer protection of Art. 6. Art. 6 (4) (e) exempts contracts as defined in Art. 4 (1) (h) from the scope of Art. 6.246 It was one of the explicit aims to exempt the trade with (most) financial instruments from the ordinary consumer protection since otherwise it would be impossible to enforce the application of one single law for transactions within a multilateral system. Recital 28 sent. 1 provides: “it is important to ensure that rights and 241

242 243 244

245

246

Leible, in: NK-BGB Art. 4 Rom I note 56; Martiny, in: MünchKomm Art. 4 Rom I note 160; M Müller, Finanzinstrumente in der Rom I-VO 229; Thorn, in: Rauscher Art. 4 Rom I note 74; R Wagner IPRax 2008, 384. See R Wagner IPRax 2008, 384. The corresponding (and identical) provision in Directive 2004/39/EC was Art. 36 (4). Garcimartín Alférez JPIL 2009, 99 s.; Gebauer, in: Callies Art. 4 Rom I note 36; Magnus, in: Ferrari/Leible, The Rome I Regulation 45; Mankowski IHR 2008, 139; Mankowski, RIW 2009, 109 s.; Martiny, in: MünchKomm Art. 4 Rom I note 162; Staudinger, in: Hk-BGB Art. 4 Rom I note 9; Thorn, in: Rauscher Art. 4 Rom I note 74; R Wagner IPRax 2008, 385; similarly Einsele WM 2009, 292. See also the definition of the home state of regulated markets in Art. 4 point (55) (b) Directive 2014/65/ EU. See also Recital 28; Garcimartín Alférez Yb. PIL 10 (2008) 245; Ferrari/Ferrari/Bischoff Art. 4 note 61; Martiny, in: MünchKomm Art. 4 Rom I note 162; Staudinger, in: Hk-BGB Art. 4 Rom I note 9; R Wagner IPRax 2008, 385.

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obligations which constitute a financial instrument are not covered by the general rule applicable to consumer contracts, as that could lead to different laws being applicable to each of the instruments issued, therefore changing their nature and preventing their fungible trading and offering.” Yet, contracts concerning financial instruments outside lit. h do not necessarily fall within the scope of Art. 6. For, Art. 6 (4) (d) further exempts the “rights and obligations which constitute a financial instrument … in so far as these activities do not constitute provision of a financial service.”247 In sum, with respect to contracts concerning financial products the Regulation restricts the protection of consumers in the interest of the ease of the market. IX. Exclusion of dépeçage 156 Art. 4 (1) sent. 2 Rome Convention of 1980 still provided that “a severable part of the

contract which has a closer connection with another country may by way of exception be governed by the law of that other country.” The judge therefore could apply different law to different – severable – parts of the contract (so-called dépeçage). The Rome I Regulation has abolished this possibility as too problematic and complicated.248 The judge must determine one single law for the contract. However, the Convention itself provides for certain exceptions: in Art. 6 (4) (d) the law applicable to financial instruments may be different for the general rights and obligations under those instruments and the rights and obligations of the same instrument which “constitute provision of a financial service”; in Art. 7 (5) “where the contract covers risks situated in more than one Member State, the contract shall be considered as constituting several contracts each relating to only one Member State.” The parties are always free to split the law applicable to their contract provided they do so for reasonably severable parts of the contract. In construction clauses it is not rare that parties determine a separate law for the interpretation of the contract whereas another law governs the contract as such. For the judge this possibility has been deleted. The exclusion of a dépeçage of the objectively determined law applies as well where the Art. 4 (3) or (4) lead to the applicable law. The closer or closest connection must not only refer to a severable part of the contract; it must concern the whole contract.249 The prohibited objective dépeçage always presupposes a single contract. It does not exclude that several contracts which are linked together can be governed by different laws unless they are so closely intertwined that only one law should apply to them. X. The default rule (par. 2) 1. In general 157 Art. 4 (2) maintains the concept of the characteristic performance which was the basic

structure of Art. 4 Rome Convention, however, puts it rather in the second row. Only if the contract does not fall under one of the contract types listed in Art. 4 (1) or if the contract 247 248

249

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See further infra the comment to Art. 6 (Wilderspin). See Behlolavek note 4.92 s.; Ferrari RabelsZ 73 (2009) 769; Kessedjian, in: Basedow/Baum/Nishitani 119; Leible/Lehmann RIW 2008, 536; Magnus, in: Ferrari/Leible Rome I Regulation 31; Thorn, in: Rauscher Rom I note 21; Martiny, in: Reithmann/Martiny note 189; probably also Plender/Wilderspin note 7–029; contra Mankowski IHR 2010, 90 s.; Mankowski, in: FS Spellenberg 267 ss. Differently with extensive discussion Mankowski, in: FS Spellenberg 267 ss.

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falls under more than one of those types is the concept of characteristic performance directly applicable. On the other hand, the majority of the conflicts rules of Art. 4 (1) already follows this concept.250 Anyway do apply special rules for transport, insurance and employment contracts (Art. 5, 7 and 8). Under Art. 4 (2) Rome Convention it was rather easy to determine the applicable law in most cases; it could be taken from the contract itself.251 The new Rome I provision uses the concept of characteristic performance as a mere default rule; it creates also new problems with the inclusion of contracts mixed of two or more contract types of par. 1.252 Even where the characteristic performance can be determined Art. 4 (3) must be taken account of which gives priority to a manifestly more closely connected law.253 Where no characteristic performance can be determined, as for instance in most exchange contracts, Art. 4 (4) with its reference to the closest connection applies.254 2. Scope of the default rule a) Contracts outside par. 1 Art. 4 (2) covers all those contracts which neither fall under the list of par. 1 nor under Art. 5, 158 7 and 8. Par. 2 thus embraces contracts for the sale of rights, donation contracts, rent or lease contracts concerning movables or rights or other contracts for the mere transfer of possession of these goods, pure credit contracts, contracts on immaterial property rights or licence contracts. These contracts are governed by the law at the seat of the contract party that renders the characteristic performance. But also mixed contracts (e.g., licence contract coupled with service obligations) can fall under par. 2 if one element appears as the main purpose of the contract and shapes its qualification.255 Where the characteristic performance of contracts outside Art. 4 (1) and outside Art. 5, 7 and 8 cannot be determined the law applies with which the contract is most closely connected (Ar. 4 (4)).256 For instance, exchange contracts on movables, swaps, co-operation and joint venture contracts can fall into this category. Further, Art. 4 (3) also applies to cases which Art. 4 (2) covers. A manifestly more closely connected law supersedes the law determined according to Art. 4 (2). b) Contracts falling under more than one lit. of par. 1 The ‘pure’ concept of the characteristic performance of par. 2 is also applicable “where the 159 elements of the contract would be covered by more than one of points (a) to (h) of paragraph 1.” Although some of the points of par. 1 do not follow the concept of characteristic performance, but use other connecting factors such as the situs of immovables or the place of an auction, Art. 4 (2) evidently refers to all points of par. 1 (“points (a) to (h)”). Even if a contract combines elements of at least two of the points (a) to (h) of par. 1 the applicable law shall be determined according to the concept of characteristic performance although this concept then does not really fit. This fact and the question when “the elements of the contract” are covered by more than one of the points of par. 1 make the application of par. 2 problematic. 250 251 252 253 254 255 256

See supra para. 38 et seq. See also Giuliano/Lagarde Report 53. See thereto infra para. 41 et seq. See already supra para. 26 and infra para. 184 et seq. See thereto infra para. 199 et seq. See also infra para. 159 et seq. See thereto infra para. 199 et seq.

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160 Art. 4 (2) does certainly not intend to cover those cases where a contract falls under at least

two points of par. 1 but one of these points is evidently lex specialis. Then only this special rule is applicable; the application of par. 2 is excluded.257 This is the case with respect to auction sales of (movable) goods: only Art. 4 (1) (g) is applicable although such sales also fall under lit. a and thus under par. 2 if the Regulation is understood strictly verbally (moreover, the different connecting factors these provisions use point to different laws). Likewise, franchise and distribution contracts fall exclusively under lit. e and f although they also fulfill the requirements of lit. b (service contracts) and franchise contracts are in addition also distribution contracts. The lex specialis rule further grants precedence of lit. d (shortterm rent or lease of immovables) over lit. c (general rule for contracts on immovables).258 Moreover, the wording of par. 2 (“the elements of the contract”) suggests that what is meant is not the qualification of a single contract type under several points of Art. 4 (1). Art. 4 (2) shall rather come into play only if a contract combines elements of different contract types mentioned in par. 1.259 161 Therefore, a mixed contract whose elements fall under different points of Art. 4 (1) in the

sense of Art. 4 (2) may be for instance a contract of sale combined with installation service, a franchise or distribution contract with concrete purchase obligations or a sale of an immovable with the additional duty of the seller to remove a building or waste from the land. It should be further required for par. 2 to apply that the element of another contract type must not only be of unimportant significance.260 Thus, where in the given example the seller of a piece of land is also obliged to remove a small amount of waste or a little shed it would be surprising and inconsistent if the law at the seat of the seller would constitute the governing law because according to Art. 4 (2) the seller would effect the characteristic performance (either as seller or service provider). If this solution would be allowed to overturn the traditional and globally accepted lex situs rule enshrined in Art. 4 (1) (c), then an insignificant element of the contract would be allowed to determine the law governing the contract. The tail would be wagging the dog. In order not to violate the core principle of the Regulation, namely the application of the most closely connected law,261 in such cases the specific rule of par. 1 must apply. 162 It should be further demanded that the application of par. 2 does not contradict the pro-

tective purpose which Art. 4 (1) (e) and (f) pursue. Where a franchise or distribution contract contains considerable purchase obligations, the conflicts rule in these provisions should be maintained even if the purchase obligations constitute the economic centre of the contract. If the emphasis would be put, as Recital 19 sent. 3 appears to require, on the centre of gravity of the whole contract, then the law at the seat of the seller – and thus of the

257

258 259 260

261

310

See also Azzi D. 2008.2172; Ferrari/Ferrari/Bischoff Art. 4 note 63; Magnus ZEuP 2010, 34; Martiny, in: MünchKomm Art. 4 Rom I note 186; Martiny, in: FS von Hoffmann 290 s.; Ringe, in: jurisPK-BGB Art. 4 Rom I note 49. See also the text of lit. d: “notwithstanding point (c)”. See further Magnus IPRax 2010, 37. See Lando/Nielsen CMLR 45 (2008) 1703; Magnus, in: Ferrari/Leible, The Rome I Regulation 46 ss.; Ringe, in: juris-PK BGB Art. 4 Rom I note 47; probably stricter: Tang JPIL 4 (2008) 54 (Art. 4 (1) is applicable if one element prevails); see also supra para. 158. See supra para. 1.

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franchisor or of the principal of the distributor – would become applicable. The intended protection of the franchisee and the distributor262 would be rendered futile. Apart from the pre-mentioned special situations “the characteristic performance of a 163 ‘mixed’ contract should be determined having regard to its centre of gravity” (Recital 19). Despite a certain ambivalence of this formulation – the “centre of gravity” can refer to the characteristic performance or to the contract – the obligations and their performance that form the centre of the contract shall be regarded as characterising the contract as a whole.263 This solution will regularly lead to the law at the habitual residence (Art. 19) of the offeror of the entire contract. Where a contract combines elements of those points of par. 1 which themselves are based on the concept of characteristic performance (in essence sales [of movables] and service contracts), the advice of Recital 19 has no function because the rule of par. 2 would lead to the same law. The case is however different if the contract combines elements of par. 1 based on the characteristic performance concept with elements of par. 1 based on other connecting factors like the lex situs etc. An example is the purchase of land coupled with – not only insignificant – obligations for work or of work as for instance the purchase of a new building (including the land) from a property developer who is obliged to construct the building. Also a plant construction contract (turn-key contract) may fall into this category. Following strictly the wording of Art. 4(2), contracts mixed in this way can be governed merely by the law at the seat of the party that effects the characteristic performance. The other connecting factor, as for instance the lex situs, had to be neglected264 and could gain relevance only under Art. 4 (3). This interpretation was hardly the intention of the drafters, as Recital 19 indicates. Therefore, a contrary and preferable interpretation imports the consideration of Recital 19 that the centre of gravity of the whole contract should decide on the applicable law. Then, the conflicts rule for the dominating contract element is decisive.265 For the determination of the dominating element the comparative economic value of the elements could be used as a general though not exclusive standard.266 In the example of the purchase of a building to be erected on land the lex situs would prevail if the main value would be the value of the land and the law at the developer’s seat would prevail if valuewise the building is the core of the transaction. If the developer has its seat in another country than the property is located in, the applicable law depends on which part of the contract is the dominant one. c) Other contracts Art. 4 (2) does not cover the case that the contract combines elements of one of the points of 164 262

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264

265

266

See the reasoning to the two provisions in the Rome I-Draft of 15 December 2005: COM (2005) 650 final, p. 6. Lando/Nielsen CMLR 45 (2008) 1703; Martiny, in: MünchKomm Art. 4 Rom I note 187; Staudinger, in: Hk-BGB Art. 4 Rom I note 10. It could be argued that Art. 4 (2) does not apply to these cases; perhaps in this sense Ferrari/Ferrari/ Bischoff Art. 4 note 64. However, this interpretation would clearly contradict the wording of Art. 4 (2). In this sense Leible, in: NK-BGB Art. 4 Rom I note 64; Magnus, in: Ferrari/Leible, The Rome I Regulation 45; Martiny, in: MünchKomm Art. 4 Rom I note 191 s.; Ringe, in. juris-PK/BGB Art. 4 Rom I note 56; Staudinger, in: Hk-BGB Art. 4 Rom I note 10; probably differently Kenfack Clunet 136 (2009) 26; Villani, in: Boschiero 170 s. Also Magnus, in: Ferrari/Leible, The Rome I Regulation 45; Martiny, in: MünchKomm Art. 4 Rom I note 191 s.; Staudinger, in: Hk-BGB Art. 4 Rom I note 10.

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par. 1 and an element of a contract type not mentioned in par. 1. An example of such a case is a service contract with lease obligations, for instance the ‘lease’ of an air plane with crew or a leasing contract coupled with purchase obligations. Again, it should be decisive which part of the contract constitutes the centre of gravity of the contract. Where franchise and distribution contracts contain also elements of contract types not listed in par. 1 the intended protection of the franchisee and the distributor should be given precedence267 so that the law at their seat should prevail. 165 Also here, where necessary, the centre of gravity of the contract should be assessed primarily

in accordance with the value ratio between the different elements. The element which in respect of its economic value is the preponderant part should regularly constitute the core of the contract. This solution is supported by Art. 3 CISG under which the Sales Convention is applicable if the preponderant part of a mixed contract is a sale.268 3. The concept of the characteristic performance a) Justification and criticism 166 Under Art. 4 (2), each contract falling under this provision is governed by the law of the

place where the debtor of the characteristic performance has its habitual residence in the sense of Art. 19, which means the seat of the debtor. This rule refers to any contract to which no more special conflicts rule is applicable. The provision is applicable without limitation to contracts concluded by way of electronic communication, in particular via the internet. 167 The rule of Art. 4 (2) allows a connection between the contract and a legal system that is

adapted to the specifity of the contract but is still rather certain and foreseeable. It combines considerable flexibility with relatively high legal certainty and practicality. Generally, parties can infer from the contract itself and from its peculiar kind which law is applicable. This is easily discernible. In principle, elements outside the contract such as the citizenship of the parties or the place of the conclusion of the contract or of its performance play no role. The escape clause of Art. 4 (3) does not undermine this gain in legal certainty and foreseeability since the clause must be applied restrictively. Its new wording (“manifestly more closely connected”) shall avoid any extensive use of Art. 4 (3).269 There will be only few cases and contract types where the determination of the characteristic performance is impossible. For these cases Art. 4 (4) helps out with the most closely connected law.270 168 The father of the modern concept of the characteristic performance was the Swiss scholar

Adolph F. Schnitzer (1889–1989); the concept was further developed by the Swiss scholar Frank Vischer (1923–2015).271 The Swiss Federal Court had accepted this concept very early.272 The concept proved itself in practice and found its way into the Swiss Act on Private 267 268 269 270 271

312

See also supra para. 124 and 135. See further Magnus, in: Staudinger Art. 3 CISG note 14, 21. See thereto infra para. 184 et seq. See thereto infra para. 199 et seq. See Schnitzer, Handbuch des internationalen Privatrechts unter besonderer Berücksichtigung der schweizerischen Gesetzgebung und Rechtsprechung vol. II (2nd ed. 1944) 513 ss.; Vischer, Internationales Vertragsrecht (1962) 108 ss. To earlier and less successful predecessors see Mankowski, in: FS Siehr (2010) 434 s.

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International Law of 1989, where Art. 117 (2) contains the general principle of the characteristic performance and par. (3) contains a list of conflicts rules for specific contract types.273 Similar catalogues of the rules applicable to specific contract types were enacted, among other countries, in Austria and the former German Democratic Republic.274 The concept of the characteristic performance is often justified with the argument that the 169 party who effects the characteristic performance has regularly to fulfill the more difficult obligations which require a more intensive Regulation than the obligations of the other party who generally merely pays; further, the debtor of the characteristic performance often acts on a professional basis and often for a multitude of cases; he or she is therefore more intensely affected by the applicable law than the counter-party.275 Its greatest advantage and justification is however its practicality. It allows the easy and quick determination of the applicable law for the great majority of contract cases. Criticism of the concept of characteristic performance has never been completely silenced.276 170 In particular, a systematic preferential treatment of the professional provider of the characteristic performance cannot be denied because the concept regularly leads to the application of the law of this party; this party has the advantage that the own law is applicable (“a ‘home game’ of the marketer”).277 In relation to consumers such preference cannot be justified; however, Art. 6 Rome I now compensates this shortcoming of the concept of characteristic performance considerably better than its predecessor, Art. 5 Rome Convention. The ‘consumer problem’ does not prove that the concept of characteristic performance is generally inappropriate in order to determine the law with which the contract is most closely connected.278 It merely shows that the basic concept requires necessary additions which remove or at least reduce its shortcomings. It is also no convincing argument against the concept that in certain cases a characteristic 171 performance is lacking or cannot be determined or that sometimes the contract is more closely connected with another law.279 These examples demonstrate limits of the concept of characteristic performance but do not prove its principal unsuitability. Moreover, Art. 4 (3) and (4) Rome I – like already Art. 4 (1) and (5) Rome Convention – take account of these special situations. In sum, the concept of characteristic performance constitutes a solid fundament for the determination of the law applicable to contractual relations. It combines 272 273 274

275

276

277 278

279

For the first time: BG SchweizJbIntR 5 (1948) 113 s.; finally in BGE 78 II 74. See thereon Heini/Keller/Kren Kostkiewicz Art. 117 note 1 ss.; Vischer/Oser/Huber 163 ss. See the former §§ 36 ss. Austrian Act on Private International Law; § 12 Act on the Application of Laws of the GDR. See in particular von Hoffmann, in: Lando/von Hoffmann/Siehr 8; Kropholler § 52 III 2a; Mankowski, in: FS Siehr (2010) 436 ss. Se, e.g., Gunst, Die charakteristische Leistung: zur funktionellen Anknüpfung im internationalen Vertragsrecht Deutschlands, der Schweiz und der Europäischen Gemeinschaft (1994) 103 ss.; Juenger RabelsZ 46 (1982) 75 ss.; Kaye 188 ss.; Morse YbEurL 2 (1982) 326 ss.; stating – but rejecting – further criticism: Mankowski, in: FS Siehr (2010) 441 ss. Mankowski, in: FS Siehr (2010) 436. As to the defence of the concept see Vischer, in: Liber amicorum Droz 499 ss.; Vischer/Oser/Huber 144 ss.; also Mankowski, in: FS Siehr (2010) 433 ss (conclusion at 462). In this sense, for instance, Juenger RabelsZ 46 (1982) 75 ss.; Kaye 188 ss.

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legal certainty and foreseeability with sufficient flexibility and is in practice easy to apply.280 The principles which the courts and legal doctrine developed in the interpretation of the concept under Art. 4 Rome Convention can and should be resorted to also for the interpretation of the concept under Art. 4 (2) Rome I Regulation. 172 Unlike Art. 4 (2) Rome Convention the present Art. 4 (2) Rome I Regulation does no longer

establish an express and rebuttable presumption in favour of the law at the seat of the provider of the characteristic performance.281 Yet, in substance the new provision does not mean anything else. For, if there exist manifestly closer relations to another law than that determined by Art. 4 (2) Rome I Regulation this other law has to be applied (Art. 4 (3)). Thus, the solution found under the basic rule is not necessarily the final result but must be corrected in respective cases. As to the case that the characteristic performance cannot be determined, see infra para. 178 and 199 et seq. b) Qualification 173 Under the Rome I Regulation the concept of characteristic performance lost some of its

significance as primary rule for the determination of the applicable law. Nonetheless, to a certain extent it still requires to establish categories of contract types. This qualification has to be done uniformly in a European-autonomous way. This now follows from the fact that the Regulation is part of European Community law.282 Already the Rome Convention prescribed a uniform interpretation (Art. 16 Rome Convention) and thus a uniform way of qualification. It is not admissible to interpose conflicts rules for the purpose of qualification because that could not be done without pre-deciding the question. 174 The qualification is possible only for the entire contract. A dépeçage of the objectively

determined statute of the contract is no longer permitted.283 Furthermore, the main purpose of the contract decides to which contract type (and thus which party carries out the characteristic performance) the contract at hand belongs. c) The contents of the characteristic performance 175 Like the Rome Convention the Regulation does not define the characteristic performance.

However, the Regulation follows insofar the same concept as the Rome Convention. Under it the characteristic performance is that performance that gives the contract its specific character, distinguishes it from other contract types and allows its categorisation as, for instance, a sale, a lease or a licence; very often, though not exclusively it will not be the payment that characterises the contract.284 The term ‘characteristic performance’ intends to take account of the specific economic function of the respective contract. According to the Report by Giuliano/Lagarde “(t)he concept of characteristic performance essentially links the contract to the social and economic environment of which it will form a part.”285 If this 280

281 282 283 284

285

314

See also Mankowski, in: FS Siehr (2010) 433 ss. (462); Martiny ZEuP 1995, 76; Martiny, in: MünchKomm Art. 4 Rom I note 171. See to this character under the Rome Convention Giuliano/Lagarde 54 s. See supra Introduction para. 71 et seq. (Magnus); probably also Reithmann/Martiny/Martiny note160. See supra para. 156. Ferrari/Ferrari/Bischoff Art. 4 note 65; Hohloch, in: Erman Art. 4 Rom I note 32; Leible, in: NK-BGB Art. 4 Rom I note 63; Martiny, in: MünchKomm Art. 4 Rom I note 172; Thorn, in: Palandt Art. 4 Rom I note 22. See Report at Art. 4 para. 3.

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formulation is meant to determine the characteristic of the contract in accordance with the economic function it shall serve in the community or social environment where the contract shall be used then it is probably nothing else than a modern description of the closest connection for contractual relations.286 Anyway, it should not be overlooked that the actual connecting factor is the seat of the characteristically performing party. Essential for the determination of the characteristic performance is the contract type and the 176 allocation of duties and rights which according to the parties’ agreement – whether valid or not – is evidently intended at the time of conclusion of the contract. Where the agreement and the later factual practice contradict each other (for instance, contrary to the agreement the branch performs the contract instead of the central administration), then in principle the agreement takes precedence unless the parties have agreed to modify their contract – in the example the central administration remains decisive.287 Otherwise a party could unilaterally change the applicable law. Frequently the characteristic performance is the typical professional conduct of the party who carries it out. This is however no prerequisite of the characteristic performance.288 A private person can also effect the characteristic performance, for instance by letting a car to another or by selling a right. The following basic rules apply for the determination of the characteristic performance 177 unless the specific conflicts rules of Art. 4 (1), 5, 7 or 8 apply: – In case of contracts with unilateral obligations of one party only this party effects the characteristic performance.289 The same is true for contracts where the main performance (e.g. donation) is gratuitous.290 – Synallagmatic, non-gratuitous contracts are generally characterised by the performance in kind, not by the performance in money.291 However, in rare cases also the payment obligation can characterise the contract, for instance the lending of money in lending contracts.292 – Complex contracts which provide for performances in kind by both parties will often fall within the scope of Art. 4 (4) because a single characteristic performance cannot be determined.293 Yet, it is not principally excluded that even in such cases the performance 286

287 288

289

290

291

292

293

Critical to the “socio-economic function” Mankowski, in: FS Siehr (2010) 440 s. with references to further criticism. See already Report Giuliano/Lagarde Art. 4 para. 3; Dicey/Morris/Collins (eds) note 32–116 s. Also von Hoffmann/Thorn § 10 note 47; Leible, in: NK-BGB Art. 4 Rom I note 63; partly differently Kegel/ Schurig § 18 I 1d. See Report Giuliano/Lagarde Art. 4 para. 3; Dicey/Morris/Collins (eds) note 32–114; Hohloch, in: Erman Art. 4 Rom I note 32; Reithmann/Martiny/Martiny note 165; Thorn, in: Rauscher Art. 4 Rom I note 90, 97. See Hohloch, in: Erman Art. 4 Rom I note 32; Reithmann/Martiny/Martiny note 156; Ringe, in: jurisPK Art. 4 Rom I note 51. General opinion: see already Giuliano/Lagarde Art. 4 para. 3; Hohloch, in: Erman Art. 4 Rom I note 32; Martiny, in: MünchKomm Art. 4 Rom I note 172; Ringe, in: jurisPK Art. 4 Rom I note 50; Thorn, in: Rauscher Art. 4 Rom I note 80. von Hoffmann/Thorn § 10 note 46; Martiny, in: MünchKomm Art. 4 Rom I note 172; in detail to loan contracts see infra para. 329 et seq. See infra para. 202.

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of one party characterises the contract, for instance, if the economic weight or the purpose of this performance constitutes the centre of gravity of the contract. Then this is the characteristic performance. The German Supreme Court held that in a settlement in which a party waived all rights for the violation of a patent through the other party this was the characteristic performance, because the settlement obliged the other party only to pay a certain sum of money and to withdraw its claims before certain courts.294 178 Where it is impossible to determine the characteristic performance of a contract Art. 4 (4)

applies (see infra para. 199 et seq.) As to the characteristic performance in regard of the different types of contract see infra para. 235 et seq. d) Territorial connection of the characteristic performance 179 The characteristic performance alone does not lead to the applicable national contract law.

The Regulation creates the necessary territorial connection – like the Rome Convention – by reference to the law of the place where the provider of the characteristic performance has its habitual residence in the sense of Art. 19 Rome I Regulation. Professionally active persons have their habitual residence at their principal place of business, companies and other legal persons at their place of central administration. Only private persons have their habitual residence where they regularly live.295 Therefore, the seat of the person is relevant that effects or is obliged to effect the characteristic performance. According to the basic idea of the concept of characteristic performance the legal environment at this place is generally most closely connected with the contractual relationship between the parties.296 This basic rule applies as well to transactions that are communicated electronically, in particular via the internet.297 Where the server is located is irrelevant.298

180 The habitual residence in the sense of Art. 19 can regularly be recognised when the contract

is concluded. This permits the relatively easy and safe determination of the applicable law in advance even without an agreed choice of law. Furthermore, all contracts which a characteristic performer concludes are governed by the same law.299 An export business can regularly trust that the own law is applicable to all its export contracts.300 181 Under the concept of the characteristic performance the determination of the applicable

contract law does no longer depend on casual elements such as the place of conclusion of the contract or on elements which can be difficult to determine such as the place of performance or the citizenship of a party.301 On the other hand, what is relevant is not the seat of the debtor as such but only the seat of the debtor of the characteristic performance. This seat decides alone and for the whole contract.302 Other connecting factors do not play any role for the application of Art. 4 (2). 294 295 296 297 298 299

300 301

316

BGH RIW 2010, 65. See further infra the comment to Art. 19. See Report Giuliano/Lagarde Art. 4 para. 3; also supra para. 169. Mankowski RabelsZ 63 (1999) 220 ss.; Martiny ZEuP 1999, 259. See also Mankowski RabelsZ 63 (1999) 226 s.; Reich/Nordhausen note 1103. Lagarde Rec. crit. dr. int. pr. 1991, 308; Martiny, in: MünchKomm Art. 4 Rom I note 171; Thorn, in: Rauscher Art. 4 Rom I note 82. See thereto also Mankowski, in: FS Siehr (2010) 458 s. See already the Report Giuliano/Lagarde Art. 4 para. 3.

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e) The relevant date The decisive point of time for the determination of the objective contract statute is generally 182 the time of the conclusion of the contract.303 This can be indirectly inferred from Art. 19 (3) which for the determination of the habitual residence refers to that point of time. The circumstances at the conclusion of the contract therefore decide which performance is the characteristic one and where its debtor is seated in the sense of Art. 19. Any later modification, for instance, the relocation of the seat, is principally irrelevant.304 The contract statute is immutable. However, the parties may alter the law applicable to their contract at any time by agreement. Where the parties alter the contractual obligations – for instance, consensual termination of the contract and restitution of exchanged performances – the decisive point of time for the determination of the law applicable to the new obligations is the time of the agreement on the alteration. But the originally applicable law will often remain in force, either as implied choice or via Art. 4 (3) as manifestly more closely connected law. The principle of immutability of the governing contract law applies likewise to long-stan- 183 ding contract relationships305 unless the parties alter the applicable law by – even implied – agreement. In cases where the relevant habitual residence has been changed shortly after the conclusion of the contract this may suggest that the parties intended that the future permanent seat should be the relevant seat for the determination of the applicable contract law.306 XI. The escape clause (par. 3) 1. In general Even if the law applicable to the contract in question has been determined according to 184 Art. 4 (1) or (2) there may be cases where the contract has a considerably closer connection to a law different from that following from par. 1 or 2. A legislative example of such a case is Art. 4 (1) (d) in relation to Art. 4 (1) (c): the common lex domicilii of the parties of a shortterm tenancy of an immovable prevails over the general lex situs principle that normally governs contracts on immovables. Another example would be the case that parties who are seated in the same state conclude – in their home country before a notary public there – a contract on a foreign immovable. In such a case of a definitely closer connection to another than the actually applicable law, Art. 4 (3) allows the application of that other, “manifestly more closely connected” law. The provision constitutes an important general element of structure of the Rome I Regulation which re-occurs also in other conflict rules, namely in Art. 5 (3), Art. 7 (2) sent. 3, Art. 8 (3). It provides an escape clause which enables a balance between fixed conflict rules and the sufficiently flexible determination of the applicable law in the individual case. 302 303

304

305 306

Report Giuliano/Lagarde Art. 4 para. 3. See Ferrari, in: Ferrari/Leible, The Rome I Regulation 64; Ferrari/Ferrari/Bischoff Art. 4 note 71; Martiny, in: MünchKomm Art. 4 Rom I note 199; PWW/Brödermann/Wegen Art. 4 Rom I note 19; Thorn, in: Palandt Art. 4 Rom I note 22; also supra para. 32 et seq. See Giuliano/Lagarde Art. 4 para. 3; Dicey/Morris/Collins (eds) note 32–117; Ferrari, in: Ferrari/Leible, The Rome I Regulation 64; Martiny, in: MünchKomm Art. 4 Rom I note 199. Also Ferrari/Ferrari/Bischoff Art. 4 note 71; Martiny, in: MünchKomm Art. 4 Rom I note 200. See also supra para. 34 et seq.

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185 Art. 4 (3) thus provides a corrective if the rules of par. 1 and 2 prove to be too rigid and do not

lead to the law with which the contract in reality is most closely connected. Already the Rome Convention contained such an escape clause (Art. 4 (5)). The Giuliano/Lagarde Report to the Rome Convention stated that the escape clause was “the inevitable counterpart of a general conflict rule intended to apply to almost all types of contract.”307 The CJEU held that the clause is applicable “where it is clear from the circumstances as a whole that the contract is more closely connected with a country other than that determined on the basis of those criteria of (now Art. 4[1] and [2] Rome I Regulation), it is for the court to disregard those criteria and apply the law of the country with which the contract is most closely connected.”308 In the same vain, Art. 4 (3) Rome I Regulation is applicable if the entirety of circumstances clearly speak in favour of another law than that determined by Art. 4 (1) or (2). And although Art. 4 (3) can be applied in exceptional cases only, the provision must nonetheless be checked in each single case whether there is reason to apply it.309 For Art. 4 (3) also realises the central aim of the Regulation that the most closely connected law be applied. The wording of Art. 4 (3) Rome I Regulation is almost verbally identical with the wording of the respective escape clause in the Rome Convention. The Rome I Draft of 2005 had proposed to delete the escape clause in order to achieve stricter legal certainty. However, this would have been too great a sacrifice of flexibility and would have offended the principle of the closest connection. The final version of the Regulation therefore re-introduced the escape clause.310 186 Contrary to the Rome Convention the present escape clause of Art. 4 (3) does not only

require a closer connection but a manifestly closer connection which means a significantly closer connection than that which the ordinary conflict rule presupposes.311 The text of the Regulation has increased the threshold from which on a judge, arbitrator or other practitioner may deviate from the regular conflict rule and replace its result by a more closely connected law. However, already under the Rome Convention it was widely accepted that the escape clause required connecting circumstances which significantly prevailed over the connecting factors of the regular conflict rules.312 One or few ephemeral, weak connecting points did not suffice to rebut the presumptions of the ordinary conflict rules. This view is even more appropriate for the present Art. 4 (3).313 The closer connection must prevail over the ordinary conflict rule in such a clear and unambiguous manner that it is evident that this connection and not the ordinary rule leads to the law that is appropriate for the contract in question. Insofar, there is a remarkable difference between Art. 4 (3) and (4). Under par. 4, even a slight balance of connecting factors in favour of one of the involved laws triggers the application of this law since under this provision the decision for one of these laws cannot be avoided. Under par. 3 the actually applicable conflict rule is superseded only if there are 307 308

309 310 311 312

313

318

Report Giuliano/Lagarde Art. 4 para. 7. ECLI:EU:C:2009:617 (C-133/08, Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV and MIC Operations BV); see thereto Mankowski IHR 2010, 89 ss. Also Spickhoff, in: Beck-OK BGB Art. 4 Rom I note 79. See also Recital 16; further supra para. 9. See supra para. 9. See for instance Hoge Raad Ned. Jur. 1992 no. 750; BGH NJW 1999, 2242 (2243); BGH NJW-RR 2005, 206; Dicey/Morris/Collins (eds) note 32–122; Hohloch, in: Erman12 Art. 28 EGBGB note 17; von Hoffmann/Thorn § 10 note 59; Martiny, in: MünchKomm4 Art. 28 EGBGB note 92. See also Thorn, in: Palandt Art. 4 Rom I note 29.

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clearly (“manifestly”) prevailing indicia for the application of the more closely connected law. Otherwise the conflict rules of par. 1 and 2 would be almost useless and the legal certainty which they shall ensure would be sacrificed in favour of an almost unforeseeable discretion of the decider in each single case. In sum, the escape clause must not be applied extensively but as an exception rather restrictively.314 For those countries which applied the escape clause of the Rome Convention already in a 187 restrictive way the new formulation (“manifestly”) does not really change the scene. The prior practice can be continued. Those countries which applied the escape clause more loosely must however change their practice. Contrary to the Rome Convention under Art. 4 (3) Rome I Regulation the possibility of 188 dépeçage is excluded.315 The closer connection must concern the whole contract. A closer connection of a separate part of the contract to another than the orderly determined law is irrelevant. 189

Art. 4 (3) ranks always before par. 4, whereas par. 1 and 2 rank before par. 3. 2. Criteria of the closer connection

In order to establish a closer connection, there is always a comparison necessary: the in- 190 tensity of the link to the regularly determined law must be compared with the intensity of the links to the law that may be more closely connected. As a result of the comparison the intensity under par. 3 must clearly exceed that under par. 1 or 2. According to the text of par. 3 this comparison must take account of “all the circumstances of the case”. The judge, arbitrator or other decider must weigh all pros and cons speaking for and against a closer connection and decide on an overall assessment.316 Although par. 3 does not expressly say this, most likely all circumstances shall count which are generally relevant for the determination of the law applicable to a contract. Support derives from Recital 20 which provides that “account should be taken, inter alia, of whether the contract in question has a very close relationship with another contract or contracts.” The formulation “inter alia” militates in favour of an understanding that all circumstances should be considered that are normally relevant for the objective determination or the tacit choice of the law applicable to the contract.317 According to a contrary view certain circumstances like the citizenship of the parties, the place where the contract was concluded and the language of the contract shall not matter because, according to this view, they are not sufficiently related to the exchange of

314

315 316 317

Hohloch, in: Erman Art. 4 Rom I note 44; Leible, in: NK-BGB Art. 4 Rom I note 71; Martiny, in: MünchKomm Art. 4 Rom I note 287; Spickhoff, in: Beck-OK BGB Art. 4 Rom I note 79; Thorn, in: Rauscher Art. 4 Rom I note 135; also still to the Rome Convention: ECLI:EU:C:2009:617 (C-133/08, Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BVand MIC Operations BV); BGH NJW-RR 2005, 206. Martiny, in: MünchKomm Art. 4 Rom I note 290; Okoli JPIL 9 (2013) 530 s. See also Hohloch, in: Erman Art. 4 Rom I note 45. See also Ferrari/Ferrari/Bischoff Art. 4 note 78; Martiny, in: MünchKomm Art. 4 Rom I note 290; Ringe, in: juris-PK Art. 4 Rom I note 56; Staudinger, in: Hk-BGB Art. 4 Rom I note 11.

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performances under the contract.318 However, par. 3’s reference to “all the circumstances of the case” does not mention, and does not allow for, any limitation. Therefore, all those circumstances have to be taken into account from which a connection to a specific law can be inferred. Like for the tacit choice of law the citizenship, the place of the contract’s conclusion, the place of performance, language, currency as well as all other relevant facts belong to those circumstances, even if one such circumstance alone may not have much weight.319 191 The conflict rules of par. 1 and 2 must step back in particular when a number of indicia point

to another law than that determined by par. 1 or 2. By their cumulation even weak indicia like citizenship, contract language, place of contracting and currency can gain sufficient weight to supersede the regularly applicable law.320 The different weight of certain strong and certain weak indicia has the same importance here as for the tacit choice of law. The weight given connecting factors there can be used as well for Art. 4 (3). Therefore, none of the mentioned indicia alone does suffice to challenge the outcome of the general conflict rules under par. 1 or par. 2. This is also true for the habitual residence or place of business of the receiver of the characteristic performance. Neither alone nor in combination with few weak connecting factors such as the contract language or the contract currency are they able to overcome the weight of the seat of the party that effects the characteristic performance. However, where, for instance, the seat of both parties and the place of conclusion of the contract lead to the same law, then this law regularly displaces the lex rei sitae principle of Art. 4 (1) (c); Art. 4 (1) (d) exemplifies this for the case of a private short-term tenancy (regularly for holiday purposes).321 The general conflict rule of par. 1 (c) remains on the other hand unaffected if the object of a long-term tenancy is situated in one country whereas the relevant seats of the parties are in another or in different countries.322 In this latter case the weight of the connection to the country where the tenancy is continuously performed is generally still stronger than the common domicile of the parties. However, if few further (weak) elements point to this latter law (for instance contract language, place of negotiation and currency) the tide changes and it will be regularly justified to apply the lex domicilii communis as the manifestly closer connected law. The German Federal Court has held (still under the prior law) that French law governs the contract between a German photographer (seated in Germany) and a France-based company to take pictures of the company’s hotel in France for advertising purposes – primarily in France.323 Although actually the German seat of the photographer would have determined the applicable contract law, in the Court’s view the links to France were definitely stronger and finally – and in my view: correctly – led to the application of French law.324 If on the other hand the New York office of an English law firm advises a New York based client in New York on English law, New York law should govern the contract.325 For, if a branch performs the contract it is generally the place of that 318

319 320 321

322 323 324

320

See Thorn, in: Rauscher Art. 4 Rom I note 136, 140, 143, 145; cautiously also Thorn, in: Palandt Art. 4 Rom I note 29. See also Art. 3 para. 188 (Mankowski). Also Leible, in: NK-BGB Art. 4 Rom I note 74. See (under the former law) BGH IPRax 1990, 318 and already Giuliano/Lagarde Art. 4 note 4; Reithmann/Martiny/Martiny note 172. See (under the former law) OLG Düsseldorf NJW-RR 1998, 1159. BGH NJW 2015, 1690. BGH NJW 2015, 1690 para. 43.

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branch that is the relevant seat (Art. 19 (2)). The facts that an English mother company exists and that advice on English law was owed are not weighty enough to prevail over the fact that the seat of the characteristic performer was in New York, especially since this fact is further strengthened by the seat of the receiver of that performance as well as the place of performance being in New York. The determination of the applicable law according to the pure concept of characteristic 192 performance (par. 2) is displaced by a manifestly closer connection if, for instance, the foreign branch of the characteristically performing party fulfills the contractual obligations while the main seat of this party and the seat of the other party as well as the place of performance are all located in the same country.326 The same solution should apply where the debtor of the characteristic performance is seated in a foreign country whereas the seat of the creditor, the place of the conclusion and the performance of the contract lie all in the same (other) country, in particular if further activities are owed to be fulfilled there, e.g. installation, training, instruction etc.327 The solution under the concept of characteristic performance has also been held to be displaced in the case of a sale of a payment claim:328 there the seller had its seat in Germany, the buyer on the Philippines; the claim was secured by a mortgage on a plot of land in France, in which the buyer is particularly interested; the sales contract had been concluded in France before a French notary public; French advocates represented the parties; the contract language was French and the currency was the then French franc. The Court was justified in applying French law to the contract. In a similar vain, in case of immediately performed transactions (in particular sales) against cash on the spot the applicable law is regularly the law of the place, where the exchange is carried out.329 Where an agent concludes a contract at the seat of the contract partner and the contract is to 193 be performed there while the principal is seated in another country the regular rule under par. 1 or 2 is generally not displaced.330 Equally, the regular conflict rules of par. 1 and 2 remain principally unaffected, if the contract concerns the supply of an industry plant or a large building project (e.g. underground) or other projects of large dimensions. The mere dimension does not matter. The place of the building project as such does not suffice to supersede the rule of par. 1 (b). The law at the seat of the building company governs the building contract wherever the building is erected,331 even if the foreign state is the other contract party.332 The special conflict rules of Art. 4 (1) and (2) may also be superseded by par. 3 if “the 194 contract in question has a very close relationship with another contract or contracts.”333 If the other – linked – contract is governed by a specific law this law may also apply to the 325 326 327

328 329 330 331 332 333

Differently Dicey/Morris/Collins (eds) note 32–127 (English law should apply). See already Lagarde Rec. Crit. 1991, 310; also von Hoffmann/Thorn § 10 note 59. Differently under the Rome Convention: Hoge Raad Ned. Jur. 1992 no. 750 and thereto Rammeloo IPRax 1994, 243 et seq.; Martiny ZEuP 1995, 77 et seq. BGH NJW-RR 2005, 206. See Thorn, in: Palandt Art. 4 Rom I note 29. Hoge Raad Ned. Jur. 1992 no. 750 (under the Rome Convention). See also BGH RIW 1999, 456 (under the former law); Leible, in: NK-BGB Art. 4 Rom I note 74. Thorn, in: Rauscher Art. 4 Rom I note 147. Recital 20.

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contract in question. This can be the case where there is a main contract on which the contract in question depends. Then, the law applicable to the main contract ‘infects’ the dependent contract and applies to it.334 Such accessoriness is sometimes though not necessarily accepted where the parties concluded a frame contract which is executed by single contracts.335 However, with respect to distribution contracts the courts regularly apply an own law (the CISG or else) to the single sales transactions between the principal and the distributor even if another law governs the distribution contract.336 On the contrary, an accessory connection can be considered where a contract merely serves the aim to secure another transaction or has else a mere supporting function for another contract. For instance, a sub-broker contract has been held to follow the law of the main broker contract337 although the contract with a broker and the intermeddled contract are generally to be dealt separately and each follows its own law.338 The French Cour de cassation held a guarantee of the son for sums owed by the mother to her pensioners’ home to be governed by the law applicable to the home’s claims.339 Likewise, English courts held that a guarantee for a charterparty was governed by the law of the charterparty.340 However, the accessory determination of the applicable law of different though linked contracts is the exception and should be used cautiously. The fact alone that several contracts are concluded simultaneously in one document or at the same time does not suffice.341 Always a “very close relationship” between the leading and the following contract is required (Recital 20). This relationship can concern the legal or/and the economic side of the two or more contracts. Therefore, a preliminary contract will generally be governed by the law of the main contract.342 Regularly though not exclusively (guarantee and other securing contracts) will it be necessary that the parties of the different contracts are identical.343 Partly it is argued that the identity of the parties is mandatory because otherwise the accessory connection would go at the expense of a third party.344 However, it is not the question of advantaging or disadvantaging a third party. The law applicable to each of the involved contracts between the same or different parties has to be determined separately first in accordance with Art. 4 (1) or (2); then, it must be examined, again separately for each single contract, whether the escape clause applies. If there exists a “very close relationship” between two or more contracts so that the one contract should be governed also by the law applicable to the other contract, the objective determination may require the application of the law of the leading contract to the following contract. The ‘third’ party which is not party to the leading contract need not consent to this 334

335

336 337 338 339 340 341 342

343 344

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See Ferrari/Ferrari/Bischoff Art. 4 note 79; Leible, in: NK-BGB Art. 4 Rom I note 76; Martiny, in: MünchKomm Art. 4 Rom I note 294 et seq.; Ringe, in: juris-PK Art. 4 Rom I note 57; Thorn, in. Palandt Art. 4 Rom I note 29; Vischer/Huber/Oser (eds) note 270 et seq. See Martiny, in: MünchKomm Art. 4 Rom I note 302; Thorn, in: Palandt Art. 4 Rom I note 29; differently OLG Düsseldorf RIW 1996, 958 (959). See, e.g., BGH NJW 1997, 3309; OLG Düsseldorf RIW 1996, 958. OLG Düsseldorf RIW 1997, 780. OGH ÖJZ 2011, 683. French Cass. civ. Clunet 139 (2012) 1335 with crit. note Parisot. Star Reefers Pool Inc. v. JFC Group Ltd. [2011] EWHC 339 (Comm). von Hoffmann/Thorn § 10 note 62; Martiny, in: MünchKomm Art. 4 Rom I note 298. Ferrari/Ferrari/Bischoff Art. 4 note 80; also still to the Rome Convention: Czernich/Heiss/Czernich Art. 4 note 32. Martiny, in: MünchKomm Art. 4 Rom I note 297. See Martiny, in: MünchKomm Art. 4 Rom I note 297; Thorn, in: Rauscher Art. 4 Rom I note 150.

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law345 because the determination of the applicable law does not depend on the parties’ subjective will. Nor ‘disadvantages’ the application of the more closely connected law a party. Yet, certainly the interests of the ‘third’ party – as well as the interests of the other party – have to be taken into account when correcting the ordinary conflict rule of par. 1 or 2. In respect of securing contracts (guarantee, surety etc.) therefore often the separate determination of the applicable law will prevail.346 If a contract is invalid under the law to which the regular conflict rule leads this circumstance 195 as such is in no case sufficient to apply another law via Art. 4 (3). 3. Relevant point of time Art. 4 (3) does not expressly mention the point of time that is relevant for the determination 196 of the manifestly closer connection. However, as generally, principally the time of the conclusion of the contract counts.347 The contract statute as such is immutable. Nevertheless, later events (a new habitual residence, contractual modification of the place of performance) can influence the overall assessment if they evidence that the contract from its conclusion on was intended to be related to a different law.348 4. Consequences Where a manifestly closer connection to another law than that designated by par. 1 or 2 197 exists this other law applies to the whole contract. Where the connection is closer but not manifestly closer the law, to which par. 1 or 2 leads, remains applicable. In such a case it is not admitted to apply Art. 4 (4) and resort to the closest connection. Art. 4 (4) is applicable only if a determination of the relevant law is neither possible under Art. 4 (1) nor under Art. 4 (2).349 Par. 3 must be applied if there is a manifestly closer connection. The decider has only 198 discretion whether the connection is manifestly closer. Furthermore, par. 3 must be applied ex officio.350 A party may but need not expressly invoke par. 3. XII. The closest connection (par. 4) 1. In general As the last resort for the objective determination of the law applicable to a contract Art. 4 (4) 199 refers to the law of the country with which the contract is most closely connected. Actually, the provision formulates the basic principle of all private international law and in particular the general maxim for the determination of the contract statute if the parties have not chosen 345 346

347 348 349 350

In this sense Thorn, in: Rauscher Art. 4 Rom I note 150. See Hohloch, in: Erman Art. 4 Rom I note 45; Reithmann/Martiny/Martiny note 178; Ringe, in: jurisPK Art. 4 Rom I note 57. Also Leible, in: NK-BGB Art. 4 Rom I note 78; Reithmann/Martiny/Martiny note 173. See Dicey/Morris/Collins (eds) note 33–267; also already Lagarde Rev. crit. 1991, 311. See also Recital 21. Ferrari/Ferrari/Bischoff Art. 4 note 81.

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the applicable law and if no specific conflicts rule or prevailing international convention applies. Then, contracts are governed by the most closely connected law. However, whereas the Rome Convention placed this principle formally at the beginning of its respective rule (Art. 4 (1)), the Rome I Regulation grants it a subsidiary role which only comes into play if all other connecting rules of Art. 4 (1) and (2) fail.351 The “actually too vague notion of the ‘closest connection’”352 which alone has little meaning“353 denominates the final aim the determination of the applicable law should reach. However, in view of that aim the closest connection remains important for the interpretation of Art. 4 and of the Regulation as a whole. 200 Since the Regulation does not define the notion ‘closest connection’ the term needs to be

filled and concretised.354 Recital 21 gives merely limited guidance, namely that “account should be taken, inter alia, of whether the contract in question has a very close relationship with another contract or contracts.” This corresponds verbally to Recital 20 which in turn refers to the manifestly closer connection of Art. 4 (3). From the identity of both formulations it can be inferred that for the determination of the closest connection the same connecting factors shall be considered as for the determination of the closer connection.

201 As far as Art. 4 is applicable the judge, arbitrator or lawyer must make a decision with which

law the contract is most closely connected. He or she cannot avoid the decision. There exists no further default rule for the determination of the applicable law. The decision must be made even if the connection with one law is only minimally stronger than the connection with another law – as for instance in the case of a barter contract possible. Vice versa is the determination of the closest connection always possible how minimal the preference of the closest connection before other merely closer connections may be. The decision for the closest connection is based on a balancing process which compares all relevant circumstances that connect the contract with the involved laws. Then, in weighing the weight of the connections with the different laws that one has to be selected that constitutes the closest of them. 2. Scope of application 202 Art. 4 (4) presupposes that the objectively applicable law cannot be determined according to

par. 1 and par. 2. Therefore, the contract must neither fall under one of the specific rules of par. 1 nor must it be possible to determine the characteristic performance. Also the correcting rule of the manifestly closer connection (par. 3) prevails over par. 4.355 Only if all these possibilities to determine the applicable contract law fail, par. 4 comes into play. The provision thus covers only few contract types, essentially those where both parties effect a performance which – as for instance generally in barter contracts – stamps and characterises the contract so that a single characteristic performance of one party cannot be identified.356 351 352 353

354 355 356

324

Reithmann/Martiny/Martiny note 185: “Lückenbüßer” (“gap-filler”). See to the Rome Convention Giuliano/Lagarde Art. 4 para. 4. So German Begründung BT-Drucks. 10/504 p. 78; even sharper Juenger RabelsZ 46 (1982) 72 (“non rule”); Kegel/Schurig § 6 I 4 b (“Leerformel” [“rule without content”]). See infra note 205 et seq. See supra note 26. For examples see infra note 203.

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Because in these cases the concept of the characteristic performance does not work357 a default rule is needed. As already under the Rome Convention the law of the closest connection is then the way out in order to determine the applicable contract law. Regularly it will be easy to determine whether a contract falls under one of the types 203 regulated in Art. 4 (1) or which is the applicable law under the concept of the characteristic performance of par. 2. Most contracts will be covered by these ordinary conflict rules. For Art. 4 (4) therefore only a small scope of application remains, essentially for those cases where no characteristic performance can be identified. A single characteristic performance is in particular missing where both parties are obliged to fulfill non-monetary obligations of more or less the same economic and contractual weight as in the case of a barter contract. However, exchange contracts concerning land or flats fall principally under Art. 4 (1) (c). But if the property objects are located in different countries the two leges rei sitae neutralise each other; then merely the application of the principle of the closest connection can solve the situation.358 Also for contractual settlements it is often though not necessarily impossible to determine a characteristic performance. This is also frequently the case with respect to cooperation contracts, joint ventures or publishing contracts, company contracts (as far as covered by the Regulation) as well as swaps where the concrete contract is not characterised by the duties and performance of one party alone. The same can be true for licence contracts. Likewise, a characteristic performance will often be missing in game and betting contracts.359 Then, one should not make the convulsive attempt to identify a characteristic performance where none exists. In such a case it is also no escape route to determine the characteristic performance and the applicable law for each side separately. On the contrary, the closest connection under par. 4 decides. The determination of the characteristic performance may also be impossible if several debt- 204 ors in different countries are the characteristically performing parties.360 This can be the case with an emission by a syndicate of banks (consortium agreement) from different countries unless one of the banks has clearly the lead.361 On the contrary, the determination of the characteristic performance does not fail merely because its debtor is obliged to fulfill its obligations in different countries.362 It is not the place of performance which decides but exclusively the seat (in the sense of Art. 19) of the debtor of the characteristic performance. 3. Indicators of the closest connection a) In general Under the Rome Convention it was common ground that only objective facts were relevant 205

357

358 359

360 361 362

Ringe, in: jurisPK Art. 4 Rom I note 59 et seq. (“Fehlschlagen der Regelanknüpfung” [“failure of the regular conflict rule”]). Also Thorn, in: Palandt Art. 4 Rom I note 31; Thorn, in: Rauscher Art. 4 Rom I note 156 et seq. See thereto Martiny, in: FS Lorenz 382 et seq.; Thorn, in: Rauscher Art. 4 Rom I note 162; further infra para. 563 et seq. Dicey/Morris/Collins (eds) note 32–122; Martiny, in: MünchKomm Art. 3 Rom I note 161. Similarly Dicey/Morris/Collins (eds) note 32–122. Though in this sense Dicey/Morris/Collins (eds) note 32–122.

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for the determination of the closest connection, not the presumed or hypothetical will of the parties.363 The same consideration has to be applied to the Rome I Regulation.364 206 It was further the unanimous view under the Rome Convention that the entirety of the

circumstances had to be taken into account for the determination of the closest connection. A single or isolated circumstance did not suffice.365 Art. 4 (3) expressly provides this for the escape clause. The same consideration is valid for Art. 4 (4).366 207 Finally, indications which circumstances may be relevant for the determination of the most

closely connected law can be taken from the connecting factors used in the general conflict rules of Art. 4 (1) and (2) as well as in Art. 5–7 or in special rules such as Art. 9 (3), 10 (2) and 12 (2).367 The circumstances mentioned there such as the habitual residence, the location of the contract object, the place of performance and other similar circumstances368 count also for the closest connection. In essence more or less the same factors play a role which can give an indication of a tacit choice of law.369 Anyway, the borderline to the implied choice of law is only theoretically clear but in practice regarded as fluent.370 208 The closest connection exists with that law to which after a weighing of all circumstances

the – even only slightly – preponderant indicia point. Rather often some of the most relevant indicia will neutralise each other because they exist on both sides though in contrary manner, as for instance the seat of the parties in different countries, different citizenship of the parties, separate places of performance for each party’s duties in different countries etc. Also the language and the currency give no hint to the most closely connected law if they are the same for the parties. Then, the closest connection often depends on weak connecting factors like, e.g., the place of the conclusion or negotiation of the contract. In any event the closest connection cannot be left open.371 By contrast, the manifestly closer connection in the sense of Art. 4 (3) presupposes that significantly more, and more important, circumstances than the original conflict rule requires, point at another law in order that that other law shall prevail.372 If under par. 3 no such clear prevalence can be identified then the original conflict rule remains applicable.

209 The closest connection denominates a result which must be inferred from certain indicators.

Which facts can give hints at the applicable law follows foremost from the factors which the 363

364 365

366 367 368 369 370 371 372

326

See, e.g., Audit note 802; Dicey/Morris/Collins (eds) note 32–106 et seq.; Hohloch, in: Erman12 Art. 28 EGBGB note 10; Kropholler § 52 III 5; Lagarde Rev. crit. 1991, 306; Martiny, in: MünchKomm4 Art. 28 EGBGB note 10, 89. See, for example, Reithmann/Martiny/Martiny note 188. Giuliano/Lagarde Art. 4 note 2; von Bar vol. II note 486; Dicey/Morris/Collins (eds) note 32–107; Heldrich, in: Palandt67 Art. 28 EGBGB note 2; Hohloch, in: Erman12 Art. 28 EGBGB note 10; Kropholler § 52 III 5; Martiny, in: MünchKomm4 Art. 28 EGBGB note 6. Reithmann/Martiny/Martiny note 188; Thorn, in: Palandt Art. 4 Rom I note 30. Also Reithmann/Martiny/Martiny note 188. See infra para. 215 et seq. Reithmann/Martiny/Martiny note 188; Ringe, in: jurisPK Art. 4 Rom I note 63. Reithmann/Martiny/Martiny note 188; Thorn, in: Palandt Art. 4 Rom I note 30. See supra para. 201. See supra para. 190 et seq.

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statutory provisions on international contract law use.373 In addition, there exists a group of unwritten connecting factors on whose significance there is more or less agreement.374 Further, there have to be taken into account many and not finally definable elements which may be given in the case at hand and may be decisive. For a number of connecting factors it is agreed that they have a strong or weak indicative 210 effect.375 Furthermore, the cumulation of several strong or many weak factors, that all point to the same law, regularly leads to that law. Beyond these rules the weighing and balancing of the different connecting factors depends on the circumstances of the single case; the decider has a certain degree of discretion. b) Statutory connecting factors aa) Habitual residence It is evident from a number of provisions of the Regulation that one of the central – and 211 strong – connecting factors is the habitual residence of the parties (in the sense of Art. 19) which at the same time is regularly the centre of their professional or private life.376 Art. 4 (1) and (2), Art. 5 (1) and (2), Art. 6 (1), Art. 7 (2) and Art. 10 (2) use it. In particular, the habitual residence or seat of both parties in the same country has a considerable weight for the determination of the applicable law as Art. 4 (1) (d) proves.377 This rule applies without restriction as well to transactions on the internet.378 bb) Situs of contract object The place where the object of the contract is situated does not only play a – strong – role in 212 case of transactions concerning immovables (Art. 4 (1) (c). It is also a relevant connecting factor where the object of the contract is fixed to a certain place in a similar way like for instance an enterprise or where the situs of the contract object else plays a specific role (for instance for a licence contract the country of the licence)379 unless the place of performance is located there anyway. As to the significance of the situs in case of construction contracts see infra para. 398. cc) Place of performance Already under the Rome Convention the place of performance did no longer serve as the 213 ultimate default rule for the determination of the applicable contract law (as in many laws prior to the Rome Convention). The same is true for the Rome Regulation. Only with respect to employment contracts is the place of performance (of the duties of the employee) still the primarily decisive connecting factor (Art. 8 (2)). In all other cases the Regulation uses it only in a subordinate function in Art. 12 (2) and only indirectly in Art. 5 (1) and (2): The place of 373 374 375

376 377

378 379

See infra para. 211 et seq. See infra para. 215 et seq. Also Reithmann/Martiny/Martiny note 192; Thorn, in: Rauscher Art. 4 Rom I note 155; see further infra para. 211 and 216. See also Reithmann/Martiny/Martiny note 193; Thorn, in: Palandt Art. 4 Rom I note 30. See already Giuliano/Lagarde Art. 4 para. 4 with the example that a tenancy contract on a holiday home on the isle of Elba (Italy) between two parties seated in Belgium should be governed by Belgian law. See Mankowski RabelsZ 63 (1999) 220 et seq., 230 et seq.; Reich/Nordhausen note 104 et seq. See also Kropholler § 52 III 5.

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dispatch and destination mentioned there will often be a place of performance. Thus, for the determination of the closest connection the place of performance constitutes – in particular of the main and characteristic duties under the contract – a circumstance that certainly has to be taken into account. However, its indicative effect is limited and regularly not strong.380 214 The determination of the place of performance can be problematic. Either the factual or the

legal place of performance may be relevant. The following solution should apply: Where the parties have validly fixed the place of performance this is the relevant place. In the absence of such a fixation and as far as a factual place of performance exists (where the seller has in fact delivered or the service provider in fact rendered the service etc.) this place is the relevant place of performance.381 In the remaining cases where no factual place of performance can be identified the legal place of performance decides which in turn must be determined according to the law applicable to the contract. Since the same problematic situation encounters under Art. 7 no. 1 Brussels Ibis Regulation, the same solution should be adopted. The parallelity and correlation between the two instruments requires that they should be uniformly interpreted as far as possible and as far as their purposes do not significantly differ.382 Here, the different – international-procedural and private international – context does not demand different solutions. c) Further relevant circumstances aa) Citizenship 215 In principle, today the citizenship has little meaning for the international contract law. Also

modern international conventions prove this (see, for example, Art. 1 (3) CSG) as well as European legislation (see, e.g., Art. 4 (1) Brussels Ibis). Also Art. 13 Rome I Regulation demonstrates this tendency in recognising the citizenship of the parties for the requirements of the conclusion of the contract only in a very limited manner. The citizenship thus constitutes a connecting factor that must be taken account of; however, it can gain decisive weight only in combination with further indicia. The citizenship of one party gives regularly merely a weak hint at the closest connection with the law of the state of citizenship.383 Where the parties have the same citizenship the indicative effect is slightly stronger though not necessarily decisive.384 The parties’ habitual residence or seat in the same country has much greater weight.385 Therefore, if so-called guestworkers of the same citizenship conclude contracts with each other in the country of their common habitual residence, generally the law of the latter country will apply to their contract.386

380 381 382 383

384

385 386

328

See however contra Reithmann/Martiny/Martiny note 192; Thorn, in: Rauscher Art. 4 Rom I note 155. Differently – the legal place of performance decides – Martiny, in: MünchKomm Art. 4 Rom I note 328. See also Recital 7 Rome I Regulation. Also Reithmann/Martiny/Martiny note 194; Thorn, in: Palandt Art. 4 Rom I note 30; however, for a strong indicative effect for employment contracts: BAG IPRax 1994, 123 (127 et seq.); without a qualification as strong or weak: Loussouarn/Bourel note 378–6. See for instance OLG Köln IPRspr 2000 no. 26; even for entire irrelevance KG WM 2003, 2093. Older decisions still held the common citizenship as decisive; BGH WM 1977, 793. See Reithmann/Martiny/Martiny note 194. See already OLG Düsseldorf IPRax 1984, 270.

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bb) Place of conclusion of the contract, contract language, currency There is wide agreement that the place of the conclusion of the contract, the contract 216 language and the contract currency are each weak connecting factors for the determination of the applicable law.387 In weighing all circumstances these factors must be considered; but they can only support other indicia or, where they cumulatively point all to the same law, give a hint to the applicable law. Generally even less indicative than the place of the conclusion of the contract is the place of 217 contract negotiations because that place may entirely depend on chance and must not have any relation to the later contract and its performance. However, in certain instances the place of conclusion of the contract is decisive for the 218 closest connection. This concerns transactions in particular at stock exchanges and auctions where the rule and the expectation is that the law including any specific regulations for these transactions is that of the place of the stock exchange or the auction. Also Art. 4 (1) (g) and (h) follow this rule.388 cc) Place of certification; involvement of third persons Where the valid conclusion of the contract requires that an official authority – a court, a 219 notary public, a state agency – permits or certifies the contract, this is generally a hint at the law of the place of that official activity because this law also grants the authority.389 This connecting factor has to be part of the weighing of all circumstances. Its weight depends on the concrete circumstances of the case, in particular on the purpose and the necessity of the official involvement. The involvement of third persons in the conclusion or performance of the contract (e.g., 220 representing lawyers, brokers etc.) must be taken into consideration as a – generally weak – indicator which can point, together with other indicia, to the law of the seat or place of business of such third persons. dd) Flag, home port, place of registration For contracts which concern vessels, airplanes, automobiles or other objects which are 221 generally registered the place of registration, the flag or the home port gives some indication as to the applicable contract law. Again, the weight of these connecting factors depends on the circumstances as a whole. For contracts of carriage in these vehicles the place of registration has only little importance as Art. 5 demonstrates.390 For contracts concerning the sale or lease of these vehicles normally Art. 4 (1) (a) or Art. 4 (2) applies and prevails over par. 4. ee) State as contract partner If one of the parties is a state or a state organ or state agency this has often been regarded as a 222

387

388 389 390

Also Ferrari et al./Ferrari Art. 4 Rom I note 74; Martiny, in: MünchKomm Art. 4 Rom I note 327 (for the place of the conclusion of the contract); Thorn, in: Rauscher Art. 4 Rom I note 155. See supra para. 142 et seq. and 148 et seq. Martiny, in: MünchKomm Art. 4 Rom I note 329; Reithmann/Martiny/Martiny note 201. See – at least indirectly – infra Art. 5 (Fentiman) para. 33.

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clear hint that in the absence of any choice the law of the involved state must be applied.391 The main argument was that the state is obliged to observe the own laws. However, in the field of contract states act like private persons and should be treated as such. Therefore, the fact that a state is a contract partner gives a certain though not necessarily mandatory indication as to the applicability of the law of this state.392 ff) Conduct during legal proceedings 223 From specific conduct during legal proceedings (in particular, pleading by both parties on

the basis of a specific law etc.) an express or implied choice of law of the parties may be inferred where the parties were aware that actually another law would be applicable.393 To infer also an objective choice of law from such conduct should be rejected.394 In particular, unilateral conduct of a party during litigation is no objective factor that demonstrates the connection of the involved contract with a specific law.395 gg) Choice of court-clauses, arbitration agreements 224 (Exclusive) choice of court clauses and arbitration agreements are often significant indica-

tors of an implied choice of law.396 However, if they do not lead to a subjective choice of law then they have also little meaning for the objective determination of the applicable law.397 For in such a case a clear hint to a specific law is missing. hh) Reference to a specific law; related or combined contracts 225 Where the text of a contract explicitly refers to provisions or regulations of a specific law this

fact, if not sufficient to establish a tacit choice of law,398 has also only little significance for the objective choice of law since it gives no clear hint to a specific law.399 226 Similar considerations apply if a contract refers to another contract or is related to it for

which the applicable law is already fixed as can be the case with combined or linked contracts. If in such a case no implied choice of law by the parties can be inferred,400 then the relationship between the contracts is also of rather limited value for the objective determination of the applicable law. This is in certain contrast to Recital 21 which regards “a very close relationship with another contract or contracts” as a relevant factor – though “inter alia” – for the determination of the closest connection. However, the reference to another contract or a link between contracts is also relevant for an implied (subjective) choice of law which in any event would prevail over any objective determination of the applicable contract law. 391

392

393 394 395 396 397 398 399 400

330

See, e.g., OLG Koblenz OLGZ 1975, 379; OLG Frankfurt IPRspr 1979 no. 10 b; LG Bonn NJOZ 2002, 222, 246; Kegel/Schurig § 18 I 1 d; Thorn; in: Palandt Art. 4 Rom I note 30. Also – already to the prior law – KG IPRax 1998, 280 (283); Audit note 806; von Hoffmann BerGesVR 25 (1984) 57 et seq.; Reithmann/Martiny/Martiny note 196. See supra Art. 3 para. 143 et seq. (Mankowski). However, in this sense, older decisions: BGH NJW 1962, 1005; BGH IPRax 1981, 93. Also Martiny, in: MünchKomm Art. 4 Rom I note 326. See Recital 12; further supra Art. 3 para. 115 et seq. (Mankowski). In the same sense Martiny, in: MünchKomm Art. 4 Rom I note 322 et seq. See thereto Art. 3 para. 160 et seq. (Mankowski). Similarly Martiny, in: MünchKomm Art. 3 Rom I note 286. See thereto Art. 3 para. 176 et seq. (Mankowski).

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ii) Favor negotii; market connection According to the general view it is irrelevant for the objective determination of the applicable 227 law whether or not the latter declares the contract as valid or invalid.401 This does, however, not prohibit taking account of the interests of the parties when the closest connection is determined. Generally the parties will be interested in the validity of their contract.402 The market place where the contractual transaction is conducted generally has no particular 228 importance (but for transactions at stock exchanges or auctions see supra para. 142 et seq. and 148 et seq.). In principle, it is a weak connecting factor which in combination with other factors may yet gain significant weight. In certain contexts, for instance cash sales on the spot, this factor can lead to the law in force there instead of the actually indicated law (law at the seat of the seller). This will however result already from the application of Art. 4 (3) not from Art. 4 (4).403 4. Relevant point of time Art. 4 (4) does not mention at which time the closest connection must exist. Here again the 229 general rule of Art. 19 (3) should be applied: The circumstances at the time of the conclusion of the contract are decisive;404 they give the contract their imprint. The Report of Giuliano/ Lagarde to the Rome Convention stressed that later circumstances could be recognised, though.405 However, this statement probably meant that a later change of circumstances could be taken into account if it could shed light on the closest connection at the time of the conclusion of the contract.406 A change of the applicable law in the actual sense (‘change of statute’) is not admitted since it would be strange if the objective determination could lead to a sequence of different laws applicable to the contract.407 At the time when the dispute has to be decided it must be inferred from the entirety of all then known circumstances with which law the contract is most closely connected. This can have importance for long-standing contractual relationships for which connecting factors (e.g., the seat of a party) can have changed since the conclusion of the contract. Here, it must be concluded from the circumstances whether under an overall perspective the closest connection existed to the law of the prior or the later seat – or to another law. 5. Consequences Where the applicable law has been determined via Art. 4 (4), the most closely connected law 230 401 402 403 404

405 406 407

Reithmann/Martiny/Martiny note 2.262; Thorn, in: Palandt Art. 4 Rom I note 30. Also Martiny, in: MünchKomm Art. 4 Rom I note 312. In detail thereto Martiny, in: FS Drobnig 389 et seq. Also Calliess/Gebauer Art. 4 note 77; Martiny, in: MünchKomm Art. 4 Rom I note 318; Reithmann/ Martiny/Martiny note 2.237; but differently Leible, in: NK-BGB Art. 4 Rom I note 96 (following Czernich, in: Czernich/Heiss Art. 4 EVÜ note 9) (recognition of contract-internal grounds for a change [e.g., of the person of the debtor or creditor]; non-recognition of unilaterally caused changes [e.g., of the seat or citizenship of a party]). Report Giuliano/Lagarde OJ C 282 of 1980, p. 20. See also Dicey/Morris/Collins (eds) note 32–110. Probably in exceptional cases for a change of the contract statute: Reithmann/Martiny/Martiny note 2.237.

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governs the whole contract. A dépeçage of the objectively determined contract statute is – contrary to the Rome Convention408 – no longer admitted.409 XIII. Procedural questions 1. Burden of proof 231 The conflict rules of Art. 4 which under the Rome Convention were still formulated as

presumptions have to be applied ex officio.410 They need not to be invoked by a party. This is true for par. 1 and 2 as well as for par. 3 and 4. The judge, arbitrator or other decider has to determine on his or her own motion whether the regular rules of par. 1 and 2 or the exceptional rules of par. 3 and 4 apply. No party has the burden to prove the respective applicability. On the other hand it is self-understanding that each party should point to those conflict rules that are favourable for the own interest because they lead to a favourable substantive law. 232 However, where the circumstances of the connecting factors are in dispute – for instance, in

which country the debtor of the characteristic performance had its seat at the time of the conclusion of the contract – then the allocation of the burden of proof becomes relevant. Insofar, the rules on the burden of proof of the lex fori, of the lex causae (which first had to be determined) or of an autonomous European origin could be applied. Art. 18 (1) refers generally to the lex causae, though only for the burden of proof within contractual relations (and Art. 18 (2) partly to the lex fori).411 The provision does not concern the burden of proof and further questions of evidence with respect to the conflict rules of the Regulation. Yet, the analogous application and generalisation of Art. 18 (1) appears possible. On the other hand, the dispute over connecting facts does not concern rules of substantive contract law but the interpretation and application of the Regulation itself. Therefore, autonomous common European rules on the burden of proof would certainly be preferable. They must still be developed, though. However, on the central rule there is probably Europe-wide agreement, namely that in principle each party must prove those facts from which it wants to infer favourable consequences for the own position. At least this rule could be accepted as autonomous common European consensus. 233 As far as questions of evidence in the context of the applicable contract law become relevant

the allocation of the burden of proof is principally governed by the law applicable to the contract in question (Art. 18 (1)). All other evidence aspects (procedure of taking evidence, the standard of proof etc.) are generally regulated by the lex fori (see for a specific aspect already Art. 18 (2)).412

408 409

410

411 412

332

See Art. 4 (1) Rome Convention. Nourissat, in: Corneloup/Joubert 208 et seq.; Reithmann/Martiny/Martiny note 2.240; Thorn, in: Palandt Art. 4 Rom I note 30. In this sense already under the prior law BGH NJW 1993, 2305; BGH NJW 1995, 2097; BGH RIW 1995, 1027 (1028). See further the comment on Art. 18 (Ferrari). See the comment on Art. 18; further Coester-Waltjen, Internationales Beweisrecht passim; Schack note 656 et seq.

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2. Revisibility It is a question of the law of procedure of the court seised whether the wrong application of 234 the conflict rules can be appealed against. Generally this will be the case because it is a question of law – and not of fact – whether a conflict rule was correctly applied. The wrong application of foreign law can, on the contrary, often not be attacked or only be attacked on limited grounds as for instance because the application violated the court’s duty to examine the foreign law in a reasonable way or violated general principles of logic and experience.413 XIV. Law applicable to different contract types Although the structure of Art. 4 actually covers all types of contracts it is not infrequently 235 difficult to decide which alternative of the provision’s four sections applies to the contract at hand. Furthermore, views vary with respect to the question where to place certain types of contract. That often raises difficulties to find where the specific contract type relevant in the practical case is dealt with. The following part therefore does not further analyse the respective conflict rules but starts from the contract type and discusses the applicable law for the different kinds of contract. However, special conflict rules exist for transport, insurance and employment contracts. For them see the special treatment in Art. 5, 7 and 8; for the details of consumer contracts see Art. 6 Rome I Regulation. 1. Sales contract a) Sale of immovables Thus far, there do not exist international conventions on international sales of immovable 236 property (land). A choice of law by the parties is always admissible.414 Art. 3 applies to it with its usual 237 limitations following from Art. 3 (3, pure domestic case), Art. 3 (4, pure EU-case), Art. 9 (internationally mandatory provisions) or Art. 21 (ordre public). A tacit choice of law is to be recognised if it is sufficiently clear. The situs of the land alone does however not suffice to justify a subjective choice of the law of that situs. A tacit choice (of the law at the seat of the parties) has often been assumed where two citizens of the same state with their habitual residence in that state conclude a contract on land that is situated in another state.415 This solution should also be adopted under the Rome I Regulation.416 It can also be reached via Art. 4 (3) in connection with Art. 4 (1) (c) because the demarcation between a tacit choice and the manifestly closer connection is fluent. In case of doubt the solution via Art. 4 (3) is preferable since it avoids a possible fiction of the parties’ will to choose a specific law. In the absence of a subjective choice of law a land sale is governed by the law of the situs of 238 the property (Art. 4 (1) (c)). This law recommends itself by the special appropriateness of the

413 414 415

416

See for instance for Germany Kropholler, IPR § 59 I 3. See Reithmann/Martiny/Limmer note 6.811 et seq.; Thorn, in: Palandt Art. 4 Rom I note 16. See, e.g., already under the prior law OLG Hamm RIW 1993, 940; OLG Frankfurt OLG-Report Frankfurt 1995, 15; OLG Nürnberg NJW-RR 1997, 1484. See also Reithmann/Martiny/Limmer note 6.819; Thorn, in: Palandt Art. 4 Rom I note 16.

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law where the land is situated as well as by the aspect of the immobility of land.417 In the case of a manifestly closer connected law this law is applicable (Art. 4 (3)). It is however no manifestly closer connection to the law at the parties’ seat if parties who have the citizenship of, and habitual residence in, the same state buy immovable property in another state that is situated there; in particular not if a notary public of that other state is involved.418 The involvement of a notary public as such does not constitute a closer connection with the law at the seat of the notary, either. Its involvement or the necessary participation of another official authority can lead to the application of the law of the authority only in combination with further indicia.419 As to the case that inlanders buy in their state land in a foreign state see already the preceding para. 239 The special consumer protection of Art. 6 does not apply to sales of immovables (Art. 6 (4)

(c)).The Regulation trusts that the lex situs grants sufficient protection. 240 For the form of sales of land Art. 11 (5) provides that primarily those form requirements

must be observed which the state of the situs declares as mandatory.420 If such internationally mandatory form requirements of the lex situs – if they are internationally mandatory will often be a matter of interpretation – are not observed the sale is invalid. For instance, German law, according to the governing view, does not know of any internationally mandatory form requirements for sales of land.421 241 If no internationally mandatory form provisions of the lex situs apply, Art. 11 (1) and (2)

determines the law applicable to the form of the contract. According to these provisions the contract must comply either with the form requirements of the place where the contract was concluded or with the requirements of the law that governs the contract. The place of conclusion of the contract is located where any of the parties or its agent is present or where either party had its habitual residence in the sense of Art. 19.422 Therefore, parties can validly conclude a contract concerning land in another country if they observe the form of the place where they conclude the contract. Their eventual motive to thereby save costs does not affect the validity of the contract.423 It is further possible by choosing foreign law as applicable to the contract to subject the sale of domestic land to foreign form provisions424 although in purely domestic cases the choice of foreign law cannot supersede mandatory domestic law (Art. 3 (3)). 242 Sometimes domestic law provides that a lack of form can be healed, in particular if the

ownership has effectively passed.425 Whether the ownership passed is however not determined by the contract statute but by the lex rei sitae426 which often cannot be chosen. 417 418 419 420 421 422 423

424 425

334

See already thereto supra para. 86. See, e.g., LG Frankfurt NJW-RR 1993, 182. Also Reithmann/Martiny/Limmer note 6.818; further supra para. 219. See the comment on Art. 11. See Thorn, in: Palandt Art. 4 Rom I note 16; Reithmann/Martiny/Limmer note 6.850. See in detail infra the comment to Art. 11. See Reithmann/Martiny/Limmer note 6.849; also – under the prior law – OLG Düsseldorf RIW 1989, 225; OLG Köln RIW 1993, 414. Reithmann/Martiny/Limmer note 6.846. See for instance § 311 (1) sent. 2 BGB.

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Irrespective of the law applicable to the contract regularly the national mandatory rules of 243 public law on the transfer of land. These rules are mandatory provisions in the sense of Art. 9. 244

The in rem consequences of land sales are governed by the lex rei sitae.

As to timesharing contract see infra para. 319 et seq.; to building construction contracts 245 combined with the sale of the land infra para. 396 et seq. b) Sale of movables (aa) Uniform substantive law (1) UN Sales Convention of 1980 (CISG) The primary source for international sales of movable things (goods) is the Vienna UN 246 Convention on Contracts for the International Sale of Goods of 11 April 1980 (CISG).427 The Convention regulates the substantive law of the conclusion of such contracts and of the rights and obligations following from such contract. The following 85 States (status: 31 August 2016; taken from UNCITRAL website) have ratified the CISG (among them all EU States except Great Britain, Ireland, Malta and Portugal): State

Notes

Signature

Albania

Ratification, Accession(*), Approval(†), Acceptance(‡) or Succession(§)

Entry into force

13/05/2009(*)

01/06/2010

Argentina

(a)

19/07/1983(*)

01/01/1988

Armenia

(a), (b)

02/12/2008(*)

01/01/2010

17/03/1988(*)

01/04/1989

29/12/1987

01/01/1989

Azerbaijan

03/05/2016(*)

01/06/2017

Bahrain

25/09/2013(*)

01/10/2014

Australia Austria

426 427

11/04/1980

See, e.g., BGHZ 73, 391; Reithmann/Martiny/Limmer note 6.861. Bibliography: Brunner (ed.), UN-Kaufrecht – CISG (2nd ed. 14); Honnold/Flechtner, Uniform Law for International sales Under the 1980 United Nations Convention (4th ed. 2009); Kröll/Mistelis/Perales Viscasillas (eds.), UN Convention on Contracts for the International Sale of Goods (CISG) – Commentary (2011); Lookofsky, Understanding the CISG (4th ed. 2012); Neumayer/Ming, Convention de Vienne sur les contrats de vente internationale de marchandises: Commentaire (1993); Schlechtriem/Butler, UN Law on International Sales – The UN Convention on the International Sale of Goods (2009); Schlechtriem/Schroeter, Internationales UN-Kaufrecht (5th ed. 2013); Schlechtriem/Schwenzer (eds.), Kommentar zum Einheitlichen UN-Kaufrecht – CISG – (6th ed. 2013); Staudinger (-Magnus), Kommentar zum Bürgerlichen Gesetzbuch, Wiener UN-Kaufrecht – CISG (ed. 2013).

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State

Notes

Belarus

(a)

Signature

Ratification, Accession(*), Approval(†), Acceptance(‡) or Succession(§)

Entry into force

09/10/1989(*)

01/11/1990

Belgium

31/10/1996(*)

01/11/1997

Benin

29/07/2011(*)

01/08/2012

Bosnia and Herzegovina

12/01/1994(§)

06/03/1992

Brazil

04/03/2013(*)

01/04/2014

Bulgaria

09/07/1990(*)

01/08/1991

Burundi

04/09/1998(*)

01/10/1999

23/04/1991(*)

01/05/1992

Canada

(c)

Chile

(a)

11/04/1980

07/02/1990

01/03/1991

China

(b)

30/09/1981

11/12/1986(†)

01/01/1988

Colombia

10/07/2001(*)

01/08/2002

Congo

11/06/2014(*)

01/07/2015

Croatia

08/06/1998(§)

08/10/1991

Cuba

02/11/1994(*)

01/12/1995

Cyprus

07/03/2005(*)

01/04/2006

30/09/1993(§)

01/01/1993

14/02/1989

01/03/1990

Dominican Republic

07/06/2010(*)

01/07/2011

Ecuador

27/01/1992(*)

01/02/1993

Egypt

06/12/1982(*)

01/01/1988

El Salvador

27/11/2006(*)

01/12/2007

Estonia

20/09/1993(*)

01/10/1994

26/05/1981

15/12/1987

01/01/1989

27/08/1981

06/08/1982(†)

01/01/1988

Gabon

15/12/2004(*)

01/01/2006

Georgia

16/08/1994(*)

01/09/1995

21/12/1989

01/01/1991

Czech Republic

(b)

Denmark

(d)

Finland

(d)

France

Germany Ghana

336

(e)

26/05/1981

26/05/1981 11/04/1980

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Chapter II: Uniform Rules State

Notes

Ratification, Accession(*), Approval(†), Acceptance(‡) or Succession(§)

Entry into force

Greece

12/01/1998(*)

01/02/1999

Guinea

23/01/1991(*)

01/02/1992

Guyana

25/09/2014(*)

01/10/2015

Honduras

10/10/2002(*)

01/11/2003

16/06/1983

01/01/1988

10/05/2001(*)

01/06/2002

Iraq

05/03/1990(*)

01/04/1991

Israel

22/01/2002(*)

01/02/2003

11/12/1986

01/01/1988

Japan

01/07/2008(*)

01/08/2009

Kyrgyzstan

11/05/1999(*)

01/06/2000

Latvia

31/07/1997(*)

01/08/1998

Lebanon

21/11/2008(*)

01/12/2009

18/06/1981

01/01/1988

Liberia

16/09/2005(*)

01/10/2006

Lithuania

18/01/1995(*)

01/02/1996

Luxembourg

30/01/1997(*)

01/02/1998

Madagascar

24/09/2014(*)

01/10/2015

Mauritania

20/08/1999(*)

01/09/2000

Mexico

29/12/1987(*)

01/01/1989

Mongolia

31/12/1997(*)

01/01/1999

Montenegro

23/10/2006(§)

03/06/2006

13/12/1990(‡)

01/01/1992

22/09/1994(*)

01/10/1995

20/07/1988

01/08/1989

13/01/2006(*)

01/02/2007

25/03/1999(*)

01/04/2000

19/05/1995

01/06/1996

Republic of Korea

17/02/2004(*)

01/03/2005

Republic of Moldova

13/10/1994(*)

01/11/1995

Hungary

(a), (f)

Iceland

(d)

Italy

Signature

11/04/1980

30/09/1981

Lesotho

18/06/1981

Netherlands

29/05/1981

New Zealand Norway

(d)

Paraguay

(a)

26/05/1981

Peru Poland

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Rome I Regulation Notes

Signature

Ratification, Accession(*), Approval(†), Acceptance(‡) or Succession(§)

Entry into force

22/05/1991(*)

01/06/1992

(a)

16/08/1990(*)

01/09/1991

Saint Vincent and (b) the Grenadines

12/09/2000(*)

01/10/2001

San Marino

22/02/2012(*)

01/03/2013

Serbia

12/03/2001(§)

27/04/1992

16/02/1995

01/03/1996

28/05/1993(§)

01/01/1993

Slovenia

07/01/1994(§)

25/06/1991

Spain

24/07/1990(*)

01/08/1991

15/12/1987

01/01/1989

Switzerland

21/02/1990(*)

01/03/1991

Syrian Arab Republic

19/10/1982(*)

01/01/1988

The former Yugoslav Republic of Macedonia

22/11/2006(§)

17/11/1991

Turkey

07/07/2010(*)

01/08/2011

Uganda

12/02/1992(*)

01/03/1993

03/01/1990(*)

01/02/1991

11/12/1986

01/01/1988

Uruguay

25/01/1999(*)

01/02/2000

Uzbekistan

27/11/1996(*)

01/12/1997

18/12/2015(*)

01/01/2017

06/06/1986(*)

01/01/1988

Romania Russian Federation

Singapore

(b)

Slovakia

(b)

Sweden

(d)

Ukraine

(a)

United States of America

(b)

Zambia

338

26/05/1981

31/08/1981

28/09/1981

Venezuela (Bolivarian Republic of) Viet Nam

11/04/1980

(a)

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Notes: (a) This State declared, in accordance with Articles 12 and 96 of the Convention, that any provision of Article 11, Article 29 or Part II of the Convention that allowed a contract of sale or its modification or termination by agreement or any offer, acceptance or other indication of intention to be made in any form other than in writing, would not apply where any party had his place of business in its territory. (b) This State declared that it would not be bound by paragraph 1 (b) of Article 1. (c) Upon accession, Canada declared that, in accordance with Article 93 of the Convention, the Convention would extend to Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island and the Northwest Territories. In a declaration received on 9 April 1992, Canada extended the application of the Convention to Quebec and Saskatchewan. In a notification received on 29 June 1992, Canada extended the application of the Convention to the Yukon Territory. In a notification received on 18 June 2003, Canada extended the application of the Convention to the Territory of Nunavut. (d) Denmark, Finland, Iceland, Norway and Sweden declared that the Convention would not apply to contracts of sale or to their formation where the parties have their places of business in Denmark, Finland, Iceland, Norway or Sweden. (e) Upon ratifying the Convention, Germany declared that it would not apply Article 1, paragraph 1 (b) in respect of any State that had made a declaration that that State would not apply Article 1, paragraph 1 (b). (f) Upon ratifying the Convention, Hungary declared that it considered the General Conditions of Delivery of Goods between Organizations of the Member Countries of the Council for Mutual Economic Assistance to be subject to the provisions of Article 90 of the Convention. If the territorial, material, personal and temporal conditions of application of the CISG are met and if the parties have not excluded the Convention then it is automatically applicable and has to be applied ex officio (opt-out solution). The respective conditions of application are the following: – In territorial respect it is necessary that both parties have their places of business (see thereto Art. 10 CISG) in different states (Art. 1 (1) CISG). It is additionally necessary that these states are Contracting States of the CISG (Art. 1 (1) (a) CISG) or that the rules of private international law of the court seised – that is: Art. 3 or 4 Rom I Regulation – lead to the law of a CISG Contracting State (Art. 1 (1) (b) CISG). Whether the law of a CISG Contracting State is applicable by the parties’ choice or by an objective determination is irrelevant. – In material respect the CISG covers sales, contracts for the supply of goods to be manufactured or produced and mixed contracts if the sales element prevails (for instance turnkey contracts or sales contracts with installation obligations, Art. 3 CISG). However, the contract must concern the sale of a movable (“good”). Software, at least standard software is regarded as movable,428 whereas the sale of rights and immovables does not fall within the ambit of the CISG. Certain sales are explicitly excluded, namely consumer sales, sales by auction or on execution, the sale of negotiable instruments and money, of 428

See OGH CISG online no. 1043; LG München CISG online no. 203; OLG Köln CISG online no. 132; OLG Koblenz RIW 1993, 936; further Ferrari, in: Schlechtriem/Schwenzer Art. 1 CISG note 38; Mistelis, in: Kröll/Mistelis/Perales Viscasillas Art. 1 CISG note 40; Magnus, in: Staudinger Art. 1 CISG note 44.

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ships, aircrafts and electricity (Art. 2 CISG). The legal aspects which the CISG covers extend to the contract formation and to the sales-specific obligations but not to all general institutes of contract law such as assignment, agency, partly set-off etc. For those institutes redress to the applicable national law is necessary. – In personal respect the CISG does not establish any specific requirements. Neither the formal capacity as merchant nor the citizenship of a Contracting State nor any other personal qualification is required (Art. 1 (3) CISG). However, evident consumer sales are excluded (Art. 2 (a) CISG). – In temporal respect the CISG applies to all sales which have been concluded on or after the day the CISG entered into force in the State that is relevant according to Art. 1 (1) (a) or (b) CISG (see Art. 100 CISG). 247 It is further necessary that the parties did not explicitly or tacitly exclude the CISG (Art. 6

CISG). It constitutes an exclusion, if the parties for instance agree: “The contract is governed by German law with the exclusion of the CISG”, or if they choose the law of a Non CISG-State.429 On the other hand is it no exclusion if the parties agree on the application of the law of a CISG-State, for instance “Swiss law applies to this contract.”430 For Swiss law includes the CISG which is the special national law for international sales of the respective state. (2) Hague Uniform Sales Law

248 The Hague Uniform Sales Law of 1964 was the predecessor of the present CISG with which it

has much in common both in structure and wording although the Hague Law consisted of two conventions, one on the formation (ULFIS) and one on the rights and obligations of the parties to an international sales contract (ULIS). Only nine, mainly European states ratified the Hague Uniform Sales Law and only in some of them (Belgium, Germany, Israel, Italy, the Netherlands) the Hague Law was applied in practice. However, there, it proved to be a practical and useful piece of legislation. 249 With the exception of two, all of the Contracting States of the Hague Law adopted the CISG

and had to renounce the Hague Law at the same time. Only Great Britain and Gambia remain until today Contracting States of the Hague Uniform Sales Law though with the reservation that the parties must opt for the application of that law (opt-in solution). The effect of this reservation was that in more than forty years no single court decision directly applying the Hague Law has been reported in the two countries.431 In the UK this led to the 429

430

431

340

For instance English law; see further Bonell, in: Bianca/Bonell Art. 6 note 2.3.3; Ferrari, in: Schlechtriem/ Schwenzer Art. 6 CISG note 20; Magnus, in: Staudinger Art. 6 CISG note 23. See, e.g., BGH NJW 1997, 3309; OGH JBl 1999, 54; Supreme Court of Queensland CISG online no. 587; Cour d’appel Paris CISG online no. 677; Hof Gent CISG online no. 746; Ferrari, in: Schlechtriem/ Schwenzer Art. 6 CISG note 22; Mistelis, in: Kröll/Mistelis/Perales Viscasillas Art. 6 CISG note 18; Magnus, in: Staudinger Art. 6 CISG note 24. The Hague Law was only mentioned obiter on few occasions: see Butler Machine Tool Co. Ltd. v. Ex-CellO Corp. (England) Ltd. [1977] EWCA Civ 9; LaFarge Plasterboard Ltd. v. Fritz Peters & Co KG [2000] EWHC Technology 103 (merely express exclusion of the Hague Law); Amiri Flight Authority v. BAE Systems Plc [2003] EWCA Civ 1447 para. 35 ss; Trident Turboprop (Dublin) Ltd. v. First Flight Couriers Ltd. [2009] EWCA Civ 290 para. 27; Air Transworld Ltd. v. Bombardier Inc. [2012] EWHC 243 (Comm) para. 70 ss.

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paradoxical situation that the Hague Law is in force there but was never applied while the CISG – not yet in force in the UK – is applied when private international law so requires.432 In cases where parties from Gambia and the UK conclude a sales contract and courts of a 250 third state are seised with the case it could be argued that the courts should apply the Hague Uniform Sales Law. However, since both Gambian and British courts would apply the Hague Law only if the parties expressly chose it this must be respected also in such a case. Without the parties’ express choice the Hague Law would not be applicable. (3) UN Limitation Convention of 1974 Already in 1974 UNCITRAL gave birth to the United Nations Convention on the Limitation 251 Period in the International Sale of Goods. In 1980 a Protocol adapted this Convention to the scope of application of the CISG. Presently (31 August 2016) 30 states have ratified the original Convention, 23 of them also its form as amended by the Protocol (status of ratifications, taken from UNCITRAL website): State

Notes

Signature

Argentina Belarus

14/06/1974

Belgium

Entry into force Ratification, Accession(*), Succession(§) or Participation under Article VIII or X of the Protocol of 11 April 1980 (†) 19/07/1983(*)

01/08/1988

23/01/1997(*)

01/08/1997

01/08/2008(†)

01/03/2009

Benin

(a)

29/07/2011(*)

01/02/2012

Bosnia and Herzegovina

(a)

12/01/1994(§)

06/03/1992

04/09/1998(*)

01/04/1999

Côte d’Ivoire

01/02/2016

01/09/2016

Cuba

02/11/1994(*)

01/06/1995

Brazil

14/06/1974

Bulgaria

24/02/1975

Burundi

(a)

Costa Rica

30/08/1974

Czech Republic

(b)

30/09/1993(§)

01/01/1993

Dominican Republic

(d)

30/07/2010(*)

01/02/2011

06/12/1982(*)

01/08/1988

07/10/1975

01/08/1988

Egypt Ghana 432

(a)

05/12/1974

See Kingspan Environmental Ltd. a.o. v. Borealis A/s a.a. [2012] EWHC 1147 para. 993 ss.

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Signature

Guinea

Ratification, Entry into force Accession(*), Succession(§) or Participation under Article VIII or X of the Protocol of 11 April 1980 (†) 23/01/1991(*)

01/08/1991

16/06/1983(*)

01/08/1988

Liberia

16/09/2005(†)

01/04/2006

Mexico

21/01/1988(*)

01/08/1988

06/08/2012(*)

01/03/2013

20/03/1980

01/08/1988

18/08/2003(*)

01/03/2004

19/05/1995(†)

01/12/1995

Republic of Moldova

28/08/1997(*)

01/03/1998

Romania

23/04/1992(†)

01/11/1992

Hungary

14/06/1974

Mongolia Montenegro

14/06/1974 (e)

Nicaragua Norway

13/05/1975 (a), (c)

11/12/1975

Paraguay Poland

14/06/1974

Russian Federation

14/06/1974

Serbia

(a)

12/03/2001(§)

27/04/1992

Slovakia

(b)

28/05/1993(§)

01/01/1993

Slovenia

02/08/1995(†)

01/03/1996

Uganda

12/02/1992(†)

01/09/1992

13/09/1993

01/04/1994

05/05/1994(†)

01/12/1994

Uruguay

01/04/1997(†)

01/11/1997

Zambia

06/06/1986(*)

01/08/1988

Ukraine

(a)

United States of America

(b)

14/06/1974

Notes: (a) Party only to the unamended Convention. (b) Upon accession to the Protocol, Czechoslovakia and the United States of America declared that, pursuant to Article XII of the Protocol, they did not consider themselves bound by Article I of the Protocol. (c) Upon signature, Norway declared, and confirmed upon ratification, that, in accordance with Article 34, the Convention would not govern contracts of sale where the seller and

342

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the buyer both had their relevant places of business within the territories of the Nordic States (i.e. Denmark, Finland, Iceland, Norway and Sweden). (d) From 1 August 1988 to 31 January 2011, the Dominican Republic was a Party to the unamended Convention. (e) From 3 June 2006 to 28 February 2013, Montenegro was a Party to the unamended Convention. The amended Limitation Convention provides for the same territorial, material, personal 252 and temporal requirements of application as the CISG whereas the original Convention applies only if the parties have their places of business in different Contracting States of the Convention. The unamended version does not contain the possibility of application via private international law rules. Within the EU Belgium, Czechia, Hungary, Poland, Romania, Slovakia and Slovenia have ratified the Convention; outside the EU the US is the most important Contracting State. The Limitation Convention provides for a mandatory period of prescription of four years 253 (Art. 8). Any act which under Art. 13 ss of the Convention may cease the limitation period to run can only be recognised between Contracting States. The effect of such acts with respect to third states is governed by the law applicable to the contract or – in case of insolvency or the like – by the international procedural law of the forum. (4) UNIDROIT Agency Convention of 1983 The UNIDROIT Convention on Agency in the International Sale of Goods of 1983 has not 254 yet entered into force due to a lack of the necessary ten ratifications. It is highly unlikely that it will ever enter into force. (bb) Uniform conflict rules on sales contracts (1) Hague Convention on applicable sales law of 1955 The Hague Convention on the law applicable to international sales of goods of 15 June 255 1955433 has been ratified, and is in force, in Denmark, Finland, France, Italy, Niger, Norway, Sweden and Switzerland. The Convention is a ‘loi uniforme’; its Contracting States apply it even towards Non-Member States. In the first line, the applicable law is that chosen by the parties (Art. 2). In the absence of such choice the contract is governed by the law at the seller’s place of business (Art. 3 (1)). Where the seller or its auxiliary has received the order in the country of the buyer’s habitual residence or place of business the law of that place is applicable (Art. 3 (2)). According to Art. 25 (1) Rome I Regulation the 1955 Hague Convention takes precedence 256 over the conflicts rules of the Rome I Regulation because the Convention is addressed to, and has been ratified not only by, EU Member States (see further the comment on Art. 25 Rome I Regulation). (2) Hague Convention on applicable sales law of 1986 The Hague Convention on the Law Applicable to Contracts for the International Sale of 257

433

For the text see the HCCH website.

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Goods of 22 December 1986434 was concluded to further develop the 1955 Hague Convention and was intended to replace that predecessor. However, with Argentina and Moldavia as the only Contracting States the necessary number of five ratifications for its entry into force is still missing. It is uncertain whether the necessary number will ever be reached. (3) European Sales Law, CESL and further European initiatives 258 Thus far, in the EU no common sales law exists – in contrast to the USA where Chapter 2 of

the UCC more or less has harmonised the law of commercial sales (with the exception of Louisiana). Nonetheless, Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees of 25 May 1999 has harmonised central elements of the law of consumer sales in the EU. Also, Directive 2011/83/EU on consumer rights etc of 25 October 2011 is of some, though limited relevance for sales contracts, in particular Art. 18– 22 of this Directive. Moreover, for international sales the CISG is applicable in most EU Member States. 259 In 2011 the EU Commission presented a Proposal for a Regulation on a Common European

Sales Law (CESL).435 This Sales Law was intended to be optional; the parties had to choose it. It covered both consumer and commercial sales and followed in many respects the model of the CISG. In 2015 the new EU Commission abandoned the Proposal and presented instead in 2016 two Proposals for Directives concerning sales in the digital market.436 It remains to be seen whether these Directives (with which content?) will be enacted. (4) Uniform contract terms 260 For international supply contracts the respective trade organisations provide many special

contract forms or contract conditions which they recommend their members for use and which the members in fact often use. The most common and well known forms are the INCOTERMS of the International Chamber of Commerce.437 These and similar sets of conditions are generally applicable only if the parties have agreed on their application. It is a rare exception that they or some of them have gained recognition as trade usage. If parties use for instance an INCOTERM such as fob, cif etc without any reference to the INCOTERMS and their specific version (e.g., cif Incoterms 2010), then in case of doubt the term is to be interpreted in the sense which the ICC has defined in its newest version current at the time of the conclusion of the contract because this is the most common understanding.438 In relation to the CISG (if that is applicable) the agreement on an INCOTERM excludes any deviating provision of the CISG though not the CISG in its totality. The INCOTERM takes precedence over the CISG as far as the term reaches; for the rest of the contract the CISG remains applicable.439

434 435 436 437

438 439

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For the text see the HCCH website. COM (2011) 635 final. COM (2015) 634 final; COM (2015) 635 final. On a survey of the INCOTERMS see Magnus, in: Max Planck Encyclopedia of European Private Law (2012) 855 ss; on a full commentary Piltz/Bredow, Incoterms (2016). See, e.g., BGH NJW 2009, 2606 para. 18; BGH NJW-RR 2013, 309 para. 22, 24. See with further references Magnus, in: Staudinger (2013) Art. 9 CISG note 11, 17; Schmidt-Kessel, in: Schlechtriem/Schwenzer Art. 9 note 26.

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c) Law applicable to sales contracts of movables Unless international conventions or the parties’ choice determine otherwise, the law at the 261 seat of the seller is the law that in principle governs sales contracts of movables.440,441 This is the same solution as followed under the Rome Convention.442 The seat of the seller must be determined in accordance with Art. 19 Rome I Regulation. For consumer sales and sales of rights and intangibles see infra note 287 et seq., 281 et seq. and 285 et seq. The sale of movables by auction is regularly governed by the law of the country where the 262 auction takes place if such a place can be determined (Art. 4 (1)(g) Rome I Regulation).443 This is also true in case of Internet auctions if there exists a real place where the highest bid is accepted and where only the bidding is made over the Internet by email. Since so-called internet auctions rarely meet these conditions the transactions at such ‘auctions’ are in most cases normal sales contracts which fall under Art. 4 (1) (a) or Art. 6 Rome I Regulation. The law applicable to sales of movables determined by the pre-mentioned rules has to be 263 corrected – even in case of a sale by auction – if the contract is manifestly closer connected with another country (Art. 4 (3) Rome I Regulation). Under the Rome Convention this was held to be the case for sales on the spot where the sale was concluded and fully performed at one and the same place, for instance a sale on the market or at a fair between the buyer and a travelling seller from abroad who was present there only for purposes of selling.444 This rule should be upheld under the Rome I Regulation.445 However, if the contract is not entirely executed on the spot, the general conflicts rule applies. The general conflicts rule under which the seller’s seat is decisive does also not fit for sales at 264 commodity exchanges; the general rule would considerably hinder the marketability of the goods and their rapid transfer. Art. 4 (1) (h) Rome I Regulation takes account of this situation with respect to the trade with financial instruments within multilateral systems though not in regard of the trade with movables at commodity exchanges. Yet, in accordance with Art. 4 (3) Rome I Regulation it is rightly proposed that the law at the place of the commodity exchange should govern the sales there.446

440

441

442 443 444

445 446

Bibliography (law applicable to sales contracts of movables): Czerwenka, Rechtsanwendungsprobleme im internationalen Kaufrecht (1988); Fawcett/Harris/Bridge, International Sale of Goods in the Conflict of Laws (2005); Magnus, Internationales Kaufrecht, insbes. UN-Kaufrecht, in: Büchel/vRechenberg (Hrsg), Kölner Handbuch Handels- und Gesellschaftsrecht (3. Aufl 2015); Merschformann, Die objektive Bestimmung des Vertragsstatuts beim internationalen Warenkauf (1991); Piltz, Anwendbares Recht in grenzüberschreitenden Kaufverträgen, IPRax 1993, 191. See Art. 4 (1) (a) Rome I Regulation; further BGH NJW 2014, 3156 para. 18; Dicey/Morris/Collins (eds) note 33–094; Martiny, in: MünchKomm Art. 4 Rom I-VO note 11; Plender/Wilderspin note 7–058; Thorn, in: Palandt Art. 4 Rom I-VO note 6; also supra note 50 et seq. See BGH IPRax 2006, 594 with note Leible/Sommer IPRax 2006, 568; Hoge Raad Ned Jur 1992, no. 750. See already supra note 142 et seq. See LG Aachen RIW 1990, 491; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 8; Martiny, in: MünchKomm Art. 4 Rom I-VO note 31; Thorn, in: Rauscher Art. 4 Rom I-VO note 30; Reithmann/ Martiny/Martiny note 6.113. In the same sense Thorn, in: Palandt Art. 4 Rom I-VO note 20. Reithmann/Martiny/Martiny note 6.113; R Wagner IPRax 2008, 384.

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265 The applicable law governs all sales issues. However, as always for the conclusion of sales

contract, Art. 10 (2) Rome I Regulation must be considered. Furthermore, Art. 12 (2) provides a special conflicts rule for the manner of performance and the steps to be taken in the event of defective performance. Then, “regard shall be had to the law of the country in which performance takes place.” In particular, the modalities of the examination of the goods and of a respective notice fall to be adjudicated in accordance with this law.447 266 Sometimes under the applicable sales law it is relevant whether or not the parties are

merchants in a strict formal sense (for instance for the requirement of a formal notice of defects). This question should be governed by its own law that should be determined separately from the applicable contract law because the capacity as formal merchant may play a role also in other contexts and should be answered in a uniform way which does not change from context to context in order to avoid contradicting obligations. Generally, the law at the seat of the involved person should govern the capacity as merchant.448 The involved person should be able to trust that ‘his’ or ‘her’ law determines the standard for being treated as a merchant or non-merchant. If this law does not provide for a special notion of merchant then a parallel evaluation under the lex causae (the law governing the contract) should determine whether or not the person is a merchant. d) Sale of an enterprise; sale of a practice 267 The sale of an enterprise449 can take two different forms: either as the sale of the shares in the

company or legal body which runs the enterprise (share deal) or as a sale of the entirety of the assets which the enterprise owns (asset deal). In the latter form often the sale of the private practice of a doctor, solicitor, accountant or another free profession will occur. aa) Share deal 268 There is no international convention that covers share deals of enterprises. The CISG does

not apply because it does not extend to sales of rights, claims or negotiable instruments even if they are securitised in documents.450 Thus, the rules of the Rome I Regulation apply. The exclusion of company issues in Art. 1 (2) (f) Rome I Regulation does not comprise mere contracts for the sale of shares,451 for such contracts do not concern the structure and inner 447 448

449

450

451

346

See further the comment on Art. 12 (2). LG Hamburg IPRspr 1958–59 Nr 22; OLG Naumburg WM 1994, 906 [interlocal case]; Ebenroth JZ 1988, 19; Hagenguth 178, 256 ff; Thorn, in: Palandt Art. 7 EGBGB note 7; partly differently – combination of law governing the contract and law of the person’s seat – Reithmann/Martiny/Martiny note 3.136; differentiating: van Venrooy 28 ff; for applicability of the law governing the contract: Leible, in: NK-BGB Art. 12 Rom I-VO note 14. Bibliography (sale of an enterprise; sale of a practice): Göthel, Grenzüberschreitende Unternehmenskaufverträge durch Anteilserwerb, ZIP 2011, 505; Göthel (ed.), Grenzüberschreitende M & A-Transaktionen (4th ed. 2015); Land, Rechtsfragen des internationalen Unternehmenskaufs, BB 2013, 2697; Merkt/ Göthel, Internationaler Unternehmenskauf (3. Aufl 2011). Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 66; Piltz AnwBl 1991, 59; Brödermann/Wegen, in: PWW Art. 4 Rom I-VO note 10; Reithmann/Martiny/Göthel note 6.2480 s.; Schlechtriem/Schroeter, Int UN-Kaufrecht note 79; Magnus, in: Staudinger Art. 1 CISG note 56. Hohloch, in: Erman Art. 4 Rom I-VO note 11; Lüttringhaus, in: Ferrari Art. 1 note 74; Martiny, in: MünchKomm Art. 4 Rom I-VO note 207; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 8; Thorn, in: Palandt Art. 4 note 23; Reithmann/Martiny/Göthel note 6.2483; see also supra the comment on Art. 1.

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organisation of the company. Also, the exclusion of obligations arising under bills of exchange, cheques and other negotiable instruments (Art. 1 (2) (d) Rom I Regulation) does not cover the acquisition of company shares because the obligations under the latter contracts do not arise from the negotiability of the shares.452 On the other hand, restrictions which arise out of company law – for instance the prohibition for companies to buy own shares – must follow the law that governs the company.453 The parties may expressly or implicitly choose the law applicable to sales of shares. The place 269 where the sold enterprise is located is a relevant though not decisive element for a tacit choice of law. In the absence of the parties’ choice the law at the place is applicable where the seller’s seat is located. This does not follow from Art. 4 (1) (a) which applies exclusively to sales of tangible movables but from Art. 4 (2) Rome I Regulation because the seller effects the characteristic performance so that its seat in the sense of Art. 19 is decisive.454 A manifestly closer connection to another law suffices to lead to that other law (Art. 4 (3)). The place alone where the sold enterprise is located does, however, not suffice.455 Only with respect to immovable property (land) the legislator gave precedence to the situs rule because of the immobility of that kind of property (Art. 4 (1) (c)). Therefore, Art. 4 (2) Rome I Regulation remains applicable even if land belongs to the sold enterprise because the subject of the sale are not the rights in rem in the immovable property but merely the shares. A deviating view requests that enterprise takeovers be generally and mandatorily governed 270 by the law that is applicable to the company that shall be taken over.456 This would facilitate takeovers since bidders need not take account of different laws if the shareholders of the target company (the envisaged sellers) are seated in different countries. This solution would help to steer the capital flow to the place of its most efficient use and thus lead to economically desirable results.457 In addition, the aspect of equal treatment of all shareholders and the easy recognisability of the applicable law are advanced as arguments.458 According to still another view public tender offers and takeover bids should be governed by the law of the market place where they are made.459 However, with the increasing importance of the 452

453

454

455 456

457 458 459

See already Giuliano/Lagarde Art. 1 note 4 stressing that the exclusion requires “that the obligations under such other negotiable instruments arise out of their negotiable character. … Furthermore, neither the contracts pursuant to which such instruments are issued nor contracts for the purchase and sale of such instruments are excluded.” Also Reithmann/Martiny/Göthel note 6.2483. Leible, in: Nk-BGB Art. 4 Rom I-VO note 22; Thorn, in: Palandt Anh nach Art. 12 EGBGB note 14; also Grossfeld, in: Staudinger [1998] IntGesR note 344; Merkt, in: FS Sandrock 149. Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 66; Gebauer, in: Calliess Art. 4 Rom I-VO note 49; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 142; Martiny, in: MünchKomm Art. 4 Rom I-VO note 207; Leible, in: Nk-BGB Art. 4 Rom I-VO note 22; Brödermann/Wegen, in: PWW Art. 4 Rom I-VO note 10; Thorn, in: Rauscher Art. 4 Rom I-VO note 89; Reithmann/Martiny/Göthel note 6.2486. Contrary: Thorn, in: Palandt Art. 4 Rom I-VO note 23 (place suffices). Hahn RIW 2002, 744; Kindler, in: MünchKomm IntGesR note 469; Zimmer, Internationales Gesellschaftsrecht 85, 99; alternative determination – law at the place of the relevant stock exchange or law governing the enterprise/company to be taken over – Grossfeld, in: Staudinger IntGesR [1998] note 420. See Hahn RIW 2002, 744. Hahn RIW 2002, 744. Grundmann RabelsZ 54 [1990] 282 ff; Hopt, in: FS W Lorenz [1991] 414 ff; cautiously also Reithmann/ Martiny/Göthel note 6.2489.

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Internet for such offers it becomes more and more difficult to determine a specific market place. 271 Anyway, share deals at stock exchanges are not governed by the law at the seller’s seat but by

the law at the place of the involved stock exchange. This follows at least indirectly from Art. 4 (1) (h) Rome I Regulation.460 272 Provisions of national law which implement EU Directive 2004/25/EC of 21 April 2004 on

takeover bids may constitute internationally mandatory rules in the sense of Art. 9 Rome I Regulation. If they are provisions of the forum they must be respected irrespective of the otherwise applicable law. If they are provisions of the law at the place of performance they can be taken into account.461 273 The form of the share purchase and sale is regulated by Art. 11 Rome I Regulation. Accord-

ing to para. 1 of this provision the fulfilment of the form of the lex causae or of the lex loci actus suffices. According to Art. 11 (2), where the contract is concluded between parties or their agents who are not then present, the fulfilment of the form requirements of the law at any place suffices where one of the parties or agents then was or where one of the parties had its habitual residence (in the sense of Art. 19 Rome I Regulation). The parties may thus choose the law applicable to the form of the share sale deal or even for a part of it. In the absence of the parties’ choice quite a number of possible forms is applicable of which only one must be fulfilled. This creates the possibility of manipulation and circumvention of reasonable form purposes such as the function of information and warning, for the mere presence of a party or even its agent in a country is sufficient to let the form of that country govern the share deal. It is however questionable whether all these possible forms should be available, in particular where some national laws require a strict form for specific share transactions as for instance in Germany the notarial form for the sale of GmbH shares.462 Taken literally, Art. 11 Rome I Regulation allows this form requirement to be easily circumvented by the presence of one party or its agent in a country with no form requirement. A short presence at the time of conclusion of the contract – even a stay for the only purpose of concluding the contract – would suffice. This solution would allow the unilateral determination of the applicable form and it would oust all reasonable purposes of the form requirements in the country or countries with which the transaction is connected. For share deals it should therefore be modified: mere presence should not suffice to overturn form requirements that either the lex causae or the law at the seat of either party provides for.463 274 The execution of the share acquisition does not fall within the ambit of the Rome I Regu-

lation because it is no longer a matter of contractual obligations. It belongs to the questions covered by the law applicable to the involved company.464 The form of the execution is regulated by the law that national conflicts rules determine. Art. 11 Rome I Regulation is inapplicable. 460 461 462 463

464

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Garcimartín Alférez EuLF 2008, 68; Reithmann/Martiny/Göthel note 6.2487. See further the comment on Art. 9. See § 15 (3) and (4) GmbHG. In a similar direction though by other means: Reithmann/Martiny/Göthel note 6.2504 (the locus actus form should be only available if that law knows of a comparable transaction). Also Reithmann/Martiny/Göthel note 6.2507.

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In principle the law that is applicable to share deals covers all contractual questions (Art. 12 275 Rome I Regulation).465 However, because of the relation to company matters certain specialities must be observed. As mentioned (see preceding note) the execution/performance is governed by the law applicable to the company. Furthermore, duties on information and disclosure concerning public takeover bids are generally of a precontractual character and fall thus outside the scope of the Rome I Regulation (unless there are explicit agreements on those duties between the parties; then the law applicable to this agreement must be determined). Precontractual duties fall regularly under Art. 12 Rome II Regulation whose para. 1 refers back to the law of the intended or concluded contract. However, this applies only to duties which have their root in the sale. Duties which have their root in company law follow the applicable company law.466 The former Rome Convention (Art. 5 (1)) extended its special protection to buying con- 276 sumers only if they bought movable goods. This has changed under the Rome I Regulation whose Art. 6 covers consumer purchases of all objects, therefore also share deals if the buyer is a consumer. Yet, the purchase of an enterprise via a share deal will rarely serve private purposes although the acquisition of shares for financially securing life after retirement should qualify as private. On the other hand, Art. 6 (4) (d) Rome I Regulation excludes certain transactions of negotiable instruments; the pure purchase of shares is probably not covered by this exception.467 bb) Asset deal The CISG will also not apply to most cases of takeovers of enterprises via asset deals because 277 this is generally a transfer of an entirety of movable and immovable property as well as material and immaterial rights whereas the CISG concerns the sale of movable goods. However, where the entirety of the value of the enterprise consists to more than 50 % of movable goods then the CISG is applicable.468 In principle, the same conflict rules as to share deals apply to asset deals. The applicable law 278 for the asset deal must be determined uniformly for the whole contract in accordance with Art. 3 ss Rome I Regulation.469 This is true even if land or immaterial property belongs to the enterprise’s assets. A subjective choice of law is always admitted. In the absence of such a choice the objective determination of the applicable law regularly leads to the law at the seat of the seller (Art. 4 (2) Rome I Regulation).470 The same rule applies to the sale of the practice/office of a doctor, solicitor or other free profession.471 Even if land is also transferred 465 466 467 468 469

470

471

See further Reithmann/Martiny/Göthel note 6.2490. See also Reithmann/Martiny/Göthel note 6.2495, 6.2499 with further references. Also Thorn, in: Palandt Art. 6 Rom I-VO note 4; see further the comment on Art. 6. Reithmann/Martiny/Göthel note 6.2528; Magnus, in: Staudinger Art. 3 CISG note 51. Brödermann/Wegen, in: PWW Art. 4 Rom I-VO note 10; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 142; Gebauer, in: Calliess Art. 4 Rom I-VO note 50; Martiny, in: MünchKomm Art. 4 Rom I-VO note 208; Thorn, in: Rauscher Art. 4 Rom I-VO note 89. Brödermann/Wegen, in: PWW Art. 4 Rom I-VO note 10; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 142; Gebauer, in: Calliess Art. 4 Rom I-VO note 50; Martiny, in: MünchKomm Art. 4 Rom I-VO note 208; Reithmann/Martiny/Göthel note 6.2532; Thorn, in: Rauscher Art. 4 Rom I-VO note 89; differently Palandt/Thorn Art. 4 Rom I-VO Rn 23 (law at the main seat of the sold enterprise decisive via Art. 4 (3)). See in this sense though under the former law: OLG Hamm WiB 1995, 266 with note von der Seipen.

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with the practice/office the special rule on land sale (Art. 4 (1) (c)) does not prevail because the main object of the contract is the transfer of the entirety of the enterprise. To render rights in rem or a tenancy of immovable property is merely an accessory obligation. Only in rare cases will the transfer of land constitute the main object of the contract; the application of Art. 4 (1) (c) would be justified if the exclusive purpose of the sold enterprise is the administration of the enterprise’s immovable property. However, in such a case also Art. 4 (3) would lead to the lex situs. 279 Some specialties also concern the execution of asset deals. The execution is governed by the

law that regulates the transfer of each single asset.472 Therefore, the lex situs reigns the transfer of title with respect to movable and immovable property. The assignment of claims falls under Art. 14 Rome I Regulation. The transfer of the business name of the enterprise and in particular any liability arising from the continuation of the business is governed by the law at the place where the transferred enterprise is located.473 280 In all probability consumer protection under Art. 6 Rome I Regulation will not apply to asset

deals. Such deals will regularly not be made for private purposes. Even if a private person acquires all assets of an enterprise in preparation for a later business start this qualifies as non-private purpose.474 e) Sale of claims and rights 281 The CISG does not apply to sales and purchases of rights and claims.475 However, the

UNIDROIT Convention on international factoring of 28 May 1988 may be applicable. The Convention is in force (1 February 2016) in Belgium, France, Germany, Hungary, Italy, Latvia, Nigeria, Russia and Ukraine.476 It takes precedence over the Rome I Regulation (Art. 25 (1) Rome I Regulation) and applies if the receivables of the factoring contract arise from a sales contract where both supplier and debtor are seated in different contracting states of the Convention or where both the factoring contract and the sales contract are governed by the law of a contracting state.477 282 As generally the parties may choose the applicable law. The objective determination of the

applicable law is regulated by Art. 4 (2).478 In principle this rule applies as well if the sold right or claim is secured by a mortgage on land.479 However combined with other indicia a 472 473

474

475 476 477 478

479

350

Reithmann/Martiny/Göthel note 6.2541. See Hausmann, in: Staudinger Anh zu Art. 16 Rom I-VO note 20; Martiny, in: MünchKomm Art. 15 Rom I-VO note 36; Reithmann/Martiny/Göthel note 6.2556. In this sense for the comparable question under Art. 13 and 14 of the former Brussels Convention: CJEU ECLI:EU:C:1997:337 (C-269/95, Benincasa . /. Dentalkit) para. 19. See supra note 246. See the status report on www.unidroit.org/status-1988-factoring. Art. 2 (1) Factoring Convention. Also Brödermann/Wegen, in: PWW Art. 4 Rom I-VO note 10; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 142; Gebauer, in: Calliess Art. 4 Rom I-VO note 47; Hohloch, in: Erman Art. 4 Rom I-VO note 35; Leible, in: Nk-BGB Art. 4 Rom I-VO note 97; Martiny, in: MünchKomm Art. 4 Rom I-VO note 206; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 65; Thorn, in: Palandt Art. 4 Rom I-VO note 23; Thorn, in: Rauscher Art. 4 Rom I-VO note 86. See thereto supra note 192.

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manifestly closer connected law may apply (Art. 4 (3)). The sale of rights and claims can fall under Art. 6 if the buyer acts as consumer and the situative requirements of that provision are met. As to the sale and purchase of immaterial property rights see infra note 577 et seq. f) Sale of vessels The general conflict rule for the sale of movable goods governs the sale of – regularly used – 283 ships.480 The contract for the building of a new ship is almost ever a contract for work. The place of registration of the ship or its flag can add to apply a manifestly more closely connected law but each alone and both together do not yet overcome Art. 4 (1) (a). International sales of pleasure boats, yachts etc will often fall within the ambit of Art. 6 Rome I Regulation. The effects on the property title concerning the sold ship are rarely regulated by the lex situs 284 because this place may constantly change. Instead the law either at the place where the ship is registered or the law of the ship’s flag is applied.481 In most cases this will lead to the same law. g) Sale of other things The sale and purchase of immaterial goods such as – even secret or illegal – knowledge, titles, 285 permissions etc follows the same conflict rules as the sale of movables or rights and claims. Where these transactions violate national provisions on legality, boni mores etc Art. 21 Rome I Regulation may become applicable if the case is sufficiently connected with the country whose laws are violated. The direct application of these laws via Art. 9 Rome I Regulation is regularly inadmissible.482 h) Sale of goods to be manufactured The sale of goods to be manufactured of material whose major part is not provided by the 286 buyer is generally regarded as sale.483 Art. 4 (1) (a) applies. It does not matter that the buyer prescribed certain specifications for the manufacture or production of the goods.484 Therefore the law at the seller’s seat is applicable unless the parties have validly chosen another law or another law is applicable via Art. 4 (3). i) Consumer sale The UN Sales Convention excludes all consumer sales which the seller could recognise as 287 such (Art. 2 (a) CISG). Therefore, the CISG does normally not cover consumer sales.485

480

481

482 483

484 485

Calvo Caravaca/Carrascosa González note XXV-130; Magnus, in: Ferrari/Leible, Rome I 37; Martiny, in: MünchKomm Art. 4 Rom I-VO note 29. See the comprehensive survey on international regulations by Mansel, in: Staudinger Art. 45 EGBGB note 10 ss. See further the comment on Art. 9. See Art. 1 (4) Consumer Sales Directive; Art. 3 (1) CISG; Art. 6 (2) UN Limitation Convention of 1974; further though in the context of jurisdiction under Art. 5 (1) (b) of the former Brussels I Regulation: CJEU ECLI:EU:C:2010:90 (C-381/08, Car Trim GmbH . /. KeySafety Systems Srl) para. 33 ss. See explicitly CJEU ibid para. 43. Ferrari, in: Schlechtriem/Schwenzer Art. 2 note 7 ss.; Magnus, in: Staudinger Art. 2 CISG note 10 ss.; Schlechtriem/Schroeter, Int UN-Kaufrecht note 80 ss.

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288 All pre-mentioned conflict rules can be modified by the application of Art. 6 Rome I Regu-

lation whose ambit has been modestly extended as compared to its predecessor provision (Art. 5 Rome Convention). Art. 6 requires that the buyer concludes the contract for a private/personal purpose; furthermore, the seller must have pursued its activities in the consumer’s country or must have directed them to that country.486 2. Barter/exchange contract 289 As yet no special international convention deals with barter or exchange contracts. It is the

clearly prevailing view that the CISG does not cover barter or countertrade transactions.487 However, the UNCITRAL Legal Guide on International Countertrade Transactions of 1992488 has some importance as soft law. Further, the revised Timeshare Directive of 2009489 harmonises the law for specific barter contracts to a certain extent. The harmonisation concerns the precontractual information that the consumer must be given and the right of withdrawal of the consumer. 290 The parties to a barter contract can choose the applicable law. If one party is a consumer,

Art. 6 remains applicable. In addition, Art. 12 (2) Timeshare Directive 2009 prescribes for exchange contracts falling under the Directive that the consumer protection the Directive provides for cannot be excluded – neither by choice nor by the objectively applicable law – if the involved immovable property is located in an EU Member State or if the trader pursues its business activities in a Member State or directs them to a Member State. 291 In the absence of a subjective choice of law barter contracts fall under Art. 4 (1) Rome I

Regulation only in exceptional cases of an exchange of immovable property or of tenancies (Art. 4 (1) (c); see further next note). No other special provision of Art. 4 (1) applies to exchange contracts. Also, Art. 4 (2) is generally not applicable, for barter contracts are the standard example for contracts for which – in most cases – no characteristic performance of one party can be identified.490 In single cases, in particular in countertrade or compensation transactions, the performance of one side may nonetheless characterise the contract, for instance if for currency exchange problems the other party is forced to deliver goods instead of payment. Then, the law at the place of the first party is applicable. However, generally the closest connection of the exchange contract must be determined uniformly for the entire contract (Art. 4 (4)).491 This is also true for exchange contracts concerning rights, e.g. 486 487

488 489

490

491

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See further the comment on Art. 6. Ferrari, in: Schlechtriem/Schwenzer Art. 1 note 30; Magnus, in: Staudinger Art. 1 CISG note 29 both with further references. See www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1992 Guide_countertrade.htm. Directive 2008/122/EC of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts, OJ 2009 L 33 p. 10. Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 58; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 166; Gebauer, in: Calliess Art. 4 Rom I-VO note 75; Leible, in: Nk-BGB Art. 4 Rom I-VO note 102; Martiny, in: MünchKomm Art. 4 Rom I-VO note 340; Plender/Wilderspin note 7–086; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 83; Thorn, in: Rauscher Art. 4 Rom I-VO note 156; also already Lagarde Rev crit 1991, 309 in respect of the Rome Convention. Also Hohloch, in: Erman Art. 4 Rom I-VO note 47; Martiny, in: MünchKomm Art. 4 Rom I-VO note 340; Staudinger, in: Hk-BGB Art. 4 Rom I-VO note 12; Thorn, in: Palandt Art. 4 Rom I-VO note 31.

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licences.492 Often the main indicia for the closest connection – seat of the parties, place of performance – will neutralise each other. Then, even weak indicia such as the place of the conclusion of the contract, the language of the contract, the currency etc may become decisive.493 Where in cases of international exchange contracts on immovable property (or tenancies) 292 the involved properties are located in different states, Art. 4 (1) (c) is not applicable.494 Here, the closest connection may be inferred from the place where the contract was concluded and/or certified by a notary or other official person.495 3. Donation Without the parties’ choice donations of immovable property are governed by the law of the 293 place where the immovable is situated (Art. 4 (1) (c)).496 The same applies to donations of limited rights in rem or contractual rights to use the immovable property. With respect to donations of other objects than immovables – movable goods, rights – the 294 donor effects the characteristic performance in the sense of Art. 4 (2).497 The law at his or her seat (Art. 19) applies. This rule is also applicable to donations mixed with other contracts.498 Where the donation is promised and immediately fulfilled on the spot, the law of the place where this happens may be more appropriate than the law at the donor’s seat.499 In principle, donations between spouses follow the conflict rules mentioned above and not 295 the conflict rules on family matters.500 This is also true for so-called unnamed donations which a spouse promises or effects towards the other and which national law may not qualify as donation because they are made in the expectation that the marriage or non-marital community continues and that the ‘donor’ hopes also to benefit from the transfer. However,

492 493

494

495

496 497

498 499

500

See the case of a cross-licence contract: LG Mannheim BeckRS 2015, 15001. Martiny, in: MünchKomm Art. 4 Rom I-VO note 340; Plender/Wilderspin note 7–090; Thorn, in: Rauscher Art. 4 Rom I-VO note 155 s. Leible, in: Nk-BGB Art. 4 Rom I-VO note 102; Martiny, in: MünchKomm Art. 4 Rom I-VO note 340; Reithmann/Martiny/Limmer note 6.821; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 83; Thorn, in: Palandt Art. 4 Rom I-VO note 31. See Martiny, in: MünchKomm Art. 4 Rom I-VO note 340; Reithmann/Martiny/Limmer note 6.821; Rauscher/Thorn, Art. 4 Rom I-VO Rn 157; in case of doubt law at the place of certification Thorn, in: Palandt Art. 4 Rom I-VO note 31. See supra note 54 et seq. Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 53; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 157; Gebauer, in: Calliess Art. 4 Rom I-VO note 51; Leible, in: Nk-BGB Art. 4 Rom I-VO note 100; Martiny, in: MünchKomm Art. 4 Rom I-VO note 209; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 74; Thorn, in: Palandt Art. 4 Rom I-VO note 24. For a case concerning the donation of dower (under the former law) see OLG Köln NJW-RR 1994, 1026. See Czernich/Heiss/Czernich Art. 4 note 134; Martiny, in: MünchKomm Art. 4 Rom I-VO note 209. See R Magnus, in: Dutta/Weber, Internationales Erbrecht (2016) IntSchenkungsR S. 687 et seq.; see also the parallel solution for sales contracts (supra note 263). See for instance Siehr, in: MünchKomm Art. 14 EGBGB note 111.

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the law applicable to the effects of marriage may prohibit donations between spouses. Such prohibitions must be observed.501 296 Donations mortis causa are governed by the above mentioned conflict rules if still executed

during the life time of the donor. After his or her death the law governing succession is applicable.502 297 Donations can fall under the reign of Art. 6 Rome I Regulation, for instance if the donee is a

consumer whereas the donor pursues commercial purposes with the donation such as advertising, gaining or maintaining clients etc. (e.g.: international tobacco enterprise gratuitously distributes cigarettes to pupils in front of schools in other countries). Vice versa the donor may be the consumer who for instance gifts money to a foreign foundation for charitable purposes (see further the comment on Art. 6). 298 The applicable donation law governs the contractual rights and obligations such as eventual

warranties, rights to terminate or revoke the donation and eventual claims for return.503 The execution of the donation – transfer of title, assignment of right – follows however the law that insofar applies: for tangible goods the lex rei sitae; for rights and claims pursuant to Art. 14 Rome I Regulation the law applicable to the contract. 299 The form of the donation, in particular the form of the promise to donate something, follows

the lex causae or the lex loci actus (Art. 11 (1) and (2) Rome I Regulation. Whether the execution of the donation (which must be valid according to its law [see preceding note]) heals a lack of form of the donation promise should depend on the law applicable to the form. This serves the interest in the validity of the donation promise. Therefore, a lack of form is healed if either the law of the place where the donation was fulfilled or the applicable contract law so provides. 4. Rent, tenancy a) Tenancy of immovable or room 300 Uniform law for rental contracts for immovable property (land or room) does not yet exist. 301 The parties’ choice of the applicable law is always admitted. In the absence of such choice,

pursuant to Art. 4 (1) (c), the law of the place applies where the immovable is located.504 An exception is made for short-term tenancies for private use if both landlord and tenant have their habitual residence in the same country (Art. 4 (1) (d) Rom I Regulation). Then, the law of this country governs the contract. As always, Art. 4 (3) must be observed: a manifestly 501 502 503 504

354

See Siehr, in: MünchKomm Art. 14 EGBGB note 111. See, e.g., Thorn, in: Palandt Art. 25 EGBGB note 15. Martiny, in: MünchKomm Art. 4 Rom I-VO note 209. Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 48; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 38 s.; Gebauer, in: Calliess Art. 4 Rom I-VO note 24; Hohloch, in: Erman Art. 4 Rom I-VO note 24; Leible, in: Nk-BGB Art. 4 Rom I-VO note 39; Martiny, in: MünchKomm Art. 4 Rom I-VO note 122; Reithmann/Martiny/Mankowski note 6.950; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 36; Thorn, in: Rauscher Art. 4 Rom I-VO note 65; see already in the same sense under the former law: BGH NJW-RR 1996, 1034.

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closer connection to another country leads to the law of that country. A case of such manifestly closer connection is now regulated in Art. 4 (1) (d).505 With the exception of timeshare contracts the consumer protection under Art. 6 does not 302 extend to tenancies concerning immovables or rooms in buildings (see Art. 6 (4) (c)). Even if such tenancies include considerable services by the landlord (for instance, caring for the tenant’s horse or food supply to the tenant) and even if the further requirements of Art. 6 (1) are met, Art. 6 will regularly not be applicable because these services are most likely to have been exclusively supplied outside the consumer’s home country. Then, pursuant to Art. 6 (4) (a), they are excluded. Only if this is not the case and if the services are the preponderant objective of the contract, then in the absence of a subjective choice the law at the consumer’s habitual residence is applicable. The law of the place where the immovable is situated governs not only the tenancy of land, of 303 rooms in buildings, business premises, flats or holiday homes but also of parts of a parcel of land, for instance the place at a campsite or a parking space or other kinds of pitches coupled with land.506 However, the rent of a residential container falls under Art. 4 (1) (c) only if a part of land is rented as well. Tenancy law for housing purposes has a strong social element. Adequate protection of 304 tenants does not only serve the individual interests of the respective tenant but also the interest of the general public that the population as a whole is provided with reasonable housing facilities which also adds to social peace. National tenancy law therefore often contains mandatory provisions for housing, in particular on termination of such contracts and on increases of the rental costs. They not only serve the individual interest but also common goals and public interest. These protective provisions will therefore often constitute internationally mandatory rules in the sense of Art. 9 Rome I Regulation. Where the respective flat or room is located in the forum state this state’s mandatory tenancy law will generally prevail over a different tenancy law that is applicable by the parties’ choice.507 Contracts for accommodation in a hotel or boardinghouse do not fall under the scope of 305 Art. 4 (1) (c), because they are regularly mixed contracts which couple the rent of room with further elements (provision of breakfast or further meals, room cleaning etc.). They are therefore covered by Art. 4 (2) (see further infra note 422 et seq.). b) Other kinds of rent The hire of other goods than immovables, flats or rooms is governed by the law that the 306 parties have chosen or, in the absence of such choice, by the law at the seat of the lessor who is the debtor of the characteristic performance (Art. 4 (2)).508 The place where the good is left 505 506

507 508

See to this provision in detail supra note 102 et seq. Calvo Caravaca/Carrascosa González XXV note 137; Leible, in: Nk-BGB Art. 4 Rom I-VO note 39; Thorn, in: Palandt Art. 4 Rom I-VO note 25; see also OLG Frankfurt NJW-RR 1986, 108; AG Mannheim IPRspr 1994 no. 36. See further the comment on Art. 9. Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 48; Dicey/Morris/Collins (eds) note 33–095 s.; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 38 s.; Gebauer, in: Calliess Art. 4 Rom I-VO note 24; Hohloch, in: Erman Art. 4 Rom I-VO note 37; Leible, in: Nk-BGB Art. 4 Rom I-VO note 142; Martiny, in:

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to the user or where it is in fact used does not matter for Art. 4 (2). These places are however relevant under Art. 4 (3) where they may, in combination with other factors, lead to another law than that at the seat of the lessor. 307 The charter of ships, airplanes or other means of transport is also governed by the law at the

seat of the owner or person who lets on charter.509 However, if the dominant purpose of the charter contract is the transportation from one place to another, then Art. 5 Rome I Regulation applies (see the comment on that provision).510 c) Effects towards third parties 308 Under national law tenancy contracts, in particular residential leases, can have effects even

towards third persons, for instance a landlord’s lien on the tenant’s goods. It is argued that such quasi in rem effects should be governed by the conflict rule on property, the lex rei sitae,511 which in some countries does not allow for a subjective choice of law.512 5. Usufructuary rent 309 The usufructuary rent includes not only the use of the leased object but also the permission

to enjoy any fruits of the object. Such contracts follow the same conflict rules as apply to ‘normal’ rent or tenancy contracts.513 In the absence of the parties’ choice the usufructuary lease of land is governed by the lex situs of the land (Art. 4 (1) (c); exceptionally by the law of the common seat of the parties, lit. (d)). Where movables or rights are involved the law at the seat of the lessor who renders the characteristic performance (Art. 4 (2)) is applicable.514 310 In principle the usufructuary rent of an enterprise is governed by the law at the seat of the

lessor as well. However, if the lessor has its seat in another state than where the enterprise is located the law at the latter’s location should apply via Art. 4 (3) because this is the manifestly closer connected law.

509

510

511

512

513 514

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MünchKomm Art. 4 Rom I-VO note 210; Plender/Wilderspin note 7–036; Reithmann/Martiny/Mankowski note 6.950; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 37; Thorn, in: Palandt Art. 4 Rom I-VO note 25; Thorn, in: Rauscher Art. 4 Rom I-VO note 65; see also under the former law for instance OLG Düsseldorf IPRspr 2004 Nr 118; further Lagarde Rev crit 191, 309. See on the different forms of ship charters and the applicable law Mankowski, Seerechtliche Vertragsverhältnisse 89 ss.; Scrutton on Charterparties and Bills of Lading (21st ed. 2015) 2 ss., 498 s. As to the distinction between charter as rent and charter as transport contract see also CJEU ECLI:EU: C:2009:617 (C-133/08, Intercontainer Interfrigo SC (ICF) . /. Balkenende Oosthuizen BV and MIC Operations BV); ECLI:EU:C:2014:2320 (C-305/13, Haeger & Schmidt GmbH . /. Mutuelles du Mans assurances IARD (MMA IARD) a. o.). Martiny, in: MünchKomm Art. 4 Rom I-VO note 126; Reithmann/Martiny/Mankowski note 6.983; Thorn, in: Rauscher Art. 4 Rom I-VO note 67; also under the former law, e.g., LG Hamburg IPRspr 1991 no. 40. See in particular for Austria: § 31 Austrian IPRG; for Germany: Mansel, in: Staudinger Art. 43 EGBGB note 647; Swiss law on the contrary provides for a – limited – subjective choice of law concerning movables (Art. 104 Swiss IPRG). Hohloch, in: Erman Art. 4 Rom I-VO note 37; Thorn, in: Palandt Art. 4 Rom I-VO note 16, 25. See the references in the preceding fn; however differently Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 153 (law of the lessee).

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6. Gratuitous loan In principle, the gratuitous loan follows the same conflict rules as rent and tenancy contracts 311 (see supra note 300 et seq.). Taking the wording strictly the gratuitous loan does however not fall under Art. 4 (1) (c) and (d), which – contrary to the Rome Convention – merely cover tenancies. Yet, it is questionable whether the change of wording from the Rome Convention (Art. 4 (3): “right to use immovable property”) to the present text (“tenancy”) in fact meant a change in substance.515 Despite this difficulty the international gratuitous loan of land should be governed by the law of the place where the land is situated, either by analogy to Art. 4 (1) (c) and (d) or via Art. 4 (3).516 Also the specific rule on the domicilium communis in lit. (d) should be applied. In case of gratuitous loans of movables the law at the seat of the lender is applicable.517 7. Leasing The characteristics of leasing518 contracts are that the lessee is permitted to use the lease 312 object and has to pay for it. However, in contrast to rental contracts the lessee regularly has obligations and risks which are more extensive than those of a tenant or rentee.519 The content of lease agreements may vary, in particular between an operating lease and a financial lease. Under a financial leasing contract the rentals payable shall amortise the cost for the acqui- 313 sition of the leased object which the lessor has acquired from a supplier.520 The UNIDROIT Convention on International Financial Leasing of 1988 unified the substantive law for this kind of leasing. The Convention is in force in ten States (Belarus, France, Hungary, Italy, Latvia, Nigeria, Panama, Russia, Ukraine and Uzbekistan). It is applicable if the lessor and the lessee have their places of business in different states which are either Contracting States (where also the supplier must have its place of business) or when both the supply agreement and the leasing contract are governed by the law of a Contracting State.521 Under this latter alternative even the courts of Non-Contracting States may be compelled to apply the Convention.

515 516

517

518

519

520 521

For critique see Plender/Wilderspin note 7–040 (“regrettable”). See also Martiny, in: MünchKomm Art. 4 Rom I-VO note 211; Thorn, in: Rauscher Art. 4 Rom I-VO note 97. Hohloch, in: Erman Art. 4 Rom I-VO note 37; Martiny, in: MünchKomm Art. 4 Rom I-VO note 211; Thorn, in: Palandt Art. 4 Rom I-VO note 25. Bibliography (leasing): Ackermann, Grenzüberschreitende Leasingverträge, in: Martinek/Stoffels/Wimmer-Leonhardt (eds.), Handbuch des Leasingrechts (2nd ed. 2008) 973; Berninghaus/Lorscheider, Leasing und Factoring: Auslandsgeschäfte (2012); Dageförde, Internationales Finanzierungsleasing – Deutsches Kollisionsrecht und die Konvention von Ottawa (1992); Girsberger, Grenzüberschreitendes Finanzierungsleasing (1997); Rosen, International Leasing: a System Without a Law, in: Liber amicorum Bär und Karrer (2004) 195. See also the definition in Art. 1 UNIDROIT Convention on International Financial Leasing of 28 May 1988. See also Art. 1 (2) (c) UNIDROIT Leasing Convention of 1988. Art. 3 (1) UNIDROIT Leasing Convention of 1988.

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314 The operating leasing is closer to a normal rent contract, however, again with some rent-

untypical obligations of the parties. It serves also tax purposes. 315 The CISG does not apply to any kind of leasing contracts even if they provide for an option

to acquire the lease object at the end of the lease period. Only if the acquisition is the main objective the contract may fall within the scope of the CISG. The CISG is however applicable to the supply contract by which the lessor acquires the lease object from the supplier. 316 Leasing contracts are not covered by the catalogue of Art. 4 (1) Rome I Regulation. In

particular, they are no service contracts because their central element is to let the lease object for use.522 Therefore, pursuant to Art. 4 (2) and unless the parties have chosen the applicable law, leasing contracts are governed by the law at the seat of the lessor who effects the characteristic performance.523 This rule applies as well to the lease of a ship.524 317 The leasing of immovables should be governed by the law where the immovable is situ-

ated.525 Whether they fall under Art. 4 (1) (c) is however doubtful. The leasing of a right in rem in the immovable property appears to be unrealistic because the aim of a leasing contract is the factual use of the lease object. Whether lease contracts can qualify as tenancies in the sense of Art. 4 (1) (c) is again doubtful (see already to the same problem supra note 311 for gratuitous loans). Likewise, either a broad interpretation of the term tenancy or its analogous application or the application of Art. 4 (3) should lead to the lex situs of the leased immovable. The specific conditions of Art. 4 (1) (d) are more than unlikely to be ever met in leases of immovables. 318 Leasing contracts fall without limitation under Art. 6 if the lessee is a consumer and the

lessor a trader who pursues its activities in the consumer’s country or directs the activities to that country.526 However, leases of immovables enjoy no consumer protection (Art. 6 (4) (c)). Since they are governed by the lex situs (see supra note 95) this is only consequent. 8. Timeshare contract 319 Timeshare contracts527 generally distribute property rights in an object or rights to use the 522

523

524 525

526

527

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Thorn, in: Rauscher Art. 4 Rom I-VO note 92; contra – Art. 4 (1) (b) applicable – Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 41; probably also Calvo Caravaca/Carascosa González XXV note 137. Calvo Caravaca/Carrascosa González XXV Rn 137; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 147; Hohloch, in: Erman Art. 4 Rom I-VO note 38; Martiny, in: MünchKomm Art. 4 Rom I-VO note 52 s.; Plender/Wilderspin note 7–036; Reithmann/Martiny/Martiny note 6.379. Magnus, in: Staudinger Art. 4 Rom I-VO note 265; Martiny, in: MünchKomm Art. 4 Rom I-VO note 52. In this sense also Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 147; Martiny, in: MünchKomm Art. 4 Rom I-VO note 52. See also Magnus, in: Staudinger Art. 4 Rom I-VO note 267; Martiny, in: MünchKomm Art. 4 Rom I-VO note 53. Bibliography (timeshare contracts): Downes, Los contratos internacionales de timesharing (1998); Downes, Conflicting Interests in Timeshare Contracts Revisited on the Occasion of the CJEU (First Chamber) Case C-73/04 Judgment of 13 October 2005, Brigitte and Marcus Klein v. Rhodos Management Ltd, ERPL 2007, 157; Franzen, Neue Regeln für das IPR des Timesharing, in: FS von Hoffmann

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object between several persons so that for a certain period recurring each year each person is exclusively entitled to the property right or the right of use. Often immovables, for instance a holiday home or holiday flat, are the object of a timeshare contract. However, timeshare contracts can also concern movables or rights. The form in which the timeshare right is granted varies from in rem or contractual entitlement to company or club constructions. Accordingly, the conflict rules vary respectively.528 a) EU Directive In 1994 the EU enacted the first Timeshare Directive (94/97/EC of 26 October 1994).529 The 320 Directive introduced an EU-wide standard of protection for purchasers of timeshare rights relating to land. Furthermore, the purchaser was granted a right of withdrawal if he or she was a consumer. In implementing these provisions the Member States had to ensure that irrespective of the applicable law purchasers could not be deprived of the protection afforded by the Directive if the timeshare object was located in the EU (Art. 9 of the Directive). This conflict rule prevailed over the provisions of the Rome I Regulation (see Art. 23 Rome I Regulation). In 2009 the EU enacted an extended Timeshare Directive which replaced the old one. This is 321 Directive 2008/122/EC of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts.530 Following the developments of the timeshare market the Directive embraces not only the traditional timeshare contracts but also other comparable contracts such as on long-term holiday products, resale and exchange contracts. The contract must, for consideration, relate to the use of, or other benefit in respect of, overnight accommodation generally for more than one period. The Directive extended also the rights of consumers and contains again a special conflict rule. Its Art. 12 (2) provides that, even if the law of a third state is applicable the consumer must not be deprived of the protection granted by the Directive “if any of the immovable properties concerned is situated within the territory of a Member State, or, in the case of a contract not directly related to immovable property, the trader pursues commercial or professional activities in a Member State or, by any means, directs such activities to a Member State and the contract falls within the scope of such activities.” The Member States had to implement the Directive until 23 February 2011. b) Conflict rules Generally, the parties can freely choose the contract law applicable to timeshare contracts of 322 whatever kind.531 This is also true for the obligation to acquire the right via shares in a

528

529 530 531

(2011) 115; Franzen, Das “Gesetz zur Modernisierung der Regelungen über Teilzeit-Wohnrechteverträge, Verträge über langfristige Urlaubsprodukte sowie Vermittlungsverträge und Tauschsystemverträge”, NZM 2011, 217; Hellwig, Internationale Zuständigkeit und anwendbares Recht bei Timesharingverträgen, EWS 2011, 406; Kelp, Time-Sharing-Verträge (2005); Leible/Leitner, Das Kollisionsrecht des Timesharing nach der Richtlinie 2008/122/EG, IPRax 2013, 37; Wegner, Internationaler Verbraucherschutz beim Abschluß von Timesharingverträgen: § 8 Teilzeitwohnrechtegesetz (Diss Göttingen 1998). For the conflict rules for the different forms see Reithmann/Martiny/Mankowski note 6.2360 ss.; see further Plender/Wilderspin note 7–039 ss. OJ 1994 no L 280, p. 83. OJ 2009 no. L 33, p. 10. Thorn, in: Rauscher Art. 4 Rom I-VO note 70; to the same avail under the former law BGHZ 135, 124 [130]; LG Düsseldorf RIW 1995, 415 s. with note Mankowski RIW 1995, 364 ss.

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respective company or via the membership in a respective club or association. However, the implemented Art. 12 (2) Directive 2009 restricts the effects of such choice: The standard of the (implemented) Directive cannot be excluded by the choice of the law of a third country if the involved immovable property is located in the EU; concerning timeshare or comparable contracts not directly related to immovable property, the effects of the choice of the law of a third country are likewise restricted if the trader acted within the EU or directed its activities to this territory. The choice of the law of an EU State remains unrestricted. The drafters obviously assumed that all EU States correctly implement the Directive so that the standard of protection is identical throughout the EU. 323 In the absence of a valid choice by the parties, where the timeshare right or holiday product

is acquired via the membership in a company or association, pursuant to Art. 4 (2) Rome I Regulation, the obligation to purchase the share or membership is regularly governed by the law at the seat of the seller.532 If manifestly closer connections exist to another law this becomes applicable (Art. 4 (3)). However, questions of the valid entry into the company or association and other company-related issues are regulated by the law applicable to the company or association.533 324 On the other hand, contracts which concern in rem or contractual timeshare rights in

immovable property should be governed by the law where the immovable property is located.534 As far as timeshare contracts oblige to confer a right in rem, this solution follows directly from Art. 4 (1) (c). However, timeshare contracts which oblige to confer mere contractual rights without in rem effects fall under Art. 4 (1) (c) as well, as the argumentum e contrario in respect of Art. 6 (4) (c) shows. The latter provision generally excludes “a tenancy of immovable property” from the range of Art. 6 unless it is “a contract relating to the right to use immovable properties on a timeshare basis within the meaning of [the present Directive]”. This demonstrates that the drafters regarded all timeshare contracts concerning immovables as actually falling under the notion of ‘tenancy’.535 Otherwise, the sub-exemption of timeshare contracts would have been unnecessary. This interpretation is not inconsistent with the CJEU decision on Klein ./. Rhodos Management.536 In that case a club membership contract allowed, for an annual fee, to exchange holiday accommodation and included further services. The Court held that the link between the membership contract and the use of the property was “not sufficiently close to warrant classifying it as a tenancy” in the context of exclusive jurisdiction under the former Brussels Convention (which anyway required a narrow interpretation).537 From this reasoning it can be inferred 532

533 534

535 536 537

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Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 60; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 167; Leible, in: Nk-BGB Art. 4 Rom I-VO note 41; Martiny, in: MünchKomm Art. 4 Rom I-VO note 132; Plender/Wilderspin note 7–040; Reithmann/Martiny/Mankowski note 6.2408; Staudinger, in: HkBGB Art. 4 Rom I-VO note 5; differently – law applicable to the company – Thorn, in: Rauscher Art. 4 Rom I-VO note 68. See Mankowski, Martiny, Staudinger (preceding fn.). Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 60; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 167; Leible, in: Nk-BGB Art. 4 Rom I-VO note 40; Martiny, in: MünchKomm Art. 4 Rom I-VO note 132; Plender/Wilderspin note 7–040; Reithmann/Martiny/Mankowski note 6.2396 s. See also Recital 27 Rom I Regulation. CJEU ECLI:EU:C:2005:607 (C-73/04, Klein . /. Rhodos Management Ltd.). CJEU ECLI:EU:C:2005:607 (C-73/04, Klein . /. Rhodos Management Ltd.) para. 26.

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that, if the use of the immovable property were the dominant purpose, being merely disguised in the club membership construction, the contract would be classified as tenancy.538 The contract would then fall under Art. 4 (1) (c); the application of the lex situs of the involved immovable property would in any event be the adequate solution.539 If this solution is opposed one has to apply Art. 4 (2). However, even then the applicable law (at the seat of the ‘seller’ of the contractual timeshare rights) had often to be replaced by the lex situs via Art. 4 (3).540 Moreover, Klein . /. Rhodos Management was decided before the Timeshare Directive 2009 extended its scope to further contracts on a timeshare basis. The CJEU could not yet take into account this extension. Timeshare contracts in the form of exchange contracts must not be treated differently from 325 other timeshare contracts. If they concern immovable property, then, following the extension of the Timeshare Directive 2009 and the reasoning in the preceding note, they should be considered ‘tenancies’ in the sense of Art. 4 (1) (c). The German Supreme Court still denied this for a contract on “Ferientauschwochen” (holiday exchange weeks) concerning accommodation in a Spanish hotel complex, however, also in the jurisdictional context and before the enactment of the Timeshare Directive 2009.541 The parties of that case were a claimant company from Liechtenstein and German defendants as consumers who otherwise had to conduct their dispute before Spanish courts although the location of the involved immovable was not particularly relevant for the claim, for the claimant sued for the payment of the contractual fee and the defendants who finally won argued that they had validly withdrawn their contractual consent. For purposes of the applicable law the decision might have been differently. For timeshare contracts concerning movables, pursuant to Art. 4 (2), the law at the place of 326 the ‘seller’ is decisive. This law is also applicable to timeshare contracts on ships and airplanes. As always, a manifestly closer connection to another law may prevail (Art. 4 (3)). The transfer of rights in rem in the timeshare object – in execution of the contractual 327 obligations – is governed by the law that regulates property questions.542 Thus, the lex rei sitae is applicable; with respect to ships and airplanes it is regularly the law at the place of their registration. c) Consumer protection As indicated above (note 320 et seq.), the conflict rule of the Timeshare Directive as im- 328 plemented into national law takes precedence over the Rome I Regulation. Therefore, neither the choice of the law of a third country nor the objective application of such a law can deprive consumers of the protection granted by the Timeshare Directive. In addition, Art. 6 538 539

540 541 542

See in this sense Jarrett v. Barclays Bank [1999] Q.B. 1 (also in the jurisdictional context). Also OLG Brandenburg NZM 2008, 660; Reithmann/Martiny/Mankowski note 6.2396 et seq.; also favouring this view though feeling compelled to apply Art. 4 (2) Rome I Regulation: Plender/Wilderspin note 7–040. See also Plender/Wilderspin note 7–040. See BGH RIW 2008, 633. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 167; Hohloch, in: Erman Art. 4 Rom I-VO note 24; MünchKomm/Martiny Art. 4 Rom I-VO note 133; Reithmann/Martiny/Mankowski note 6.2403; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 38; Thorn, in: Palandt Art. 4 Rom I-VO note 16.

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Rome I Regulation applies to all kinds of timeshare contracts that fall under the Directive (Art. 6 (4) (c) Rome I Regulation). It is self-understanding that the further requirements of Art. 6 must be met. In particular, the trader must have acted in the consumer’s country or must have directed its activities to that country. This may be questionable where the trader has its seat at an often exotic place (Liechtenstein, Isle of Man or else) and offers timeshare contracts at typical holiday resorts (Spain, Turkey etc) to tourists from England, France, Germany etc. As intended by the trader, the contract will then be fully performed and continued at the consumer’s habitual residence where information and invoice is received, payment is made etc. This strategy that is planned before the contract at the holiday resort is concluded should be classified as “directing” the activities to the consumer’s country.543 9. Credit contract, loan 329 Thus far, there exists no substantive uniform law convention on credit agreements.544 With-

in the EU the Consumer Credit Directive 87/102/EEC of 22 December 1986545 harmonised some aspects of consumer credit law. The Directive was amended and replaced by Directive 2008/48/EC of 23 April 2008 on credit agreements for consumers and repealing Directive 87/102/EEC.546 The latter Directive had to be implemented until 12 May 2010 and has been again amended by Directive 2011/90/EU.547 Further, on 8 May 2012 the Commission published Guidelines on the application of Directive 2008/48/EC (Consumer Credit Directive) in relation to costs and the Annual Percentage Rate of charge.548 The 2008 Directive contains a special conflict provision in Art. 22 (4): The Member States must ensure “that consumers do not lose the protection granted by this Directive by virtue of the choice of the law of a third country as the law applicable to the credit agreement, if the credit agreement has a close link with the territory of one or more Member States.” As far as it reaches, this rule takes precedence over the provisions of the Rome I Regulation (Art. 23 Rome I Regulation) which however remains applicable to issues not affected by the Directive’s conflict rule. 330 The parties may always – expressly or impliedly – choose the law applicable to their credit

contract.549 The German Supreme Court assumed a tacit choice of German law where Ger543 544

545 546 547 548 549

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In the same sense Reithmann/Martiny/Mankowski note 6.2385. Bibliography (credit loan, loan): Einsele, Auswirkungen der Rom I-Verordnung auf Finanzdienstleistungen, WM 2009, 289; Hausmann, Ausländische Staaten als Darlehens- oder Anleiheschuldner vor deutschen Gerichten, in: FS Geimer (2002), 289; Hinsch/Horn, Das Vertragsrecht der internationalen Konsortialkredite und Projektfinanzierungen (1985); Hoffmann/Primaczenko, Verbraucherschutz beim grenzüberschreitenden Internetkredit, WM 2007, 189; Hoyer, Die Anknüpfung des privaten Darlehensvertrages, ZfRV 37 (1996) 221; Mankowski, Verbraucherkreditverträge mit Auslandsbezug, RIW 2006, 321; Mankowski, Verbraucherkreditverträge und europäisches IPR, ZEuP 2008, 845; Schücking, Das Internationale Privatrecht der Banken-Konsortien, WM 1996, 281; Wenzel, Rechtsfragen internationaler Konsortialkreditverträge (2006). OJ 1987 no. L 42, p. 48. OJ 2008 no. L 133, p. 66. OJ 2011 no. L 296, p. 35. SWD (2012) 128 final. Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 120; Gebauer, in: Calliess Art. 4 Rom I-VO note 55; Hohloch, in: Erman Art. 4 Rom I-VO note 39; Leible, in: NK-BGB Art. 4 Rom I-VO note 131; Martiny, in: MünchKomm Art. 4 Rom I-VO note 213; Spickhoff, in: Bamberger/Roth note 61; Thorn, in: Palandt

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man parties in Germany in the German language concluded a credit contract which referred to provisions of the German Civil Code although the credit was secured by a mortgage on Spanish real estate for which Spanish law should be expressly observed.550 The law objectively applicable to credit agreements is generally the law at the seat (in the 331 sense of Art. 19) of the lender. The lender is the party that regularly effects the characteristic performance. Making money – or other loan objects – available is the essence of credit contracts whereas the repayment (with interest) is their mere consequence. Thus, Art. 4 (2) applies,551 but the same solution would follow from Art. 4 (1) (b) if credit agreements were to be classified as service contracts552 (which is doubtful).553 For Art. 4 the question of qualification does not play any role. However, under Art. 6 (4) (a) the classification becomes decisive, because this provision excludes from the scope of consumer protection all services exclusively rendered in another than the consumer’s country (see further the comment on Art. 6). Where a private person lends money to another – private or professional – person, the law at 332 the lender’s habitual residence governs the contract.554 Where the lender is a bank, the law at its responsibly acting branch or, in the absence of a branch acting, the law at the place of the bank’s central administration is applicable (Art. 19).555 This rule applies as well to current account credits.556 Frequently credits will be secured by mortgages and the like on real estate. Yet, Art. 4 (1) (c) 333 does not cover these cases of real estate credits because the credit agreement as such is

550

551

552

553 554

555

556

Art. 4 Rom I-VO note 26; also in the same sense under the former law BGH RIW 1997, 426; BGH NJW-RR 2005, 581. BGH RIW 1997, 426 (still under the former law); see also BGH NJW-RR 2005, 581: tacit choice of German law where German citizens concluded a credit agreement in Germany in German language even if the contract served the financing of the purchase of real estate in Italy where the lenders already lived. In this sense Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 18; Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 120; Gebauer, in: Calliess Art. 4 Rom I-VO note 56; Hohloch, in: Erman Art. 4 Rom I-VO note 39; Leible, in: NK-BGB Art. 4 Rom I-VO note 131; Martiny, in: MünchKomm Art. 4 Rom I-VO note 213; Spickhoff, in: Bamberger/Roth note 61; Thorn, in: Palandt Art. 4 Rom I-VO note 26. Also under the prior law: Re Atlantic Telecom GmbH, (2004) SLT 1031; for a more flexible approach Plender/Wilderspin note 7–059. In this sense BGH NJW 2012, 1817 with respect to Art. 5 no. 1 (b) former Brussels I Regulation; Ringe, in: jurisPK-BGB Art. 4 Rom I-VO note 76; already with respect to the old Doorstep Directive of 1985 the CJEU stated in Bayerische Hypotheken- und Wechselbank AG . /. Edgar Dietzinger: “The grant of a credit facility is indeed the provision of a service […]” [ECLI:EU:C:1998:111, C-45/96] para. 18). However, this view overlooks that the lending of money requires no activity on the part of the lender (except the letting of the money); an active conduct is on the contrary the core element of a service; to the same avail also Thorn, in: Palandt Art. 4 Rom I-VO note 8. See on the contrary view, e.g., Thorn, in: Palandt Art. 4 Rom I-VO note 8. See Reithmann/Martiny/Martiny note 6.441; also under the prior law OLG Düsseldorf NJW-RR 1995, 756. Martiny, in: MünchKomm Art. 4 Rom I-VO note 213; Spickhoff, in: Bamberger/Roth note 61; Thorn, in: Palandt Art. 4 Rom I-VO note 26; also under the prior law OLG München RIW 1996, 329. OLG München RIW 1996, 329.

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regularly no contract “relating to a right in rem in immovable property” but aims at the provision of money to the borrower. Therefore, in principle Art. 4 (2) applies to such contracts, again with the lender as the characteristically performing party. However, Art. 4 (3) may nevertheless lead to the application of the law of the place where the involved real estate is situated.557 334 International syndicated or consortium loan agreements under which several banks of

different countries are the lenders – generally under the lead of one of the participating banks – are governed by the chosen law. In the exceptional case that no choice has been made the relation between the lending banks and the borrower is regulated by the law of the place where the leading bank has its central administration or responsible branch.558 This law is also applicable as far as the relations between the participating banks are concerned.

335 The Rome Convention still excluded pure credit contracts from the scope of its consumer

protection provision. Art. 6 Rome I Regulation now covers all consumer credit contracts. If they are exclusively provided in a country other than that of the consumer’s habitual residence, Art. 6 (4) (a) excludes them only if they are classified as services (see thereto supra note 331). Further, the protection granted by the Consumer Credit Directive 2008 cannot be excluded by the choice of the law of a third country if the contract has a close link with EU territory (see supra note 329). The habitual residence of the borrower within the EU should suffice as such link. 336 In particular exchange control regulations may be applicable to international credit con-

tracts pursuant to Art. 9 Rome I Regulation as international mandatory provisions of the forum or of the place of performance.559 Furthermore, interest rates which the applicable foreign law admits may nonetheless contradict the public policy of the forum and be inapplicable in accordance with Art. 21 Rome I Regulation. 10. Bond 337 Bonds560 are special loans, namely generally securitised promises to repay with interest a

sum of money which the bond holder (the lender/investor) has made available to the issuer 557

558 559 560

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Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 120; Hohloch, in: Erman Art. 4 Rom I-VO note 39; Martiny, in: MünchKomm Art. 4 Rom I-VO note 213; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 61; Thorn, in: Palandt Art. 4 Rom I-VO note 26. Martiny, in: MünchKomm Art. 4 Rom I-VO note 216. See infra the comment on Art. 9. Bibliography (Bond): Pfeiffer, Zahlungskrisen ausländischer Staaten im deutschen und internationalen Rechtsverkehr, ZVglRWiss 102 (2003) 141; Sandrock, Griechenland-Ausstieg – Auswirkungen auf die privaten Inhaber von griechischen Staatsanleihen, ZfgK 2012, 1175; Sandrock, Ersatzansprüche geschädigter deutscher Inhaber von griechischen Staatsanleihen, RIW 2012, 429; Sandrock, Drei Ergänzungen zu möglichen Ersatzansprüchen geschädigter deutscher privater Inhaber von griechischen Staatsanleihen, RIW 2013, 12; Sandrock, Nationaler und internationaler Schutz von privaten Inhabern von Staatsanleihen gegenüber Schuldenschnitten, WM 2013, 393; Siebel, Rechtsfragen internationaler Anleihen (1997); Stadler, Pacta sunt servanda – auch im Falle argentinischer Staatsanleihen, IPRax 2008, 405; Stucke, Das Recht der Gläubiger bei DM-Auslandsanleihen (1988); Vischer, Kollisionsrechtliche Rechtsprobleme bei internationalen Anleihen, in: FS Gauch (2004) 681; Weller, Die Grenze der Vertrags-

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of the bond (the borrower). Often the issuer is not the actual debtor of the loan because frequently banks or other intermediaries issue the bonds and make the money over to the debtor who is obliged to repay the money with interest to the bond holder. Very often bonds are negotiable instruments which actually fall under the exclusion in Art. 1 338 (2) (d) Rome I Regulation as far as obligations arising out of their negotiability are concerned. Because it is difficult and disputed which these obligations are, and in order to avoid a split legal regime for bonds, the Rome I Regulation should nevertheless be applicable. A further reason is that practically no bond is issued without a choice of law clause.561 The relationship between the bondholder and the debtor of the bond is governed by the 339 expressly or impliedly chosen law.562 However, a choice of law clause in the trust contract between the debtor and the bank as trustee of the bond holders has principally no effect on the relationship between the debtor and the bond holders unless the single bond refers to this contract.563 It should be further requested that the bond holder/investor should have had a reasonable opportunity to take notice of the content of the choice of law clause. In the exceptional case of a lacking choice of law clause the law objectively governing the 340 relationship between bondholder and debtor is the law at the debtor’s seat. For Art. 4 it can be left open whether this follows from Art. 4 (1) (b), Art. 4 (2) or even from Art. 4 (4). The result should be identical. Although the performance of the bondholder rather widely resembles that of a lender nonetheless the specific promise of the debtor is what the transaction characterises. The debtor therefore effects the characteristic performance. The law at its seat applies.564 But as always, a manifestly closer connection to another law outrules the law at the debtor’s seat – for instance, the law of the place of the issuance of the bonds may prevail if the bonds are specifically designed for this country.565 The same conflict rules apply to government bonds. States as bond debtors are by no means 341 immune.566 A state can also not avoid its liability as bond debtor by enacting exchange control regulations to its own favour that prohibit the transfer of money.567 Likewise, a state can principally not rely on a situation of national emergency in order to refuse the repayment of government bonds.568

561 562 563 564

565

566

567 568

treue von (Krisen-)Staaten: zur Einrede des Staatsnotstands gegenüber privaten Anleihegläubigern (2013). See Reithmann/Martiny/Freitag 6.633. Martiny, in: MünchKomm Art. 4 Rom I-VO note 221; Reithmann/Martiny/Freitag 6.633. See Magnus, in: Staudinger Art. 4 Rom I-VO note 290. In the same sense Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 104; Martiny, in: MünchKomm Art. 4 Rom I-VO note 221; Reithmann/Martiny/Freitag Art. 4 Rom I-VO note 103; Spickhoff, in: Bamberger/ Roth Art. 4 Rom I-VO note 57; Thorn, in: Rauscher Art. 4 Rom I-VO note 103. See also Martiny, in: MünchKomm Art. 4 Rom I-VO note 222; Thorn, in: Rauscher Art. 4 Rom I-VO note 103. See BVerfGE 117, 141; however, the execution into a state’s assets is only admitted as far as the asset does not serve sovereign tasks, see BVerfGE 118, 124; BGH RIW 2010, 72 (income from lease of the Russian House in Berlin that belongs Russia is immune and cannot be seized; it serves sovereign tasks). Reithmann/Martiny/Freitag note 6.656. BverfGE 118, 124.

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342 In contrast to credit and other loan contracts Art. 6 Rome I Regulation does not cover bonds

even if the bond holder is a consumer and the further situative preconditions of Art. 6 (1) are met, for Art. 6 (4) (d) excludes the specific consumer protection for “a financial instruments and … the issuance or offer to the public … of transferable securities”. According to Recital 30 Rome I Regulation “financial instruments and transferable securities are those instruments referred to in Article 4 of Directive 2004/39/EC”. Art. 4 no. 18 (b) of this Directive (the so-called MiFID)569 expressly includes in “transferable securities” “bonds or other forms of securitised debt …”. Thus, bonds are principally excluded from the scope of Art. 6. However, Art. 6 (4) (d) Rome I Regulation provides for a counter-exception if the excluded activities “constitute provision of a financial service”. Bonds are most likely not covered by this counter-exception. The reason is that for bonds the general consideration in Recital 28 Rome I Regulation is relevant: “It is important to ensure that rights and obligations which constitute a financial instrument are not covered by the general rule applicable to consumer contracts, as that could lead to different laws being applicable to each of the instruments issued, therefore changing their nature and preventing their fungible trading and offering.” If consumers are bond holders, applying each consumer’s law would indeed undermine the “uniformity in the terms and conditions of an issuance”570 of bonds and thus their fungibility.571 Therefore, bonds remain excluded from the scope of Art. 6. 343 If a third party, e.g. an issuing bank, is involved as issuer of bonds, the contractual relation-

ship between this party and the bond holder is governed by the law at the seat of the issuer (unless the parties have agreed on the applicable law).572 344 In the absence of a subjective choice the contractual relationship between the issuing bank

and the bond debtor is also regulated by the law at the seat of the bank which, with the issuance of the bonds, effects the characteristic performance.573 345 Where a bank consortium issues bonds, conflict rules parallel to those for syndicated credits

apply (see supra note 334). 11. Service contract a) In general 346 The notion of service contract comprises a huge number of different contracts.574 Under the

Rome Convention they fell under the general rule that the law at the seat of the characteristically performing party determined the applicable law. Now, in principle Art. 4 (1) (b) Rome I Regulation covers specifically all contracts for services. However, to certain kinds of service contracts special conflict rules apply. This is particularly true for transport contracts: 569

570 571

572

573 574

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OJ 2004 no. L 145, p. 1. The MiFID of 2004 shall be replaced by the revised MiFID II ( Directive 2014/65/ EU, OJ 2014 no. L 173, p. 349). The date of application of the new MiFID is still open, probably 2018. Also Recital 28 Rome I Regulation. See also Mankowski RIW 2009, 105; Martiny, in: MünchKomm Art. 6 Rom I-VO note 27 s.; Thorn, in: Rauscher Art. 4 Rom I-VO note 103. See Magnus, in: Staudinger Art. 4 Rom I-VO note 294; Martiny, in: MünchKomm Art. 4 Rom I-VO note 176; in the same sense under the prior law: Hopt, in: FS W. Lorenz (1991) 415. Hopt, in: FS W. Lorenz (1991) 415. See already supra note 66 et seq.

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on the one hand, numerous international conventions govern this field of contracts; on the other hand, Art. 5 provides conflict rules for the remaining cases. The law applicable to insurance and employment contracts is regulated by Art. 7 and 8. Services supplied to consumers fall under Art. 6 and the special conflict rules in some of the Directives concerning consumer protection. Further, Art. 4 (1) (e) and (f) specifically apply to franchising and distribution contracts. As to the special form of contracts for work see infra note 390 et seq. and of contracts for the management of the affairs of another see infra note 429 et seq. The parties can always choose the law applicable to their service contract.575 In the absence of 347 a valid choice the law at the place applies where the service provider has its habitual residence (Art. 4 (1) (b) in connection with Art. 19 Rome I Regulation) because he or she effects the characteristic performance.576 Therefore, for the so-called free professions – lawyers, doctors, accountants, tax consultants etc. – regularly the law at the place is applicable where they have their office and generally conduct their professional activities.577 This rule applies as well in respect of other independent service providers such as management consultants, construction supervisors, advertising and marketing agencies etc. The law at the seat of the service provider is principally decisive even if the person provides its service in other countries, for instance as tour guide578 or as international searcher of heirs.579 The law at the seat of the service provider can be substituted by a manifestly closer con- 348 nection to another law (Art. 4 (3)). However, the same nationality of the parties alone does not suffice to bring this escape clause into play.580 The same is in principle true where the parties have their habitual residence in the same country. Nor is it sufficient to displace the basic rule of Art. 4 (1) (b) if the contract has been concluded at the seat of the receiver of the service and parts of the contract were to be performed there.581 On the contrary, pursuant to Art. 4 (3), the contract between a director and his or her company will be governed by the law at the seat of the company (where the director is supposed primarily to work) unless the contract qualifies as an employment contract – in which case anyway the law at the place would be applicable where the employee carries out his or her work.582 b) Contract between lawyer and client The substantive law regulating contracts of lawyers with their clients583 has not yet been 349 575 576 577 578 579 580 581 582 583

In the same sense already under the prior law, e.g., BGHZ 128, 41 (48): consultancy contract. This was also the common solution under the prior law; see for instance BGHZ 128, 41 (48). Extensively Bairlein 123 ss. See, under the former law, BGH RIW 1995, 1027 (1028). LG München I IPRax 2014, 438 (para. 49). Also Hohloch, in: Erman Art. 4 Rom I-VO note 45. BGHZ 128, 41 (48 s.). See further the comment on Art. 8. Bibliography (contract between lawyer and client): Eisenberg, Das Internationale Privatrecht der Anwaltshaftung (Diss Konstanz 1998); Henssler, Anwaltliche Berufspflichten bei grenzüberschreitender Tätigkeit, NJW 2009, 1556; Hofmann, Internationales Anwaltsrecht (2. Aufl 2002); Knöfel, AnwaltsKollisionsrecht, AnwBl 2003, 3; Knöfel, Grundfragen der internationalen Berufsausübung von Rechtsanwälten (2005); R Magnus, Der Schutz der Vertraulichkeit bei grenzüberschreitender Anwaltstätigkeit, RabelsZ 77 (2013) 111; Mankowski, Rechts- und Steuerberatung mit Auslandsberührung, ZErb 2007, 406; Spickhoff, Zwingendes Gebührenrecht und Internationales Vertragsrecht, IPRax 2005, 125; Stau-

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unified or harmonised – neither on the international nor on the European level. In the EU practising lawyers can rely on the freedom of establishment (Art. 49 TFEU) as well as on the freedom to provide services (Art. 56 TFEU). Directive 1998/5/EC of 16 February 1998584 and Directive 2005/36/EC of 7 September 2005585 concretise the basic freedoms for practicing lawyers. Lawyers who are admitted to practice in one EU Member State may practice in any other Member State, however, only under the home-country professional title. For full admission as lawyer in the host Member State a three year period of practice or an examination is necessary. 350 If not otherwise agreed upon, the contract between lawyer and client is regularly governed

by the law at the seat of the lawyer.586 The same conflict rule applies to patent attorneys587 as well as to other professionals who are allowed to give legal advice. Contracts with notaries public also fall under this rule as far as the notary acts in a non-sovereign capacity. Where the notary acts in a sovereign function, then the contract falls outside the scope of the Rome I Regulation which merely covers civil and commercial matters (Art. 1 (1)). In such cases, the law of the state applies, from which the notary public derived its sovereign power. Regularly, this will also be the law at the seat of the notary public.588 351 If the instructed law firm has several branches in different states, then, pursuant to Art. 19

(2), the branch is relevant that responsibly performs the contract and conducts the case.589 If, for instance, a French business instructs a French law firm which has a branch in Hong Kong to represent the business there in court proceedings, then the law of Hong Kong applies to the contract between the business and the law firm, for the necessary extent, content and remuneration of the legal representation can only be judged by the standards of that law. If, on the other hand, the French business requests advice from the French law firm in respect of the setting up of a new company in Hong Kong, French law applies because it is the French partner that performs the contract (also in France) even if the relevant answers originate from the Hong Kong branch.

584

585

586

587

588 589

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dinger, Erfolgshonorare und quota litis-Vereinbarungen im Internationalen Privatrecht, IPRax 2005, 129; vWestphalen, Einige international-rechtliche Aspekte bei grenzüberschreitender Tätigkeit von Anwälten, in: FS Geimer (2002) 1485. Directive to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained (OJ 1998 no. L 77, p. 36). Directive on the recognition of professional qualifications (OJ 2005 no. L 255, p. 22). The Directive was several times amended. OVG Berlin-Brandenburg NJW 2012, 1749; Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 4; Calvo Caravaca/Carrascosa González XXV note 137; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 105; Hohloch, in: Erman Art. 4 Rom I-VO note 14; R Magnus RabelsZ 77 (2013) 127; Martiny, in: MünchKomm Art. 4 Rom I-VO note 71; Plender/Wilderspin note 7–058; Reithmann/Martiny/Mankowski/Knöfel note 6.689 with further references; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 13; Thorn, in: Palandt Art. 4 Rom I-VO note 9; also under the prior law BGH NJW 2004, 1521; Tribunal de grande instance Paris, D. 1983 J. 146. Martiny, in: MünchKomm Art. 4 Rom I-VO note 71; also previously BGH NJW 1981, 1176; BGH IPRax 1983, 67 with note Stoll (52). See also Thorn, in: Rauscher Art. 4 Rom I-VO note 40. Dicey/Morris/Collins (eds) note 32–125; Martiny, in: MünchKomm/Martiny Art. 4 Rom I-VO note 73; Reithmann/Martiny/Mankowski/Knöfel note 6.691 ss.

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If each of several foreign branches of the instructed law firm performs relevant parts of the 352 contract, then the law at the central seat of the law firm should be applicable (Art. 4 (1) (b) in connection with Art. 19 (1)). To split a uniform contract and to subject the several parts to the law at each branch’s seat is no longer consistent with the fact that the Rome I Regulation abrogated the objective dépeçage.590 If the activities of one branch clearly prevail, the law at this branch’s seat should apply. According to a different view the law at each branch’s seat should decide.591 In any event it must be carefully determined whether the client concluded a uniform contract with the law firm or separated contracts with each branch. In sufficiently clear cases it is also possible that the parties tacitly agreed on different law for the different parts of the contract performance (for each part the law at the seat of the respective branch). In so far as one law firm instructs another law firm, the law at the latter’s seat is applicable 353 because it provides the relevant services. Where the lawyer advises or represents the client in the latter’s private matters (divorce, 354 succession, maintenance, private purchase etc), Art. 6 Rome I Regulation can come into play since the lawyer always acts as professional and the client is consumer in the sense of the provision.592 However, it will be rather rare that the situative requirements of Art. 6 (1) are met; or, Art. 6 (4) (a) will exclude the application of Art. 6 (1) and (2). If the lawyer “pursues his commercial or professional activities” in the country of the consumer, the lawyer will most regularly have its place of business there and the law of that country remains applicable. A foreign element of the mandate does not affect the application of the law applicable at the seat of the parties. If the lawyer “directs” its activities to the country of the consumer this may occur via – legal or even illegal – advertisements etc. and most likely via a website on the Internet. The mere existence of a website which offers the services of the lawyer does not suffice.593 In accordance with the case law of the CJEU, on the website “the trader must have manifested its intention to establish commercial relations with consumers from one or more other Member States, including that of the consumer’s domicile.”594 This can be expressed by naming the respective countries595 or by indicia indicating the willingness to contract with persons from abroad, as for instance “the description of itineraries from one or

590 591

592

593

594

595

See thereto supra note 156. Martiny, in: MünchKomm/Martiny Art. 4 Rom I-VO note 73 (if each branch performs a separable part of the contract); Reithmann/Martiny/Mankowski/Knöfel note 6.692. Reithmann/Martiny/Mankowski/Knöfel note 6.679 ss; Thorn, in: Palandt Art. 4 Rom I-VO note 9; also under the prior law, e.g., LG Hamburg NJW-RR 2000, 510 (Greek lawyer acting in Germany can request remuneration from German client in accordance with German law on remuneration); see thereto Jayme/ Kohler IPRax 2000, 463 s. See – though in respect of jurisdiction under Art. 15 former Brussels I Regulation – CJEU ECLI:EU: C:2010:740 (C-585/08 and C-144/09, Peter Pammer . /. Reederei Karl Schlüter GmbH & Co KG and Hotel Alpenhof GesmbH . /. Oliver Heller) para. 72. See also Recital 24 Rome I Regulation; further BGH IPRax 2009, 258 with critical note by Mankowski IPRax 2009, 238 ss. CJEU ECLI:EU:C:2010:740 (C-585/08 and C-144/09, Peter Pammer . /. Reederei Karl Schlüter GmbH & Co KG and Hotel Alpenhof GesmbH . /. Oliver Heller) para. 75. CJEU ECLI:EU:C:2010:740 (C-585/08 and C-144/09, Peter Pammer . /. Reederei Karl Schlüter GmbH & Co KG and Hotel Alpenhof GesmbH . /. Oliver Heller) para. 81.

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more other Member States to the place where the service is provided” or similar signs.596 However, it has been rightly held to be not “directing activities” to Germany if a German insurer mentions on its website the name and address of a Greek lawyer (who probably did not know this) for German clients and the consumer had concluded the contract with the Greek lawyer in Greece only after recommendations there and not knowing of the German insurer’s website.597 355 National provisions which require a registration for any lawyering activity on the respective

state’s territory can fall under Art. 9 Rome I Regulation, for they primarily serve the public interest in securing responsible and thorough legal counselling. If the foreign lawyer violates such provisions, the contracts with clients may be invalid in accordance with domestic law that is applicable via Art. 9 Rome I Regulation. 356 It is always domestic legal counselling if a foreign lawyer (admitted to practice only in his or

her country of origin) maintains an office or branch in another than the own country.598 However, this is not the only case.599 Partly, it is held to be decisive where the lawyer in fact acted.600 Partly the market of counselling shall decide on which the lawyer is active.601 The latter view requires however further consideration wherefrom the acting on the market follows. Therefore, the law of the place should be applicable where, in the concrete single case, the lawyer in fact performs his or her duties in respect of advising and representing the client. Appearing in court as representative of the client is acting in the country where the court is situated. A legal opinion which a foreign lawyer delivers for a party in another country is on the contrary no lawyering in that country. 357 Special questions can arise if lawyer and client agree on a contingency fee (“no win, no fee”)

or on a quota litis agreement. While in many countries such agreements are perfectly valid – in particular in the US –, other countries regard them as doubtful and/or indecent.602 The respective national restriction could be considered an internationally mandatory provision in the sense of Art. 9 Rome I Regulation. The more adequate view is to examine in the concrete case whether extraordinary high fees or lawyers’ shares in the positive result of litigation offends the public policy of the forum state.603

596

597 598

599

600 601

602

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CJEU ECLI:EU:C:2010:740 (C-585/08 and C-144/09, Peter Pammer . /. Reederei Karl Schlüter GmbH & Co KG and Hotel Alpenhof GesmbH . /. Oliver Heller) para. 83. BGH IPRax 2009, 258 with critical note by Mankowski IPRax 2009, 238 ss. OLG Stuttgart MDR 1997, 285; LG Dortmund AnwBl 1999, 617; Martiny, in: MünchKomm Art. 9 Rom I-VO note 71; Reithmann/Martiny/Mankowski/Knöfel note 6.723. OLG Hamm IPRax 2001, 249 with note Budzikiewicz IPRax 2001, 218; Reithmann/Martiny/Mankowski/ Knöfel note 6.723; contra OLG Stuttgart, LG Dortmund AnwBl 1999, 617. See, e.g., LG München I IPRspr 1964/65 Nr 43; VG Schleswig NJW 1989, 1178. OLG Hamm IPRax 2001, 249 with note Budzikiewicz IPRax 2001, 218; Reithmann/Martiny/Mankowski/ Knöfel note 6.723. E.g., they were entirely forbidden in Germany until 1 July 2008. Since then they are permitted though under rather restrictive conditions, namely, whether otherwise the client would not pursue his or her case due to financial constraints. Also in this sense Martiny, in: MünchKomm Art. 4 Rom I-VO note 75; Reithmann/Martiny/Mankowski/ Knöfel note 6.715 s.; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 13.

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c) Contract between doctor and patient In the absence of an always admissible – express or implied – choice of the applicable law, 358 contracts for medical treatment604 are governed by the law at the place where the doctor has his or her practice or where the hospital is situated in which the patient is medically treated.605 The same rule is applicable to contracts with other members of the health care profession such as midwives, psychologists, alternative practitioners, even pharmacists (if they give advice for medical treatment). In principle, nothing else applies in case of so-called telemedicine that is the medical treatment – mainly by advice – by a doctor or other health care professional via the internet.606 However, in such cases the law at the place where the treated patient is may be more appropriate and be manifestly closer connected (Art. 4 (3)). The law at the doctor’s seat also governs international contracts between doctors and patients on artificial insemination.607 To contracts on organ donation see infra note 664 et seq. Contracts with doctors will often fall under Art. 6 Rome I Regulation, because medical 359 treatment of human beings regularly affects the private sphere of the patient who is then classified as consumer in the sense of Art. 6, whereas medical treatment of animals may often – in particular in farming – belong to the professional sphere of the owner. However, it is rather infrequent that the requirements of Art. 6 (1) (a) or (b) are met – despite a considerable amount of advertising for dental treatment in East-European countries. But most likely in such cases the treatment will be exclusively performed in the country where the doctor’s practice or the involved hospital is located. Thus, the exclusion clause of Art. 6 (4) (a) applies. d) Contract for teaching or training Contracts whose objective is the learning, teaching, training, education and the like of the 360 participants are governed firstly by the chosen law and in its absence by the law at the place where the provider has its habitual residence in the sense of Art. 19 (Art. 4 (1) (b) Rome I Regulation).608

604

605

606

607

608

Bibliography (contract beween doctor and client): vDomarus, Internationales Arzthaftungsrecht nach Inkrafttreten der Rom I- und Rom II-Verordnung (2013); Schwenzfeier, Die kollisionsrechtliche Anknüpfung des Behandlungsverhältnisses im Rahmen einer kosmetischen Operation (2011); Wendelstein, Kollisionsrechtliche Probleme der Telemedizin (2012). See, e.g., LG Mönchengladbach BeckRS 2015, 17169 (medical treatment of German patient in hospital in Turkey = Turkish law applicable via Art. 4 (1) (b) or Art. 4 (2)); in the same sense Calvo Caravaca/ Carrascosa González XXV note 137; von Domarus 67 s.; Hohloch, in: Erman Art. 4 Rom I-VO note 14; Leible, in: Nk-BGB Art. 4 Rom I-VO note 105; Martiny, in: MünchKomm Art. 4 Rom I-VO note 76; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 15. See Bairlein 145 ss.; Leible, in: Nk-BGB Art. 4 Rom I-VO note 105; Magnus, in: Staudinger Art. 4 Rom I-VO note 309; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 15; Wendelstein, Kollisionsrechtliche Probleme der Telemedizin (2012) 240 ss. See Backmann, Künstliche Fortpflanzung und Internationales Privatrecht (2002) 135 ss.; Magnus, in: Staudinger Art. 4 Rom I-VO note 309. Hohloch, in: Erman Art. 4 Rom I-VO note 14; Leible, in: Nk-BGB Art. 4 Rom I-VO note 107; Martiny, in: MünchKomm Art. 4 Rom I-VO note 77; also previously Danish Østre Landsret, UfR 1988, 626 (Danish woman attends German course on natural healing in Munich = German law applied); AG Heidelberg IPRax 1987, 25 with note Boll IPRax 1987, 11.

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361 The law at the place where the learning, teaching etc. is performed – for example as a

summer course abroad – is as such immaterial but may – in combination with other indicia – lead to the application of that law as the manifestly closer connected law (Art. 4 (3)).

362 Contracts on distant learning where the teaching is effected either by sending materials or by

teaching via the internet are to be treated in the same way as traditional courses where the participants are present at the place of teaching: generally, the law at the provider’s seat is decisive.609 363 Contracts with course participants will often be consumer contracts. Then, Art. 6 applies if

its situative requirements are fulfilled and the course is not exclusively run in another country than that of the participant’s home country (Art. 6 (4) (a)). However, where the course intentionally serves the preparation for professional activities – e.g., preparation for the examination as alternative healing practitioner, as tax adviser etc. –, a consumer contract must be denied. 364 Special national provisions which provide for the protection of the participants are regularly

no internationally mandatory provisions in the sense of Art. 9 Rome I Regulation because their aim is generally the protection of the individual participant but not of public interests. 365 The contract between the teaching institution and the teacher follows different conflict rules.

If the teacher is an employee, Art. 8 Rome I Regulation is applicable. If the teacher acts as independent contractor, pursuant to Art. 4 (1) (b) his or her seat determines the regularly applicable law although the place of teaching may become relevant when Art. 4 (3) is considered. e) Contract for performance as artist etc. 366 If the parties have not chosen the applicable law, contracts which artists, sportspersons,

scientists etc. oblige to act, sing, play, dance, speak publicly or in private performance, are regulated by the law of the place where the actor has its seat.610 In combination with further facts the place of the performance may lead to the law at this place as the manifestly closer connected law. 12. Brokerage contract 367 Brokers are independent intermediaries who arrange transactions between two or more

other parties and receive a brokerage fee for making the contact or bringing the contract between those parties about. Generally one of those parties has instructed the broker to act and find opportunities for concluding contracts. The contract between the broker and the instructing client concerns a service;611 it therefore falls under Art. 4 (1) (b). If the applicable 609 610

611

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Also Martiny, in: MünchKomm Art. 4 Rom I-VO note 77. In the same sense Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 110; Thorn, in: Rauscher Art. 4 Rom I-VO note 37; probably also Plender/Wilderspin note 7–081; also under the prior law Definitely Maybe (Touring) v. Marek Lieberberg Konzertagentur [2001] 1 W.L.R. 1745 (the German defendant was the organiser of concerts – in Germany – for the English artists, the claimants; the court held that the artists effected the characteristic performance, but applied German law as the more closely connected law). BGH NJW 2015, 2339; OGH IPRax 2006, 608 (610).

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law has not been chosen, the law at the broker’s seat applies.612 This is also true for ship brokers and ship agents.613 If the principal broker engages a sub-broker, the relationship between the two is governed by the law at the sub-broker’s seat.614 The law at the broker’s seat is likewise applicable to contracts of real estate brokerage; it is not the law of the place of the involved estate that regularly determines the applicable law. Such contracts do also not fall under Art. 4 (1) (c) because they concern neither a right in rem in the immovable property nor a tenancy of it.615 Contracts of brokers who act for their clients at stock exchanges should not be treated differently. The seat of the broker, not of the stock exchange is decisive, for the broker may act at more than one stock exchange and/or at electronic exchange platforms so that the seat of the stock exchange or of the virtual platform cannot be determined; in addition the contract between such broker and the client is not a contract within but outside the stock exchange. This is a further reason not to apply the law at the place of the respective stock exchange.616 If the broker’s client is a consumer and the contract is concluded under the requirements of 368 Art. 6 (1) (a) or (b), then Art. 6 must be applied.617 The exceptions of Art. 6 (4) (d) and (e) do not interfere here. For the determination of the law applicable to brokerage contracts it is principally imma- 369 terial which law applies to the contracts resulting from the brokerage.618 This law can however play a role – together with other facts – whether Art. 4 (3) leads to another law. This may be for instance the case if the brokerage contract was concluded exclusively with the view to bring about the contract for a certain large-scale project.619 The contracts which the broker brings about follow their own law. Only in exceptional cases 370 (Art. 4 (3)) do they follow the law of the brokerage contract. The law applicable to the brokerage contract determines in particular under which condi- 371 612

613 614

615

616 617

618

619

Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 150; Hohloch, in: Erman Art. 4 Rom I-VO note 17; Martiny, in: MünchKomm Art. 4 Rom I-VO note 78; Plender/Wilderspin note 7–058; Reithmann/Martiny/Mankowski/Knöfel note 6.689 with further references; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 30; Thorn, in: Palandt Art. 4 Rom I-VO note 12; also under the prior law OLG Düsseldorf RIW 1997, 780; LG Frankfurt RIW 1994, 778; Danish Højesteret UfR 1992, 253; HIB Ltd. v. Guardian Insurance Co. [1997] Lloyd’s Rep. 412 (Q.B.). See Mankowski, Seerechtliche Vertragsverhältnisse 453 ss. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 150; Reithmann/Martiny/Martiny note 6.665; differently – law of the contract between the principal broker and its client applicable – under the prior law OLG Düsseldorf RIW 1997, 780. Czernich/Heiss/Czernich Art. 4 note 128; Dicey/Morris/Collins (eds) note 33–397 ss.; Reithmann/Martiny/Martiny Rn 6.664; see also supra note 92. See Reithmann/Martiny/Mankowski note 6.1742. Reithmann/Martiny/Mankowski note 6.1738 ss.; in the same sense in the context of jurisdiction BGH NJW 2015, 2339; OGH IPRax 2006, 608 (610). Reithmann/Martiny/Martiny note 6.666; Thorn, in: Rauscher Art. 4 Rom I-VO note 36; still under the Rome Convention OGH ÖJZ 2011, 683. For a more generous application of the escape clause under the prior law (where still the word “manifestly” was lacking in the text): OLG Düsseldorf RIW 1997, 780.

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tions the brokerage fee is owed and becomes due. However, where the fee depends on the condition that a contract between the client and a third party has come into existence this question must be answered according to the law governing this contract.620 372 National law may contain prohibitions or restrictions for certain kinds of brokerage con-

tracts, for instance for the intermediation of employment contracts or housing rental contracts. Such provisions can constitute overriding mandatory rules if and because they primarily intend to safeguard a functioning employment or housing market. 13. Commission contract 373 A commission contract between a principal and a commission agent obliges the agent to

enter into contracts with third parties in the agent’s own name but for the account of the principal. The commission agent thus acts in undisclosed agency. In the absence of the parties’ choice of the applicable law, the commission contract is governed by the law at the place where the commission agent has its habitual residence (Art. 4 (1) (b) in connection with Art. 19 Rome I Regulation).621 Neither the place where the contract with the third party was concluded nor the law that governs this contract nor the law at the seat of the principal are relevant for the regular determination of the applicable law. However, all these facts play a role in the context of Art. 4 (3) and may, if they all lead to the same law, justify the application of this law. 374 Commission contracts can fall under the scope of Art. 6 if the principal for whose account

the commission agent acts is a consumer.622 14. Commercial agency contract a) Unification of law 375 The substantive law of commercial agency contracts623 has been partly harmonised by 620 621

622 623

374

Reithmann/Martiny/Martiny note 6.666 s.; also under the prior law LG Oldenburg RIW 1985, 576. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 144; Hohloch, in: Erman Art. 4 Rom I-VO note 20; Leible, in: Nk-BGB Art. 4 Rom I-VO note 120; Martiny, in: MünchKomm Art. 4 Rom I-VO note 82; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 45; Thorn, in: Palandt Art. 4 Rom I-VO note 12; also previously BGH NJW-RR 2003, 1582. Reithmann/Martiny/Martiny note 6.670. Bibliography (commercial agency contracts): Ancel, Les contrats de distribution et la nouvelle donne du règlement Rome I, Rev crit dr int pr 97 (2008) 561; Hopt, Handelsvertreterrecht (4th ed. 2009); Kessler, Ausländisches und Internationales Handelsvertreterrecht (7th ed. 2003); Küstner/Thume, Handbuch des gesamten Außendienstrechts vol. 1: Das Recht des Handelsvertreters (3rd ed. 2000); vol. 2: Der Ausgleichsanspruch des Handelsvertreters (8th ed. 2007); vol. 3: Vertriebsrecht (3rd ed. 2009); Lando, Handelsagenter og international privatret, UfR 1999, 508; Lando, The Territorial Scope of Application of the EU Directive on Self-employed Commercial Agents, in: FS Isabel de Magalhães Collaça I (2002) 249; Magnus, Internationalprivatrechtliche Fragen des Vertriebs aus der Schweiz in die EU, in: Arter (ed.), Vertriebsverträge (2007) 221; Mankowski, Handelsvertreterverträge im Internationalen Prozess- und Privatrecht, in: Hopt/Tzouganatos (eds.), Europäisierung des Handels- und Wirtschaftsrechts. Gemeinsame oder unterschiedliche Probleme für das deutsche und griechische Recht? (2006) 131; Mankowski, Commercial Agents and the Brussels I Regulation, in: Calvo Caravaca/Rodríguez Rodrigo (Hrsg), Par-

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Directive no. 86/653/EEC on the coordination of the laws of the Member States relating to self-employed commercial agents.624 The degree of harmonisation is relatively low. In particular, the Directive opened an option concerning the indemnification of the commercial agent after an unjustified termination of its agency contract.625 Also the unification of the conflict rules on agency contracts is rather limited. The Hague 376 Convention on the Law Applicable to Agency of 14 March 1978 is in force in four states only (since 1992 in Argentina, France, Netherlands and Portugal).626 The courts of the contracting states have to apply the Convention also towards persons of non-contracting states.627 The Convention designates the law of the place where the agent has its business or simple residence unless the parties have agreed otherwise.628 Further, the Convention prevails over the Rome I Regulation (Art. 25 (1) Rome I Regulation). b) Qualification A commercial agent is “a self-employed intermediary who has continuing authority to 377 negotiate the sale or the purchase of goods on behalf of another, […] called the ‘principal’, or to negotiate and conclude such transactions on behalf of and in the name of that principal” (Art. 1 (2) Commercial Agency Directive).629 The characteristic is thus that the agent is an independent contractor who on behalf of the principal and generally in the latter’s name negotiates and concludes contracts with third persons. The branch in which the agents acts is immaterial (although the Commercial Agent Directive only covers the sale and purchase of goods). Whether the contract between the agent and the principal constitutes a commercial agency 378 contract or an employment contract has to be determined in an autonomous European interpretation. The degree of independence is decisive. If the agent him- or herself can determine the organisation of the own activities without being insofar bound by instructions of the principal this speaks in favour of a (commercial) agency contract (“self-employed intermediary”). On the contrary is it not decisive how national law qualifies agents, for instance treats them under certain circumstances as employees.630

624 625 626 627 628 629

630

malat y otros casos de derecho internacional privado (2007) 413; Martinek/Semler/Habermeier/Flohr (eds.), Handbuch des Vertriebsrechts (3rd ed. 2010); W-H Roth, Handelsvertretervertrag und Rom I-Verordnung – eine Skizze, in: FS Spellenberg (2010) 309; Thume, Grenzüberschreitende Vertriebsverträge, IHR 2009, 141; Valdini, Der Schutz der schwächeren Vertragspartei im internationalen Vertriebsrecht (2013); Verhagen, Agency in Private International Law (1995). OJ 1986 no. L 382, p. 17. See Art. 17 s. Commercial Agency Directive. For the text see www.hcch.net/en/instruments/conventioons/full-text/?cid=89. See Art. 4 of the Convention. See Art. 5 and 6 of the Convention. Art. 1 (1) Hague Convention on the Law Applicable to Agency defines agency contracts in the following way: “a person, the agent, has the authority to act, acts or purports to act on behalf of another person, the principal, in dealing with a third party.” And Art. 1 (3) adds: “The Convention shall apply whether the agent acts in his own name or in that of the principal and whether he acts regularly or occasionally.” See insofar, e.g., Art. L 751–1 ss. French Code de travail.

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c) Applicable law aa) Subjective choice 379 The parties can always choose the law applicable to their agency agreement.631 If the parties

agreed on the – exclusive – jurisdiction of a court or the courts of a specific country this is generally a strong indication that the law of this country should apply.632 The agreement on a place of performance – for instance, a specific agency territory – is regularly a weak element which only in combination with other facts can indicate a tacit choice of law.633 Likewise, the common citizenship of the parties does normally not suffice to indicate an implied choice of law.

380 The agency relationship need not be linked in any way to the chosen law. The choice of

foreign law is admitted even if the contractual relationship has no link to another legal system whatsoever. If the case is a mere internal case, then, despite the choice, all mandatory domestic law remains applicable; the chosen law applies only in the non-mandatory area (Art. 3 (3)). Businesses can therefore agree on the domestic law with their agents acting abroad;634 and they can agree on foreign law with their domestic agents.635 Similar is the situation if all relevant elements are linked to the EU/EEA territory: then, the choice of the law of a third state cannot dispense of the implemented mandatory EU law (Art. 3 (4)).636 Whether the agency relationship is a pure domestic or a pure inner-European case can be problematic if the domestic commercial agent occasionally acts abroad or outside the EU/ EEA. In order to overcome the restrictions under Art. 3 (3) or (4) more than a single or merely occasional activity of the agent abroad or outside the EU/EEA should be necessary. bb) Objective choice 381 If a subjective choice of the applicable law is lacking, the law at the habitual residence of the

commercial agent must be applied (Art. 4 (1) (b) in connection with Art. 19).637 Neither the seat of the principal nor the place where the agent acts nor the law governing the negotiated

631

632 633 634 635

636 637

376

See the examples CJEU ECLI:EU:C:2013:663 (C-184/12, United Antwerp Maritime Agencies (Unamar) NV . /. Navigation Maritime Bulgare); CJEU ECLI:EU:C:2000:605 (C-381/98, Ingmar GB Ltd . /. Eaton Leonard Technologies Inc); also Leible, in: NK-BGB Art. 4 Rom I-VO note 119; Martiny, in: MünchKomm Art. 4 Rom I-VO note 143; Reithmann/Martiny/Häuslschmid note 6.1492; W-H Roth, in: FS Spellenberg 310; also under the prior law BGH NJW 1998, 1861; OLG Frankfurt NJW-RR 1995, 351. See also Recital 12 Rome I Regulation. On the weight of the place of performance for a tacit choice of law see supra Art. 3 (Mankowski). See, e.g., OLG Frankfurt NJW-RR 1995, 351. See Magnus, in: Staudinger Art. 4 Rom I-VO note 328; Martiny, in: MünchKomm Art. 4 Rom I-VO note 143. See further supra Art. 3 (Mankowski). Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 32; Calvo Caravaca/Carrascosa González XXV note 136; Dicey/Morris/Collins (eds) note 33–400; Hohloch, in: Erman Art. 4 Rom I-VO note 28a; Leible, in: Nk-BGB Art. 4 Rom I-VO note 119; Martiny, in: MünchKomm Art. 4 Rom I-VO note 145; Plender/ Wilderspin Rn 7–058; Reithmann/Martiny/Häuslschmid note 6.1496; Thorn, in: Palandt Art. 4 Rom I-VO note 19; already in the same sense under the prior law: see e.g., Hof Leeuwarden Ned. Jur. 1984 no. 745; BGH NJW 1993, 2753; BGHZ 127, 386; BGH DtZ 1996, 57; BGH NJW-RR 2002, 1433; Albon v. Naza Motor Trading [2007] EWHC 9 (Ch.); Giuliano/Lagarde 53; Lagarde Rev crit 1991, 309.

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contracts determines the applicable law. These elements become relevant only in connection with Art. 4 (3). Where the commercial agent – for instance as continuously travelling agent or merely 382 occasional agent – has no own place of business, the agent’s habitual residence (in the sense where he or she regularly lives, returns to etc.) is decisive. Relevant is the place of business or the normal habitual residence at the time of conclusion of the agency contract.638 The agent’s habitual residence remains primarily relevant for the determination of the 383 applicable law even if the agent has to act in different countries or if the area of activity is situated in another country than this residence. d) Mandatory law Mandatory law of the Commercial Agency Directive (in particular Art. 17 and 18) as im- 384 plemented into national law has been held to be applicable despite a subjective choice of the law of a third state with no comparable provisions if the agent pursued its activities within the territory of the EU. The CJEU confirmed this view in two decisions.639 The reasoning in Unamar clarified that the Court regarded the (implemented) mandatory provisions of Art. 17 and 18 Commercial Agency Directive which aimed at the protection of commercial agents as overriding mandatory provisions in the sense of (now) Art. 9 Rome I Regulation.640 In Ingmar the Court argued that the mentioned provisions of the Directive did not only intend to safeguard the individual interests of commercial agents but also “to protect, for all commercial agents, freedom of establishment and the operation of undistorted competition in the internal market.”641 The Court obviously saw strong public interests involved which the principal should not easily neglect “by the simple expedient of a choice-of-law clause”.642 Other overriding mandatory provisions which can be relevant for commercial agency con- 385 tracts are in particular those on competition law or regulations on currency exchange. e) Authority The Rome I Regulation covers agency contracts but does not regulate “the question whether 386 an agent is able to bind the principal … in relation to a third party” (Art. 1 (2) (g)). This latter aspect must be determined according to the national conflict rule on the authority of agents. The national conflict rules on this question differ among the EU Member States. Three Member States have adopted the Hague Convention of 14 March 1978643 which allows for a 638 639

640

641 642 643

See further the comment on Art. 19. See CJEU ECLI:EU:C:2000:605 (C-381/98, Ingmar GB Ltd . /. Eaton Leonard Technologies Inc); CJEU ECLI:EU:C:2013:663 (C-184/12, United Antwerp Maritime Agencies (Unamar) NV . /. Navigation Maritime Bulgare). See CJEU ECLI:EU:C:2013:663 (C-184/12, United Antwerp Maritime Agencies (Unamar) NV. /. Navigation Maritime Bulgare) para. 41 ss. (still to Art. 7 Rome Convention but also referring to Art. 9 Rome I Regulation [para. 48 s.]); in the same sense Magnus, in: Staudinger Art. 4 Rom I-VO note 336; Martiny, in: MünchKomm Art. 4 Rom I-VO note 147; Reithmann/Martiny/Häuslschmid note 6.1506; Reithmann/Martiny/Freitag note 5.96; Thorn, in: Palandt Art. 4 Rom I-VO note 19. See CJEU ECLI:EU:C:2000:605 (C-381/98, Ingmar GB Ltd . /. Eaton Leonard Technologies Inc) para. 24. See CJEU ECLI:EU:C:2000:605 (C-381/98, Ingmar GB Ltd . /. Eaton Leonard Technologies Inc) para. 25. See supra note 376.

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choice of the applicable law and prescribes the applicability of the law at the agent’s seat as general default rule. Others follow the general solution that in the absence of a valid choice by the parties primarily the law of the place is applicable where the agent makes use of the authority.644 15. Distribution contract 387 As for the law applicable to distribution contracts see supra note 133 et seq.

16. Franchising 388 As for the law applicable to franchising contracts see supra note 123 et seq.

17. Sponsoring 389 Sponsoring contracts encounter in a great variety of situations and forms (e.g. sponsoring of

sport or cultural events, of social, environmental or other projects and purposes). In contrast to a mere gift the sponsor pays an amount to, or supports otherwise, a person, organisation, institution etc. in order that the latter in turn during its activities highlights the name and reputation of the sponsor. In most cases the contract will fall under Art. 4 (1) (b) – otherwise under Art. 4 (2) – because the receiving party will be obliged to provide certain services (mention the sponsor in a specific way, show its trademark, logo or else). These services give the contract its characteristic feature. Therefore, unless there is a subjective choice of the applicable law, the law at the place of the sponsored party should be applicable. 18. Contract for work a) In general 390 Contracts for work comprise a large number of varying sub-types such as the contract with

an architect, the construction contract or the transport contract. The latter is specifically regulated by Art. 5. The other contracts for work fall under the wide notion of contracts for services in Art. 4 (1) (b). 391 In the absence of an – express or implied – subjective choice contracts for work are governed

by the law of the country where the provider of the work has its habitual residence in the sense of Art. 19 Rome I Regulation.645

644

645

378

See for instance Germany: BGHZ 43, 21 (26), BGH IPRspr 1993 no. 27. However if the agent has a fixed place of business the law at that place is applicable if third persons could recognise this fact. § 49 Austrian IPRG contains similar rules. Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 70; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 175; Hohloch, in: Erman Art. 4 Rom I-VO note 15; Leible, in: Nk-BGB Art. 4 Rom I-VO note 138; Martiny, in: MünchKomm Art. 4 Rom I-VO note 56; Ringe, in: jurisPK-BGB Art. 4 Rom I-VO note 20; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 33; Thorn, in: Palandt Art. 4 Rom I-VO note 10; already in the same sense under the prior law: see e.g., OLG Schleswig IPRax 1993, 95 with note Vollkommer IPRax 1993, 79; OLG Nürnberg IPRspr 1993, Nr 31; OLG Hamm IPRax 1995, 106; LG Berlin IPRax 1996, 416 with note Rüssmann.

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This conflict rule applies in principle to all kinds of contracts for work, for instance for the 392 delivery of a study of market conditions,646 for the development of a special IT program,647 for repair contracts of cars, ships etc.,648 or for processing goods.649 Contracts for the supply of goods to be manufactured or produced follow the conflict rules 393 for sales (see supra note 286). Unless the CISG applies or the parties have agreed otherwise these contracts are also governed by the law of the country where the supplier has its seat.650 Contracts for work can fall under Art. 6 if the customer intends to use the work primarily for 394 private purposes. However, the exclusions in Art. 6 (4) (a) and (b) Rome I Regulation must be observed. For a sub-contract for work the same conflict rules apply as to contracts for work in general. 395 In case of doubt the law at the seat of the sub-contractor is applicable.651 To apply regularly the law of the main contract for work to the sub-contract would neglect the independence of the sub-contractor’s work.652 b) Construction contract International construction contracts,653 whose subject is the erection or repair of buildings – 396 also underground –, are governed by Art. 3 and 4 (1) (b) Rome I Regulation (as to building supervision contracts see infra note 435 et seq.). Thus, in the first line the parties can select the applicable law. Where the parties agree on specific national provisions on construction work – for instance, in Germany on the so-called VOB654 – this is regularly a sufficiently clear 646 647 648

649

650

651

652 653

654

OLG Köln RIW 1994, 970. OLG Nürnberg IPRspr 1993 no. 31. Martiny, in MünchKomm Art. 4 Rom I-VO note 56; Reithmann/Martiny/Thode note 6.386; also under the prior law Flessner, Reform 17; Mankowski, Seerechtliche Vertragsverhältnisse 427 ss. See, e.g., OLG Schleswig IPRax 1993, 95 (dyeing and ironing of clothes); LG Köln RIW 1979, 128 (binding of books). Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 10; Martiny, in: MünchKomm Art. 4 Rom I-VO note 32; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 34; Thorn, in: Rauscher Art. 4 Rom I-VO note 23; in the same sense under the prior law: see e.g., OLG Frankfurt NJW 1992, 653; see further supra note 54 et seq., 286. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 175; Hohloch, in: Erman Art. 4 Rom I-VO note 15; Martiny, in: MünchKomm Art. 4 Rom I-VO note 58; Reithmann/Martiny/Thode note 6.389; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 33. See the references in the preceding fn. Bibliography (construction contract): Bitterich, Vergaberechtswidrig geschlossene Verträge und internationales Vertragsrecht, IPRax 2010, 465; Christie, The Law Governing an International Construction Contract, Int Constr L Rev 24 (2007) 252; Freitag, Grenzüberschreitende Bau- und Planerverträge, in: Messerschmidt/Voit (eds.), Privates Baurecht (2nd ed. 2012) Teil P; Hök, Handbuch des internationalen und ausländischen Baurechts (2nd ed. 2012); Hök, Neues europäisches Internationales Baurecht, ZfBR 2008, 115; Markowsky, Der Bauvertrag im internationalen Rechtsverkehr (1997); Martiny, Anwendbares Recht für internationale Bauverträge, BauR 2008, 241; Schäuble, Internationales Schuldvertragsrecht in der notariellen Praxis, BWNotZ 2015, 1. Vergabe- und Vertragsordnung für Bauleistungen (Regulation for construction work) which in turn refers to provisions of the German Civil Code.

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tacit choice of the law of the respective country.655 Reference to provisions which would be applicable anyway as overriding mandatory provisions (Art. 9) is however no sufficiently clear indication of a selection of the law of the country that enacted the mandatory provisions.656 Agreement on international sets of conditions such as the FIDIC-conditions657 which are not based on a specific national law is no tacit choice of law. Such sets of rules replace or supplement the applicable law as far as they reach and do not contradict (simple) mandatory national law. The place of the building or construction work as such does not indicate a tacit choice of the law governing at that place. 397 In the absence of a subjective choice of law, pursuant to Art. 4 (1) (b) construction contracts

are governed by the law at the seat of the building contractor who effects the characteristic performance.658 Where the building contractor has more than one place of business in different states the law at that place is relevant which under the contract is obliged to perform the contract (Art. 19 (2)). The regular conflict rule applies as well to shipbuilding contracts.659 398 The place where the building is erected or other construction work is done is irrelevant for

the ordinary objective conflict rule.660 Art. 4 (1) (c) does not apply to contracts for the erection of buildings on land because these contracts do neither concern a right in rem in immovable property nor a tenancy but essentially the construction work.661 Even if construction work on land may lead to an in rem right in the land as security for the contractor662 this does not result in the application of Art. 4 (1) (c) because this effect is a mere consequence of the contract whose center is the construction work. However, the place of the construction work is a relevant factor for Art. 4 (3) which in combination with further elements can designate the applicable law. Therefore, the French Cour de cassation rightly held – though still under the Rome Convention – that French law was applicable where a Swiss construction business erected a silo in France and the contract was in French, French currency was agreed upon and a French sub-contractor had been employed.663 The place of 655

656 657

658

659 660

661

662 663

380

Magnus, in: Staudinger Art. 4 Rom I-VO note 348; Martiny, in: MünchKomm Art. 4 Rom I-VO note 60; Reithmann/Martiny/Thode note 6.383; also under the prior law BGH WM 1999, 1177. See Reithmann/Martiny/Thode note 6.388; also previously BGH NJW 2001, 1936. Conditions of the Fédération Internationale des Ingenieurs Conseil (post box 86, 1000 Lausanne, Switzerland). Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 11; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 115; Leible, in: Nk-BGB Art. 4 Rom I-VO note 139; Martiny, in: MünchKomm Art. 4 Rom I-VO note 60; Reithmann/Martiny/Thode note 6.393; Thorn, in: Palandt Art. 4 Rom I-VO note 10; already in the same sense under the prior law: see e.g., BGH RIW 1999, 456 = IPRax 2001, 336 with note Pulkowski IPRax 2001, 206; OLG Hamm NJW-RR 1996, 1144; OLG Brandenburg NJ 2001, 258; OGH IPRax 1995, 326 with note W Lorenz IPRax 1995, 329. See Mankowski, Seerechtliche Vertragsverhältnisse 422 ss. See also still under the Rome Convention French Cour de cassation Clunet 138 (2011) 913 with note Brière. Martiny, in: MünchKomm Art. 4 Rom I-VO note 60; Reithmann/Martiny/Thode note 6.394; Thorn, in: Palandt Art. 4 Rom I-VO note 10; also under the prior law: BGH RIW 1999, 456; OGH JBL 1995, 116; Giuliano/Lagarde 53. See for instance § 648 German Civil Code. Cour de cassation – Chambre civile 23 September 2014, no. 11–20972, 11–23948.

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the construction work alone does not suffice to establish a manifestly closer connection to the law at this place.664 A special case is the property development contract where generally a building business 399 arranges for the erection of a building which it sells to a customer with the land on which the building is erected (in normal building contracts the customer owns the land on which the building is to be erected). The property development contract is thus a combination of sale of land and providing work. The center of the contract could be seen in the sale of the land with the building or in the erection of the building. In such cases actually Art. 4 (2) shall be applied for the objective determination of the applicable law because the contract falls under two of the categories of Art. 4 (1). Under Art. 4 (2) it is no question that the property developer effects the characteristic performance, so that generally the law at its place applies.665 Because of the close connection of the contract to the place of construction rather often Art. 4 (3) will step in and lead to the lex situs.666 Building contracts can fall under Art. 6; Art. 6 (4) (a) must however be respected if the 400 building is erected in a country other than that of the consumer’s habitual residence. Property development contracts are generally exempted from Art. 6 because they also confer the property title to the land on which the building is built (see Art. 6 (4) (c)). The applicable contract law regulates also whether the building or developing business is 401 entitled to an in rem right in the immovable property for securing its payment claim.667 How and in which form the right in rem then comes into existence is however a question regulated by the conflict rules for immovables (lex rei sitae).668 National law may provide that the contractor acquires an in rem right in the goods which the 402 customer contributes to the work, for instance a lien that has effects towards third parties. Because of the involvement of third parties and the need to protect their interests too, again, the property conflict rules (lex rei sitae) should be applied.669 National law regularly provides for rather strict construction rules for buildings, ships, 403 airplanes etc. which set specific safety standards. Such rules which are in force at the place of construction are applicable via Art. 9 (3). They must also be taken into account if under a deviating contract law the question of fault or contributory negligence must be answered.670 Specific procurement rules of the forum or at the place of performance which shall ensure

664

665

666 667

668 669 670

Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 115; Martiny, in: MünchKomm Art. 4 Rom I-VO note 60; Reithmann/Martiny/Thode note 6.394; Thorn, in: Palandt Art. 4 Rom I-VO note 10. Contra – lex situs applicable – Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 11; Martiny, in: MünchKomm Art. 4 Rom I-VO note 120. See the references in the preceding fn. Martiny, in: MünchKomm Art. 4 Rom I-VO note 60; Reithmann/Martiny/Thode note 6.402; Thorn, in: Rauscher Art. 4 Rom I-VO note 43; also under the former law: OLG Köln IPRax 1985, 161 with note Schröder IPRax 1985, 145. See also Magnus, in: Staudinger Art. 4 Rom I-VO note 352; Thorn, in: Rauscher Art. 4 Rom I-VO note 43. Also Magnus, in: Staudinger Art. 4 Rom I.VO note 353; Thorn, in: Rauscher Art. 4 Rom I-VO note 43. Reithmann/Martiny/Thode note 6.395.

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fair competition conditions are also internationally mandatory provisions if the case is sufficiently connected with the country where the seised court is situated.671 c) Turnkey contract 404 Turnkey contracts regularly oblige the provider to deliver a fully functioning industrial

plant, production line or other complex installation. This requires the planning and erecting of the project and delivering it ready for operation. Such contracts can fall within the scope of the CISG if the value of the sales part exceeds the value of the other obligations (labour, installation, training etc.).672 With respect to major plants or complex machinery the parties generally fix the content of the contract so meticulously that there is little room, if at all, for the application of the CISG.673 405 It is the rare exception that parties to turnkey contracts do not include a choice of law clause

into their agreement. In the exceptional case that a subjective choice of law is missing it is questionable whether such contracts fall within the scope of Art. 4 (1) (b),674 for even more than building construction contracts they regularly contain also elements of sales contracts. Therefore, the application of Art. 4 (2) is more obvious although the result is the same: the law at the seat of the supplier is applicable.675 If several branches, agencies or establishments of the supplier are involved the one which is responsible determines the relevant seat (Art. 19 (2)). A mere site office at the place where the turnkey plant is to be erected does however not constitute a branch, agency or other relevant establishment. 406 The place of erection or installation alone does not lead to the application of the law of that

country.676 This is even true if the customer is a state or state organisation. But in combination with other connecting factors the law of this place may become applicable as the manifestly closer connected law (Art. 4 (3)), for instance if there is also a site office of the supplier at this place, the contract was concluded there and is in the language of this country. 407 It is more than unlikely that ever a consumer will be the customer of a turnkey contract.

d) Contract with architect 408 International contracts between architects and customers are governed by the chosen law677

and in the absence of a subjective choice by the law at the architect’s seat in the sense of Art. 19.678 Also here the place of the building site matters only for Art. 4 (3). 671 672

673 674 675

676

677

382

See OLG Düsseldorf BauR 2008, 1503; Reithmann/Martiny/Freitag note 5.107. See ICC Arbitral Award no. 7660/JK; Magnus, in: Staudinger Art. 3 CISG note 27; Schlechtriem/Schroeter note 68 ss. Also Ferrari, in: Schlechtriem/Schwenzer Art. 3 CISG note 18. In this sense, e.g., Reithmann/Martiny/Thode note 6.404. Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 4; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 103; Hohloch, in: Erman Art. 4 Rom I-VO note 15; Leible, in: Nk-BGB Art. 4 Rom I-VO note 140; Martiny, in: MünchKomm Art. 4 Rom I-VO note 62; Reithmann/Martiny/Thode note 6.404; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 12; Thorn, in: Rauscher Art. 4 Rom I-VO note 42; already in the same sense under the prior law: see e.g., OLG Hamm OLGR Hamm 1993, 161. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 103; Martiny, in: MünchKomm Art. 4 Rom I-VO note 62; Reithmann/Martiny/Thode note 6.404; Thorn, in: Rauscher Art. 4 Rom I-VO note 43. Also under the former law, e.g., BGH NJW 2003, 2020.

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Architectural contracts can fall under Art. 6, although international contracts between 409 architects and consumers seem to encounter in rare situations only. At least thus far, there appears to be no respective case law. National law may specifically regulate the fees of architects and engineers and prescribe 410 mandatory levels of fees. Under the former conflict rules the German Supreme Court regarded the respective German regulation679 as internationally mandatory (in the sense of – now – Art. 9 Rome I Regulation).680 Architects and engineers were thus obliged to charge no more nor less fees than provided for in the German regulation, irrespective whether the case was an international or purely domestic one. The reason behind was that the mandatory level of remuneration should avoid ruinous price competition between the members of the profession, for this competition in turn could result in substandard services, unsafe buildings and dangers for the general public. However, the German Regulation can achieve this purpose only, if at all, in the territory for which it is in force, not in international cases outside Germany. For purely domestic cases the German price Regulation would be objectively applicable anyway, and Art. 3 (3) Rome I Regulation further safeguards that mandatory domestic law cannot be excluded by the subjective choice of another law. Moreover, such price regulations primarily serve the individual income interests of the respective profession. They should thus not qualify as overriding mandatory provisions in the sense of Art. 9 Rome I Regulation.681 e) Rating contract Rating contracts682 have as their subject that a rating agency as information intermediary is 411 obliged towards a customer to evaluate the creditworthiness of a state, a business or a single product (e.g. shares) and, for money, to make this information available to the customer. The intermediary shall as reliable as possible assess (‘rate’) the risks of non-payment, nonperformance or default. Often it will be businesses which mandate rating agencies. However, it may also be private persons who, for instance, as investors subscribe to a regular rating service. Even public institutions can be customers. Rating contracts will often be contracts for work.

678

679

680 681

682

Calvo Caravaca/Carrascosa González XXV note 137; Martiny, in: MünchKomm Art. 4 Rom I-VO note 56; Palandt/Thorn Art. 4 Rom I-VO note 10; Reithmann/Martiny/Thode note 6.407; Thorn, in: Palandt Art. 4 Rom I-VO note 10; also previously, e.g., LG Kaiserslautern IPRax 1987, 368 with note Mezger IPRax 1987, 346. Honorarordnung für Architekten und Ingenieure (HOAI) (Regulation for fees of architects and engineers). BGH NJW 2001, 1936 (1937); BGH NJW 2003, 2020. In the same sense: Martiny, in: MünchKomm Art. 4 Rom I-VO note 57; Reithmann/Martiny/Freitag note 5.69 ss.; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 21. Bibliography (rating contract): Arntz, Die Haftung von Ratingagenturen gegenüber fehlerhaft bewerteten Staaten und Unternehmen, BKR 2012, 89; Dutta, Die Haftung amerikanischer Ratingagenturen in Europa – Die Rolle des internationalen Privatrechts, IPRax 2014, 33; Karner, Zur Haftung von RatingAgenturen, ÖBA 2010, 587; Kontogeorgou, Externes Rating und Anlegeschutz im Spiegel der neuen Verordnung (EU) Nr. 462/2013, DStR 2014, 1397; Schroeter, Ratings – Bonitätsbeurteilungen durch Dritte im System des Finanzmarkt-, Gesellschafts- und Vertragsrechts (2014); Wojcik, Zivilrechtliche Haftung von Ratingagenturen nach europäischem Recht, NJW 2013, 2385.

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412 On the EU level Regulation 1060/2009/EC on credit rating agencies of 16 September 2009683

essentially concerns the regulatory admission, supervision and administration of the activities of agencies that rate the creditworthiness of entities or financial products. Regulation 462/2013/EU inserted a new Art. 35a into the original Rating Regulation of 2009 that provides for civil liability.684 According to that provision an investor or issuer may claim damages caused by an infringement of duties listed in Annex III of the basic Regulation if the credit rating agency acted with intent or gross negligence. This provision is directly applicable in all EU Member States. 413 The law applicable to rating contracts is governed by Art. 3 ss. Rome I Regulation. Where the

parties did not explicitly or tacitly select the applicable law, Art. 4 (1) (b) or, depending on the concrete content of the contract, Art. 4 (2) determine the governing law. The rating agency is the provider either of the service or of the characteristic performance. Thus the law at the habitual residence of the agency applies. In principle, this is the place of the agency’s central administration; where a branch is responsible, its place decides (Art. 19).685 414 As to case law on the international jurisdiction for rating disputes see, e.g., BGH ZIP 2013,

239; OLG Frankfurt WM 2011, 2360. 19. Travel contract 415 A travel or package travel contract generally obliges the travel organiser to provide transport

and accommodation; the traveller is obliged to pay. They have to be distinguished from simple transport contracts to which Art. 5 Rome I Regulation applies. 416 The Brussels International Convention on Travel Contracts (CCV) of 23 April 1970686

unifies the substantive law on travel contracts. But only few states have ratified the convention: Argentina, Belgium, China, Cameroon, Dahomey, Italy, San Marino and Togo.687 The Convention does not regulate matters of private international law. 417 Within the EU, Directive 90/314/EEC on package travel, package holidays and package

tours of 13 June 1990688 brought about a certain harmonisation of the law on travel contracts. The Directive provides in particular for information duties of the travel organiser who shall also be liable in case of unexcused non-performance689 and who is obliged to provide “security for the refund of money paid over and for the repatriation of the consumer in the event of insolvency” of the travel organiser.690 Unlike many other Directives primarily dealing with consumer issues, the Package Travel Directive does not contain an own conflict of law provision; it leaves the application of the Rome I Regulation unaffected. 683 684 685

686 687 688 689 690

384

OJ 2009 no. L 302, p. 1 with later amending Regulations (513/2011/EU and 462/2013/EU). See point 22 of Regulation 462/2013/EU, OJ 2013 no. L 146, p. 1 (20 s.). See Schroeter, Ratings – Bonitätsbeurteilungen durch Dritte im System des Finanzmarkt-, Gesellschaftsund Vertragsrechts (2014) 783 ss.; also Dutta IPRax 2014, 33 (37); Karner ÖBA 2010, 587 (589). For the text see www.unidroit.org/instruments/transport/ccv. See the status report www.unidroit.org/status-ccv-1970. OJ 1990 no. L 158, p. 59. Art. 5 Package Travel Directive. Art. 7 Package Travel Directive.

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In the absence of an – always admitted – subjective choice, in principle, pursuant to Art. 4 (1) 418 (b) the law at the seat of the travel organiser is applicable; the organiser renders the service and the characteristic performance.691 Further services such as extra visits, adventure tours etc., if they are part of the travel contract and no separate contracts with other organisers, are governed by the same law as the main travel contract. As in general, the place of the central administration of the organiser or the place of the separate responsible branch constitutes the relevant connection factor. Therefore if the organiser has a branch in the foreign country where the travel shall take place and this branch is responsible for the performance of the travel contract the law at that place applies at least where the traveller must have the impression that this branch is the actual contract partner.692 In most cases travel contracts are consumer contracts to which Art. 6 Rome I Regulation 419 applies if the further conditions of this provision are met whereas simple transport contracts are excluded from the scope of Art. 6 (see Art. 6 (4) (b)).693 The latter fall exclusively under Art. 5. Mandatory provisions of national law which originate from the Package Travel Directive 420 cannot be excluded by the choice of the law of a third state if EU consumers contract for voyages within the EU with EU travel organisers (Art. 3 (4)).However, these provisions do not constitute internationally mandatory provisions in the sense of Art. 9 because their primary aim is the protection of the individual interests of travellers/consumers.694 As to contracts of tour guides with the business which employs them see supra note 347, 421 unless it is a true employment contract to which Art. 8 applies. 20. Accommodation contract Accommodation contracts are contracts which provide for the hosting of guests with stays 422 overnight for a limited time. They generally couple elements of rent of a room, service – cleaning etc. – and sale (meals). The Convention on the Liability of Hotel-keepers concerning the Property of their Guests of 423 the Council of Europe of 17 December 1962 has led to a partial unification of the liability of hotel- and other innkeepers for goods their guests have brought with them irrespective 691

692 693

694

See, e.g., Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 52; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 155; Hohloch, in: Erman Art. 4 Rom I-VO note 19; Leible, in: Nk-BGB Art. 4 Rom I-VO note 126; Martiny, in: MünchKomm Art. 4 Rom I-VO note 67; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 32; Staudinger, in: Hk-BGB Art. 4 Rom I-VO note 4; Thorn, in: Palandt Art. 4 Rom I-VO note 10; in the same sense under the prior law: see e.g., LG Siegen MMR 2013, 722 (German tourist concludes contract via the internet on travel in Egypt with Egyptian travel organiser = Egyptian law applicable; application of the law at the tourist’s place refused because contract was exclusively to be performed in Egypt); see further KG IPRspr 1994 Nr 21 b. See though still under the former law KG IPRspr 1994 Nr 21 b. Magnus, in: Staudinger Art. 4 Rom I-VO note 365; Martiny, in: MünchKomm Art. 4 Rom I-VO note 67; Thorn, in: Palandt Art. 4 Rom I-VO note 10; also under the previous law OLG München NJW-RR 2002, 694. In the same sense Martiny, in: MünchKomm Art. 4 Rom I-VO note 67.

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whether or not a contract was concluded. The Convention is in force in Belgium, BosniaHercegovina, Croatia, Cyprus, France, Germany, Ireland, Italy, Lithuania, Luxembourg, Macedonia, Malta, Montenegro, Poland, Serbia, Slovenia and the United Kingdom. The Convention does not regulate conflict of law issues. 424 Where the parties have not chosen the applicable law, accommodation contracts are gov-

erned by the law at the seat of the innkeeper.695 The relevant place of business is the branch (hotel, boarding-house etc.) which in fact performs the contract and in the view of a reasonable guest appears as the contract partner even if the hotel is merely part of a chain of hotels whose central administration is elsewhere. Thus, regularly the law at the place of accommodation is applicable.696 425 Accommodation contracts do not fall under Art. 4 (1) (c) or (d) because they are not mere

tenancies but include further obligations which in their combination form the characteristic feature of these contracts.697 426 Because of its par. (4) (a) Art. 6 Rome I Regulation does regularly not apply to international

accommodation contracts but only to package travel contracts (Art. 6 (4) (b)).698 427 The liability of hotel-keepers for the property of their guests falls within the scope of the

applicable contract law unless the Convention mentioned above prevails.699 428 Contracts which merely involve the provision of food and drink in a restaurant or else,

follow the same conflict rules as accommodation contracts. The dinner in a restaurant in a foreign holiday resort is therefore, when it comes to disputes, governed by the law of that country irrespective whether it is for business or private purposes.700 Likewise, rental contracts for a camping site are governed by the law of that place. 21. Mandate; contract for the management of the affairs of another a) In general 429 Contracts for the management of the affairs of another may be gratuitous or for remunera-

tion. They regularly contain a certain contact of the service provider to third parties and a certain fiduciary element between the provider and the receiver of the service. Such man695

696

697 698

699 700

386

Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 32; Calvo Caravaca/Carrascosa González XXV note 137; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 116; Hohloch, in: Erman Art. 4 Rom I-VO note 19; Leible, in: Nk-BGB Art. 4 Rom I-VO note 110; Martiny, in: MünchKomm Art. 4 Rom I-VO note 65; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 25; Thorn, in: Palandt Art. 4 Rom I-VO note 10; prior case law: LG Hamburg IPRspr 1991 Nr 33; AG Bernkastel-Kues IPRspr 1993 Nr 28. In the same sense: Hohloch, in: Erman Art. 4 Rom I-VO note 19; Martiny, in: MünchKomm Art. 4 Rom IVO note 65; Thorn, in: Palandt Art. 4 Rom I-VO note 10. Martiny, in: MünchKomm Art. 4 Rom I-VO note 65. Hohloch, in: Erman Art. 4 Rom I-VO note 19; Martiny, in: MünchKomm Art. 4 Rom I-VO note 65; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 25; Thorn, in: Palandt Art. 4 Rom I-VO note 10; prior case law: AG Bernkastel-Kues IPRspr 1993, Nr 28. See Reithmann/Martiny/Martiny note 2.184. Art. 6 (4) (a) excludes the application of Art. 6.

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agement service contracts take many diverse forms and include giving advice, rendering supervision, administration, performance, execution, making decisions for another. Some of them have developed into own categories such as the management, consulting or building supervision contract. But also exhibition, catering, logistic or marketing contracts belong hereto as well as contracts to search heirs, to provide a title or border crossing services. The wide – European- autonomous – notion of services in Art. 4 (1) (b) comprises all these different contracts where the provider cares, and takes actions, for the affairs of another and shall observe the interests of that other person. Despite the variety of contract forms, in principle, they all follow the same conflict rule of Art. 4 (1) (b). Cases of negotiorum gestio are however covered by Art. 11 Rome II Regulation. With respect to mandate contracts or contracts for the management of the affairs of another 430 the parties can always choose the applicable law.701 Without such choice the law at the place is applicable where the mandatary or manager has 431 its habitual residence (Art. 4 (1) (b) in connection with Art. 19).702 Under this rule fall, e.g., asset management contracts,703 real estate management contracts704 as well as consultancy contracts.705 For contracts with lawyers see supra note 349 et seq. Manifestly closer connections (Art. 4 (3)) may lead to another law than determined by Art. 4 432 (1) or (2). Neither the common citizenship of the parties alone nor the law governing the transaction the mandatary or manager shall conclude, however, constitutes such connection.706 Mandate contracts and contracts for the management of the affairs of another will often fall 433 under Art. 6. Provided the further requirements of this provision are met and the activity of the mandatary or manager has not exclusively to be conducted abroad the law at the consumer’s habitual residence is applicable. The contracts dealt with in the following notes present some specialties in comparison to the 434 conflict rules mentioned above.

701 702

703 704 705

706

See – under the former law – e.g., OLG Hamm NJW-RR 1997, 1007; LG Frankenthal IPRspr 1994 no. 38. Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 7; Calvo Caravaca/Carrascosa González XXV note 136 s.; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 109; Hohloch, in: Erman Art. 4 Rom I-VO note 16; Leible, in: Nk-BGB Art. 4 Rom I-VO note 128; Martiny, in: MünchKomm Art. 4 Rom I-VO note 54 s.; Ringe, in: jurisPK-BGB Art. 4 Rom I-VO note 71; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 16; Thorn, in: Palandt Art. 4 Rom I-VO note 11; prior case law: BGH DtZ 1996, 51 (consultancy contract); BGH NJW-RR 2003, 1582 (marketing contract); BGH RIW 2005, OLG Hamm IPRax 1996, 33 with note Otto IPRax 1996, 22; OLG Hamm NJW-RR 1997, 1007 (German claimant instructed German defendant to place certain football bets in Austria = contractual relationship between the parties governed by German law). See Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 109. See already supra note 92. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 119; Martiny, in: MünchKomm Art. 4 Rom I-VO note 63; under the prior law: BGH DtZ 1996, 51. See already under the prior law OLG Hamm NJW-RR 1997, 1007.

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b) Contract for building supervision 435 Contracts for building supervision are characterised by the fact that the supervisor plans and

supervises the erection of a building for the customer until the building is completed. The supervisor does not erect the building personally. This is the task of those who the supervisor controls. In the absence of a choice of law agreement between the supervisor and the customer, the law at the seat of the supervisor is applicable. The place where the building is situated is only relevant – among other factors – for the application of Art. 4 (3). Further, the contract between supervisor and customer does not fall under Art. 4 (1) (c) since neither a right in rem nor a tenancy is concerned. 436 A special case is the situation that a trustee conducts the building project for the customers.

The objectively applicable law is regularly that of the country where the trustee has its place of habitual residence. Often Art. 6 will apply. 437 A further special case is the property development contract under which the customer

‘purchases’ a building with the land on which the developer erects the building (see already supra note 92, 399). Normally, the customer’s wishes in respect of the building are taken into account and the customer’s advance payments finance the erection of the building. Since the contract couples sale of land and provision of work, Art. 4 (2) should be applied in order to determine the objectively applicable law.707 Yet, the close connection of the contract to the place of construction will, in combination with further connecting factors, rather often lead to the lex situs.708

438 Art. 6 will generally not apply to property development contracts even if the customer

acquires the building for private purposes since this contract type, though not exclusively, involves a right in rem in immovable property (Art. 6 (4) (c)). 439 National law often requires a specific form for in rem rights in immovable property. These

rules primarily aim at the protection of the individual interests of the parties. They should not be regarded as overriding mandatory provisions in the sense of Art. 9 Rome I Regulation.709 On the other hand, national provisions which intend to secure customers of building developers in the public interest may qualify as internationally mandatory where a sufficiently strong connection to the country exists that enacted the provisions. c) Management contract; business management contract 440 Management contracts oblige the manager to run – against remuneration – an enterprise or

a part of it for its owner. 441 Where the parties did not select the applicable law, pursuant to Art. 4 (1) (b), in principle,

the law at the seat of the manager is applicable who is the provider of the specific service. However, rather often the law at the place where the managed enterprise is located will be manifestly closer connected.710 For management contracts which relate to ships the law at 707

708 709 710

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Contra – lex situs applicable – Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 11; Martiny, in: MünchKomm Art. 4 Rom I-VO note 120; further supra note 92. See the references in the preceding fn. Doehner, in: Nk-BGB Art. 9 Rom I-VO note 31; also under the prior law OLG Köln RIW 1993, 415. See Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 47; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note

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the manager’s seat remains applicable.711 As to the contract of a company director with the company see supra note 348; generally to company contracts see infra note 615 et seq. d) Consulting contract It characterises consulting contracts that the consultant is obliged to give advice on eco- 442 nomic, technical or other matters; the client is obliged to pay the agreed remuneration. In the absence of a subjective choice the law at the seat of the consultant determines the 443 applicable law (Art. 4 (1) (b) in connection with Art. 19).712 e) Contract with an arbitrator Arbitrators713 become – private – judges by an agreement with the party or parties for whom 444 they shall decide a dispute either gratuitously or non-gratuitously. This contract with the arbitrator has to be distinguished from the arbitration agreement between the parties that their dispute shall not be decided by state judges. Whereas Art. 1 (2) (e) Rome I Regulation excludes arbitration agreements this exclusion does not cover the contract between the arbitrator and the involved party or parties. A subjective selection of the applicable law is always possible. The parties can choose any law 445 and are not limited to the law that governs the arbitration agreement or the arbitration procedure.714 However, together with further elements the latter laws can indicate a tacit choice.715 The objectively applicable law is that at the habitual residence of the arbitrator who in 446 accordance with Art. 4 (1) (b) provides the service of arbitrating.716 Under the former law it had been suggested that contracts with arbitrators should usually follow the law that governs the arbitration procedure.717 This solution will apply only exceptionally under Art. 4 (3) Rome I Regulation. Where this result can be appropriate is the case when the arbitral tribunal consists of arbitrators of different countries and the obligations of the arbitrators can only uniformly be determined towards the parties.718

711 712

713

714 715 716

717 718

151; Martiny, in: MünchKomm Art. 4 Rom I-VO note 64; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 31. Mankowski, Seerechtliche Vertragsverhältnisse 452; Martiny, in: MünchKomm Art. 4 Rom I-VO note 64. Calvo Caravaca/Carrascosa González XXV note 137; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 119; Martiny, in: MünchKomm Art. 4 Rom I-VO note 63; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 31; Thorn, in: Palandt Art. 4 Rom I-VO note 36. Bibliography (contract with an arbitrator): Ferrari/Kröll. Conflict of Laws in International Arbitration (2011). Basedow JbPraxSchG 1987, 20; Reithmann/Martiny/Hausmann note 8.191. See Reithmann/Martiny/Hausmann note 8.191. Also Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 54; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 158; Martiny, in: MünchKomm Art. 4 Rom I-VO note 62; Reithmann/Martiny/Hausmann note 8.191; Thorn, in: Rauscher Art. 4 Rom I-VO note 36. See, e.g., OGH (Austrian) RdW 1998, 551. See also Reithmann/Martiny/Hausmann note 8.191.

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447 The law applicable to contracts with mediators has to be determined in the same way as for

arbitrators. 448 Not infrequently parties agree with an arbitrator that he or she shall produce an expert

opinion which shall have the effect of an arbitral award. Without a choice of law clause, the contract between the arbitrator and the parties is also governed by the law at the arbitrator’s seat.719 f) Trust contract 449 Contractual trust relationships720 which do not concern the creation and running of a trust

in its actual sense as an independent property arrangement are not covered by the exclusion in Art. 1 (2) (h) Rome I Regulation. This provision means the trust of the common law and “the relationship between settlors, trustees and beneficiaries.” Therefore, mere trust contracts fall within the scope of the Rome I Regulation. 450 Trust contracts usually have the management of the affairs of another person as objective.

Therefore, they fall under Art. 4 (1) (b). Where, exceptionally, a service element is lacking nonetheless the trustee effects the characteristic performance. In both situations, the law at his or her seat determines the applicable law if the parties did not select it.721 Where the mandator is a consumer, the applicable law is that of his or her habitual residence if the further requirements of Art. 6 are met. 451 The law applicable to a common law trust can follow from the Convention on the Law

Applicable to Trusts and on Their Recognition of 1 July 1985. It is in force in Australia, Canada, Italy, Luxembourg, Malta, Monaco, Netherlands, Switzerland and the United Kingdom.722 The Convention refers to the law chosen by the trust settlor.723 In the absence of such a choice the law applies with which the trust “is most closely connected.”724 To determine the closest connection, the place of administration of the trust, the situs of the trust assets, the seat of the trustee as well as the objects of the trust and the places of their performance are particularly relevant.725 719 720

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722 723 724

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Reithmann/Martiny/Hausmann note 8.193. Bibliography (trust contract): Dörner, Der Trust im deutschen Internationalen Privatrecht, in: Schweizerisches Institut für Rechtsvergleichung (Hrsg), Le trust en droit international privé (2005) 73; Kötz, Zur Anknüpfung des unter Lebenden errichteten trust, IPRax 1985, 205; Schulte-Brunert, Das Vertragsstatut der Treuhand im internationalen Privatrecht (2006); Siehr, Der Trust im IPR, in: Mélanges en l’honneur du Bernhard Dutoit (2000) 297; Wienbracke, A clash of cultures: Trusts und deutsches (internationales) Privatrecht, ZEV 2007, 413; Wilhelm, Die Anknüpfung von Treuhandverträgen im Internationalen Privatrecht unter besonderer Berücksichtigung der Rom I-VO, IPRax 2012, 392; Willemer, Grenzüberschreitende Treuhandverhältnisse an GmbH-Anteilen (2008); Wittuhn, Das internationale Privatrecht des Trust (1987). Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 168; Hohloch, in: Erman Art. 4 Rom I-VO note 18; Reithmann/Martiny/Martiny note 1.112; Thorn, in: Palandt Art. 4 Rom I-VO note 12; Wilhelm IPRax 2012, 396 s.; also in prior case law: BGH NJW 2004, 287; OLG Hamm RIW 1994, 513 [516] = IPRax 1996, 33 with note Otto IPRax 1996, 22. See the status report at www.hcch.net/en/instruments/conventions/status-table/?cid=59. Art. 6 Trust Convention. Art. 7 (1) Trust Convention.

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If the Convention is inapplicable national conflict rules on trusts determine the applicable 452 law. g) Contracts for the care for another Contracts which oblige to care for others – for instance, for old or handicapped people – are 453 governed by the law at the seat of the care provider (Art. 4 (1) (b) in connection with Art. 19) unless the parties agreed on a certain law. However, often Art. 6 will be applicable and lead to the law at the habitual residence of the person cared for. 22. Gratuitous services in general If someone provides services of whatever kind gratuitously, since a choice of law by the 454 parties will usually be lacking in such cases, the law at the habitual residence of the provider determines the applicable law (Art. 4 (1) (b) in connection with Art. 19 Rome I Regulation). Art. 6 will come into play only in the less likely situation that the provider is acting in a professional capacity while the other party is a consumer. If the provider pursues private purposes, Art. 6 is inapplicable. 23. Storage and warehousing contract; deposit contract An international contract for the storage of goods is in principle and without a subjective 455 choice governed by the law at the seat of the person or business that stores the goods.726 Storing goods and taking care for their integrity should qualify as a provision of services under Art. 4 (1) (b). Otherwise, Art. 4 (2) would apply and lead to the same law since the storing person or business effects the characteristic performance. The same rule applies to more unusual situations of storing goods, for instance for storage on a fiduciary basis,727 or to an archiving contract.728 For the issue of liability under a certain kind of international warehousing contracts the UN 456 Convention on the Liability of Operators of Transport Terminals in International Trade of 19 April 1991 attempted the unification of substantive law.729 Thus far, the Convention did not yet enter into force. Thus, for warehousing contracts like for storage contracts the objectively determined law is 457 usually the law at the seat of the warehouse operator.730

725 726

727 728 729 730

See Art. 7 (2) Trust Convention. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 174; Hohloch, in: Erman Art. 4 Rom I-VO note 18; Leible, in: Nk-BGB Art. 4 Rom I-VO note 127; Martiny, in: MünchKomm Art. 4 Rom I-VO note 83; Ringe, in: jurisPK-BGB Art. 4 Rom I-VO note 88; Thorn, in: Palandt Art. 4 Rom I-VO note 12; also explicitly Art. 117 (3) (d) Swiss IPRG. See – still under the prior law – OLG Hamm RIW 1994, 513 (516). KG ZUM 1986, 550 with note Sieger ZUM 1986, 527. For the text see www.uncitral.org/pdf/english/texts/transport/ott/ott_e.pdf. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 146; Leible, in: Nk-BGB Art. 4 Rom I-VO note 127; Martiny, in: MünchKomm Art. 4 Rom I-VO note 85; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 28; Thorn, in: Palandt Art. 4 Rom I-VO note 11; prior case law: OLG Hamburg IPRspr 1971 no. 23.

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458 The law that in the absence of a subjective choice governs contracts for deposit – where

goods or money is deposited for an (often unknown) third person – is the law at the place where the goods or money is deposited.731

459 All contracts for storing, warehousing or depositing can fall under Art. 6 if the mandator is a

consumer and the further requirements of the provision are met.732 However, often the exclusion clause of Art. 6 (4) (a) will apply. 24. Insurance contract 460 International insurance contracts are specifically regulated by Art. 7 which prevails over

Art. 4. See the comment on Art. 7. 25. Contracts for the provision of security a) In general 461 By a contract for the provision of security a party (the grantor or security provider) gives the

other party (the grantee) security for the occurrence of a specific event (in contrast to insurance contracts the secured party does not necessarily ‘buy’ the protection). Generally, the security will be for the debt of another person than the grantor. The security may be a personal one. In that case the contract usually obliges the grantor to pay a sum to the grantee up to the agreed amount if the risky event materialised, for instance if the original debtor did not pay. The security may also be a real one, e.g., a mortgage in immovable property which the contract obliges to provide and which the grantee is permitted to realise if the principal debtor does not pay. 462 There is no general uniform law on contracts of that kind. However, some international

instruments deal with specific aspects of security contracts, in particular with their in rem effects. This is the case with two UNIDROIT Conventions, namely the Cape Town Convention on International Interests in Mobile Equipment of 2001 (with further Protocols) and the Geneva Convention on Substantive Rules for Intermediated Securities of 2009. For contractual issues the UN Convention on Independent Guarantees and Stand-by Letters of Credit of 11 December 1995 can be relevant. It contains also provisions on conflict of laws, but is in force only in eight states and has thus far little practical importance (see further infra note 478 et seq.). Furthermore, in 2007 the United Nations have published an exhaustive Legislative Guide on Secured Transactions733 with a Supplement on Security Rights in Intellectual Property of 2010.734 The Guide contains numerous recommendations for national legislators and includes a comprehensive set of provisions on conflict of laws (Recommendations 203–227). Also the International Chamber of Commerce (ICC) has devel-

731

732 733 734

392

Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 32; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 137; Hohloch, in: Erman Art. 4 Rom I-VO note 18; Leible, in: Nk-BGB Art. 4 Rom I-VO note 127; Martiny, in: MünchKomm Art. 4 Rom I-VO note 84; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 16; Thorn, in: Palandt Art. 4 Rom I-VO note 11. Thorn, in: Palandt Art. 4 Rom I-VO note 12. For the text see www.uncitral.org/uncitral/en/uncitral_texts/security/Guide_securedtrans.html. For the text see www.uncitral.org/uncitral/en/uncitral_texts/security/ip-supplement.html.

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oped Uniform Rules for Demand Guarantees (URDG). As soft law they are not directly applicable but must be incorporated into contracts by the parties’ agreement. Under the Rome I Regulation, the parties can always choose the law applicable to security 463 contracts. Restrictions can follow from Art. 6, Art. 9 and Art. 21. It is rather rare, though, that international security contracts are consumer contracts. If so, the consumer will most often be the grantor of the security. In that case, he or she effects the characteristic performance. Art. 6 should cover this situation as well although this is open to discussion (see further the comment to Art. 6). For the determination of the objectively applicable law it is necessary to distinguish accord- 464 ing to which kind of security has been agreed upon. For contracts which provide for immovable property as security Art. 4 (1) (c) the lex situs of the immovable property is the applicable law.735 In all other cases, the regular rule is the application of the law at the seat of the grantor of the security.736 Whether this follows from Art. 4 (1) (b) is doubtful. The agreement on a security falls under this provision only if the definition of service is understood in an extremely wide meaning. Yet, the grantor of the security provides the characteristic performance so that its seat determines the applicable law in any event (although for Art. 6 (4) (a) the qualification is decisive).737 The – often tacit – stipulation that the security serves a merely securing purpose and can be realised only if the envisaged event occurred is governed by the law at the place of the grantor as well. It is tempting to subject the security contract to the same law as the contract or relationship 465 for which the security contract shall provide security. Art. 4 (3) would be the basis for this consequence. However, the mere fact that otherwise the security contract and the secured contract would follow different laws is not sufficient to assume a manifestly closer connection to the main contract, for this is the regular situation to which Art. 4 (2) applies.738 For Art. 4 (3) further elements are necessary to indicate a manifestly closer connection. A contractual penalty promise fulfills functions similar to those of a security contract in the 466 sense described above, namely to secure the performance of a contract. However, the contract party itself gives the penalty promise. Because of the close connection between the penalty and the involved contract – the penalty-clause is usually a mere part of the principal contract – the law is applicable to the penalty that governs the contract as such.739

735 736

737 738

739

See also supra note 91; for an exception for building contracts see supra note 396 et seq. Brödermann/Wegen Anh zu Art. 4 Rom I-VO note 16 (for suretyship); Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 118 (for suretyship); Hohloch, in: Erman Art. 4 Rom I-VO note 40; Leible, in: Nk-BGB Art. 4 Rom I-VO note 151; Martiny, in: MünchKomm Art. 4 Rom I-VO note 224 (for suretyship); Ringe, in: jurisPK-BGB Art. 4 Rom I-VO note 75; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 60 (for suretyship); Thorn, in: Palandt Art. 4 Rom I-VO note 27; Wilhelm IPRax 2012, 398; also under prior law: BGH NJW 1993, 1126 (for suretyship); Giuliano/Lagarde 53 (for guaranty). See further the comment on Art. 6. In this sense also Gebauer, in: Calliess Art. 4 Rome I note 58; Martiny, in: MünchKomm Art. 4 Rom I-VO note 224 and under the Rome Convention Giuliano/Lagarde 53. See – under the prior law – BGH WM 1997, 560.

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b) Suretyship 467 Under a suretyship740 contract the surety (the provider of this personal security) promises

the creditor to satisfy a specified obligation of the creditor’s debtor if that debtor fails to do so. The law governing the suretyship is usually to be determined independently of the contract between the creditor and the principal debtor.741 468 The parties of a suretyship contract may always choose the applicable law.742 In the absence

of a choice the law at the seat of the surety applies (Art. 4 (2) in connection with Art. 19 Rome I Regulation),743 for the surety effects the characteristic performance. If the surety is a bank, the law at the seat of the bank, respectively of its responsible branch, is applicable. The same conflict rules apply as well to suretyships concerning litigation (a suretyship for securing that a judgment can be executed before its becoming final or that execution is postponed until that date).744 469 The place of the conclusion of the suretyship contract, the place of its performance, the place

where the creditor or the principal debtor has its seat is irrelevant for the regular determination of the applicable law.745 However, in particular in combination, they play a role for Art. 4 (3) and may lead to another law than that at the seat of the surety.746 470 The governing law covers the creation of the suretyship, whether and to which extent the

obligation of the surety depends on the existence of the principal debt, the modalities of the surety’s liability, in particular the latter’s defences towards the creditor and whether, if the surety has satisfied the creditor, there is a subrogation of the debt and a redress claim of the surety against the principal debtor.747 On the other hand, the law governing the principal 740

741

742

743

744 745 746

747

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Bibliography (suretyship): Klingel, Die Principles of European Law on Personal Security als neutrales Recht für internationale Bürgschaftsverträge (2009); Reich, Grundgesetz und internationales Vertragsrecht, NJW 1994, 2128; Schimansky/Bunte/Lwowski (eds.), Bankrechtshandbuch (4th ed. 2011). Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 118; Leible, in: Nk-BGB Art. 4 Rom I-VO note 152; Martiny, in: MünchKomm Art. 4 Rom I-VO note 224; Ringe, in: jurisPK-BGB Art. 4 Rom I-VO note 75; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 60; Thorn, in: Palandt Art. 4 Rom I-VO note 27; also under the prior law: BGH NJW 1993, 1126. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 118; Hohloch, in: Erman Art. 4 Rom I-VO note 40; Leible, in: Nk-BGB Art. 4 Rom I-VO note 152; Martiny, in: MünchKomm Art. 4 Rom I-VO note 224; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 60; Thorn, in: Palandt Art. 4 Rom I-VO note 27; also under the prior law: BGH NJW 2003, 2605; BGHZ 134, 127; BGHZ 121, 224. Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 16; Calvo Caravaca/Carrascosa González XXV note 139; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 118; Hohloch, in: Erman Art. 4 Rom I-VO note 40; Leible, in: Nk-BGB Art. 4 Rom I-VO note 151; Martiny, in: MünchKomm Art. 4 Rom I-VO note 224; Ringe, in: jurisPK-BGB Art. 4 Rom I-VO note 75; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 60; Thorn, in: Palandt Art. 4 Rom I-VO note 27; also under the prior law: BGHZ 121, 224 (228); BGHZ 134, 127. See Martiny, in: MünchKomm Art. 4 Rom I-VO note 224; Thorn, in: Palandt Art. 4 Rom I-VO note 27. Martiny, in: MünchKomm Art. 4 Rom I-VO note 224; Thorn, in: Rauscher Art. 4 Rom I-VO note 104. Calvo Caravaca/Carrascosa González XXV note 139; Leible, in: Nk-BGB Art. 4 Rom I-VO note 151; Martiny, in: MünchKomm Art. 4 Rom I-VO note 224; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 60. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 118; Hohloch, in: Erman Art. 4 Rom I-VO note 40; Martiny,

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debt decides what the surety has to satisfy.748 Likewise, the relationship between the surety and the principal debtor follows its own law. The form of the contract of suretyship is governed by Art. 11 Rome I Regulation. Thus the 471 form suffices which the lex causae of the suretyship contract or the lex loci actus requires.749 Limits or consent requirements which can follow from family, in particular marriage law 472 (e.g., prohibition of intercession) should be governed by the law that prescribes these limitations, i.e. the law governing the marriage etc.750 National provisions which specifically protect the surety do not fall under the umbrella of 473 Art. 9 Rome I Regulation. However, the ordre public (Art. 21) can interfere if the principal debtor or the creditor has misused a specific relationship of dependency under which the surety – understandably – felt compelled to take over the obligation.751 c) Guarantee contract aa) In general A guarantee contract752 or bond is rather similar to a suretyship contract. It also obliges the 474

748

749 750

751

752

in: MünchKomm Art. 4 Rom I-VO note 225; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 60; Thorn, in: Palandt Art. 4 Rom I-VO note 27; also under the prior law: BGHZ 121, 224 (228). Hohloch, in: Erman Art. 4 Rom I-VO note 40; Martiny, in: MünchKomm Art. 4 Rom I-VO note 226; Thorn, in: Palandt Art. 4 Rom I-VO note 27. See Thorn, in: Rauscher Art. 4 Rom I-VO note 105; also under the prior law: BGH WM 1993, 496. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 118; Hohloch, in: Erman Art. 4 Rom I-VO note 40; Leible, in: Nk-BGB Art. 4 Rom I-VO note 151; Martiny, in: MünchKomm Art. 4 Rom I-VO note 228; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 60; Thorn, in: Palandt Art. 4 Rom I-VO note 27; differently under the prior law – lex causae –: BGHZ NJW 1977, 1011 with critical note Jochem. See cases like that of BVerfGE 89, 214: a 21year old woman who earned – only occasionally – 1.150 DM/ month in a fish factory was induced by her father and in particular by the involved bank to accept a suretyship of 100.000 DM for the debts of the father; the German Constitutional Court corrected the Supreme Court which had rejected the woman’s claim to state the invalidity of the suretyship contract. The Constitutional Court held that the contract violated the ordre public provision of the Civil Code (§ 138 BGB) in such a way that also the constitutional right of autonomy was infringed because the young daughter had no prospects whatsoever to satisfy the debts of her father and was pressed into the contract by the bank. Bibliography (guarantee contract): Affaki, A User’s Handbook to the URDG – ICC Uniform Rules on Demand Guarantees (2001); Bertrams, Bank Guarantees in International Trade (4th ed. 2013); Dortschy, Die Bankgarantie im internationalen Geschäft (2006); Häberle/Aden, Handbuch der Akkreditive, Inkassi, Exportdokumente und Bankgarantien (2000); Horn, Die UN-Konvention über unabhängige Garantien, RIW 1997, 717; ICC (ed.), Bank Guarantees in International Trade (3rd ed. 2004, ICC-Publ No. 661); Nielsen, Internationale Bankgarantie, Akkreditiv und anglo-amerikanisches Stand-by nach Inkrafttreten des ISP 98, WM 1999, 2005 (Teil 1), 2049 (Teil 2); Schefold, Die rechtsmissbräuchliche Inanspruchnahme von Bankgarantien und das Kollisionsrecht, IPRax 1995, 118; Schefold, Bankgarantien bei Auslandsgeschäften, in: Schimansky/Bunte/Lwowski (Hrsg), Bankrechtshandbuch (4. Aufl 2011) 2195; Schulz/ Mettke, Die Garantie auf erstes Anfordern als Sicherungsinstrument im Kreditgeschäft, WM 2014, 54; vWestphalen/Zöchling-Jud (eds.), Die Bankgarantie im internationalen Handelsverkehr (4th ed. 2014).

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guarantor to step in and satisfy the creditor if the guaranteed result does not occur, in particular if a certain obligation is not satisfied by the debtor who is another person than the guarantor. In contrast to the suretyship contract the guarantor usually must satisfy the creditor in any event if the guarantee event occurs. The obligation of the guarantor is thus generally independent of the existence of the debt of the principal debtor.753 475 Guarantees can take various forms: in a performance guarantee the guarantor promises

payment for the case that the principal debtor does not perform. In a tender guarantee or bid bond the guarantor promises to pay an agreed sum if the successful bidder refuses to accept the bid. Under an advance payment guarantee the guarantor must pay if the principal debtor did not use the advance payments of the creditor in the agreed manner. If a confirmed guarantee is agreed upon, a second guarantor (generally a bank) undertakes to guaranty the obligation of the first guarantor in the same amount. Under an indirect guarantee the actually mandated guarantor does not itself give a guarantee undertaking but instructs a second agency (often a bank in the country of the creditor) to provide the guarantee. Frequently, the first guarantor secures the second guarantor by a matching counter-guarantee. 476 For the determination of the applicable law it is essential to distinguish precisely which legal

relationship is at stake. In practice, the guarantee on first demand or demand guarantee is particularly important. In that case, the creditor need not prove that the guarantee event occurred but can immediately claim payment if he or she thinks that it occurred. However, the creditor will become liable in damages, if in fact the event had not occurred. 477 As indicated, in contrast to a suretyship contract a guarantee is ‘abstract’; the guarantor

cannot invoke defences which follow from the underlying contract between the creditor and the principal debtor. All the more it is important whether and when the guarantor may nonetheless be entitled to refuse payment because the creditor’s claim would be an abuse of rights. The law governing the guarantee determines whether and when this is the case. bb) Uniform law 478 The UN Convention on Independent Guarantees and Stand-by Letters of Credit of 11

December 1995754 unifies the substantive law concerning these special security contracts. It regulates the main rights and obligations under guarantees, also demand guarantees, and stand-by letters. At present, the Convention is in force in only eight – mainly developing or emerging – countries: since 1 January 2000 in Ecuador, El Salvador, Kuwait, Panama and Tunisia, further in Belarus (since 1 February 2003), Gabon (1 January 2006) and Liberia (1 October 2006). In territorial respect, the Convention is applicable if – following the model of the CISG – either the guarantor/issuer has its place of business in a Contracting State or if the private international law of the court seised leads to the law of a Contracting State.755 Furthermore, at least two of the three involved parties – guarantor/issuer, creditor and principal debtor – must have their place of business in different states (which need not be

753

754 755

396

See also the definition of guarantees in Art. 2 and 3 UN Convention on Independent Guarantees and Stand-by Letters of Credit. For the text see www.uncitral.org/pdf/english/texts/payments/guarantees/guarantees.pdf. See Art. 1 (1) of the Convention.

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Contracting States).756 Therefore, the Convention can be applicable even by courts of NonContracting States. The regulations of the Convention are in line with those of the Uniform Rules on Demand 479 Guarantees whose most recent version the ICC published in 2010.757 The Uniform Rules are applicable only if the parties agreed on them. Where the parties failed to specify the respective version of the Uniform Rules the version current at the conclusion of the contract is applicable. cc) Applicable law Due to its limited territorial scope, the UN Convention which actually prevails over domes- 480 tic law will in most cases not be applicable. Then, according to Art. 3 Rome I Regulation, the parties – guarantor/issuer and creditor – can always select the law applicable to the guarantee or stand-by letter.758 If the guarantor/issuer and the principal debtor agree on the law applicable to the guarantee/stand-by letter this choice is valid towards the creditor only if he or she consents or has been reasonably informed of the choice before the conclusion of the contract (and did not object). An exclusive jurisdiction clause can indicate a tacit choice.759 In the absence of a subjective choice the law of the place is applicable where the guarantor/ 481 issuer has its habitual residence in the sense of Art. 19 Rome I Regulation.760 This party effects the characteristic performance and should be able to infer the extent of the own obligation from the law it is familiar with. Like for suretyship contracts, Art. 4 (2) should be applicable (not Art. 4 (1) (b)).761 This rule is valid also for bank guarantees762 as well as for

756 757

758

759 760

761

762

See Art. 4 (1) of the Convention. See ICC-Publication no. 758. This version replaced the Uniform Rules for Contract Guarantees (URCG) of 1978 (ICC-Publication no. 325) and the Uniform Rules on Demand Guarantees (URDG) of 1992 (ICC-Publication no. 458). Both former sets of Uniform Rules were little used in practice. For a commentary on the URDG 758 see Affaki/Goode, Guide to Uniform Rules for Demand Guarantees. URDG 758 (2011). This is also provided for by Art. 21 UN Convention on Independent Guarantees and Stand-by Letters of Credit. See, e.g., OLG Frankfurt RIW 1998, 477 for stand-by letter of credit. Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 23; Calvo Caravaca/Carrascosa González XXV note 139; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 132; Hohloch, in: Erman Art. 4 Rom I-VO note 40; Leible, in: Nk-BGB Art. 4 Rom I-VO note 155; Martiny, in: MünchKomm Art. 4 Rom I-VO note 231; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 62; Thorn, in: Palandt Art. 4 Rom I-VO note 27; also under the prior law: BGH NJW 1996, 2569 (2570); OLG Köln RIW 1992, 145; Cour de Cassation JCP 1997 II J. 22827 with note Muir Watt; Hoge Raad NIPR 1997 Nr 116; also Art. 22 UN Convention on Independent Guarantees and Stand-by Letters of Credit. In this sense also Hohloch, in: Erman Art. 4 Rom I-VO note 40; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 62; Thorn, in: Palandt Art. 4 Rom I-VO note 27; left open: Reithmann/Martiny/Martiny note 6.494; contra Calvo Caravaca/Carrascosa González XXV note 139; the question is relevant for Art. 6 Abs 4 lit a. Leible, in: Nk-BGB Art. 4 Rom I-VO note 155; Martiny, in: MünchKomm Art. 4 Rom I-VO note 231; Thorn, in: Palandt Art. 4 Rom I-VO note 27; also under the prior law: BGH NJW 1996, 2569 (2570); OLG Köln RIW 1992, 145.

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confirmed, indirect or counter guarantees.763 Likewise the objectively determined law applicable to stand-by letters of credit depends on the seat of the issuer of the letter.764 482 In principle, the creditor must declare to make use of the guarantee in the same language in

which the guarantee has been provided or which the parties explicitly or tacitly agreed upon. It can suffice if the creditor uses the language at the seat of the guarantor. However, in that case, errors are at the creditor’s risk.765 483 The law at the creditor’s seat can become applicable via Art. 4 (3), for instance if the place of

conclusion of the guarantee or the place of issuance of the stand-by letter, the contract language and specific protective interests of the creditor point to the law of this place.766 484 Where the parties have incorporated the ICC Uniform Rules on Demand Guarantees into

their contract as banks will regularly do, according to Art. 10 URCG 325, Art. 27 URDG 458, Art. 34 URDG 758 the law at the seat of the guarantor rules all aspects not covered by the respective Uniform Rules. In case of several places of business of the guarantor the branch, agency or the like is relevant which issued the guarantee. Without the incorporation of the Uniform Rules into the contract they are not applicable. However, the Rules may be referred to, and help, in the interpretation of the guarantee contract at hand. 485 A party to a guarantee contract or stand-by letter can be a consumer. In that case, Art. 6 has

to be taken into account, even if the guarantor is a consumer.767 d) Comfort letter 486 Comfort letters (letters of comfort, letters of patronage) in the sense used here are declara-

tions often of a parent company, but also for instance of a bank, towards third persons to render financial or economic assistance, in case the subsidiary or debtor is unable or unwilling to perform its obligation. The legally binding effect of such declarations depends on its concrete wording and is often doubtful. ‘Hard’ comfort letters make the declaring party liable, while ‘soft’ letters do not. Consequently, it is important which law governs the interpretation and effects of such declarations. 487 If no subjective choice has been made, pursuant to Art. 4 (2), the law at the seat of the

declaring party applies. The performance of this party characterises the contractual relationship.768 This rule is also applicable if public law entities declare comparable assurances.769 763

764 765 766 767 768

398

Calvo Caravaca/Carrascosa González XXV note 139 (for counter guarantee); Martiny, in: MünchKomm Art. 4 Rom I-VO note 234; Thorn, in: Rauscher Art. 4 Rom I-VO note 112 ss.; in detail Reithmann/ Martiny/Martiny note 6.497. See further infra note 464. See BGH NJW 2001, 2480. See BGH NJW 1996, 2569 (2570). See already supra note 463 and the comment on Art. 6 (Wilderspin). Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 51; Calvo Caravaca/Carrascosa González XXV note 139 (although for application of Art. 4 (1) (b)); Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 154; Martiny, in: MünchKomm Art. 4 Rom I-VO note 239; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 73 (also for application of Art. 4 (1)); Thorn, in: Palandt Art. 4 Rom I-VO note 27; also under the prior law: LG Berlin IPRax 2000, 526 with note Hass IPRax 2000, 494.

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e) Promise of debt; acknowledgment of debt aa) Promise of debt A promise by which a party declares to be liable for a certain amount (or other obligation) 488 independent of any underlying cause or claim (abstract promise of debt) is in principle governed by the law at the seat of the promising party unless the parties selected the applicable law.770 This law determines the defences which the declaring party may invoke. The law that governs an eventual underlying contract does in principle not matter. This is different if the promise shall depend on such underlying contract (causal promise of debt). In that case, in the absence of a subjective choice the law applicable to the underlying contract applies also to the promise.771 Although the declaring party still effects the characteristic performance, the connection to the underlying contract is usually manifestly closer so that pursuant to Art. 4 (3) the law of this contract is applicable. If the causal or the abstract promise of debt is closely connected with a transaction concerning real estate, then, often the lex situs of the estate will be the manifestly closer connected law. The form of causal as well as abstract promises of debt (and also of acknowledgments of a 489 debt) is governed by the lex causae or the lex loci actus. The law applicable to obligations arising from the negotiable character of negotiable instru- 490 ments, in particular from bills of exchange and cheques, is not to be determined in accordance with the rules of the Rome I Regulation (see Art. 1 (2) (d)). In so far specific conflict rules apply.772 bb) Acknowledgment of debt A contract by which a party acknowledges the existence of an obligation follows in the 491 absence of a subjective choice generally the law of the acknowledged obligation.773 Though the acknowledging party effects the characteristic performance, the close connection be769 770

771

772 773

See, e.g., OLG Frankfurt IPRspr 1979 no. 10b. Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 2; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 160; Leible, in: Nk-BGB Art. 4 Rom I-VO note 151; Martiny, in: MünchKomm Art. 4 Rom I-VO note 240; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 75; Thorn, in: Rauscher Art. 4 Rom I-VO note 119. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 160; Martiny, in: MünchKomm Art. 4 Rom I-VO note 240; Thorn, in: Rauscher Art. 4 Rom I-VO note 119; also under the former law: LG München IPRspr 1981 Nr 13 A. See further the comment on Art. 1 Rome I Regulation. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 159; Hohloch, in: Erman Art. 4 Rom I-VO note 40; Leible, in: Nk-BGB Art. 4 Rom I-VO note 154; Martiny, in: MünchKomm Art. 4 Rom I-VO note 240; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 75; also under the prior law: OLG Düsseldorf VersR 2003, 1324; OLG Hamm RIW 1999, 785 (786); LG Hamburg NJW-RR 1995, 183; to a tacit choice of law in the case of a declaratory acknowledgment see OLG München RIW 1997, 507 (508); for the application of Art. 4 (2) Rome I Regulation for a constituent acknowledgment of debt see LG Mönchengladbach BeckRS 2015, 17169 (German patient was operated in Turkish hospital and signed an acknowledgment to owe 43.000 J [the rest price of the operation]. In the declaration the patient and defendant acknowledged the application of German law. The Court held that German law would also be applicable via Art. 4 (2) and rejected the hospital’s claim because medical experts regarded the operation as unnecessary).

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tween the acknowledgment and the acknowledged debt leads generally to the law governing that debt (Art. 4 (3)).774 26. Settlement 492 A settlement is a contract by which the parties settle a dispute between them. Typically, both

parties make concessions. Settlement in court and out of court must be distinguished. To settlements, arrangements etc. in insolvency proceedings the special conflict rules on such proceedings apply. 493 Settlements during legal proceedings are governed by the lex fori as far as their form and

procedural consequences are concerned because in so far the settlement is an act of procedure.775 In so far no subjective choice is possible. For the effects outside legal proceedings the same law is applicable as to settlements out of court.776 494 For settlements out of court the parties can always select the applicable law.777 Without such

choice the applicable law must regularly be determined in accordance with Art. 4 (4). For, generally there is no characteristic performance of one party because both sides give in. Only in those case cases where the performance of one party characterises the contract the law at the seat of this party becomes applicable via Art. 4 (1) or (2). Thus, where the parties agreed to withdraw their mutual actions and the defendant further promised not to enforce its patent rights whereas the claimant promised a certain payment it was rightly held to be a quasi-licence contract and the law at the seat of the defendant was applied.778 However, where the most closely connected law (Art. 4 (4)) must be determined this will often be the law that governs the settled relationship.779 Otherwise, the applicable law must be determined by balancing all relevant circumstances. 27. Waiver contract 495 By a waiver contract a creditor waives the debt of the debtor who thereby is relieved from this

liability. The parties may expressly or impliedly select the applicable law.780 In the absence of a subjective choice, actually the law at the seat of the creditor would apply because the creditor effects the characteristic performance in the sense of Art. 4 (2). However, Art. 12 (1) (d) Rome I Regulation refers to the law applicable to the contract for “the various ways of extinguishing obligations.” Waiving the obligation or releasing the debtor from it belongs to 774 775

776 777

778 779

780

400

Differently LG Mönchengladbach BeckRS 2015, 17169. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 172; Reithmann/Martiny/Martiny note 3.261; also under the former law BGH NJW 2005, 1373 (1374); OLG München IPRspr 1974 Nr 10 b. See the reference in the preceding note and the following marginal note. See – though under the former law – BGH IPRax 2002, 27 with note Hohloch Kjelland IPRax 2002, 30; BGH RIW 2010, 65 (66). See the case BGH RIW 2010, 65. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 172; Hohloch, in: Erman Art. 4 Rom I-VO note 48; Leible, in: Nk-BGB Art. 4 Rom I-VO note 158; Reithmann/Martiny/Martiny note 3.261; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 84; Thorn, in: Palandt Art. 4 Rom I-VO note 34; also under the prior law: BGH NJW 2005, 1373 (1374). Under the former law BGH NJW-RR 2002, 1359 (1361); OLG Karlsruhe NJW-RR 1989, 367 (368).

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those ways.781 Anyway exists a close connection between the waiver of an obligation with the obligation itself. Therefore, pursuant to Art. 4 (3), the law is applicable that governs the waived debt.782 In particular, the effect of the waiver on the waived obligation has to be taken from the latter’s governing law.783 28. Order An order is a contractual relationship between at least three persons where a person – 496 usually in writing – instructs (orders) another person to furnish money, securities or other fungible things to a third person. Where the parties did not agree on the applicable law, the instructed person effects the 497 characteristic performance and the law at its habitual residence applies to the order contract.784 The relationship between the instructing person and the beneficiary of the order follows its 498 own law which does not depend on the law governing the order. 29. Banking contracts a) In general Contracts between banks and their customers785 cover many different fields of business, e.g., 499 providing credit, account management, investments, custody business, transfer service etc. International uniform law for banking contracts in general does not exist as yet. However, in the field of factoring a uniform law Convention is in force in a number of countries (see infra note 514). 781 782

783 784

785

See further the comment on Art. 12. Spellenberg, in: MünchKomm Art. 12 Rom I-VO note 101 s.; Reithmann/Martiny/Martiny note 3.246 s.; in the same sense under the former law: BGH NJW-RR 2002, 1359 (1361); OLG Karlsruhe NJW-RR 1989, 367; OLG Hamm RIW 1999, 621 (622); differently – Art. 4 (2) applicable – Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 127; differently also Swiss law – independent contract statute for the waiver contract – Art. 148 (3) Swiss IPRG. See OLG Bamberg RIW 1989, 221. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 58; Martiny, in: MünchKomm Art. 4 Rom I-VO note 242; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 58. Bibliography (banking contracts): Assmann/Schütze (eds.), Handbuch des Kapitalanlagerechts (4th ed. 2015); Bälz, Islamic Law as Governing Law under the Rome Convention, Rev dr unif 6 (2001) 37; Blesch, Bankgeschäfte mit Auslandsbezug (2007); Claussen (ed.), Bank- und Börsenrecht (5th ed. 2014); Derleder/Knops/Bamberger (eds.), Handbuch zum deutschen und europäischen Bankrecht (3rd ed. 2015); Einsele, Bank- und Kapitalmarktrecht – Nationale und internationale Bankgeschäfte (3rd ed. 2014); Einsele, Auswirkungen der Rom I-Verordnung auf Finanzdienstleistungen, WM 2009, 289; Freitag, Auslandsgeschäfte, in: Derleder/Knops/Bamberger (eds.), Handbuch des deutschen und europäischen Bankrechts (3rd ed. 2015) § 62; Höfer, Grenzüberschreitender Onlinewertpapierhandel (2004); Kiel, Internationales Kapitalanlegerschutzrecht (1994); Kümpel/Wittig, Bank- und Kapitalmarktrecht (4th ed. 2011); Schimansky/Bunte/Lwowski (eds.), Bankrechtshandbuch (4th ed. 2011); Sousi/Roubi, La Convention de Rome et la loi applicable aux contrats bancaires, DS 1993 Chron 183; Zahn/Ehrlich/Neumann, Zahlung und Zahlungssicherung im Außenhandel (8th ed. 2010).

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500 Moreover, UNCITRAL has concluded a Model Law on International Credit Transfers of 15

May 1992 which national legislators may use for their domestic legislation. 501 Within the EU several Directives and Regulations concern banking transactions. In par-

ticular, the following instruments are relevant for the private law sector: – Directive 2007/64/EC on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/ EC of 13 November 2007.786 – Directive 2002/65/EC concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC of 23 September 2002.787 – Directive 2008/48/EC on credit agreements for consumers and repealing Council Directive 87/102/EEC of 23 April 2008.788 – Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No. 1093/2010 of 4 February 2014.789 – Regulation (EC) 2560/2001 on cross-border payments in euro of 19 December 2001.790 502 Furthermore, Directive 2004/39/EC on markets in financial instruments amending Council

Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC of 21 April 2004,791 the so-called MiFID, is helpful for the autonomous-European qualification of banking and financial services. The MiFID of 2004 will be replaced by MiFID II (Directive 2014/65/ EU of 15 May 2014)792 which probably must be implemented until 2018, but mostly contains identical definitions. 503 In practice, the ICC’s Uniform Customs and Practice for Documentary Credits (UCP 600)

as well as the ICC’s Uniform Rules for Collection (URC 522) are widely used. However, they are applicable only if the parties have incorporated them into their contract. 504 As far as the Rome I Regulation is applicable, the parties can choose the law applicable to

their banking contract (Art. 3).793 This rule applies as well if the contract is concluded via the Internet.794 Generally, banks contract only under their standard contract terms which usually refer to the law at the bank’s seat. Whether the standard terms are – even tacitly – incorporated into the contract is not only determined by the law envisaged in the standard 786 787 788 789 790 791 792 793

794

402

OJ 2007 no. L 319, p. 1. OJ 2002 no. L 271, p. 16. OJ 2008 no. L 133, p. 66. OJ 2014 no. L 60, p. 34. OJ 2001 no. L 344, p. 13. OJ 2004 no. L 145, p. 1. OJ 2014 no. L 173, p. 349. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 113; Hohloch, in: Erman Art. 4 Rom I-VO note 21; Leible, in: Nk-BGB Art. 4 Rom I-VO note 131; Martiny, in: MünchKomm Art. 4 Rom I-VO note 87; Reithmann/ Martiny/Freitag note 6.551 ss.; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 17; Thorn, in: Palandt Art. 4 Rom I-VO note 13. See Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 113.

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terms (Art. 3 (5), Art. 10 (1) Rome I Regulation), but, pursuant to Art. 10 (2) and under certain conditions, also by the law of the country in which the client’s habitual residence is located. As to the specific consumer protection see infra note 507. In the unusual case that the applicable law was not chosen, subject to Art. 6 the objective 505 determination of the applicable law for banking contracts follows from Art. 4 Rome I Regulation. What banks offer to customers are generally services in the sense of Art. 4 (1) (b). Even where this is not the case, the bank will effect the characteristic performance (Art. 4 (2)). Thus, in principle always the law at the bank’s seat will be applicable.795 Also transactions between banks are objectively governed by the law at the place of that bank 506 which effects the respective characteristic performance, for instance transfers money etc.796 Already Art. 5 Rome Convention extended its protection to contracts between banks and 507 consumers as far as the contracts concerned services. However, pure credit contracts were not covered.797 Also, the purchase of securities did not fall under this provision on consumer protection.798 Furthermore, the narrow conditions of application in Art. 5 (2) Rome Convention restricted the protection rendered by this provision. Now, Art. 6 Rome I Regulation covers almost all kinds of banking contracts, also pure consumer credit contracts and partly the purchase of securities (however, see the exceptions in Art. 6 (4) (d) and (e)). The situative conditions of application have been considerably extended, although those banking services fall outside the protection that are exclusively supplied in another country than that of the consumer’s habitual residence (Art. 6 (4) (a)). For instance, the management of a bank account in a foreign country is in most cases no service exclusively supplied there because the bank usually sends information, notices, account surveys etc. to the consumer’s habitual residence, thus performing the respective duties there. Art. 6 is therefore applicable to most transborder contracts between banks and their – private – customers.799

795

796

797

798 799

Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 9; Calvo Caravaca/Carrascosa González XXV note 141; Dicey/Morris/Collins (eds) note 33–303; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 113; Hohloch, in: Erman Art. 4 Rom I-VO note 21; Leible, in: Nk-BGB Art. 4 Rom I-VO note 131; Martiny, in: MünchKomm Art. 4 Rom I-VO note 87; Plender/Wilderspin Rn 7–060; Reithmann/Martiny/ Freitag note 6.557 s.; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 17; Thorn, in: Palandt Art. 4 Rom I-VO note 13; also under the former law: BGH NJW 2001, 2968 (2970); OLG Köln RIW 1993, 1025; AG Düsseldorf RIW 1994, 158; OLG München RIW 1996, 330; OLG Düsseldorf RIW 1996, 155; LG Aachen RIW 1999, 304; OLG Celle IPRspr 1998 Nr 76; OLG Saarbrücken IPRspr 2001 Nr 30; with the same result though applying the law at the place where the bank account was managed: Sierra Leone Telecommunications Co Ltd . /. Barclays Bank plc [1998] 2 All E.R. 821 [827]; Giuliano/Lagarde 53. OLG Düsseldorf NJW-RR 2011, 57; Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 9; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 113; Hohloch, in: Erman Art. 4 Rom I-VO note 21; Leible, in: Nk-BGB Art. 4 Rom I-VO note 131; Martiny, in: MünchKomm Art. 4 Rom I-VO note 89; Reithmann/ Martiny/Freitag note 6.557; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 17; Thorn, in: Palandt Art. 4 Rom I-VO note 13; also under the former law: BGHZ 108, 362. Dicey/Morris/Collins (eds)12 note 33–033; Heldrich, in: Palandt66 Art. 29 EGBGB note 2; Hohloch, in: Erman12 Art. 28 EGBGB note 25. Giuliano/Lagarde 53. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 113; Leible, in: Nk-BGB Art. 4 Rom I-VO note 131;

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b) Deposit business 508 Deposit business comprises contracts under which a bank accepts cash deposits or time

deposits of valuables of its clients, also of other banks. Where a valid choice by the parties is exceptionally lacking, the law at the place of the acting bank governs the contract.800 The reason behind is that – in contrast to a pure credit contract – the bank undertakes to render further services such as the management of the deposit, accounting etc. which characterise the contract and distinguish it from a pure credit contract.801 Where the deposit serves private purposes of the customer, Art. 6 can be applicable. 509 Under the former conflict rules it was partly argued that the customer effected the char-

acteristic performance in granting the bank a loan.802 However, it is not this performance that characterises the deposit contract but the safe depositing and eventual interest payments. Likewise, deposits in a certain currency (e.g., Euro) or on a specific money market (e.g., Euro money market) are governed by the law at the seat of the bank that manages the deposit. The investment market or currency area may play a role in the examination whether a manifestly more closely connected law has to be applied (Art. 4 (3)). 510 The law at the bank’s seat governs all questions relating to the deposit, in particular its set-

up, running, overdraft and termination.803 c) Credit contract 511 If the bank grants a customer credit, in the unlikely event that the applicable law has not

been chosen, the law at the seat of the bank (in the sense of Art. 19) governs the contract.804 d) Discount business 512 The discount business under which banks ‘buy’ bills of exchange and cheques with a certain

discount is objectively governed by the law at the seat of the buying bank.805 On the other hand, also the performance of the ‘seller’ could be regarded as characteristic. However, the bank grants a prefinancing and thus credit. This performance gives the contract its typical character.

800

801 802 803 804 805

404

Martiny, in: MünchKomm Art. 4 Rom I-VO note 87; Reithmann/Martiny/Freitag note 6.560; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 17; Thorn, in: Palandt Art. 4 Rom I-VO note 13. Dicey/Morris/Collins (eds) note 33–304; Hohloch, in: Erman Art. 4 Rom I-VO note 21; Leible, in: NkBGB Art. 4 Rom I-VO note 132; Martiny, in: MünchKomm Art. 4 Rom I-VO note 88; Reithmann/ Martiny/Freitag note 6.574; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 18; also under the prior law OLG Düsseldorf RIW 1996, 155. See in particular OLG Düsseldorf RiW 1996, 155. See, e.g., von Hoffmann, in: Soergel Art. 28 EGBGB note 318. Martiny, in: MünchKomm Art. 4 Rom I-VO note 88. See already supra note 331. Hohloch, in: Erman Art. 4 Rom I-VO note 21; Leible, in: Nk-BGB Art. 4 Rom I-VO note 132; Martiny, in: MünchKomm Art. 4 Rom I-VO note 88; Reithmann/Martiny/Freitag note 6.623; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 18; also under the prior law OLG Hamburg WM 1990, 538; OLG Frankfurt IPRax 1985, 34 with note IPRax 1985, 13 ss.

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e) Factoring Factoring806 is a special case of the discount business of banks. The factor (the bank) buys 513 claims the supplier has against its customers (the debtors) out of supply or other contracts. The claims are assigned to the bank which also collects them. The bank may or may not take the full risk that the debtor does not pay. In the latter case the bank has a redress claim against the supplier. Generally, factoring contains a financing element in favour of the supplier. The qualification of contracts as factoring transactions must follow the autonomous-European method. However, the definition in Art. 1 (2) Factoring Convention (see next note) should be taken into account, too. The UNIDROIT Convention on International Factoring of 28 May 1988807 unified the 514 substantive law of international factoring contracts. The Convention is in force since 1 May 1995 in France, Italy and Nigeria and also in Belgium (since 1 October 2010), Germany (1 December 1998), Hungary (1 December 1996), Latvia (1 March 1998) and Russia (1 March 2015). In territorial respect the Convention is applicable if the factor, the supplier and the debtor have their places of business in different states which are either Contracting States or that both the contract between factor and supplier as well as the contract between supplier and debtor are governed by the law of a – not necessarily the same – Contracting State.808 In material respect the Convention governs claims (receivables) which arose from contracts of sale of goods or services other than primarily for personal, family or household use.809 In temporal respect the Convention applies if the contract between the supplier and the debtor as well as the factoring contract have been concluded on or after the day the Convention entered into force in the Contracting State relevant under Art. 2 (1) Factoring Convention.810 The Factoring Convention takes precedence over the Rome I Regulation (Art. 25 (1) Rome I Regulation). Once the UNCITRAL Convention on the Assignment of Receivables in Inter806

807 808 809 810

Bibliography (factoring): Basedow, Internationales Factoring zwischen Kollisionsrecht und UnidroitKonvention, ZEuP 1997, 615; Beraudo, Le nouveau droit du crédit-bail et de l’affacturage international (1er mai 1995), Sem jur 1995 ed E art 458, S 185; Diehl-Leistner, Internationales Factoring – eine rechtsvergleichende Darstellung zum Recht der Bundesrepublik Deutschland, Frankreichs und der Vereinigten Staaten unter Einschluß der UNIDROIT-Konvention über das Internationale Factoring (1992); Ferrari, The International Sphere of application of the 1988 Ottawa Convention on International Factoring, Int Lawyer 31 (1997) 41; Ferrari et al., Internationales Vertragsrecht (2nd ed. 2012; comments on the Factoring Convention by Ferrari, Kieninger und Mankowski); Girsberger, Defenses of the Account Debtor in International Factoring, Am J Comp L 40 (1992) 467; Häusler, Die Neuregelung der internationalen Forderungsfinanzierung durch das UNIDROIT-Übereinkommen über internationales Factoring, in: Hagenmüller (ed.), Handbuch des nationalen und internationalen Factoring (3. Aufl 1997) 270; Häusler, Das UNIDROIT Übereinkommen über internationales Factoring (Ottawa 1988) unter besonderer Berücksichtigung seiner Anwendbarkeit (1998); MünchKommHGB/Ferrari vol. 5 (3rd ed.2014; comments on the Factoring Convention); Rebmann, Das UNIDROIT-Übereinkommen über das internationale Factoring (Ottawa 1988), RabelsZ 53 (1989) 603; Rudolf, Einheitsrecht für internationale Forderungsabtretungen (2006); Tzeng, Ottawa-Konvention und nationales Recht (2002); Weller, Die UNIDROIT-Konvention von Ottawa über internationales Factoring, RIW 1999, 161; Zaccaria, Internationales Factoring nach Inkrafttreten der Konvention von Ottawa, IPRax 1995, 279. For the text see www.unidroit.org/instruments/factoring. Art. 2 (1) Factoring Convention; see further Mankowski, in: Ferrari et al. Art. 2 FactÜ note 1 ss. Art. 1 (2) (a) and (3) Factoring Convention. Art. 21 Factoring Convention.

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national Trade of 1 January 2002811 will enter into force, the Factory Convention would enjoy priority as the more special instrument.812 515 If neither the uniform law applies nor the parties have chosen the applicable law, then,

pursuant to Art. 4 (1) (b), the contract between the factor/bank and the supplier is governed by the law at the seat of the factor/bank.813 A deviating view suggests that the law at the seat of the supplier should govern at least those factoring contracts under which the factor accepts the full payment risk. For, in that case the supplier as seller of the claim would effect the characteristic performance.814 However, also in such a case the services of the factor/bank – collection of the debt, financing and crediting for the supplier, debt management – characterise the contract. Furthermore, the border between taking the full risk of non-payment, taking parts of this risk or no risk at all is not that clear. The Factoring Convention rightly abstains from drawing such a border.815 516 If a factor involves a second factor, for instance in the country of the debtor, who collects the

debt, the law at the seat of the second factor applies.816 517 Whether and how the assignment of the debt takes place, must be determined in accordance

with Art. 14 (1) Rome I Regulation. The law that governs the contract between assignor (supplier) and assignee (bank/factor) decides.817 However, the assignment must not deteriorate the position of the debtor; a choice of law on which the factor and the supplier at the expense of the debtor agree is invalid.818 On the other hand it is disputed which law governs the in rem effect of the assignment.819 f) Forfaiting 518 Forfaiting is another special case of discount business. Similarly to a factoring contract, the

forfaiter buys at a discount bills of exchange or other receivables from a seller, often an exporter, who has these claims against its customers (the debtors), often importers. In contrast to factoring contracts the forfaiter bears the full risk that the debtor cannot or will not pay. Forfaiting contracts are particularly used in the export trade where they constitute a form of export financing.820 811

812 813

814 815 816 817

818

819

406

For the text see ww.uncitral.org/pdf/english/texts/payments/receivables/ctc-assignment-convention-e. pdf. The Convention is not yet in force. See Mankowski, in: Ferrari et al. Vor Art. 1 FactÜ note 2. Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 20; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 128; Hohloch, in: Erman Art. 4 Rom I-VO note 21; Leible, in: Nk-BGB Art. 4 Rom I-VO note 134; Martiny, in: MünchKomm Art. 4 Rom I-VO note 104; Reithmann/Martiny/Freitag note 6.626; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 20; Thorn, in: Palandt Art. 4 Rom I-VO note 13; also under the former law: Cour d’appel Grenoble Rev crit 1996, 666 with note Pardoel. Thorn, in: Rauscher Art. 4 Rom I-VO note 47. See supra note 514. Martiny, in: MünchKomm Art. 4 Rom I-VO note 104. Garcimartín Alférez, in: Ferrari/Leible, Rome I-Regulation 226; Martiny, in: MünchKomm Art. 4 Rom IVO note 105; Thorn, in: Palandt Art. 14 Rom I-VO note 3. Martiny, in: MünchKomm Art. 4 Rom I-VO note 105; also under the prior law OLG Köln IPRax 1987, 239 with note Sonnenberger IPRax 1987, 221. See thereto the comment to Art. 14 Rome I Regulation.

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In the absence of an – always admissible – choice of the applicable law a forfaiting contract is 519 governed by the law at the seat of the forfaiter.821 The center of the forfaiting contract is – like that of the factoring contract – not the sale of the receivable but its purchase which further involves the taking on of the economic risk and the granting of credit. It is therefore the forfaiter who effects the characteristic performance and renders the main services (Art. 4 (1) (b)). Where the forfaited receivable itself is secured, for instance by a mortgage on land or 520 otherwise, this fact alone does not suffice to subject the forfaiting contract to the law governing the security.822 In principle, both transactions follow their own law. For a manifestly closer connection in the sense of Art. 4 (3) further connecting factors are necessary. The law regulating the assignment of the forfaited receivable from the supplier to the for- 521 faiter must be determined in accordance with Art. 14 (1) Rome I Regulation. The provision leads to the law that the – forfaiting – contract between assignor and assignee governs.823 g) Giro business The opening of a giro account is a contract between a bank and its customer which allows the 522 direct money transfer from one bank account to another bank’s account. It enables, in particular, international cashless transactions. Within the EU the international money transfer is regulated by Directive 2007/64/EC on 523 payment services in the internal market (and amending several older Directives)824 and Regulation (EC) 2560/2001 on cross-border payments in euro of 19 December 2001.825 These instruments do not contain explicit conflict of law rules. Furthermore, the UNCITRAL Model Law on International Credit Transfers of 15 May 524 1992826 contains uniform law that shall serve legislators as model for their domestic legislation. The Model Law suggests also a conflict rule (Art. Y (1)): “The rights and obligations arising out of a payment order shall be governed by the law chosen by the parties. In the absence of agreement, the law of the State of the receiving bank shall apply.”827 The law applicable to giro accounts and international money transfers must therefore be 525 determined in accordance with the Rome I Regulation. Unless the parties have chosen the 820 821

822 823

824 825 826 827

See the example of BGHZ 126, 261. Brödermann/Wegen, in: PWW Anh zu Art. 4 Rom I-VO note 20; Calvo Caravaca/Carrascosa González XXV note 141; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 130; Hohloch, in: Erman Art. 4 Rom I-VO note 21; Leible, in: Nk-BGB Art. 4 Rom I-VO note 135; Martiny, in: MünchKomm Art. 4 Rom I-VO note 106; Reithmann/Martiny/Freitag note 6.621; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 21; Thorn, in: Palandt Art. 4 Rom I-VO note 13. Also Reithmann/Martiny/Freitag note 6.621. See also Leible, in: Nk-BGB Art. 4 Rom I-VO note 135; Martiny, in: MünchKomm Art. 4 Rom I-VO note 106; Reithmann/Martiny/Freitag note 6.622. OJ 2007 no. L 319, p. 1, see also supra note 501. OJ 2001 no. L 344, p. 13. For the text see www.uncitral.org/pdf/english/texts/payments/transfers/ml-credittrans.pdf. See *note in front of Art. 1 of the Model Law.

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applicable law, pursuant to Art. 4 (1) (b), generally the law at the seat of the bank applies which has to perform the money transfer.828 This is also true for the money transfer between banks where therefore the law at the seat of the transferring bank decides.829 The law of that bank remains applicable even if it made the payment erroneously and requests repayment.830 If such repayment is no longer possible (for instance, because lapse of time or expenditure of the money) eventual claims for unjust enrichment must be determined in accordance with Art. 10 Rome II Regulation. 526 Where the mandated bank at the request of the customer involved another bank which in

fact – though in a defective way – performed the money transfer, then, a tacit contract between the customer and the second bank could be assumed which is governed by the law at the seat of the second bank.831

527 Contracts on the issue of credit cards follow the law at the seat of the issuing bank or credit

institute (unless the parties chose another law).832 This rule applies in respect of the bank’s contractual relationship to the customer as well as to those businesses where the credit card enables the customer to pay cashless. The customer’s underlying contract for goods or services with such a business is governed by its own law. 528 All payment services can be consumer transactions to which Art. 6 applies if the provision’s

further conditions of application are met and if the bank’s service is not exclusively rendered in a country different from that of the consumer’s habitual residence (Art. 6 (4) (a)). h) Documentary credit 529 Documentary letters of credit833 (LC, D/c or L/c) have themselves established as a wide828

829

830

831 832 833

408

Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 135; Leible, in: Nk-BGB Art. 4 Rom I-VO note 132; Martiny, in: MünchKomm Art. 4 Rom I-VO note 89; Reithmann/Martiny/Freitag note 6.580 ss.; Thorn, in: Palandt Art. 4 Rom I-VO note 13; also under the former law: BGH IPRspr 1987 no. 16; BGH WM 2004, 1177; OLG Köln RIW 1993, 1023 (1025). Martiny, in: MünchKomm Art. 4 Rom I-VO note 89; Reithmann/Martiny/Freitag note 6.580 ss.; Thorn, in: Palandt Art. 4 Rom I-VO note 13; also under the former law: OLG Köln RIW 1993, 1023 (SWIFTtransfer). In this sense OLG Köln RIW 1993, 1023; probably for application of the law applicable to a claim for unjust enrichment: Reithmann/Martiny/Freitag note 6.589. Apparently in the same sense Reithmann/Martiny/Freitag note 6.592. Also Reithmann/Martiny/Freitag note 6.598. Bibliography (documentary credit): vBar, Kollisionsrechtliche Aspekte der Vereinbarung und Inanspruchnahme von Dokumentenakkreditiven, ZHR 152 (1988) 38; vBernstorff/Altmann, Zahlungssicherung im Außenhandel (2007); Caprioli, Le crédit documentaire: èvolution et perspectives (1992); Díaz, Elektronische Vertragsform und Urkundenform im Akkreditivgeschäft (2007); Hampe, Das auf unwiderrufliche Dokumentenakkreditive anwendbare Recht unter besonderer Berücksichtigung von Qualifikation und Anknüpfung des Zahlungsanspruchs des Begünstigten gegen die Akkreditivbank (2002); Holzwarth, Einheitliche Richtlinien und Gebräuche für Dokumenten-Akkreditive, IHR 2007, 136; van Maanen/van Veen, Toepassilijk recht op documentair kredietverhoudingen onder het EVO en Rome I, NIPR 2012, 12; Morse, Letters of Credit and the Rome Convention, Lloyd’s MaritComLQ 1994, 560; Nielsen, Neue Richtlinien für Dokumentenakkreditive (3rd ed. 2008); Petkovic, The Proper Law of Letters of Credit, J Int BankingL 1995, 141; Schefold, Zum IPR des Dokumenten-Akkreditivs, IPRax 1990, 20;

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spread form of payment in international trade. For their use a rather uniform international practice has developed: The debtor of an international transaction, in particular the buyer in an international sale, instructs the own bank, the issuing bank, to issue a letter of credit in favour of a third party (the beneficiary). Often this will be the seller of the international sale. However, letters of credit are not limited to sales contracts but are also available if the subject of the underlying transaction is a service. With the issuance of the letter the issuing bank accepts the obligation to pay to the beneficiary/seller the sum fixed in the letter (the price for the goods sold) against the presentation of certain documents, commonly the transport document concerning the goods sold, the insurance policy for these goods and the commercial invoice as well as further documents which the parties may have agreed upon. The third party who is the creditor of the underlying transaction has thus a further independent claim against the issuing bank besides the claim against the buyer under the underlying sales contract. Frequently, the issuing bank instructs a second or correspondent bank in the country of the buyer. The second bank can act as advising bank or as confirming bank. In the first case, the correspondent bank merely advises the seller/creditor of the opening of the letter of credit and pays the fixed sum against the documents. In the second case, the bank confirms the letter and in turn accepts a further independent obligation to pay the fixed sum. Letters of credit are an appropriate means to secure the exchange of goods against money in 530 international trade. The presentation of the transport document as prerequisite for payment proves with some certainty that the goods are on their way to the buyer, and with the transfer of the documents to the bank the seller can no longer dispose of the goods. On the other hand, the seller receives payment immediately after presentation of the documents. The letter of credit thus serves the purpose of safe payment. The value of the letter of credit as security depends to a large extent on the question whether the letter is revocable or irrevocable. Only an irrevocable LC secures that the bank will be obliged to pay once the seller presents the necessary documents. As is self-understanding, letters of credit are not for free. Banks usually charge a certain percentage of the value of the underlying contract as banking fees from the party ordering the LC. For documentary letters of credit the ICC Uniform Customs and Practice for Documentary 531 Credits (UCP 600) of 2007834 are used with almost no exception. Since the banks insist on their incorporation the UCP 600 usually become part of the respective contracts between the bank(s) and the involved parties. Some of the principles of the UCP 600 are probably also international trade usages which anyway are applicable to international letters of credit. This is in particular the principle of strict compliance; the tendered documents must strictly comply with the requirements in the letter. Even slight modifications entitle the bank to withhold payment. Furthermore, the principle of abstraction of the obligation applies; the payment obligation of the bank is independent of any defences arising from the underlying sales (or other) contract. Only in case of clear and provable abuse of right on the part of the seller the bank may reject complying documents and refuse payment.

834

Schefold, Neue Rechtsprechung zum anwendbaren Recht bei Dokumenten-Akkreditiven, IPRax 1996, 347; Schütze, Das Dokumentenakkreditiv im Internationalen Handelsverkehr (6th ed. 2008). See thereon Baker/Dolan, Users’ Handbook for Documentary Credits under UCP 600 (2008).

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532 In the rare cases where the UCP 600 have not been incorporated they may nonetheless be

taken into account for the interpretation of agreements on letters of credit.835 533 The UCP 600 regulate the different forms of letters of credit and the banks’ obligations

arising from them. According to Art. 3 UCP 600, letters of credit are generally irrevocable “even if there is no indication to that effect.” 534 The search for the applicable law plays a role only in those cases where the UCP 600 are

exceptionally not applicable.836 In that case, the Rome I Regulation (Art. 3 and 4) applies.837 The exclusion of negotiable instruments in Art. 1 (2) (d) does not cover letters of credit. 535 In the first line, the law applies that the parties have – expressly or impliedly – chosen.838 A

tacit choice, though still under the former law, has been assumed with respect to the relationship between an advising bank and a seller where the place of payment and the seat of the seller were located in the country whose law also governed the sales contract.839 It is questionable whether the Rome I Regulation would lead to the same result because its Art. 3 (1) has increased the level of certainty for a tacit choice in comparison to Art. 3 (1) Rome Convention. Nonetheless, the connecting factors pointing to that law are so strong that also under Art. 3 (1) Rome I Regulation a tacit choice can be assumed. 536 In the absence of a choice of law the relationship between issuing bank and debtor who

typically orders the letter is governed by the law at the seat of the issuing bank which renders the service in the sense of Art. 4 (1) (b) and effects the characteristic performance.840 537 The same rule applies to the relationship between the issuing bank and the beneficiary of the

letter of credit, at least where no correspondent bank is involved.841 The result does not 835 836

837

838

839 840

841

410

See, e.g., OLG München RIW 1996, 1036 (1037). See, e.g., Taurus Petroleum Ltd. v. State Oil Marketing Co. of the Ministry of Oil, Republic of Iraq [2013] EWHC 3494 (Comm.). See Taurus Petroleum Ltd. v. State Oil Marketing Co. of the Ministry of Oil, Republic of Iraq [2013] EWHC 3494 (Comm.) para. 16 ss. Reithmann/Martiny/Freitag note 6.608 s.; Thorn, in: Rauscher Art. 4 Rom I-VO note 51; also under the former law: OLG Koblenz RIW 1989, 815; OLG Köln IPRax 1996, 270 with note Thorn IPRax 1996, 257. See OLG Köln IPRax 1996, 270 with note Thorn IPRax 1996, 257. See Taurus Petroleum Ltd. v. State Oil Marketing Co. of the Ministry of Oil, Republic of Iraq [2013] EWHC 3494 (Comm.) para. 18 (letter of credit issued by the London branch of a French bank for presentation in Baghdad: French law applicable, although via Art. 4 (2)); further Dicey/Morris/Collins (eds) note 33–310; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 123; Hohloch, in: Erman Art. 4 Rom I-VO note 21; Leible, in: Nk-BGB Art. 4 Rom I-VO note 133; Martiny, in: MünchKomm Art. 4 Rom I-VO note 93; Plender/ Wilderspin note 7–083 (also relying on Art. 4 (2)); Reithmann/Martiny/Freitag note 6.608; Thorn, in: Rauscher Art. 4 Rom I-VO note 51; also under the prior law: OLG Karlsruhe RIW 1997, 781 (the law at the seat of the issuing bank also governs whether the payment claim arising from the letter of credit can be assigned to another party). Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 123; Hohloch, in: Erman Art. 4 Rom I-VO note 21; Leible, in: Nk-BGB Art. 4 Rom I-VO note 133; Martiny, in: MünchKomm Art. 4 Rom I-VO note 93; Reithmann/ Martiny/Freitag note 6.609; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 19; Thorn, in: Rauscher Art. 4 Rom I-VO note 51; also under the prior law: OLG Frankfurt RIW 1992, 315 (316); obiter also Bank

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depend on whether the obligation of the issuing (or confirming) bank towards the beneficiary is qualified as a contract or as a one-sided obligation. The reason is that the Rome I Regulation covers the latter as well, because of its voluntarily binding character. If a second (correspondent) bank is involved, the relationship between this bank and the 538 beneficiary, in particular if the second bank confirmed the letter of credit, is governed by the law at the seat of the second bank.842 Under the former law it was disputed whether the law of the second bank also governed the beneficiary’s relationship to the first bank or whether both relationships followed their own law.843 Under the Rome I Regulation, and particularly with respect to the high threshold of Art. 4 (3), it appears preferable that the beneficiary’s relationship to each bank is adjudicated separately and that the contractual link between the issuing bank and the beneficiary remains in principle unaffected of whether or not a second bank is involved.844 However, pursuant to Art. 4 (3), further circumstances may justify the application of one law to both relationships. Without else, the place of payment and the habitual residence of the beneficiary in the same state should not suffice to indicate a ‘manifestly’ closer connection to this law. The relationship between the issuing bank and the second bank – whether or not the latter 539 merely advises or confirms – is objectively governed by the law of the country where the second bank has its seat. The reason is that by advising or confirming, this bank effects the characteristic performance of the service that the advising or confirming the L/C constitutes.845 The underlying contract between the debtor (the party ordering the letter of credit) and the 540 beneficiary of the letter – often a sale – follows its own law.846

842

843

844

845

846

of Baroda v. Vysya Bank [1994] 2 Lloyd’s Rep 87; differently – place of payment relevant – OLG Köln ZIP 1994, 1791. Martiny, in: MünchKomm Art. 4 Rom I-VO note 94 s.; also under the prior law: Bank of Baroda v. Vysya Bank [1994] 2 Lloyd’s Rep 87; OLG Frankfurt IPRax 1990 with note Schefold; however differently – law of the first bank if second bank is only advising bank – Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 123; Reithmann/Martiny/Freitag note 6.610 ss.; Thorn, in: Rauscher Art. 4 Rom I-VO note 51; also prior: OLG Frankfurt RIW 1992, 315. See for instance – application of law of second bank to relationship with first bank – OLG Köln IPRax 1996, 270; OLG Frankfurt IPRspr 1987 no. 20; also via Art. 4 (5) Rome Convention Bank of Baroda v. Vysya Bank [1994] 2 Lloyd’s Rep 87. In the same sense: Reithmann/Martiny/Freitag note 6.613; Thorn, in: Rauscher Art. 4 Rom I-VO note 52; supporting the application of the same law to all relationships under a letter of credit: Plender/Wilderspin note 7–085. Calvo Caravaca/Carrascosa González note XXV 139; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 123; Leible, in: Nk-BGB Art. 4 Rom I-VO note 133; Martiny, in: MünchKomm Art. 4 Rom I-VO note 96; Reithmann/Martiny/Freitag note 6.611; also under the prior law OLG Frankfurt RIW 1988, 905; Bank of Baroda v. Vysya Bank [1994] 2 Lloyd’s Rep 87; Bank of Credit and Commerce Hong Kong Ltd v. Sonali Bank [1995] 1 Lloyd’s Rep 227. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 123; Leible, in: NK-BGB Art. 4 Rom I-VO note 133; Martiny, in: MünchKomm Art. 4 Rom I-VO note 97.

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i) Collection business 541 Collection business of banks means that a bank on behalf of its customer undertakes to

recover money from a third person who owes it to the customer. In international trade documentary collection is frequently used: On behalf of the exporter/seller his bank exchanges with the importer’s/buyer’s bank documents which entitle to the ordered goods against payment in cash or in other form. 542 For the international collection business it is usual that parties incorporate the ICC Uniform

Rules on Collections (URC 522, revision 1995). The standard contract terms of banks generally contain a reference to URC 522. The URC 522 unify the substantive law for the collection of debts. 543 In those cases where URC 522 do not apply and the parties have not chosen the applicable

law, between customer (principal)847 and his or her bank (the remitting bank which merely presents the documents to the bank that actually collects payment)848 the law at the seat of that bank applies because it is the service provider in the sense of Art. 4 (1) (b) Rome I Regulation.849 The same rule – law at the seat of the bank – applies with respect to the relationship between the collecting bank850 and the debtor (drawee).851 Again, this bank is the relevant service provider. Between remitting and collecting bank the seat of the latter determines the applicable law.852 Assignments in connection with debt collection are governed by their own law that follows from Art. 14 Rome I Regulation.853 The same rules apply if the collection agency is not a bank. j) Securities business 544 The purchase and sale of securities for customers by banks is governed by the law of the

respective seller who effects the characteristic performance under Art. 4 (2) Rome I Regulation.854 However, the transfer of the property in the document is determined by the law of the place where the paper is located (lex cartae sitae).855 545 The relationship between the bank and its customer for whom the bank acts falls under the

law at the seat of the bank (Art. 4 (1) (b)).856

847 848 849

850 851 852 853

854 855 856

412

See Rule 3. a. i URC 522. See Rule 3. a. ii URC 522. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 138; Leible, in: NK-BGB Art. 4 Rom I-VO note 136; Martiny, in: MünchKomm Art. 4 Rom I-VO note 107; Plender/Wilderspin note 7–061; Reithmann/ Martiny/Freitag note 6.616; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 22; Thorn, in: Rauscher Art. 4 Rom I-VO note 48; also under the prior law: BGH IPRax 1997, 45 f with note Grundmann IPRax 1997, 34 ss. For its definition see Rule 3. a. iii URC 522. The drawee is defined in Rule 3. b. URC 522. Martiny, in: MünchKomm Art. 4 Rom I-VO note 107; Reithmann/Martiny/Freitag note 6.616. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 138; Hohloch, in: Erman Art. 4 Rome I note 21; Martiny, in: MünchKomm Art. 4 Rom I-VO note 107; Reithmann/Martiny/Freitag note 6.616. As to the sale of claims etc. see supra note 281 et seq. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 138. See also Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 138; Leible, in: NK-BGB Art. 4 Rome I note 137.

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k) Investment business Investment business of banks concerns investing and managing funds for the bank’s cus- 546 tomer, the investor, with a view to a financial return. The customer/investor will often receive a mere indirect claim on the objects in which his or her money is invested. The bank functions as intermediary for the investment. In the EU, Directive 85/611/EEC of 20 December 1985857 (replaced by Directive 2009/65/EC 547 of 13 July 2009)858 and further Directives have considerably approximated the law on investment. The Directives regulate the substantive law of specific investments but do not contain conflict rules. In the absence of the parties’ choice of law the contractual relationship between investor and 548 investment intermediary/bank is governed by the law at the latter’s seat.859 The same rule applies if the intermediary is another investment firm than a bank. Some national mandatory provisions relating to investment law constitute overriding man- 549 datory provisions in the sense of Art. 9 Rome I Regulation, for instance prohibitions on insider trading or money laundering since (and if) their primary aim is the protection of public interests. l) Custody business It belongs to normal banking activities to take securities or other assets into custody860 and to 550 care for their administration. For securities held with an intermediary the Hague Conference on Private International law developed a Convention on the Law Applicable to Certain Rights in Respect of Securities held with an Intermediary of 5 July 2006.861 The Convention is not yet in force. It refers to the law chosen by the parties and in the absence of such choice to the law at the place of the business of the intermediary.862 Likewise, not yet in force is the UNIDROIT Convention on Substantive Rules for Intermediated Securities of 9 October 2009863 which does not contain conflict rules.

857

858

859

860

861

862 863

Directive on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), OJ 1985 no. L 375/3. Directive on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), OJ 2009 no. L 302/32. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 140; Leible, in: NK-BGB Art. 4 Rom I-VO note 138; Martiny, in: MünchKomm Art. 4 Rom I-VO note 111; Plender/Wilderspin note 7–061; Thorn, in: Rauscher Art. 4 Rom I-VO note 48 s. Bibliography (custody business): Ege, Das Kollisionsrecht der indirekt gehaltenen Wertpapiere (2006); Goode/Kanda/Kreuzer, Explanatory Report on the 2006 Hague Securities Convention (2005); Reuschle, Haager Übereinkommen über die auf bestimmte Rechte in Bezug auf Intermediär-verwahrte Wertpapiere anzuwendende Rechtsordnung, IPRax 2003, 495; Reuschle, Grenzüberschreitender Effektengiroverkehr, RabelsZ 68 (2004) 687. To be found under hcch.net/en/instruments/conventions/full-text/?cid=72. See to the Convention Goode/Kanda/Kreuzer, Explanatory Report on the 2006 Hague Securities Convention (2005). See Art. 4 and 5 of the Convention. To be found under unidroit.org/instruments/capital-markets/geneva-convention.

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551 In the absence of a subjective choice the law at the place is applicable where the bank is

located that holds the securities or other deposited assets for the customer.864 However, questions concerning the title in the securities or assets are generally regulated by the law of the place where the securities or assets are located (lex cartae sitae and lex rei sitae).865 Regularly, this will be also the place where the bank or other intermediary is situated. 552 National law may provide for specific protection of customers of banks or intermediaries

who hold securities for them. For instance, German banks licenced for collective deposit of securities may transfer such securities to foreign banks only if the foreign law provides for a similar protection of customers as German law does. The German provision866 is regarded as an overriding mandatory rule in the sense of Art. 9 Rome I Regulation.867 m) Swap transactions 553 In interest or currency swap transactions the parties exchange or balance interest or cur-

rency amounts which have accumulated over a specified time. The purpose is generally to minimise interest rates or currency risks. If the parties have not chosen the applicable law, neither Art. 4 (1) nor (2) applies, because swaps do not belong to the categories listed in para. (1) and usually none of the parties effects the characteristic performance.868 Therefore, Art. 4 (4) is applicable and the closest connection must be determined.869 This can be, for instance, the common place of performance. The view that each party’s obligation follows its own law is no longer tenable. The Rome I Regulation has abolished the possibility of dépeçage ordered by the court. n) Information contract 554 Information, references, advice given by a bank on a contractual basis are governed by the

law that the parties have chosen and in the absence of such a choice by the law at the seat of the bank (Art. 4 (1) (b)).870 o) Other kinds of banking contracts 555 As to guarantees see supra note 474 et seq., to suretyship supra note 467 et seq., to loans and

credit contracts supra note 329 et seq. 864

865

866 867 868

869

870

414

Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 121; Hohloch, in: Erman Art. 4 Rom I-VO note 21; Leible, in: NK-BGB Art. 4 Rom I-VO note 137; Martiny, in: MünchKomm Art. 4 Rom I-VO note 109; Plender/ Wilderspin note 7–061; Reithmann/Martiny/Freitag note 6.575; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 23; Thorn, in: Rauscher Art. 4 Rom I-VO note 48. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 121; Martiny, in: MünchKomm Art. 4 Rom I-VO note 109; Reithmann/Martiny/Freitag note 6.576. § 5 (4) German DepotG (Deposit Act). See Reithmann/Martiny/Freitag note 5.105. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 165; Martiny, in: MünchKomm Art. 4 Rom I-VO note 110; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 23; Thorn, in: Rauscher Art. 4 Rom I-VO note 161. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 165; Martiny, in: MünchKomm Art. 4 Rom I-VO note 110; Thorn, in: Rauscher Art. 4 Rom I-VO note 161. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 111; Hohloch, in: Erman Art. 4 Rom I-VO note 21; Martiny, in: MünchKomm Art. 4 Rom I-VO note 112; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 23; also under the prior law, e.g., OLG Düsseldorf IPRspr 1994 no. 41 (incidentally); OLG Hamburg VersR 1983, 350.

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30. Stock exchange and financial market transactions a) In general For transactions at stock exchanges871 it must be distinguished between the transactions 556 directly traded at the stock market, regularly effected by (licensed) brokers for their clients, and the contracts of those brokers or traders with their clients. The direct transactions at the stock exchange are generally governed by the law at the place 557 of the stock exchange. Though the parties of these transactions may expressly or impliedly choose another law this happens in extraordinary cases only.872 Under the former law a deviating view suggested that the single transaction at the stock exchange should be governed by the law at the seat of the party effecting the characteristic performance; according to this view, the law of the stock exchange should only be applicable if the transaction was made on the basis of the standard conditions of the respective stock exchange.873 The – also formerly – prevailing view should be followed under Art. 4 Rome I Regulation. It is the rule that transactions at stock exchanges are subject to special regulations and conditions which traders have to observe and which are state controlled. This justifies the application of the law at the place of the stock exchange as the more closely connected law. This view is further supported by Art. 4 (1) (h) which for financial market contracts refers to the law of the system which usually is the law of the state that supervises the financial market.874 Unless otherwise agreed the contract between the broker/trader and its client is governed by 558 the law at the seat of the broker/trader.875 If clients acting for private, personal purposes

871

872

873 874 875

Bibliography (stock exchange and financial market transactions): Assmann/Schneider (Hrsg), Wertpapierhandelsgesetz (5th ed. 2009); Dannhoff, Das Recht der Warentermingeschäfte (1993); Einsele, Anlegerschutz durch Information und Beratung, JZ 2008, 477; Floer, Internationale Reichweite der Prospekthaftung (2002); Garcimartín Alférez, New Issues in the Rome I Regulation: The Special Provisions on Financial Markets Contracts, YBPIL 10 (2008) 245; Garcimartín Alférez, The Rome I Regulation: Exceptions to the Rule on Consumer Contracts and Financial Instruments, 5 (2009) JPIL 85; Giesberts, Anlegerschutz und anwendbares Recht bei ausländischen Börsentermingeschäften (1998); Hopt/Rudolph/Baum (eds.), Börsenreform. Eine ökonomische, rechtsvergleichende und rechtspolitische Untersuchung (1997); Lehmann, Financial Instruments, in: Ferrari/Leible (eds.), Rome I Regulation (2009) 85; Mankowski, Zu einigen internationalprivatrechtlichen und internationalprozessrechtlichen Aspekten bei Börsentermingeschäften, RIW 1996, 1001; Mankowski, Finanzverträge und das neue Internationale Verbrauchervertragsrecht des Art. 6 Rom I-VO, RIW 2009, 98; Samtleben, Warentermingeschäfte im Ausland – ein Glücksspiel?, IPRax 1989, 148; Samtleben, Warentermingeschäfte im Ausland und Schiedsverfahren – Neues Recht für alte Fälle, IPRax 1992, 362; Samtleben, Börsentermingeschäfte, in: Hopt/ Rudolph/Baum 469; Samtleben, Das Börsentermingeschäft ist tot – es lebe das Finanztermingeschäft, ZBB 2003, 69; Schwark, Kapitalmarktrechts-Kommentar (3. Aufl 2004); Starp, Die Börsentermingeschäfte an Auslandsbörsen (1985). Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 117; Hohloch, in: Erman Art. 4 Rom I-VO note 30; Martiny, in: MünchKomm Art. 4 Rom I-VO note 165; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 51. See, e.g., vHoffmann, in: Soergel Art. 28 EGBGB note 366. See supra note 154. Art. 4 (1) (b); Brödermann/Wegen, in: PWW Art. 4 Rom I-VO Anh. note 15; probably also Martiny, in: MünchKomm Art. 4 Rom I-VO note 165.

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mandate foreign brokers, Art. 6 must be taken into account.876 Also the exclusions in Art. 6 (4) must be observed. However, if domestic intermediaries intermeddle the conclusion of the contract with the foreign broker, Art. 6 is applicable.877 Then, the more favourable law at the habitual residence of the client applies. b) Futures transactions 559 Futures transactions or forward contracts are contracts at a stock exchange or similar

market which are concluded at the present market price but which are to be performed – delivered and paid – at a certain future date. Any change of the market price then favours one party and is to the disadvantage of the other. Because of their speculative character these transactions are often highly risky. Usually, the investor (seller or buyer) does not directly deal at the stock exchange but is represented by a broker as intermediary.

560 The law governing futures contracts has to be determined in the same way as other stock

exchange contracts.878 A subjective choice of – any foreign – law is always admissible.879 In the absence of such choice the transaction between the investor and the intermediary is subject to the law at the seat of the latter.880 The relationship between the intermediary and a traditional stock exchange is governed by the law at the place of the stock exchange881 (a contrary choice is entirely unusual). In the case of a virtual financial market place with no real localisation, in parallel to Art. 4 (1) (h) the law of the system should apply. This is regularly the law of the state which supervises and controls the financial market place.882 Absent a subjective choice the actual futures contract is also governed by the law at the place of the stock exchange or of the state that controls the stock exchange or market place.883

561 Where the investor is a consumer, Art. 6 – including its para. 4 (a), (d) and (e) – is applicable.

In addition, for instance in Germany, arbitration agreements between intermediaries and consumers are invalid.884 562 On the basis of EU law the Member States prescribe certain mandatory obligations of

information, instruction, advice etc. for businesses which render financial services. As far as these provisions regulate the market in the common interest, they fall under Art. 9 Rome I Regulation.

876 877

878 879 880

881 882 883 884

416

See also Mankowski RIW 2009, 107. For instance OLG Düsseldorf RIW 1994, 420 with note Mankowski; OLG Düsseldorf RIW 1996, 681 (thereto Mankowski RIW 1996, 1001 et seq.); with respect to tortious liability of foreign brokers: OLG Düsseldorf IPRax 2009, 158 with note S Huber IPRax 2009, 134. For contracts concluded within a multilateral system see however supra note 148 et seq. See, e.g., Martiny, in: MünchKomm Art. 4 Rom I-VO note 165 ff. Art. 4 (1) (b) in connection with Art. 19 Rome I Regulation; see also Martiny, in: MünchKomm Art. 4 Rom I-VO note 168; Reithmann/Martiny/Mankowski note 6.1678. Hohloch, in: Erman Art. 4 Rom I-VO note 30; Martiny, in: MünchKomm Art. 4 Rom I-VO note 165. See supra note 154. Hohloch, in: Erman Art. 4 Rom I-VO note 30; Martiny, in: MünchKomm Art. 4 Rom I-VO note 165. See § 37h WpHG (Securities Trading Act).

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31. Lottery, game and bet contracts Game and bet contracts are contracts where one or both sides promise and make a payment 563 for which sheer luck or uncertain conditions determine which party shall win. Unless the parties have chosen the applicable law, games and betting between privately 564 acting persons are usually governed by the law at the place where the game or bet takes place or is made (Art. 4 (4) Rome I Regulation),885 for there is no characteristic performance of one of the parties discernible. Where businesses offer bets or organise games (casino, racing course, bet bureau etc.), the 565 business effects the service or the characteristic performance. In the absence of a subjective choice, therefore, the law at the seat of the business is decisive.886 If the business effects the game or bet via the internet, nonetheless the law at the real seat of the business decides.887 In the absence of a choice to the contrary, lottery and similar contracts are also governed by 566 the law at the seat of the organiser who by setting the rules, organising the particularities and distributing any eventual wins to the successful participants either renders services or at least effects the characteristic performance.888 However, a different rule applies to contracts between several participants who form a community and share any win. There, it will be rare that the parties choose a law. The objectively applicable law must be determined in accordance with Art. 4 (4) Rome I Regulation. In the first line, the applicable law should be the law at the common seat of all participants. In other cases, the law of the closest connection must be inferred from all circumstances of the case. Most relevant should be the place where the lottery is upheld. If the organiser of the lottery, game or bet is a business and the participant is acting in a 567 private, personal capacity, Art. 6 Rome I Regulation must be taken into account. The applicable law determines whether obligations arising from game or betting are en- 568 forceable.889 Provisions rendering such obligations unenforceable primarily serve the interests of the involved person; they should not be classified as overriding mandatory provisions in the sense of Art. 9 Rome I Regulation.890 However, provisions which forbid certain kinds

885

886

887 888

889 890

Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 163; Hohloch, in: Erman Art. 4 Rom I-VO note 49; Leible, in: NK-BGB Art. 4 Rom I-VO note 160; Martiny, in: MünchKomm Art. 4 Rom I-VO note 342; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 76; Thorn, in: Rauscher Art. 4 Rom I-VO note 162. Dicey/Morris/Collins (eds) note 33–438; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 163; Leible, in: NK-BGB Art. 4 Rom I-VO note 161; Martiny, in: MünchKomm Art. 4 Rom I-VO note 113, 342; Thorn, in: Rauscher Art. 4 Rom I-VO note 163; also under the prior law BGH IPRax 1988, 228 with note Gottwald IPRax 1988, 210; OLG Hamm NJW-RR 1997, 1007. Leible, in: NK-BGB Art. 4 Rom I-VO note 161. Art. 4 (1) (b) or Art. 4 (2) Rome I Regulation; Martiny, in: MünchKomm Art. 4 Rom I-VO note 342; Thorn, in: Rauscher Art. 4 Rom I-VO note 163. BGH IPRax 1988, 228; OLG Hamburg IPRspr 1984 Nr 24 b. In the same sense Martiny, in: MünchKomm Art. 4 Rom I-VO note 342; also Soergel/von Hoffmann Art. 28 EGBGB note 527.

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of organised lotteries, games or bets and thus invalidate respective contracts will often serve public interests and therefore constitute internationally mandatory provisions. 32. Promise of a reward, prize competition, prize notification a) Promise of a reward; prize competition 569 A promise of a reward which someone publicly promises891 for a certain activity (e.g., for the

person who eats most rice-balls within 20 minutes) is governed by the law at the seat of the promisor. His or her promise characterises the relationship.892 However, a one-sided choice of the applicable law in the promise – which the other party accepts by requesting the promised reward – is always possible. The same rules apply to international prize competitions (for instance, for architects etc).893 570 The applicable law determines in particular whether the mere promise of a reward or prize is

binding or unenforceable because of lack of consideration. 571 Where the promise of a reward or the prize competition is directed towards consumers,

Art. 6 Rome I Regulation may be applicable. b) Prize notification 572 The message that the addressee has won a certain sum of money or other benefit (seemingly

without any consideration) is widely used as a means of advertising and making contact to possible clients, sometimes even with criminal intent. The prevailing view qualifies such prize notifications as situations that fall under the conflict rules for contractual relations.894 This qualification is in any case relevant where the prize notification intends, or leads to, the conclusion of a contract. But the contractual qualification is also justified if a so-called isolated prize notification is at stake which does not aim at the conclusion of a contract, 891

892

893 894

418

Bibliography (promise of a reward etc.): Bach, Was ist wo Vertrag und was nicht?, IHR 2010, 17; Blobel/ Rösler, Internationale Zuständigkeit und anwendbares Recht bei Gewinnmitteilungen aus dem Ausland, JR 2006, 441; S Lorenz/Unberath, Gewinnmitteilungen und kein Ende? IPRax 2005, 219; Martiny, Einseitige Rechtsgeschäfte und Gewinnzusagen im Internationalen Privat- und Prozessrecht, in: FS Pazdan (2005) 189; Oberhammer/Slonina, Grenzüberschreitende Gewinnzusagen im europäischen Prozess- und Kollisionsrecht, in: FS Yessiou-Faltsi (2007) 419; Rauscher/Schülke, Grenzüberschreitende Gewinnmitteilung – Anknüpfung und Internationale Zuständigkeit, EuLF 2001, 334; Schwartze, Die Bestimmung des auf grenzüberschreitende Gewinnzusagen anwendbaren Rechts nach Rom I und Rom II, in: FS Koziol (2010) 407. Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 112; Leible, in: NK-BGB Art. 4 Rom I-VO note 162; Martiny, in: MünchKomm Art. 4 Rom I-VO note 283; Thorn, in: Rauscher Art. 4 Rom I-VO note 79. Also Leible, in: NK-BGB Art. 4 Rom I-VO note 162. Brödermann/Wegen, in: PWW Art. 4 Rom I-VO Anh note 30; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 134; Martiny, in: MünchKomm Art. 4 Rom I-VO note 284; Reithmann/Martiny/Freitag note 5.94; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 63; in the same sense in the jurisdictional context: CJEU ECLI:EU:C:2005:33 [C-27/02, Engler . /. Janus Versand]; CJEU ECLI:EU:C:2009:303 [C-180/06, Ilsinger . /. Dreschers]; similarly BGHZ 165, 172 (application of the rules on one-sided legal acts); but contrary – qualification as tort – e.g., LG Freiburg IPRspr 2002 Nr 137; NK-BGB/Leible Art. 4 Rom I-VO note 163; for qualification as infringement of competition law, e.g., Fetsch RIW 2002, 938; Rauscher/ Schülke EuLF 2000/2001, 337.

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for even in this case the sender intends to induce the addressee to further steps (telephone calls, transmission of bank or other data etc). These measures which are generally useful for the sender constitute a kind of consideration; moreover, the sender has voluntarily offered to pay the prize and expressed its willingness to be bound by its promise. This is the minimum condition which the CJEU requires for a contractual qualification in the jurisdictional context.895 In principle, a subjective choice of law is admitted; however since international prize noti- 573 fications usually reach consumers, the restrictions of Art. 6 Rome I Regulation must be observed. Further, it is doubtful whether a one-sided choice in an isolated prize notification on which the addressee sues is valid. Yet, the question should be answered in the affirmative.896 In the absence of a subjective choice, basically the law at the seat of the promisor is appli- 574 cable.897 However, via Art. 6 regularly the law at the habitual residence of the consumer will apply since with sending a prize notification the sender at least directs its activities to the country of the consumer (Art. 6 (1) (b) Rome I Regulation). National provisions which declare prize notifications enforceable898 will usually be over- 575 riding mandatory rules in the sense of Art. 9 Rome I Regulation because they primarily serve the public interest in fair trading practices.899 Where the notified prize depends on the acceptance of an offer for goods or services, 576 according to Art. 17 ss Brussels Ibis Regulation (formerly Art. 15 Brussels I Regulation) the consumer is entitled to sue at his or her habitual residence.900 In the case of an isolated prize notification likewise the courts at the habitual residence of the addressee are internationally competent via Art. 7 no 1 Brussels Ibis Regulation/Art. 5 no 1 Brussels I Regulation.901

895 896

897

898 899

900 901

See CJEU ECLI:EU:C:2009:303 [C-180/06, Ilsinger . /. Dreschers] para. 54, 55, 60. In this sense see OLG Nürnberg IPRax 2003, 54 with note Leible IPRax 2003, 28; Häcker ZVglRWiss 103 (2004) 496; Martiny, in: MünchKomm Art. 4 Rom I-VO note 285; actually also BGH NJW 2005, 827; BGH NJW 2004, 3039 (3040); BGH NJW 2004, 1652 (1653); BGH NJW 2003, 3620; but reluctant because of the possibility to avoid liability by such choice: BGHZ 165, 172 para. 29. Brödermann/Wegen, in: PWW Art. 4 Rom I-VO Anh note 30; Ferrari, in: Ferrari et al. Art. 4 Rom I-VO note 134; Martiny, in: MünchKomm Art. 4 Rom I-VO note 286; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 63; if the conclusion of a contract is intended the same result would follow from the connection with the law governing the intended contract, see LG Braunschweig IPRax 2002, 213 with note S Lorenz IPRax 2002, 195. See for instance § 5j Austrian KSchG; § 661a German BGB. See extensively BGHZ 165, 172 (para. 30 et seq.); S Lorenz IPRax 2002, 195 f; Reithmann/Martiny/Freitag note 5.94. See CJEU ECLI:EU:C:2002:436 (C-96/00, Gabriel). See BGHZ 165, 172.

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33. Contracts on intellectual property rights a) In general 577 The law of intellectual or immaterial property rights902 – copyright, patent law, trademark

law, law on inventions, design etc. – is largely regulated by international uniform law conventions as far as the creation, the effects and the extinction of such rights are concerned. Generally, unless the conventions provide differently, the mentioned issues are governed by the law of the country where protection of these rights is sought for (lex loci protectionis).903 In addition, in the field of intellectual property rights the following EU Regulations apply directly: – Regulation (EC) no 2100/94 of 27 July 1994 on Community plant variety rights;904 – Regulation (EC) no 6/2002 of 12 December 2002 on Community designs;905 – Regulation (EC) no 510/2006 of 20 March 2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs;906 – Regulation (EC) no 207/2009 of 26 February 2009 on the Community trade mark;907 – Regulation (EU) no 1257/2012 of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection;908 – Regulation (EU) no 1260/2012 of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements.909

902

903 904 905 906 907 908 909

420

Bibliography (contrats on intellectual property rights): Basedow/Drexl/Kur/Metzger (eds.), Intellectual Property in the Conflict of Laws (2005); Basedow/Kono/Metzger (eds.), Intellectual Property in the Global Arena (2010); European Max Planck Group for Conflict of Laws in Intellectual Property (CLIP), Intellectual Property and the Reform of Private International Law – Sparks from a Difficult Relationship, IPRax 2007, 284; Fawcett/Torremans, Intellectual Property and Private International Law (1998); Kur, Are there any Common European Principles of Private International Law with regard to Intellectual Property?, in: Leible/Ohly (eds.), Intellectual Property and Private International Law (2009) 1; Mankowski, Contracts Relating to Intellectual or Industrial Property Rights under the Rome I Regulation, in: Leible/Ohly (eds), Intellectual Property and Private International Law (2009) 31; Max Planck Group on Conflict of Laws in Intellectual Property, Conflict of Laws in Intellectual Property – The CLIP Principles and Commentary (2013); Metzger, Applicable law under the CLIP Principles, in: Basedow/Kono/Metzger (eds.), Intellectual Property in the Global Arena (2010) 157; De Miguel Asensio, Applicable Law in the Absence of Choice to Contracts Relating to Intellectual or Industrial Property Rights, YBPIL 10 (2008) 199; De Miguel Asensio, The Law Governing International Intellectual Property Licensing Agreements, in: De Werra (ed), Research Handbook on Intellectual Property Licensing (2013) 312; Nishitani, Contracts Concerning Intellectual Property Rights, in: Ferrari/Leible (eds), Rome I Regulation (2009) 51; Torremans, Licences and Assignments of Intellectual Property Rights under the Rome I Regulation, JPIL 2008, 397. See for instance BGH NJW 1994, 2888; BGH NJW 1998, 1395. OJ 1994 L 227, 1. OJ 2002 L 3, 1. OJ 2006 L 93, 12. OJ 2009 L 78, 1. OJ 2012 L 361, 1. OJ 2012 L 361, 89.

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With regard to each Regulation’s specific scope they have created essentially uniform sub- 578 stantive law within the EU. Moreover, Art. 8 Rome II Regulation has introduced uniform conflict rules for non-contractual infringements of intellectual property rights. According to Art. 8 (1) Rome II Regulation the applicable law “shall be the law of the country for which protection is claimed.” Yet, for contractual transactions concerning the transfer or assignment of immaterial prop- 579 erty rights thus far no unified or harmonised law exists. In respect of the Rome Convention of 1980 there were doubts whether the instrument covered contracts on such rights. The report of Giuliano and Lagarde stressed: “First, since the Convention is concerned only with the law applicable to contractual obligations, property rights and intellectual property are not covered by these provisions.”910 However, this evidently meant the property aspects as the also mentioned property rights evidence. Contracts on immaterial property rights should not be excluded. The same is true for the Rome I Regulation. This can be inferred from the Proposal for the Rome I Regulation of 2005. It contained an express conflict rule for contracts on intellectual property rights (Art. 4 (1) (f) Proposal). This rule was deleted, however, not because such contracts should be exempted from the scope of the Rome I Regulation but basically because the rule was much criticised as too simple and undifferentiated.911 Contracts on intellectual property rights, therefore, fall within the scope of the Regulation.912 580 The applicable law is to be determined in the same way as for those types of contracts which are used for the transfer or lease of immaterial property rights (sale, rent etc). Thus, the parties may always choose the applicable law.913 In the absence of any such choice Art. 4 Rome I Regulation is applicable. For instance, as far as franchise and distribution contracts concern intellectual property rights, Art. 4 (1) (e) and (f) are to be applied.914 For the various kinds of contracts on the different intellectual property rights still see infra note 592 et seq. It can be questioned whether Art. 6 Rome I Regulation has any meaning for contracts on 581 immaterial property rights. Insofar as consumers acquire licence rights on software, music titles, films etc. – often online – the application of Art. 6 cannot be objected to if the further conditions of application of this provision are met.915 This is particularly true for licence contracts for downloads of works from the internet which are protected by copyright. The offeror of such contracts has directed its activity to the country of the consumer if the offeror concludes contracts with consumers of that country and does not clearly declare in advance to refuse acceptances therefrom.916 The solution should not be different if it is the consumer 910 911 912

913 914

915 916

Report Giuliano/Lagarde Art. 1 note 2. See Nishitani, in: Ferrari/Leible, Rome I Regulation 60. Brödermann/Wegen, in: PWW Art. 4 Rom I-VO Anh note 34; Gebauer, in: Calliess Art. 4 Rome I note 61; Hohloch, in: Erman Art. 4 Rom I-VO note 42; Martiny, in: MünchKomm Art. 4 Rom I-VO note 244; Reithmann/Martiny/Obergfell note 6.1052; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 64; Thorn, in: Rauscher Art. 4 Rom I-VO note 122; also under the prior law BGH AWD 1965, 455. Mankowski, in: Leible/Ohly 47 et seq.; Nishitani, in: Ferrari/Leible, Rome I Regulation 53 et seq. See De Miguel Asensio YBPIL 10 (2008) 207; Mankowski, in: Leible/Ohly 35 et seq.; Nishitani, in: Ferrari/ Leible, Rome I Regulation 61. Also Nishitani, in: Ferrari/Leible, Rome I Regulation 70 et seq. See Mankowski IHR 2008, 141.

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who owns and offers the IP-right to a business. Art. 6 covers these cases, too.917 Also, where publishers invite private persons to send in their stories, which they promise to publish if the story is worth publishing, Art. 6 is applicable. 582 Further, as the case may be, internationally mandatory provisions (Art. 9) may be applicable.

b) Copyright contracts 583 By a copyright contract the author/creator of a work or other owner of the intellectual

property rights to the work either transfers these rights or grants another person the right to use the work in the way the parties have agreed upon. 584 It is common ground that the parties may choose the law applicable to the contractual effects

of such contracts.918 585 In the absence of a subjective choice Art. 4 Rome I Regulation must be applied.919 In the rare

situation that the contract contains nothing more than the obligation to transfer or to let the copyright against payment, according to Art. 4 (2) the law at the seat of the transferor or lettor governs the contract, for this party effects the characteristic performance.920 586 However, where the acquirer or user of the copyright, as frequently, is obliged to dissemi-

nate, exploit, or otherwise make use of, the copyright, his or her performance characterises the contract and in case of doubt the law at this party’s seat applies.921 587 These regular rules are superseded where – manifestly – closer connections to another law

exist (Art. 4 (3)). This may be the case where further circumstances connect the case with the country where the copyright shall be used.922 917

918

919

920

921

922

422

In the same sense Nishitani, in: Ferrari/Leible, Rome I Regulation 71 fn. 99; however contra Mankowski, in: Leible/Ohly 48 et seq. Brödermann/Wegen, in: PWW Art. 4 Rom I-VO Anh note 34; Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 171; Hohloch, in: Erman Art. 4 Rom I-VO note 42; Leible, in: NK-BGB Art. 4 Rom I-VO note 165 et seq.; Martiny, in: MünchKomm Art. 4 Rom I-VO note 247; Reithmann/Martiny/Obergfell note 6.1164; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 64; Thorn, in: Rauscher Art. 4 Rom I-VO note 122; probably also Dicey/Morris/Collins (eds) note 24–002 et seq.; further expressly Art. 122 (2) Swiss IPRG. See, e.g. still under the prior law BGH NJW 2015, 1690 (1693) – Hi-Hotel II; BGHZ 136, 380 (388) – Spielbankaffaire (Casino affair); BGH NJW 2014, 771 – Pippi-Langstrumpf-Kostüm (Pippi Longstocking costume). Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 171; Hohloch, in: Erman Art. 4 Rom I-VO note 42; Mankowski, in: Leible/Ohly 52; Martiny, in: MünchKomm Art. 4 Rom I-VO note 247; Nishitani, in: Ferrari/Leible, Rome I Regulation 67 et seq.; Reithmann/Martiny/Obergfell note 6.1165; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 64; Thorn, in: Rauscher Art. 4 Rom I-VO note 126; probably also Dicey/Morris/Collins (eds) note 24–002 et seq.; further expressly Art. 122 (1) Swiss IPRG. Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 171; Hohloch, in: Erman Art. 4 Rom I-VO note 42; Leible, in: NK-BGB Art. 4 Rom I-VO note 165 et seq.; Martiny, in: MünchKomm Art. 4 Rom I-VO note 247; Reithmann/Martiny/Obergfell note 6.1165 (however suggesting that the question who renders the characteristic performance be determined case by case); Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 64; Thorn, in: Palandt Art. 4 Rom I-VO note 28; Thorn, in: Rauscher Art. 4 Rom I-VO note 126. See, still under the former law BGH NJW 2015, 1690 (1693) Hi-Hotel II: the court applied the former

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Article 4

The law that is applicable in accordance with Art. 3 or 4 exclusively governs the contractual 588 requirements for, and effects of, the agreement. The creation, effect and – even bona fide – transfer of the copyright, also its transferability, lapse and extinction is subject to the law of the country in which the copyright shall be used and protection is sought (lex loci protectionis).923 As to consumer protection concerning international copyright contracts see the general 589 remarks supra note 581. Where copyright problems encounter in employment relationships the specific employ- 590 ment questions are governed by the law applicable to the employment contract (Art. 8 Rome I Regulation). A question of that kind is for instance whether the employee or the employer owns the copyright relating to creations, inventions etc. made within the course of the employment.924 On the contrary, typical copyright questions such as the protectability of a creation or invention are subject to the lex loci protectionis. National copyright law may provide for overriding mandatory provisions in the sense of 591 Art. 9 Rome I Regulation although only if the respective provision aims at the promotion of the public interest. This may be the case if the provision ensures that the creator receives an adequate contribution of the gain the work produces. In the case Hi-Hotel II (a German photographer had to produce advertising pictures of a French hotel for the French contracting party mainly for the French market; therefore French contract law was applicable) the German Supreme Court, however, denied the overriding mandatory character of a provision of German law which regulates the scope of a supplied copyright.925 The Court argued that the primary objective of the relevant provision926 was the protection of the individual creator (in the case the photographer) whereas any protection of public interests was only a reflex of the protection of the involved individual.927 c) Publishing contracts A publishing contract obliges the author to let a work to a publishing house and the latter to 592 publish and disseminate the work and to pay an honorary. It is usual that the author transfers the copyright – or its exclusive use – to the publisher. The parties may always choose the applicable law.928 In the absence of an express or implied 593 choice the contractual part of the publishing contract is subject to the law at the seat (in the

923

924 925 926

927 928

escape clause and French law in a case where a German photographer who had its seat in Germany was obliged to take pictures and produce advertising photos of the hotel in Nice of the French contract party. In this sense under the prior law BGH NJW 1998, 1395 – Spielbankaffaire (casino affair); LG Hamburg GRUR int 2010, 67 (71). Mankowski, in: Leible/Ohly 75. BGH NJW 2015, 1690 Hi-Hotel II. This was § 31 (5) UrhG (Copyright Act) which provides that the extent of the copyright is to be inferred from the purpose of the contract as a whole unless the parties agreed otherwise. BGH NJW 2015, 1690 (1694) Hi-Hotel II. Gebauer, in: Calliess Art. 4 Rome I note 64; Martiny, in: MünchKomm Art. 4 Rom I-VO note 252; also under the prior law BGH NJW 1997, 1150; OLG München ZUM 2007, 751.

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sense of Art. 19 Rome I Regulation) of the publisher.929 The reason behind is that the performance of the publisher – production of the publication and its best possible marketing – characterises the contract. As usual the seat at the time of the conclusion of the contract is relevant. Any later change of the publisher’s seat does not affect the law applicable to the contract. However, a later change of the seat may play a role in the context of Art. 4 (3) as an indication of an altogether manifestly closer connection to the law of another country. 594 A specific form of a publishing contract is the contract between the publisher and an editor.

This contract obliges the editor to collect and prepare materials, contributions, Articles of others etc. for a book whereas the publisher is obliged to publish and market the work. In the absence of the parties’ choice of the applicable law again the law at the seat of the publisher governs the contract because its performance prevails and characterises the contract.930 Under another special form of publishing contract the publisher engages an author to write a book. If the contract provides for an express or implied obligation of the publisher to publish and market the book the law at the seat of the publisher is the objectively applicable law. Without such obligation the law at the author’s seat applies.931 595 The in rem effects of the contract, in particular the requirements for a valid transfer of the

copyright, fall under the principle of lex loci protectionis.932 d) Licence contracts 596 Licence contracts933 can take various forms. In principle, they grant the licensee the right to

exploit an immaterial property right of the licensor, usually against payment of a licence fee (royalties). The immaterial property right may be assigned for this purpose – as many laws require for an exclusive licence – though it need not necessarily be transferred. Frequently, further duties are agreed upon, such as information or cooperation obligations. Often, the licensee undertakes to exploit the licence. The licence may cover its use in one or more countries.

929

930 931 932

933

424

Brödermann/Wegen, in: PWW Art. 4 Rom I-VO Anh. note 63; Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 173; Gebauer, in: Calliess Art. 4 Rome I note 64; Hohloch, in: Erman Art. 4 Rom I-VO note 42; Leible, in: NK-BGB Art. 4 Rom I-VO note 133; Martiny, in: MünchKomm Art. 4 Rom I-VO note 252; Reithmann/Martiny/Obergfell note 6.1172; Ringe, in: jurisPK-BGB Art. 4 Rom I-VO note 79; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 77; Thorn, in: Palandt Art. 4 Rom I-VO note 28; Thorn, in: Rauscher Art. 4 Rom I-VO note 127; R Wagner IPRax 2008, 385; also under the prior law BGHZ 147, 178 (182); BGHZ 64, 183; BGHZ 19, 110 (113). Martiny, in: MünchKomm Art. 4 Rom I-VO note 253 et seq.; Reithmann/Martiny/Obergfell note 6.1176. Martiny, in: MünchKomm Art. 4 Rom I-VO note 254; Reithmann/Martiny/Obergfell note 6.1181. In this sense under the prior law BGH GRUR 1988, 296 (298); BGHZ 136, 380 (387); BGH RIW 2001, 937 (938). Bibliography (licence contracts): De Miguel Asensio, Applicable Law in the Absence of Choice to Contracts Relating to Industrial or Property Rights, Yb. PIL 10 (2008) 199; Metzger, Transfer of Rights, Licence Agreements, and Conflict of Laws, in: Basedow/Drexl/Kur/Metzger (eds.), Intellectual Property in the Conflict of Laws (2005) 61; Stimmel, Die Beurteilung von Lizenzverträgen unter der Rom-I-Verordnung, GRUR Int 2010, 783; Torremans, Licences and Assignments of Intellectual Property Rights under the Rome I Regulation, JPIL 4 (2008) 397.

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Article 4

According to CJEU case law on Art. 5 no. 1 (b) Brussels I Regulation (now Art. 7 no. 1 (b) 597 Brussels Ibis Regulation) licence contracts cannot be classified as service contracts.934 The primary aim of licence contracts is not the provision of a service but allowing the use of an immaterial right. This interpretation should also apply to the Rome I Regulation and its Art. 4 (1) (b). The parties’ choice must always be respected. The objective determination of the applicable 598 law must take account of the specific setting of the licence contract at hand. With respect to simple licence contracts which merely oblige the licensee to pay a licence fee without any duty to make use of the licensed right, in principle, the law at the seat of the licensor is applicable.935 This is common ground at least where the licence covers more than one country.936 Partly, it has been argued that, if the licence extends to one country only, the law of that 599 country should apply.937 However, this would entail an unconvincing differentiation according to the number of countries involved. Further, a later extension of the licence to other countries or its restriction to one country would lead to an unmotivated change of the applicable law.938 As always, it remains unaffected to apply a manifestly more closely connected law (Art. 4 (3)). Thus, the grant of a licence for one certain country does not automatically overturn the regular conflict rule of Art. 4 (2) Rome I Regulation. However, the application of the law at the seat of the licensor is no dogma. Where the 600 licensee undertakes the main obligations under the licence contract his or her performance characterises the contract and the law at his or her seat applies.939 Such a case can be assumed where the contract obliges the licensee to produce and market the licensed Articles and to pay gain-dependent royalties.940 Then the law at the licensee’s seat is applicable. Where each party grants the other a licence (cross-licence) Art. 4 (2) is no longer applicable and Art. 4 (4) must be applied.941

934

935

936 937 938 939

940

941

CJEU ECLI:EU:C:2009:257 (C-533/07, Falco Privatstiftung, Rabitsch . /. Weller-Lindhorst); see also Plender/Wilderspin note 7–036. OLG Köln MMR 2015, 331; De Miguel Asensio YBPIL 10 (2008) 210 et seq.; Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 149; Hohloch, in: Erman Art. 4 Rom I-VO note 42; Martiny, in: MünchKomm Art. 4 Rom I-VO note 265; Plender/Wilderspin note 7–036; Reithmann/Martiny/Hiestand note 6.1104; Ringe, in: jurisPK-BGB Art. 4 Rom I-VO note 79; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 71; Thorn, in: Rauscher Art. 4 Rom I-VO note 124; Torremans JPIL 4 (2008) 405 et seq.; also under the prior law BGHZ 129, 236; in the same sense also Art. 122 (1) Swiss IPRG. See the references in the preceding fn. See, e.g., OLG Düsseldorf AWD 1961, 295. See also Reithmann/Martiny/Hiestand note 6.1108. Differently Torremans JPIL 4 (2008) 406 et seq. (suggesting that the characteristic performance cannot be determined and Art. 4 (4) has to be applied). Thorn, in: Rauscher Art. 4 Rom I-VO note 124; contra – law at the seat of the licensor applies – Reithmann/Martiny/Hiestand note 6.1104. See the case of LG Mannheim BeckRS 2015, 15001 (the court left open whether Austrian or Italian law was the most closely connected system because their rules on the implied conclusion of a licence contract were identical).

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601 The applicable contract law governs the obligations arising from the contract. The existence,

contents, transferability and extinction of the licence follows the lex loci protectionis.942 602 As far as licence contracts restrict or distort competition within the EU, the prohibitions of

the directly applicable Art. 101 and 102 TFEU must be observed. However, licence contracts concerning technology transfer fall under Regulation 316/2014 on the application of Article 101 (3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements943 which exempts such contracts from the scope of Art. 101 (1) TFEU.944 603 Furthermore, via Art. 9 Rome I Regulation national cartel and antitrust law may supersede

the actually applicable contract law. 604 As to knowhow contracts and technology-transfer contracts see infra note 611 et seq.

e) Other exploitation contracts aa) International transmission contracts 605 Contracts – between the organiser and the exploiter – on the international recording and

transmission in particular of sport or cultural events should be subject to the law at the seat of the organiser unless the parties have chosen the applicable law, for it is the performance of the organiser rather than of the exploiter that characterises the contract; without the organisation of the event neither recording nor transmission could take place. However, not infrequently the manifestly closest connection will exist with the place of the event (Art. 4 (3)).945 bb) International film production contracts 606 Unless the parties chose the applicable law a contract between a film producer and the owner

of the copyright of the screenplay, novel etc. is generally governed by the law at the seat of the producer if the producer undertook a filming obligation (Art. 4 (2)).946 Where no such obligation was agreed upon, the letting of the immaterial property right for filming purposes prevails and characterises the contract. Then, the law at the right’s owner’s seat determines the objective choice of law.947 607 Contracts with the involved actors, artists and other persons are generally service contracts

or contracts for work (special effects etc.), sometimes even employment contracts. They are 942 943 944 945

946

947

426

See further Reithmann/Martiny/Hiestand note 6.1111. OJ 2014 no. L 93, 17. See Art. 2 in connection with Art. 1 (1) (c) of the cited Regulation. In a case concerning the right to internationally transmit broadcasting via cable the German Supreme Court applied – though under the former law – the law of the country where the transmission took place: BGH NJW 1998, 1395 (1398) – Spielbankaffaire (casino affair). Brödermann/Wegen, in: PWW Art. 4 Rom I-VO Anh. note 21; Martiny, in: MünchKomm Art. 4 Rom IVO note 255; Reithmann/Martiny/Obergfell note 6.1194 (though via Art. 4 (3)); Spickhoff, in: Bamberger/ Roth Art. 4 Rom I-VO note 64 (general application of the law at the producer’s seat); Thorn, in: Rauscher Art. 4 Rom I-VO note 128. Reithmann/Martiny/Obergfell note 6.1195; contra (law at the seat of the producer applies) Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 64.

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governed by their own regular conflict rules (Art. 3, Art. 4 (1) (b), Art. 8 Rome I Regulation). The fact alone, that the producer – or its insurance – bears the economic risk of the whole production does not justify subjecting all these contracts to the law at the seat of the producer.948 The producer’s interest in the application of one law for all the necessary contracts does not principally prevail over the interest of each involved person in the application of ‘his’ or ‘her’ law. Moreover, the producer can attempt to safeguard the application of one law by respective choice of law clauses. cc) International film distribution contracts Contracts between film producers and film exploiters/film distributors follow in case of 608 doubt and in the absence of any subjective choice the law at the seat of the producer who renders the characteristic performance by assigning the performing right and reproduction right.949 Where the exploiter/distributor undertakes the duty to perform the film the law at its seat is applied.950 To contracts for the performance of films between the owner or licensed distributor of the 609 performance right and the single cinema operator, in the absence of a subjective choice, the law at the seat of the operator applies since the operator has the duty to show the movie and thus effects the characteristic performance in the sense of Art. 4 (2).951 The same is held applicable to tv-licence contracts.952 dd) Collection and rights administration contracts A contract by which an author mandates a collecting society – for the exploitation of literary 610 works – to enforce his or her immaterial property rights and to collect royalties is governed by the law at the seat of the company which effects the characteristic performance unless the parties have chosen the applicable law.953 Contracts of such societies with users of works are likewise subjected to the law at the seat of the society (where no subjective choice has been made).954 34. Knowhow contracts; technology transfer contracts Knowhow and technology transfer contracts oblige one side to transfer specific technical 611 knowledge (that does not consist of immaterial property rights), whereas the other side has a

948

949

950

951 952

953 954

Contra Reithmann/Martiny/Obergfell note 6.1197; likewise Martiny, in: MünchKomm Art. 4 Rom I-VO note 256 et seq. Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 129; Martiny, in: MünchKomm Art. 4 Rom I-VO note 259; Reithmann/Martiny/Obergfell note 6.1204; Thorn, in: Rauscher Art. 4 Rom I-VO note 129; indifferently Brödermann/Wegen, in: PWW Art. 4 Rom I-VO Anh. note 30 (law of the producer or the owner of the right). Martiny, in: MünchKomm Art. 4 Rom I-VO note 259; Reithmann/Martiny/Obergfell note 6.1205; Thorn, in: Rauscher Art. 4 Rom I-VO note 129; also under the prior law BGH IPRspr 1958/59 no. 53. Martiny, in: MünchKomm Art. 4 Rom I-VO note 93; Reithmann/Martiny/Obergfell note 6.1207. In this sense Martiny, in: MünchKomm Art. 4 Rom I-VO note 261; Reithmann/Martiny/Obergfell note 6.1208. Martiny, in: MünchKomm Art. 4 Rom I-VO note 263; Reithmann/Martiny/Obergfell note 6.1209. See Martiny, in: MünchKomm Art. 4 Rom I-VO note 263; Reithmann/Martiny/Obergfell note 6.1209.

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mere duty to pay. Rather often such contracts are part of extended commercial exchange relations or are coupled with other contracts such as licence contracts. 612 In the absence of the parties’ choice of the applicable law the contract is governed by the law

of the seat of the party that is obliged to transfer knowhow or technology.955 This equally applies if the user is granted an exclusive right to use the knowhow or technology.956 613 A close connection of the knowhow or technology transfer contract with another contract –

e.g. a joint venture or cooperation contract – may lead to the law that applies to that contract (Art. 4 (3) Rome I Regulation). The escape clause of Art. 4 (3) may also apply because a manifestly closer connection exists with the place where the knowhow or technology has to be put into operation, in particular if the supplier has to render further services there or if the acquirer has to fulfill further duties there.

614 Knowhow and technology transfer contracts are subject to the directly applicable EU an-

titrust law (Art. 101 and 102 TFEU). However, they fall under Regulation 316/2014 on the application of Article 101 (3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements957 which exempts such contracts from the scope of Art. 101 (1) TFEU.958 35. Company contracts 615 The Rome I Regulation expressly exempts from its scope “questions governed by the law of

companies and other bodies, corporate or unincorporated, such as the creation, by registration or otherwise, legal capacity, internal organisation or winding-up … and the personal liability of officers and members as such for the obligations of the company or body” (Art. 1 (2) (f) Rome I Regulation). For companies seated in the EU or the European Economic Area these questions are governed by the law of the country where the company or other entity was founded.959 616 Though the exemption in Art. 1 (2) (f) Rome I Regulation covers contracts by which a

company or other body corporate is founded it does not extend to preliminary agreements which merely create an obligation to found a company. These preliminary contracts therefore fall within the scope of the Rome I Regulation.960 By contrast, intercompany contracts 955

956

957 958 959

960

428

Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 143; Hohloch, in: Erman Art. 4 Rom I-VO note 43; Leible, in: NK-BGB Art. 4 Rom I-VO note 168; Martiny, in: MünchKomm Art. 4 Rom I-VO note 271; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 67; Thorn, in: Rauscher Art. 4 Rom I-VO note 130. See the references in the preceding fn., however, probably differently Thorn, in: Rauscher Art. 4 Rom I-VO note 130. OJ 2014 no. L 93, 17. See Art. 2 in connection with Art. 1 (1) (c) of the cited Regulation. See in particular CJEU ECLI:EU:C:1999:126 (C-212/97, Centros Ltd. v. Erhvervs- og Selskabsstyrelsen) para. 19; for companies seated outside the EU or the EEA national conflict rules apply which partly still follow the principle that the law of the country applies where the company has its place of central administration (for instance Germany: BGHZ 97, 269; BGHZ 178, 192). von Hein, in: Rauscher Art. 1 Rom I-VO note 43; Hohloch, in: Erman Art. 1 Rom I-VO note 10; Kieninger, in: Ferrari et al Art. 1 Rom I-VO note 21; Martiny, in: MünchKomm Art. 1 Rom I-VO note 69; Spickhoff,

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Article 4

such as control or domination agreements, profit transfer agreements etc. concern the corporate structure of the involved companies. They are subject to the law that governs the dominated company.961 Art. 3 et seq. Rome I Regulation further apply to associations which have no legal personality 617 and no corporate, outwardly oriented structure such as silent partnerships, mere ad hoc associations, working groups etc.962 The same applies to contracts founding international alliances unless they are mere cooperation contracts.963 The applicable contract law also regulates the questions of the inner structure of such associations.964 For those company contracts that thus fall within the scope of the Rome I Regulation the 618 parties may always choose the applicable law.965 If the parties use in their contract formulations and institutes of a specific national law – for instance the German term “stille Gesellschaft” – this constitutes an implied choice of the applicable law, at least where the parties also agreed on the jurisdiction of the courts of that country and argued on the basis of this law during litigation.966 In the absence of a subjective choice, Art. 4 (4) Rome I Regulation will be applicable and lead 619 to the most closely connected law, for usually there is no characteristic performance by one of the parties.967 Still under the former law, the German Supreme Court applied international contract law to contribution claims between spouses who had formed an internal company; however, the Court then, via the escape clause, found that the rules on marital property law were applicable.968 Where on the other hand the contributions of one party clearly prevail, Art. 4 (2) leads to the law at the seat of that party; Art. 4 (4) is no longer applicable. Preliminary company agreements, silent partnerships, ad hoc associations and work groups 620 have often their closest connection with the place where the company-like cooperation of

961 962

963 964 965

966 967

968

in: Bamberger/Roth Art. 1 Rom I-VO note 31; also under the prior law BGH IPRspr 1975 no. 6; differently – law applying to the company applies – Leible, in: NK-BGB Art. 1 Rom I-VO note 65. See, e.g., LG München I ZIP 2011, 1511; Kindler, in: MünchKomm Int GesR note 699. von Hein, in: Rauscher Art. 1 Rom I-VO note 43; Hohloch, in: Erman Art. 1 Rom I-VO note 10; Kieninger, in: Ferrari et al Art. 1 Rom I-VO note 21; Martiny, in: MünchKomm Art. 1 Rom I-VO note 70 et seq.; Ringe, in: jurisPK-BGB Art. 1 Rom I-VO note 35; Spickhoff, in: Bamberger/Roth Art. 1 Rom I-VO note 31; Staudinger, in: Hk-BGB Art. 1 Rom I-VO note 10; Thorn, in: Palandt Art. 1 Rom I-VO note 12; in the same sense under the prior law BGH NJW 2004, 3706 (silent partnership); differently – law applicable to companies applies – Leible, in: NK-BGB Art. 1 Rom I-VO note 65. As to the latter see infra note 622 et seq. To the same avail Art. 150 (2) Swiss IPRG. BGH NJW 2004, 3706 (silent partnership); OLG Düsseldorf NJW-RR 1987, 483; OLG Karlsruhe IPRspr 2001 Nr 24; Martiny, in: MünchKomm Art. 1 Rom I-VO note 70. See BGH NJW 2004, 3706. Thorn, in: Palandt Art. 4 Rom I-VO note 33; also under the prior law: OLG Frankfurt RIW 1998, 807; OLG Hamburg NJW-RR 2001, 1012 (closest connection of an internal company between spouses to the place of their marital flat). BGH NJW 2015, 2581.

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the parties occurs, decisions etc. are made and put into effect.969 However, where indicia to another law prevail, this law applies as for instance the lex rei sitae for ad hoc associations concerning land property.970 621 As to cooperation contracts and joint ventures see infra note 622 et seq.

36. Cooperation contracts; joint ventures a) Cooperation contracts 622 The classifying essential of cooperation contracts is that two or more parties work together

in order to further own interests which, however, go in the same direction; nonetheless, the parties do not yet form a company or a joint venture. 623 The parties may choose the applicable law. Without such choice the most closely connected

law must be determined (Art. 4 (4) Rome I Regulation) because one characteristic performance will rarely be identifiable.971 Often, the law at the place will decide where the cooperation takes place and the parties work together.972 However, all connecting factors must be taken into account, in particular a common seat of the involved parties, but also the place where the cooperation contract was concluded and other factors. b) Joint ventures 624 Joint venture contracts oblige the parties either to establish a joint undertaking (the joint

venture) or to use it in order to pursue their common purpose. The creation and the inner relations and structure of the joint venture are subject to the conflict rules of international company law.973 625 By contrast, the preliminary basic contract must be qualified as contractual; Art. 3 and 4

Rome I Regulation apply.974 In the absence of a subjective choice Art. 4 (4) applies since it will be the exception that the performance of one party characterises the contract. Often, though not necessarily the closest connection will exist with the place where the joint venture has its seat in the sense of Art. 19 Rome I Regulation.975 Where the parties have their seats in the same state this may lead to the application of the law of this country. An objective depéçage is no longer available under the Rome I Regulation. 969

970 971

972 973 974

975

430

Hohloch, in: Erman Art. 1 Rom I-VO note 10; Kieninger, in: Ferrari et al Art. 1 Rom I-VO note 21; Martiny, in: MünchKomm Art. 1 Rom I-VO note 70 et seq.; also under the prior law OLG Hamburg NJW-RR 2001, 1012. Hohloch, in: Erman Art. 1 Rom I-VO note 10; Thorn, in: Palandt Art. 4 Rom I-VO note 33. In the same sense Brödermann/Wegen, in: PWW Art. 4 Rom I-VO Anh. note 39; Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 145; Martiny, in: MünchKomm Art. 4 Rom I-VO note 345; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 85; Thorn, in: Rauscher Art. 4 Rom I-VO note 165. See the references in the preceding fn. See Reithmann/Martiny/Göthel note 6.2612 et seq. Brödermann/Wegen, in: PWW Art. 4 Rom I-VO Anh. note 36; Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 141; Martiny, in: MünchKomm Art. 4 Rom I-VO note 346; Reithmann/Martiny/Göthel note 6.2616; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 85; Thorn, in: Rauscher Art. 4 Rom I-VO note 164. See Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 141; Martiny, in: MünchKomm Art. 4 Rom I-VO note 346; Thorn, in: Rauscher Art. 4 Rom I-VO note 164.

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A cumulation of the laws governing the involved persons or businesses should be rejected 626 because of possible insoluble discrepancies between the different laws. Cooperation and joint venture contracts are subject to the directly applicable European 627 antitrust and competition law. National cartel law can still be applicable via Art. 9 Rome I Regulation. 37. Life annuity and other care contracts Under a life annuity contract the debtor is obliged to pay a specified annual amount for the 628 duration of the lifetime of the creditor. The ground for this obligation is usually another transaction, for instance the transfer of immovable property or of a business onto the debtor of the life annuity. Where the parties of an international life annuity contract did not choose the applicable law 629 generally the law at the seat of the annuity debtor is applicable, for he or she effects the characteristic performance (Art. 4 (2)).976 If the annuity is paid in exchange for the transfer of immovable property, in principle the law applies where the land is situated (lex rei sitae, Art. 4 (1) (c)). International care contracts oblige one party to care for the personal health and well-being of 630 the other party. Without a subjective choice, actually the law at the seat of the caring party is the principally applicable law because that party renders the services and also effects the characteristic performance (Art. 4 (1) (b)). However, the party cared for will regularly be a consumer and Art. 6 Rome I Regulation must be taken into account. Therefore, in situations covered by Art. 6 (1) any subjective choice cannot displace protective mandatory law at the consumer’s habitual residence. Without such choice, where the care is rendered in the consumer’s country the law there is applicable. Where the care is exclusively rendered in another country the law at the seat of the carer applies but may be superseded by a more closely connected law, for instance the law at the place where the care is rendered. 38. Family contracts The special family contracts such as engagement, matrimonial property agreement, main- 631 tenance contract etc. are to be qualified as matters of family law that Art. 1 (2) (a) – (c) Rome I Regulation excludes from its scope of application. To them the conflict rules on family relationships apply. They must be distinguished from contracts between family members which could be concluded between strangers as well. For instance, donations, sale, lease or employment contracts between family members fall under this latter category. These contracts are to be dealt with in accordance with Art. 3 et seq. Rome I Regulation. The distinction between the two categories is not always easy. The guiding maxim should be whether the family relationship or the ‘stranger’s element’ prevails. Surrogate maternity contracts under which a woman – generally against money – delivers a child whose genes stem from other parents fall under the scope of the Rome I Regulation. These contracts do not aim at establishing a family relationship (with the surrogate mother) but at taking over 976

Martiny, in: MünchKomm Art. 4 Rom I-VO note 241; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 69.

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the burden and possibility of a pregnancy – in the sense of a service.977 However, the family status arising from such contracts is governed by the conflict rules on family relationships. 632 An agreement on dowry among Roma that the bridegroom had to pay a certain sum to the

family of the bride (for the loss of the bride’s working capacity) has been qualified as mere contract under which the bridegroom was the party effecting the characteristic performance.978 Under Art. 4 (2) Rome I Regulation the same solution should apply. 633 As to so-called unnamed grants between spouses see already supra note 295.

39. Internet contracts a) In general 634 On the one hand all contracts concluded via the internet979 and all kinds of contracts so

concluded can be regarded as internet contracts. The general conflict rules determine which law applies to the conclusion of such internet contracts. Within the framework of these general rules particularities of the conclusion of contracts over the internet can be taken into account (see thereto infra note 649 et seq.). 635 On the other hand contracts may qualify as internet contracts which concern specific

services in the internet as, for example, provider contracts or contracts on cloud computing. For these contracts it is necessary to fix appropriate conflict rules (see thereto infra note 649 et seq.).

977 978

979

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See generally on reproduction contracts and conflict of laws Trimmings/Beaumont JPIL 7 (2011) 627. See – still under the prior law – OLG Köln NJW-RR 1994, 1026; similarly OLG Düsseldorf IPRax 1994, 270. Bibliography (internet contracts): Calvo Caravaca, Conflictos de leyes y conflictos des jurisdicción en internet (2001); Draetta, Internet et commerce électronique (2003); Fallenböck, Internet und Internationales Privatrecht (2001); Freitag, Kollisionsrecht, in: Leible/Sosnitza (eds.), Versteigerungen im Internet (2004) 326; Freitag, Kollisionsrechtliche Aspekte des rechtsgeschäftlichen Handelns in virtuellen Welten, in: Taeger/Buchner/Habel/Schubert (eds.), Rechtsfragen virtueller Welten (2010) 63; Gössl, Internetspezifisches Kollisionsrecht? Anwendbares Recht bei der Veräußerung virtueller Gegenstände (2014); Gruber, Vertragsschluß im Internet unter kollisionsrechtlichen Aspekten, DB 1999, 1437; Grundmann, Das Internationale Privatrecht der E- Commerce-Richtlinie, RabelsZ 67 (2003) 246; Loewenheim/ Koch (eds.), Handbuch des Online-Rechts (1998); Mankowski, Das Internet im internationalen Vertragsund Deliktsrecht, RabelsZ (1999) 203; Mankowski, Internationales Privatrecht der Providerverträge, in: Spindler (ed.), Vertragsrecht der Internet-Provider (2nd ed. 2004) 185; Mankowski, Internet und besondere Aspekte des Internationalen Vertragsrechts, CR 1999, 512 und 518; Mankowski, E- Commerce und Internationales Verbraucherschutzrecht, MMR Beil 7/2000, 22; Mankowski, Das Herkunftslandprinzip als Internationales Privatrecht der e-commerce-Richtlinie, ZVglRWiss 100 (2001) 137; Mankowski, Internationales Privatrecht, in: Spindler/Wiebe (eds.), Internet-Auktionen und elektronische Marktplätze (2nd ed. 2005) 435; Nordmeier, Cloud Computing und Internationales Privatrecht, MMR 2010, 151; Schu, The Applicable Law to Consumer Contracts Made over the Internet-Consumer Protection Through Private International Law?, IntJL & Inf Tech 5 (1997) 192; Spindler/Schuster (eds.), Recht der elektronischen Medien (3rd ed. 2015); Weller/Nordmeier, in: Spindler/Schuster (eds.), Recht der elektronischen Medien (3rd ed. 2015) Rom I-VO.

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b) Unification of internet law On the global level UNCITRAL has created the UN Convention on the Use of Electronic 636 Communication in International Contracts of 2005 as well as two model laws: the Model Law on Electronic Commerce of 1996 and the Model Law on Electronic Signatures of 2001. The 2005 Convention contains several substantive law provisions which in essence equal electronic communication to traditional communication. The Convention entered into force in 2013; its Contracting States are at present (2016): Congo, Dominican Republic, Honduras, Montenegro, Russia, Singapore and Sri Lanka. The two Model Laws are addressed to national legislators; they also aim at safeguarding the legal validity of electronic communication. The EU released a number of instruments which aim at the recognition and promotion of 637 modern electronic communication technology. An accompanying objective is the furtherance of transnational trade by using this technology. The most important act in this field is Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce [also E-commerce Directive]) of 8 June 2000.980 Further Directives which primarily aim at the safety and consumer protection of the electronic commerce are the following: – Directive 2011/83/EU of 25 October 2011 on consumer rights etc. (Consumers’ Rights Directive)981 which replaced among others Directive 97/7/EC of 20 May 1997 on the protection of consumers in respect of distant contracts;982 – Directive 2002/65/EC of 23 September 2002 concerning the distance marketing of consumer financial services etc.;983 – Directive 1999/93/EC on a Community framework for electronic signatures.984 c) Special conflict of laws rules? Art. 3 E-commerce Directive (see note 637) contains a rule that is called the ‘country of 638 origin principle’ and could be regarded as conflict of laws provision. The provision runs as follows: “Article 3: Internal market 1. Each Member State shall ensure that the information society services provided by a service provider established on its territory comply with the national provisions applicable in the Member State in question which fall within the coordinated field. 2. Member State may not, for reasons falling within the coordinated field, restrict the freedom to provide information society services from another Member State. 3. Paragraphs 1 and 2 shall not apply to the fields referred to in the Annex. […]” The mentioned Annex lists among other exempted areas “the freedom of the parties to 639 choose the law applicable to their contract” as well as “contractual obligations concerning 980 981 982 983 984

OJ 2000 No. L 178, 1. OJ 2011 Nr. L 304, 64. OJ 1997 Nr. L 144, 19. OJ 2002 Nr. L 271, 16. OJ 2000 Nr. L 13, 12.

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consumer contracts.” The E-commerce Directive allows further restrictions of the country of origin principle only if they are “necessary for […] public policy […], the protection of public health, public security, including the safeguarding of national security and defence, the protection of consumers, including investors” (Art. 3 (4) (a) (i) E-commerce Directive). In addition, the Directive states in Art. 1 (4) that it “[…] does not establish additional rules on private international law […]”. The Member States had to implement the Directive until 17 January 2002. 640 It was disputed whether the country of origin principle constituted a special conflict of laws

norm.985 In eDate Advertising GmbH v. X and Olivier Martinez and Robert Martinez v. MGN Ltd. the CJEU had to deal with this question.986 In both cases claimants alleged that the defendant had infringed their personality rights by publications on the internet; in both cases the defendants questioned the jurisdiction of the German respectively the French courts. The CJEU held that the country of origin principle of the E-commerce Directive “does not require transposition in the form of a specific conflict-of-laws rule.”987 The principle merely “precludes, subject to derogations authorised in accordance with the conditions set out in Article 3 (4) [sc. the public policy etc. exceptions mentioned supra note 639], a provider of an electronic commerce service from being made subject to stricter requirements than those provided for by the substantive law in force in the Member State in which that service provider is established.”988 The country of origin principle of the E-commerce Directive therefore fulfills essentially the function of a mandatory provision in the sense either of Art. 3 (4) or even of Art. 9 Rome I Regulation in requiring that electronic service providers should not be subjected to stricter regulations than those applicable in the (EU-)country of their establishment.989 This is rather similar to Art. 3 (4) Rome I Regulation, although instead of the exclusive EU-embedding nothing else than the establishment of the provider in a Member State is necessary. By contrast to Art. 9 Rome I Regulation, under the country of origin principle it is not the internationally mandatory law of the lex fori or of the place of performance that must be respected but the mandatory law of the place of establishment of the service provider.990 641 With eDate Advertising GmbH v. X and Olivier Martinez and Robert Martinez v. MGN Ltd.

the dispute on the character of the country of origin principle of the E-commerce Directive should be decided in favour of a nature of overriding provision. The following considerations support this view: – Firstly, Recital 40 Rome I Regulation mentions expressly the E-commerce Directive 2000/31/EC. However, the Recital does not place the Directive in the context of those 985

986 987

988

989

990

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For references see Magnus, in: Staudinger Art. 4 Rom I-VO note 593; Martiny, in: MünchKomm Art. 9 Rom I-VO Anh. III note 25 et seq. ECLI:EU:C:2011:685 (C-509/09 and C-161/10). ECLI:EU:C:2011:685 (C-509/09 and C-161/10, eDate Advertising GmbH v. X and Olivier Martinez and Robert Martinez v. MGN Ltd.) para. 63. ECLI:EU:C:2011:685 (C-509/09 and C-161/10, eDate Advertising GmbH v. X and Olivier Martinez and Robert Martinez v. MGN Ltd.) para. 67. It is telling that the CJEU (para. 65) refers in this respect to its famous decision in Ingmar (ECLI:EU: C:2000:605). For detailed discussion see further Magnus, in: Staudinger Art. 4 Rom I-VO note 592 et seq.; Martiny, in: MünchKomm Art. 9 Rom I-VO Anh. III note 23 et seq.

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– – –

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Directives which contain conflict-of-laws rules (para. 1 of Recital 40) but in the context of “other instruments laying down provisions designed to contribute to the proper functioning of the internal market … The application of provisions of the applicable law designated by the rules of this Regulation [sc. Rome I] should not restrict the free movement of goods and services as regulated by Community instruments, such as [the E-commerce Directive].” (para. 2 of Recital 40). From this formulation it has to be inferred that the norm-givers themselves did not regard the country of origin principle of the E-commerce Directive as a conflict-of-laws rule. Instead they accepted the priority of the Rome I Regulation for the determination of the applicable law. The country of origin principle may come into play only afterwards as a correction of the applicable substantive law. Secondly, the E-commerce Directive does not contain an unambivalent conflict-of-laws rule which resembles those contained in some Directives. Rather, Art. 1 (4) E-commerce Directive expressly denies the intention to “establish additional rules on private international law”. This is not counterbalanced by the fact that Art. 3 (3) E-commerce Directive in connection with the Annex merely exempts the principle of party autonomy and consumer contracts from the scope of the Directive. For, Art. 1 (4) E-commerce Directive is the more general provision. Thirdly, the Rome I Regulation aims at a far-reaching concentration of provisions on international contract law. An understanding of the country of origin principle as independent conflict-of-law rule would run counter this objective. Fourthly, it would be strange had the norm-givers fully knowing the controversy about the country of origin principle impliedly recognised its character as conflict-of-law rule. Fifthly, the controversy about the nature of the country of origin principle has merely limited practical consequences: If understood as a conflicts-of-law rule on its own, the principle does not provide for an escape clause as foreseen in Art. 4 (3) Rome I Regulation. Under justice and fairness aspects it is preferable to allow for an escape clause rather than to prescribe hard and fast conflict-of-laws rules. Since Art. 4 (3) requires a manifestly closer connection the difference to the deviating view is, however, small.

In sum, there do not exist specific conflict-of-laws rules for internet contracts; the Rome I 642 Regulation fully applies to internet contracts. d) Choice of the applicable law The parties of internet contracts can always choose the applicable law (Art. 3 Rome I 643 Regulation). Such choice can be made via electronic communication, for instance by email. Where internet providers agree with their users on a specific law this does not automatically mean that this law applies as well to transactions between users of that provider. However, it may constitute an implied choice if it is the very task of the provider to enable transactions between users, as for instance is the case with internet platforms, internet auctioneers etc. In such cases users may rather expect and easier recognise the law of the ‘system’ than the law that actually would govern their transaction with the other user.991 An otherwise purely internal case in the sense of Art. 3 (3) does not become an international 644 case because the contract is concluded via the internet. Nor does it suffice that the involved server is located in another country than the parties. Also for other kinds of communication

991

See also Spindler/Schuster/Weller/Nordmeier Art. 3 Rom I-VO note 5.

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is it irrelevant where the messenger of the communication is located. These principles apply as well to Art. 3 (4) (pure internal market case). e) Objectively applicable law 645 The objective determination of the applicable law for contracts that are concluded over the

internet follows the general rules.992 Unless it is a consumer contract or one of the cases of Art. 4 (1) Rome I Regulation applies, the law at the seat of the party that effects the characteristic performance governs the contract (Art. 4 (2)). The seat of this party has to be determined in accordance with Art. 19 Rome I Regulation. Even if a business is exclusively active on the internet and has no real place of business its seat must be localised. It is then the seat of the natural person(s) running the business that is relevant. For the law governing certain specific internet contracts see infra note 649 et seq. 646 Where contracts can be performed only on the internet (as for instance a domain registra-

tion contract) the application of Art. 12 (2) Rome I Regulation becomes problematic. According to this provision “the law of the country in which performance takes place” shall be taken into account “(i)n relation to the manner of performance and the steps to be taken in the event of defective”. However, often a specific country of performance cannot be identified. Then, the generally governing contract law remains applicable.993 f) Consumer contracts over the internet 647 Since the internet is borderless by definition and nature it is the question which activity of

the provider creates a sufficiently close connection to the law at the consumer’s habitual residence so that the application of that law is justified. The predecessor of Art. 6 Rome I Regulation (Art. 5 Rome Convention) did not – and still could not – take account of the internet and modern electronic means of communication. Art. 6 Rome I Regulation changed this. The formulation in its para. 1 (b) – “directs” – intends to particularly address internet activities.994 In any event directs a professional its activities to the country of the consumer’s seat if the professional’s website solicits the conclusion of contracts also from that country and a contract of that kind has actually been concluded.995 The CJEU has further interpreted the term “directs” in the context of Art. 15 (1) (c) Brussels I Regulation (now Art. 17 (1) (c) Brussels Ibis Regulation): In the joint cases Pammer and Alpenhof the CJEU requested “evidence demonstrating that the trader was envisaging doing business with consumers domiciled in other Member States, including the Member State of that consumer’s domicile, in the sense that it was minded to conclude a contract with those consumers.”996 Such evidence includes for example the offering of goods or services in one or more Member States designated by name,997 expenditure on an internet referencing service to 992

993 994 995

996

997

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Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 139; Leible, in: NK-BGB Art. 4 Rom I-VO note 11; Martiny, in: MünchKomm Art. 4 Rom I-VO note 275. See also Mankowski RabelsZ 63 (1999) 228; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 29. See Recital 24 Rome I Regulation. See Recital 24 Rome I Regulation citing a joint declaration by the Council and the Commission on Article 15 (1) (c) Brussels I Regulation. ECLI:EU:C:2010:740 (C-585/08 und C-144/09, Peter Pammer v. Reederei KarlSchlüter GmbH & Co KG und Hotel Alpenhof GesmbH . /. Oliver Heller) para. 76. ECLI:EU:C:2010:740 (C-585/08 und C-144/09, Peter Pammer v. Reederei KarlSchlüter GmbH & Co KG und Hotel Alpenhof GesmbH . /. Oliver Heller) para. 81.

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facilitate access to the trader’s website by consumers in other Member States.998 Further possible “items of evidence” are “the international nature of the activity at issue, such as certain tourist activities; mention of telephone numbers with the international code, use of top-level domain name other than that of the Member State in which the trader is established, for example ‘.de’, or the use of neutral top-level domain names such as ‘.com’ or ‘.eu’; the description of itineraries from one or more other Member States to the place where the service is provided; and mention of an international clientele composed of customers domiciled in various Member States, in particular by presentation of accounts written by such customers.”999 Also explanations in other languages or currencies not generally used at the trader’s seat belong to this non-exhaustive list of items of evidence.1000 If an intermediary acts on behalf of the trader the items of evidence on the intermediary’s website matter.1001 On the other hand it is common ground that the mere accessibility of a website as such does not constitute ‘directing’ the activities to the country of the involved consumer.1002 Art. 6 (1) Rome I Regulation – like Art. 17 (1) (c) Brussels Ibis Regulation – further requires 648 that the contract falls within the scope of the professional’s directed activities. According to the case law of the CJEU a clear causal connection between the directed activity and the conclusion of the contract is unnecessary.1003 Recital 25 Rome I Regulation provides that the “the contract is concluded as a result of such activities.” The CJEU interpreted this requirement – again in the jurisdiction context – in a restrictive way in order not to impair the intended protection of consumers.1004 The Court held that it is merely necessary “that the contract at issue falls within the scope of such [sc. the professional’s directed] activities.”1005 In the concrete case a German consumer who lived close to the French border had bought a car from a French dealer who ran his business on the other side of the border in the same conurbation area and advertised cars on the internet also for German buyers. The German consumer had learnt from the French dealer’s business not from the latter’s website but from acquaintances. The CJEU stated that the conditions, first, of directing the activities to the consumer’s country and, secondly, the link between the activities and the conclusion of the contract were met. The result is acceptable for areas of transborder conurbation where advertising and sources of information easily transgress the border. The result would, however, be unconvincing where, for instance, a French consumer buys goods in the bazaar in Turkey during holidays entirely unaware of the website of the Turkish professional even if the website is directed to other countries including France.1006 In such cases where the 998 999

1000

1001

1002

1003 1004 1005 1006

CJEU ibid. ECLI:EU:C:2010:740 (C-585/08 und C-144/09, Peter Pammer v. Reederei KarlSchlüter GmbH & Co KG und Hotel Alpenhof GesmbH . /. Oliver Heller) para. 83. ECLI:EU:C:2010:740 (C-585/08 und C-144/09, Peter Pammer v. Reederei KarlSchlüter GmbH & Co KG und Hotel Alpenhof GesmbH . /. Oliver Heller) para. 84. ECLI:EU:C:2010:740 (C-585/08 und C-144/09, Peter Pammer v. Reederei KarlSchlüter GmbH & Co KG und Hotel Alpenhof GesmbH . /. Oliver Heller) para. 89. ECLI:EU:C:2010:740 (C-585/08 und C-144/09, Peter Pammer . /. Reederei KarlSchlüter GmbH & Co KG und Hotel Alpenhof GesmbH . /. Oliver Heller) para. 94; also Recital 24 Rome I Regulation. ECLI:EU:C:2013:666 (C-218/12, Lokman Emrek v. Vlado Sabranovic). ECLI:EU:C:2013:666 (C-218/12, Lokman Emrek v. Vlado Sabranovic) para. 24. ECLI:EU:C:2013:666 (C-218/12, Lokman Emrek v. Vlado Sabranovic) para. 22. See also BGH IPRax 2009, 258 with critical note Mankowski IPRax 2009, 238 (no “directing” if a Greek advocate offers legal services on the website of the German Embassy in Athens and on websites of

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consumer travels to the country where the professional’s business is located and concludes a contract there without preceding contacts and without knowledge of the professional’s website the application of the ‘consumer’s law’ cannot be justified. Instead, the ‘professional’s law’ is objectively applicable. g) Provider contracts 649 Provider contracts are those between the provider of an electronic communication service –

regularly over the internet – and the contract partner. Usually, the provider cares for permanent and safe internet access or for access to certain data banks; it transmits messages, gives information and advice on the use of the service and offers help in case of malfunctions; it runs a client account for billing and payment.

650 It goes without saying that the parties of a provider contract may choose the applicable law.

In the absence of such a choice Art. 4 (1) (b) Rome I Regulation leads to the law at the real seat – in the sense of Art. 19 – of the provider.1007 The provider is the party effecting the characteristic performance. Therefore, it is generally irrelevant where the server is located or where the input of electronic messages takes place. These elements may play a role only in combination with further factors for the determination of a manifestly more closely connected law (Art. 4 (3)). 651 Provider contracts with consumers regularly fall under Art. 6 Rome I Regulation. If the

contract partner of the provider uses the service primarily for private purposes Art. 6 is applicable if the conditions of its lit. (a) or (b) are fulfilled. For the condition of “directing” the activities to the country of the consumer’s seat see supra note 647. The exclusion in Art. 6 (4) (a) does not come into play because the provider’s services are not exclusively supplied in a country other than that in which the consumer has his or her habitual residence. The net access, downloads etc. necessarily take place at the seat of the consumer.1008 h) Internet auctions 652 So-called internet auctions are frequently no auctions in a legal sense but mere sales against

the highest offer or sales where an internet platform merely constitutes the virtual place for the exchange of the contract declarations. Usually in internet auctions, both an identifiable place of the auction1009 as well as a formal acceptance of the highest bid is lacking. Therefore, these auctions are generally qualified as sales irrespective whether the organiser of the ‘auction’ is the seller or a mere commission agent.1010 Where movables are at stake, in the absence of a subjective choice the law at the seat of the seller applies (Art. 4 (1) (a) Rome I

1007

1008 1009 1010

438

German insurance companies; German consumer contacts advocate entirely unaware of these internet activities; further problem in that case: advocate did not initiate the entries on these websites; the entry was the own initiative of the embassy followed by the insurance companies). Brödermann/Wegen, in: PWW Art. 4 Rom I-VO Anh. note 35; Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 139; Leible, in: NK-BGB Art. 4 Rom I-VO note 112; Martiny, in: MünchKomm Art. 4 Rom I-VO note 280; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 29; Spindler/Schuster/Weller/Nordmeier Art. 4 Rom I-VO note 20; Thorn, in: Palandt Art. 4 Rom I-VO note 14 (generally for tele services). Also Spindler/Schuster/Weller/Nordmeier Art. 6 Rom I-VO note 22. See also Art. 4 (1) (g) Rome I Regulation which requires that the place of the auction can be determined. Leible, in: NK-BGB Art. 4 Rom I-VO note 116; Martiny, in: MünchKomm Art. 4 Rom I-VO note 282; Spindler/Schuster/Weller/Nordmeier Art. 4 Rom I-VO note 14.

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Regulation).1011 The same is true for internet auctions of rights (Art. 4 (2)). Where immovables are the subject of an internet auction in case of doubt the lex rei sitae is applicable (Art. 4 (1) (c)). However, where bidders merely bid via the internet by email or else and there is a real 653 auction place (and no subjective choice), then, according to Art. 4 (1) (g), the law of the country applies where the auction takes place. The same should apply to auctions of rights if there is a real auction place. For all kinds of internet auctions the prevailing application of Art. 6 Rome I Regulation must 654 be taken into account. i) Internet tenders Tenders over the internet present no specialties. Unless the parties agreed on the applicable 655 law the relationship between the contractor and the successful tenderer is governed by the law at the seat of the party that effects the characteristic performance (Art. 4 (1) (a) or (b) or Art. 4 (2)). In most cases this will be the successful tenderer. European and national competition and procurement rules may prevail over the applicable 656 contract law via Art. 9 Rome I Regulation.1012 j) Internet and teleservices The internet has led to the creation of contracts on specific internet and teleservices which 657 have the search, preparation and transmission of information in the internet as their main objective. Contracts of that kind are, for instance, contracts with so-called infomediaries on the collection and processing of data or with web-designers on the web presence etc. In the absence of a choice by the parties the law at the seat of the party applies that renders 658 the service (Art. 4 (1) (b)). This will usually be the infomediary, web-designer etc. In case of consumer contracts the law at the habitual residence of the consumer is applicable if the conditions of Art. 6 (1) are met. Teleservices frequently comprise traditional services supplied via the internet such as med- 659 ical advice or even treatment, legal advice and the like. In such cases the internet often merely serves for advertising or for first contacts. Contracts concluded in this way are subject to the traditional conflict-of-laws rules. Without a subjective choice and subject to Art. 6 Rome I Regulation the law at the seat of the provider of the service applies (Art. 4 (1) (b) or Art. 4 (2)). k) Contracts on internet advertising Contracts which oblige a party to display advertisements (advertising banners) of the other 660 party on the own website are, in the absence of a subjective choice, governed by the law of the party who operates the website and provides the room for advertisements (Art. 4 (2) Rome I

1011

1012

Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 46; Spindler/Schuster/Weller/Nordmeier Art. 4 Rom I-VO note 14; Thorn, in: Palandt Art. 4 Rom I-VO note 20. OLG Düsseldorf BauR 2008, 1503; Reithmann/Martiny/Freitag note 5.106.

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Regulation).1013 Contracts for the design of internet advertisements are objectively governed by the law at the seat of the designer (Art. 4 (1) (b)). l) Contracts on domain registration 661 Parties of a contract which concerns the registration of an internet domain name may

choose the applicable law. In the absence of such choice the law at the – real – seat of the party is applicable that registers the name.1014 Contracts which assign the domain name or allow its use are objectively governed by the law at the seat of the party who assigns the domain or allows its use (Art. 4 (2) Rome I Regulation).1015 m) Internet bettings

662 Gambling and betting contracts on the internet are governed by the law at the – real – seat of

the organiser1016 unless the parties have agreed on the applicable law. n) Cloud computing contracts 663 Cloud computing is characterised by the fact that huge amounts of data are placed in a so-

called cloud in order to be stored, but also to be processed and to be available at any time and from everywhere. By combined computer resources the efficiency of the use of electronic communication can be immensely increased. Cloud computing requires an infrastructure whose use the provider offers on a contractual basis. In the absence of a subjective choice such contract is subject to the law at the – real – seat of the operator.1017 If the user is a consumer Art. 6 Rome I Regulation must be taken into account. However, Art. 6 (4) (a) will generally not be applicable because the consumer almost necessarily uses the cloud computing in the state of his or her habitual residence. 40. Organ donation contracts 664 Contracts on the donation of an organ1018 usually provide that either after the death of the

donor or at his or her lifetime (in particular in case of kidney donation) one or more organs can be used for transplantation to a receiver. Often the contract is concluded between the donor and an intermediary organisation, sometimes directly with the receiver.1019 National law may provide for restrictions of such contracts in order to prohibit undesirable trade with human organs. Where such restrictions primarily pursue aims of public policy they can fall under Art. 9 Rome I Regulation and apply irrespective of the applicable contract law.

1013 1014

1015 1016

1017 1018

1019

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Also Spindler/Schuster/Weller/Nordmeier Art. 4 Rom I-VO note 29. Ferrari, in: Ferrari et al Art. 4 Rom I-VO note 139; Leible, in: NK-BGB Art. 4 Rom I-VO note 113; Spickhoff, in: Bamberger/Roth Art. 4 Rom I-VO note 29; Spindler/Schuster/Weller/Nordmeier Art. 4 Rom I-VO note 21. Leible, in: NK-BGB Art. 4 Rom I-VO note 115. Leible, in: NK-BGB Art. 4 Rom I-VO note 161; Spindler/Schuster/Weller/Nordmeier Art. 4 Rom I-VO note 23. See Spindler/Schuster/Weller/Nordmeier Art. 4 Rom I-VO note 8. Bibliography (organ donation contracts): Nagel, Organtransplantation und Internationales Privatrecht (2009). For details see Nagel 108 et seq.

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In the absence of a choice by the parties, for contracts which the donor concludes, the law of 665 the country decides where the donor has his or her place of habitual residence (Art. 4 (2)). Contracts between an intermediary organisation and the organ receiver, unless the parties 666 choose the applicable law, are governed by the law at the seat of the intermediary organisation. However, Art. 6 Rome I Regulation must be taken into account if the organisation pursued its activities in the country of the receiver’s habitual residence or directed its activities to that country. 41. Contracts with the state Contracts (treaties) between nations are regulated by specific rules, in particular by the 667 Vienna Convention on the Law of Treaties of 1969. They usually do not directly affect civil and commercial relations. Contracts in the latter field which concern acta iure imperii and serve the enforcement of the state’s sovereign power also fall outside the scope of the Rome I Regulation.1020 The parties to such contracts may be either states or state organisations on both sides or, more often, private persons/entities on the one side and the state or its agency on the other. It appears to be accepted that the parties to such contracts can choose the applicable law 668 despite the fact that the state and its agencies are generally bound by the own law. In the absence of the parties’ choice the view seems to prevail that the law of the involved state governs the contract.1021 Since state agencies are subject to the rule of (their state’s) law, the application of the law of the characteristically performing party – which need not be the state or state agency – could lead to difficulties. The characteristic performance principle is thus generally inadequate for these contracts. The law of the involved state should apply. However, where both contract parties are states or their agencies, the system of conflict-of-laws rules of the Rome I Regulation should apply. Contracts which states or state agencies conclude for normal civil or commercial purposes follow, however, the conflict rules of the Rome I Regulation. Article 5: Contracts of carriage 1. To the extent that the law applicable to a contract for the carriage of goods has not been chosen in accordance with Article 3, the law applicable shall be the law of the country of habitual residence of the carrier, provided that the place of receipt or the place of delivery or the habitual residence of the consignor is also situated in that country. If those requirements are not met, the law of the country where the place of delivery as agreed by the parties is situated shall apply. 2. To the extent that the law applicable to a contract for the carriage of passengers has not been chosen by the parties in accordance with the second subparagraph, the law applicable shall be the law of the country where the passenger has his habitual residence, provided that either the 1020 1021

See further supra the comment on Art. 1. See, e.g., OLG Koblenz IPRspr 1974 no. 1a; OLG Frankfurt IPRspr 1979 no. 10b; LG Bonn NJOZ 2002, 222 and 246; contra – application of the general contractual conflict of laws rules – KG IPRax 1998, 280 (283).

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place of departure or the place of destination is situated in that country. If these requirements are not met, the law of the country where the carrier has his habitual residence shall apply. The parties may choose as the law applicable to a contract for the carriage of passengers in accordance with Article 3 only the law of the country where: (a) the passenger has his habitual residence; or (b) the carrier has his habitual residence; or (c) the carrier has his place of central administration; or (d) the place of departure is situated; or (e) the place of destination is situated. 3. Where it is clear from all the circumstances of the case that the contract, in the absence of a choice of law, is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply.

Bibliography d’Avout, Art. 5 – Contrats de transport, Rev. Lamy Dr. aff. N° 29, juillet/août 2008, p. 69 Berlioz, Case note, Rev. jur. comm. 2015, 455 Cachard, De Genève à Rome!, Clunet 136 (2009), 190 Claringbould, Artikel 5 Rome I en vervoerovereenkomsten, NIPR 2009, 426 Contaldi, Il contratto internazionale di trasporto di persone, in: Boschiero (a cura di), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), p. 359 Czepelak, The Law Applicable to Contracts of Carriage Under the Rome 1 Regulation, Czech Yearbook of International Law (2010) 47 Delebecque, Le nouveau droit international des transports, in: Mélanges Jacques Béguin (2005), p. 269 Delebecque/Jean Arié Lévy, Quelle est la loi applicable à la commission de transport?, D. 2015, 136 Eder/Berry/Foxton, Scrutton on Charterparties and Bills of Lading (22nd ed. 2011) Hartenstein, Grenzüberschreitende Transporte in der Binnenschifffahrt, TranspR 2007, 385 Hartenstein, Rom I-Entwurf und Rom II-Verordnung: Zur Bedeutung zukünftiger Änderungen im IPR für das Seerecht, TranspR 2008, 143 Laval, Case note, Clunet 142 (2015), 675 Legros, Droit applicable au contrat de transport: commentaire du règlement du 17 juin 2008 sur la loi applicable aux obligations contractuelles dit “Rome I”, Rev. dr. transp. février 2009, p. 12 Legros, Case note, RCDIP 104 (2015), 228

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Lopez di Gonzalo, The International Regime of Carriage of Passengers, Dir. comm. int. 2014, 673 Mankowski, Kollisionsrechtsanwendung bei Güterbeförderungsverträgen, TranspR 1993, 213 Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht (1995) Mankowski, Entwicklungen im Internationalen Privat- und Prozessrecht für Transportverträge in Abkommen und speziellen EG-Verordnungen, TranspR 2008, 177 Mankowski, Neues aus Europa zum Internationalen Privatrecht der Transportverträge, Art. 5 Rom I-VO, TranspR 2008, 339 Mankowski, Konnossemente und die Rom I-VO, TranspR 2008, 417 Mankowski, Pauschalreisen und europäisches Internationales Verbraucherschutzrecht, TranspR 2011, 70 Mankowski, Neues aus Europa zum Internationalen Privat- und Prozessrecht der seerechtlichen Beförderungsverträge (2011) Mankowski, Rechtswahlklauseln in Luftbeförderungs-AGB auf dem Prüfstand, RRa 2014, 118 Mankowski, Speditionsverträge im Internationalen Privatrecht, TranspR 2015, 17 Morse, Contracts of Carriage and the Conflict of Laws, in: Liber amicorum Kurt Siehr (2010), p. 463 Nielsen, The Rome I Regulation and Contracts of Carriage, in: Ferrari/Leible (eds.), Rome I Regulation (München 2009), p. 99 Okoli, Choice of law for contracts of carriage of goods in the European Union, [2015] LMCLQ 512

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Chapter II: Uniform Rules Pauknerová, Presumptions, Escape Clauses and International Carriage of Goods Contracts, in: Liber amicorum Kurt Siehr (2010), p. 481 Rammeloo, Prejudiciële vraag HR aan HvJ EG – Eenvormige interpretatie van artikel 4 EVO, NIPR 2008, 242 Rammeloo, Treatment of Charter Parties relating to the Transport of Goods under the 1980 Rome Convention on the Law Applicable to Contractual Obligations, EuLF 2008, I-241 Ramming, Fixkostenspedition – CMR – FBL, TranspR 2006, 95 Ramming, Internationalprivatrechtliche Fragen des Multimodal-Frachtvertrages und des MultimodalLadescheins, TranspR 2007, 279 Ramming, Die neue Rom I-VO und die Rechtsverhältnisse der Schifffahrt, HmbZSchR 2009, 21 I.

II.

Introduction 1. The framework of Art. 5 . . . . . . . . . . . . . . . . . 1 2. Characterising the contract . . . . . . . . . . . . . . 7 3. The scope of Art. 5 . . . . . . . . . . . . . . . . . . . . . . . 8 Art. 5 (1) 1. The operation of Art. 5 (1) . . . . . . . . . . . . . 14

Ramming, Von Kelsterbach nach Luanda – Die neue Pkw-Entscheidung des Bundesgerichtshofs, HmbZSchR 2009, 295 Remien, Tourism, Conflict of Laws and the Rome I Regulation, in: Liber amicorum Kurt Siehr (2010), p. 497 Smeele, Rome I en vervoerovereenkomsten, WPNR 6824 (2009), 1015 Tonolo, La legge applicabile ai contratti di trasporto nel regolamento Roma I, RDIPP 2009, 309 Rolf Wagner, Neue transportrechtliche Vorschriften für Beförderungsverträge in der Rom I-Verordnung, TranspR 2008, 221 Rolf Wagner, Normenkonflikte zwischen den EG-Verordnungen Brüssel I, Rom I und Rom II und transportrechtlichen Rechtsinstrumenten, TranspR 2009, 103.

III. IV.

2. Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3. The scope of Art. 5 (1) . . . . . . . . . . . . . . . . . . 21 4. Interpretation of Art. 5 (1) . . . . . . . . . . . . . 26 Art. 5 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Art. 5 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

I. Introduction 1. The framework of Art. 5 International contracts of carriage, whether of goods or passengers, are to a large extent 1 regulated by international conventions. The effect is that harmonised rules for choice of law exist in many situations irrespective of the Rome Regulation, and in other respects the substantive law of many countries is harmonised to the extent that conflicts of law do not arise. The overriding nature of the rules embodied in such instruments also ensures that they will take effect irrespective of the law applicable to the contract. Although its practical significance is therefore much diminished,1 Art. 5 provides a regime for determining the law applicable to both contracts for the carriage of goods and contracts for the carriage of passengers. Importantly, however, it is common for contracts of carriage, whether of goods or passengers, to contain an express governing law clause. Given that the rules provided by Art. 5 give primacy to party autonomy disputes about the law applicable to such contracts will be rare (although more common under Art. 5 (2) in which the parties’ choice is restricted).2

1 2

Infra Art. 5 notes 8–13. Infra Art. 5 note 26.

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2 Coupled with the rule of displacement in Art. 5 (3), Art. 5 (1) governs contracts for the

carriage of goods, and Art. 5 (2) applies to contracts for the carriage of passengers. Art. 5 of Rome 1 marks a departure from the position under the 1980 Rome Convention, which arguably sacrifices the sophistication and flexibility permitted by the Convention with a more predictable but less adaptable regime.3 The Rome Convention contained a dedicated rule for the carriage of goods,4 whereby the applicable law in the absence of choice was presumed to be that in force at the carrier’s place of business, provided that this was also the place of loading, or the place of discharge, or the consignor’s principal place of business, subject to the flexible exception for all contracts contained in Art. 4(5). In cases involving contracts for the carriage of goods not subject to Art. 4 (4), and in cases concerning all contracts for the carriage of passengers, the general provisions in Arts. 3 and 4 apply. 3 Art. 5 (1) resembles the equivalent rules of the 1980 Rome Convention by endorsing the

fundamental principle that the parties’ choice of the applicable law must be respected. Art. 5 (1) provides that a choice of law effective under Art. 3 will stand. But it represents a new departure in cases where the applicable law has not been agreed. Art. 4 (4) of the Rome Convention dealt with such cases by applying a presumption, rebuttable where appropriate, that the applicable law was that of the consignor’s habitual residence. Art. 5 (1) converts this presumption into a rigid rule of law. 4 Art. 5 (2) introduces new rules for passenger contracts, which were formerly governed by the

general rules in Arts. 3 and 4. Although driven by a wish to enhance consumer protection Art. 5 (2) nonetheless respects the position of commercial carriers by endorsing the principle of party autonomy, although in a restricted fashion. In specified situations the law applicable to a passenger contract is that agreed by the parties. 5 Importantly, an express choice of law in a passenger contract is effective where the chosen

law is that of the country where the carrier is habitually resident, or that of the country where the carrier has its central administration. In practice the first possibility means that such a choice is effective where a ticket is issued by a carrier’s head office. The second possibility offers certainty in cases where an operator has branches throughout the world. It avoids the difficulty that might otherwise arise where an operator issues tickets through its foreign branches in many foreign countries. It ensures that one law will govern wherever the contract is made, namely that in force at the operator’s place of central management. 6 Opinion differs as to the desirability of the position adopted in Art. 5. Arguably Art. 5 (2)

marries the interests of carriers and consumers. Nonetheless, where a permitted choice of law is made, passengers are unable to rely on any mandatory rules in force in the country of their habitual residence.5 Again, it is uncertain what is gained by replacing the flexibility existing under the Rome Convention with the stricter rules governing contracts of carriage in Art. 5 (1), although some flexibility is retained in Art. 5 (3).6

3 4 5 6

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See generally, Dicey/Morris/Collins, paras. 33–072 et seq.; for critique see Nielsen, in: Ferrari/Leible p. 99. Art. 4 (4) Rome Convention. Nielsen, in: Ferrari/Leible p. 99, 108. Nielsen, in: Ferrari/Leible p. 99, 108.

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2. Characterising the contract Art. 5 inevitably begs the question whether a given contract is one for the carriage of goods 7 or one for the carriage of passengers, or neither, although in practice the answer is for all practical purposes now clear.7 More troublesome, it is uncertain which rule governs a contract which provides for both the carriage of a person and of goods, such as contracts to carry airline passengers and their luggage. Principle suggests that the carriage of goods is in such a case incidental to carriage of the passenger and that such a composite contract should be characterised as a contract for the carriage of a passenger. Again, it is possible that the parties’ contractual relationship may be constituted by two separate contracts, for the carriage of goods and passengers respectively, as where a passenger’s goods are transported separately from the passenger.8 Different limbs of Art. 5 would then apply to each contract. 3. The scope of Art. 5 Art. 5 regulates contracts of carriage between business parties but also those where one party 8 is a consumer. This follows from Art. 6 (4)(b) which provides that Art. 6, which regulates consumer contracts, shall not apply to contracts of carriage save those defined as contracts relating to package travel, as defined in Council Directive 90/EEC June 13 1990 on package travel, package holidays and package tours.9 Art. 5 may be of less practical significance, however, than might be supposed. First, it is 9 commonplace that disputes relating to contracts of carriage will be subject to arbitration, or another form of non-judicial dispute resolution.10 Depending on the terms of the arbitration agreement the effect may be to oust the general rules for choice of law, including Art. 5. Secondly, important aspects of the carriage of passengers are subject to provisions in a 10 number of EU instruments which seek to enhance the protection of consumers. Regulation 261/200411 governs compensation to airline passengers in the event of delay or cancellation. Regulation 1371/200712 regulates the rights of rail passengers within the EU. The protective rules embodied in these instruments prevail over choice of law rules in Art. 5 in one of two ways. Insofar as those rules are overriding mandatory rules they oust any choice by the parties of the law of a non-EU state. Art. 3 (4) provides that, where a situation concerns one or more Member States, the parties’ choice of an applicable law other than that of a Member State shall not prejudice the application of provisions of EU law which cannot be derogated from by agreement. Again, insofar as other EU instruments embody choice of law rules, Art. 23 provides that those special rules shall prevail over the general choice of law provisions of the Rome I Regulation. Thirdly, most important aspects of the law concerning carriage of goods or passengers are 11 7 8

9 10 11 12

See paras 21–23. Contemplated in Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV (Case C-133/08), [2009] ECR I-9687 paras. 41–49. [1990] OJ L158/59. Nielsen, in: Ferrari/Leible p. 99, 101. OJ 2004 L 46/1. OJ 2007 L 315/14.

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regulated by international conventions. These are numerous, and include such prominent international instruments as the Hague-Visby Rules, embodying the Hague Rules of 1924 (as amended by the Brussels Protocol of 1968), which in some Member States governs the carriage of goods by sea, the Warsaw Convention on carriage by air (recast as the 1999 Montreal Convention), the 1980 Berne Convention on carriage by rail (the COTIF Convention), and the 1956 Convention on the carriage of goods by road (the CVR Convention). 12 Such conventions limit the role of Art. 5 insofar as they harmonise national law, thereby

removing any conflict of laws. They also have formal primacy over the choice of law rules in Art. 5 for two reasons. First, pursuant to Art. 25, the Rome 1 Regulation is subordinate to the choice of law provisions in any international conventions binding on Member States. Second, Art. 5 is subject to the rules in Art. 9 (2) which confirm the primacy of the overriding mandatory rules of the forum over the otherwise applicable law. This affects the rules contained in any international conventions which may be applicable under the law of any EU state. Insofar as those rules are mandatory in character they will prevail over the law applicable under Art. 5. Their mandatory status follows from the fact that they would be regarded as crucial to safeguarding the public interest of each EU state as required by Art. 9 (1). This is of particular importance in cases concerning the principal international conventions on the liability of carriers for damage to goods or persons.13 Importantly, the Warsaw Convention provides that any governing law clause which purports to oust the Convention’s rules shall be null and void.14 The effect is to preserve the application of the Convention irrespective of the general rules for choice of law. Again, Art. III, rule 8 of the Hague-Visby Rules invalidates any contractual governing law provisions purporting to apply the law of a country where the Rules are not in force.15 The effect is to preserve the application of the Rules irrespective of the general rules for choice of law. 13 Even where Art. 5 is engaged, however, disputes as to the law applicable to contracts of

carriage are likely to be rare. Such contracts commonly contain an express agreement as to the governing law,16 which will immediately identify the applicable law insofar as both Arts. 5 (1) and 5 (2) give primacy to the principle of party autonomy. Even if no such express choice is made such contracts very frequently contain arbitration clauses which locate the seat of arbitration. The law in force at that place is very likely to be held to be the applicable law.17 The result will be to minimise, or in practice render pointless, any dispute as to the applicable law. Were such a dispute to arise it would moreover concern the application of the general rule for implied choice under Art. 3 and not the special rules contained in Art. 5. Arguably, these considerations are of relatively greater significance in connection with Art. 5 (1) (under which party choice under Art. 3 is unrestricted) than under Art. 5 (2) (in which the parties’ choice is restricted).18 It will be rare in practice, however, that the additional requirements for party choice under Art. 5 (2) will not be satisfied, not least because the applicable law is likely to coincide with either the country where the carrier has its habitual residence, or where the carrier has its place of central administration. 13 14 15 16 17 18

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E.g. the Warsaw Convention, revised by the Montreal Convention 1999. Art. 23 Warsaw Convention; Art. 49 Montreal Convention. As e.g. in The Hollandia [1983] 1 AC 565. As e.g. in OT Africa Line Ltd v. Magic Sportswear Corp [2005] EWCA Civ 710 (carriage of goods). As e.g. in Egon Oldendorff v. Libera Corp (No 2) [1996] 1 Lloyd’s Rep 380. Infra Art. 5 note 26.

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II. Art. 5 (1) 1. The operation of Art. 5 (1) Art. 5 (1) regulates all contracts for the carriage of goods.19 It extends to contracts for carriage 14 by sea, air or land, by any means of transport. Art. 5 (1) starts with the assumption that the parties may expressly or impliedly agree to submit a contract of carriage to a law of their choice. Such a choice is made pursuant to Art. 3, and is subject to the limitations on such choice imposed by Art. 3 (3) and (4). A choice of law under Art. 3 may be either express or implied. The possibility that an 15 arbitration agreement in a contract for the carriage of goods will be evidence of the parties’ implied intention is of particular practical importance. In Egon Oldendorff v. Libera Corp (No 2)20 an English court considered when the presence of an arbitration clause in a charterparty might indicate such an implied choice. The mere presence of the agreement was not decisive. But in Oldendorff it formed part of a standard form contract which contained other provisions which had meaning only in English law, and was intended to ensure that any disputes would be heard in London by experienced arbitrators familiar with English law. The default rule embodied in Art. 5 (1) applies only to the extent that the law applicable to a 16 contract for the carriage of goods has not been chosen. Where it has not been chosen the applicable law is that of the country of the carrier’s habitual residence, subject to a proviso. That applies only where the country of the carrier’s habitual residence is also either the place of receipt, or the place of delivery, or the country where the consignor is habitually resident. The place of a party’s habitual residence is determined in accordance with the general rules 17 for determining habitual residence in Art. 19 (1). Assessed at the time of contracting, the habitual residence of a company is the place of its central administration. Where the contract is concluded in the course of the operations of a branch, agency or any other establishment, or if, under the contract, performance is the responsibility of such a branch, agency or establishment, the place where the branch, agency or any other establishment is located shall be treated as the place of habitual residence. The second sentence of Art. 5 (1) makes clear that the place delivery means the place agreed by the parties, implying that the references to the place of delivery and the place of receipt in the first sentence also refer to the terms of the contract. Where those conditions are not present the applicable law is that of the country of the place 18 of delivery as agreed by the parties. It might have been expected that the law applicable in such residual cases would be that of the country with which the contract has its most substantial connection. Art. 5 (1) instead requires, so as to promote certainty, that the law in force at the agreed place of delivery shall apply. The provision is of particular value in cases involving damaged goods and reflects the reality that claims in such cases are likely to be instituted in the place of delivery. The rule is not, however, free from difficulty. The natural meaning of the words suggests that the default rule does not engage where the parties

19 20

See generally, Dicey/Morris/Collins, para. 33–091 et seq. Egon Oldendorff v. Libera Corp (No 2) [1996] 1 Lloyd’s Rep 380.

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have not specified the place of delivery, perhaps on the assumption that the place of delivery would be determined by reference to any presumption derived from the contract’s governing law. In that event, the contract would be without an applicable law pursuant to Art. 5 (2). Principle suggests that the general rule in Art. 4 (2) would therefore apply, leading to application of the law in force at the habitual residence of the party whose performance is characteristic of the contract. In the context of a contract of carriage that law would be the law in force in the country of the carrier’s place of business. 2. Examples 19 Suppose that Alphaco charters a vessel from Betaco for the carriage of a cargo between

Germany and France. Both parties are English companies. The contract contains no express agreement as to the applicable law, and no implied intention as to the applicable may be derived from the circumstances. English law governs pursuant to Art. 5 (1) because the habitual residence of the carrier and the consignor are the same. 20 Suppose, by contrast, that Betaco, a carrier having its central administration in Spain, con-

cludes a contract for the carriage of goods owned by with Gammaco, an English company. The contract, which is for carriage between Greece and England, was concluded at Betaco’s office in Greece. The contract contains no express agreement as to the applicable law, and no implied intention as to the applicable may be derived from the circumstances. Art. 5 (1) leads to the application of the law of Greece. None of the requirements in the proviso to the general rule in Art. 5 (1) is satisfied, so the default rule applies, engaging the law of the country of the agreed place of delivery. 3. The scope of Art. 5 (1) 21 The scope of Art. 5 (1) is not without difficulty. Recital 22 ensures that the scope of Art. 5 (1)

tracks that of Art. 4 (4) of the Rome Convention. The result is that the definition of a contract for the carriage of goods is autonomous and determined by Recital 22 and the case law on Art. 4 (4). No reference should be made to any definitions existing under national law, or under any international convention such as the Hague-Visby Rules.21 Recital 22 states that a contract for the carriage of goods is one ‘the main purpose of which is the carriage of goods’. As alternatively expressed in the Giuliano/Lagarde Report on the Rome Convention the question goes to what is the ‘substance’ of the contract.22 The CJEU in Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV23 held that in applying this test it was necessary to consider the objective of the contract by reference to the obligations of the party whose obligation is characteristic of the contract.24 In ICF the contract required one party to make available rail wagons to another party which was responsible for the transport of goods carried on the wagons in space it had leased to third parties.

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Which define contracts for the carriage of goods in Art. I(b). Giuliano/Lagarde Report p. 22. Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV (Case C-133/08), [2009] ECR I-9687. Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV (Case C-133/08), [2009] ECR I-9687 para. 34.

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The test was further elaborated by the CJEU in Haeger & Schmidt GmbH v. Mutuelles du 22 Mans assurances Iard SA,25 a case concerning a commission contract for the carriage of goods whereby carriage is arranged independently by an agent acting on the principal’s behalf. The principal, which had purchased an item of equipment damaged during carriage, sought compensation from the agent and a third party employed by the agent to arrange transportation. The question at issue concerned which law governed the contract between the agent and the third party. Recital 22 and ICF require that Art. 4(4) applies to a contract for the carriage of goods only when the main purpose of the contract is the transportation of the goods concerned. The CJEU held that where the contract is a commission contract the characteristic performance is not the carriage of goods but the arranging of such carriage.26 In consequence such contracts are not normally contracts for the carriage of goods. It was, however, for the national court to determine the purpose of the contract on the facts. It was possible that a commission contract would be a contract of carriage where this was indicated by the particular obligations of the party arranging carriage and the ‘economic and commercial reality’ of the parties’ relationship.27 The approach in Recital 22, endorsed in ICF, means that where a shipowner undertakes to 23 transport goods the question is whether the provision of transport or the carriage of goods is the main purpose of the contract.28 This has the effect that single-voyage charterparties, which have as their main purpose the carriage of goods, will be regarded as contracts of carriage for the purpose of Art. 5 (1).29 For the same reason time charters (involving carriage of specified goods for a fixed time), freight contracts (involving carriage of specified goods on a vessel of the shipowner’s choice), and multi-voyage charters (involving carriage of specified goods on defined voyages), should be subject to Art. 5 (1).30 Each of these types of contract provides that a carrier undertakes to carry specified goods. By contrast, however, contracts for the hire of a vessel (demise charters) would be excluded from Art. 5 (1).31 The characteristic of such a contract is the hire of a vessel not the carriage of goods on that vessel.32 The law applicable to such contracts would therefore be determined by the general rule in Art. 4 (2). Whether a given type of contract is one of carriage is sometimes controversial. Principle 24 might suggest that a time charter is subject to Art. 5(1). But in an English first instance decision the court came to the opposite conclusion.33 The reason given was that a charterparty is a contract of carriage only in cases where, following ICF, the main purpose of the owner’s obligation is to undertake the carriage of goods, and not merely to make available a means of transport. A time charter does not involve ‘an undertaking by the owner to carry

25 26 27 28

29 30 31 32 33

Haeger & Schmidt GmbH v. Mutuelles du Mans assurances Iard SA (Case C-305/13). Haeger & Schmidt GmbH v. Mutuelles du Mans assurances Iard SA (Case C-305/13) para. 27. Haeger & Schmidt GmbH v. Mutuelles du Mans assurances Iard SA (Case C-305/13 para. 31. Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV (Case C-133/08), [2009] ECR I-9687 para. 35. Giuliano/Lagarde Report p. 22. Dicey/Morris/Collins, p. 1932. Scrutton, Charterparties and Bills of Lading (20th ed, 1996) p. 14. Dicey/Morris/Collins, 1931. Martrade Shipping & Transport GmbH v. United Enterprises Corpn [2014] EWHC 1884 (Comm).

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goods, but an undertaking by the owner to make available to the charterer a vessel and crew for the latter to employ in transporting goods’.34 25 A particular issue concerning the carriage of goods by sea is subject to the relevant choice of

law rules existing under the national law of the forum. Although such cases are now less frequent given modern communications disputes sometimes arise concerning the authority of the master of a vessel to conclude contracts binding on others.35 The authority of an agent to bind a principal is excluded from the scope by Art. 1 (2)(g) and is governed by national law. 4. Interpretation of Art. 5 (1) 26 Recital 22 provides guidance as to how Art. 5 (1) should be interpreted. Recital 22 states that

terms used in Art. 5 (1) should be interpreted in the same manner as the equivalent terms used in Art. 4 (4) of the Rome Convention. A ‘carrier’ must be both a party to the contract and responsible for the carriage of goods, and the carrier’s status is unaffected if the carriage is directly undertaken by another party.36 In principle the difficulty of identifying the carrier in some legal systems is avoided because Recital 22 supplies an autonomous definition of the concept. But a familiar problem remains concerning contractual terms in bills of lading issued by charterers, such as demise or ‘identity of carrier’ clauses which are intended to protect charters by attracting the benefit of the limited liability provisions in maritime transport conventions.37 A demise clause provides that the charterer, issuer of the bill of lading, acts merely as an agent and is wholly exempt from liability. An identity of carrier clause typically states that the owner of the vessel is the carrier, while the charterer who issued the bill of lading acts solely as the carrier’s agent and is exempt from legal liability. Which party in such cases is the carrier? 27 Although such clauses are invalid in some national legal systems, because they operate as

exemption clauses, the autonomous nature of the Recital 22 definition suggests that the identity of the carrier does not depend on national law (more precisely on the law of the forum) but only on whether that definition is satisfied. There need be no concern that the law of the forum is thereby denied any effect which public policy might require because the underlying issue concerns the identity of the applicable law, a choice of law question governed by Art. 5. The issue does not concern whether the agent may bind the principal, a matter dependent on the validity of the demise or identity clause, which are issues of substance. It concerns not the substantive effect of such clauses, but their declaratory effect for choice of law purposes. On this basis, the question of who is the carrier in such cases under Art. 5 is simply a matter of interpretation which may properly depend on a clear statement by the parties in such a clause as to the carrier’s identity. The carrier is the party deemed to be such under the clause, provided that this is consistent with the terms of the contract as a whole.38 34

35 36 37 38

450

Martrade Shipping & Transport GmbH v. United Enterprises Corpn [2014] EWHC 1884 (Comm) para. 28. A classic English case is Lloyd v. Gilbert (1865) LR 1 QB 115 (Ex. Ch.). See Giuliano/Lagarde Report, 22. Plender/Wilderspin, pp. 210–211; see, The Starsin [2004] UKHL 12. The Starsin [2004] UKHL 12.

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A ‘consignor’ is any party which concludes a contract with such a carrier.39 This definition of 28 a consignor is particularly important in cases where a forwarding agent contracts under its own name but acts on another’s behalf.40 Such an agent may be regarded as a consignor because the identity of the party which delivers the goods is irrelevant and the key factor is whether the agent is a party to the contract. III. Art. 5 (2) Art. 5 (1) regulates all contracts for the carriage of passengers.41 It extends to contracts for 29 carriage by sea, air or land, by any means of transport.42 Like Art. 5 (1) its starting point is that the parties may choose the applicable law pursuant to the general rule in Art. 3. But the circumstances in which such a choice may be made are restricted. Such a choice is permitted only where the chosen law is that of a country which is also (a) the country where the passenger has his habitual residence; or (b) the country where the carrier has his habitual residence; or (c) the country where the carrier has his place of central administration; or (d) the country where the place of departure is situated; or (e) the country where the place of destination is situated. Principle suggests that the place of departure and arrival will be determined by reference to 30 the terms of the contract.43 A question of law remains, however, where both places are the same, as in the case of a return passage, involving two separate journeys, but starting and ending in the same place. To ensure that these remain separate, as the Article presumably contemplates, principle suggests that only the outward journey should be relevant.44 Again, in connection with a round trip, involving a series of journeys, starting and ending in the same place, the place of initial departure and final arrival should be relevant for this purpose. Suppose therefore that Arno, habitually resident in Poland, purchases an airline ticket for a 31 flight between Poland and England on an aircraft owned and operated by Betaco a UK company with its central administration in England. The contract of carriage contains a governing law clause stating that English law governs. By Art. 5 (2) English law is the applicable law. The choice of English law is effective because the chosen law is not only that of the country where the carrier has its habitual residence, but also that of the country where the carrier has its place of central administration, and the place of the journey’s destination. If, however, the contract had stipulated that Greek law is the governing law the parties’ choice would be ineffective, as the contract has no relevant connection with Greece as required by Art. 5 (2). In that event the contract would be governed by the law of Poland, the country where the passenger has his habitual residence, and the place of departure. In the absence of any choice of law, or where the law of a non-approved country is chosen, 32 Art. 5 (2) provides an inflexible default rule. The law applicable shall be that of the country 39 40 41 42 43 44

Giuliano/Lagarde Report, 22. Scrutton, Charterparties and Bills of Lading (22nd ed, 2011) pp. 44–47; Plender/Wilderspin p. 212. See generally, Dicey/Morris/Collins, paras. 33–091 et seq. See generally, Dicey/Morris/Collins, paras. 33–077 et seq. See Rehder v. Air Baltic Corp (Case C-204/08), [2009] ECR I-6073 (concerning Regulation 44/2001). Dicey/Morris/Collins, p. 1923.

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where the passenger is habitually resident, subject to a proviso. The proviso is that the country where the passenger is habitually resident must also be either the place of the passenger’s departure or the place of the passenger’s destination. Where those additional conditions are not satisfied the applicable law is that of the country of the carrier’s habitual residence, identified by reference to Art. 19. 33 Given the rule embodied in Art. 5 (2) carriers are likely to insist that the contract of carriage

contains an express governing law clause in their favour. The carrier’s home law will not apply by default under Art. 5 (2) save in those rare cases where the passenger’s home law does not coincide with either the place of departure or the place of destination. In this respect the Regulation differs from the Rome Convention, under which the law of the carrier’s place of business was likely to apply pursuant to Art. 4 (2). IV. Art. 5 (3) 34 Art. 5 (3) provides a flexible exception to the rules embodied in Arts. 5 (1) and (2), in terms

similar to that in Art. 4 (3), which applies where the parties have not chosen the applicable law. The law applicable under Art. 5 (1) or 5 (2) may be displaced where it is clear from all the circumstances that the contract is manifestly more closely connected with another, the law of which will then apply. 35 The approach in such cases mirrors the approach endorsed by the CJEU in connection with

the general rule in Art. 4(3).45 Adopting this approach in a case concerning a commission contract for the carriage of goods, the CJEU in Haeger & Schmidt GmbH v. Mutuelles du Mans assurances Iard SA46 concluded that the national court must conduct an overall assessment of all ‘the objective factors characterising the contractual relationship’, and identify which are the most significant.47 These include a close connection between the contract in question and another contract, and the place of delivery of the goods.48 36 It is unlikely that the law applicable pursuant to the first sentence of Art. 5 (2) will easily be

displaced by reference to Art. 5 (3). Where the applicable law is both that of the country where the passenger has his habitual residence and that of either the place of departure or the place of destination the connection with that country may be particularly strong. Conversely, principle suggests that the law in force at the place of delivery may have a strong connection with a contract subject to Art. 5 (1) notwithstanding that another law is applicable under that provision. Alternatively, the terms of the contract and the circumstances in which it was made might be decisive in a case subject to Art. 5 (1). Suppose, for example, that Alphaco, an English company, charters a vessel from Betaco, a Greek shipowner, to carry and deliver goods from Belgium to Spain. The contract is concluded in Belgium where it states that payment is to be made. In principle, the law of Spain is applicable under Art. 5 (1), being the law in force at the agreed place of delivery. Arguably, however, the connections

45

46 47 48

452

As elaborated in Intercontainer Interfrigo SC (ICF) v. Balkenende Oothuizen BV (Case C-133/08), [2009] ECR I-9687. Haeger & Schmidt GmbH v. Mutuelles du Mans assurances Iard SA (Case C-305/13). Haeger & Schmidt GmbH v. Mutuelles du Mans assurances Iard SA (Case C-305/13) para 49. Haeger & Schmidt GmbH v. Mutuelles du Mans assurances Iard SA (Case C-305/13 para. 49.

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Article 6

with Belgium would be sufficient to establish a stronger connection with Belgium, with the effect that Belgian law would apply pursuant to Art. 5 (3). Article 6: Consumer contracts 1. Without prejudice to Articles 5 and 7, a contract concluded by a natural person for a purpose which can be regarded as being outside his trade or profession (the consumer) with another person acting in the exercise of his trade or profession (the professional) shall be governed by the law of the country where the consumer has his habitual residence, provided that the professional: (a) pursues his commercial or professional activities in the country where the consumer has his habitual residence, or (b) by any means, directs such activities to that country or to several countries including that country, and the contract falls within the scope of such activities. 2. Notwithstanding paragraph 1, the parties may choose the law applicable to a contract which fulfils the requirements of paragraph 1, in accordance with Article 3. Such a choice may not, however, have the result of depriving the consumer of the protection afforded to him by provisions that cannot be derogated from by agreement by virtue of the law which, in the absence of choice, would have been applicable on the basis of paragraph 1. 3. If the requirements in points (a) or (b) of paragraph 1 are not fulfilled, the law applicable to a contract between a consumer and a professional shall be determined pursuant to Articles 3 and 4. 4. Paragraphs 1 and 2 shall not apply to: (a) a contract for the supply of services where the services are to be supplied to the consumer exclusively in a country other than that in which he has his habitual residence; (b) a contract of carriage other than a contract relating to package travel within the meaning of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours;1 (c) a contract relating to a right in rem in immovable property or a tenancy of immovable property other than a contract relating to the right to use immovable properties on a timeshare basis within the meaning of Directive 94/47/EC; (d) rights and obligations which constitute a financial instrument and rights and obligations constituting the terms and conditions governing the issuance or offer to the public and public take-over bids of transferable securities, and the subscription and redemption of units in collective investment undertakings in so far as these activities do not constitute provision of a financial service; (e) a contract concluded within the type of system falling within the scope of Article 4(1)(h).

Bibliography Beaumont/McEleavy, Anton on Private International Law (3rd ed. 2011) Bitterich, Kollisionsrechtliche Absicherung gemeinschaftsrechtlicher Standards im Bereich des Ver-

1

braucherschutzes: der Vorschlag für eine Rome I-Verordnung, RIW 2006, 262 Boskovic, La protection de la partie faible dans le règlement Rome I, D. 2008, 2175

OJ L 158, 23.6.1990, p. 59.

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Article 6 Brödermann/Iversen, Europäisches Gemeinschaftsrecht und Internationales Privatrecht (Mohr, 1994) Cachia, Consumer contracts in European private international law: the sphere of operation of the consumer contract rules in the Brussels I and Rome I Regulations, (2009) 34 Eur. L. Rev. 476 Ehle, Wege zu einer Kohärenz der Rechtsquellen im Europäischen Kollisionsrecht der Verbraucherverträge (2002) Farah, Allocation of Jurisdiction and the Internet in EU law, (2008) 33 Eur. L. Rev. 257 Felke/Jordans, Entitlement of a consumer to whom misleading advertising has been sent to seek payment, in judicial proceedings, of the prize which he has ostensibly won, ERPL 2006, 129 Garcimartín Alférez, New Issues in the Rome I Regulation: the Special Provisions on Financial Market Contracts, in Cashin-Ritaine/Bonomi, Le nouveau règlement ‘Rome I’ relative à la loi applicable aux obligations contractuelles (Schultheiss, 2008) Garcimartín Alférez, The Rome I Regulation: Exceptions to the Rule on Consumer Contracts and Financial Instruments, (2009) 5 JPrIL 85 Gillies, Choice of Law Rules for Electronic Consumer Contracts: Replacement Rome Convention by the Rome I Regulation, (2007) 3 JPrIL 89 Hellner, The Country of Origin Principle in the E-commerce Directive: A Conflict with the Conflict of Laws?, in: A Fuchs/Muir Watt/Pataut (éds.), Les conflits de lois et le système juridique communautaire (2004), p. 205 Hess/Pfeiffer/Schlosser, The Brussels I Regulation 44/ 2001: Application and Enforcement in the EU (2008) (Heidelberg Report) J Hill, Cross-Border Consumer Contracts (2008) Lagarde/Tenenbaum, De la convention de Rome au règlement Rome I, 2008 Revue critique de droit international, 729 Lando/Nielsen, The Rome I Regulation, 2008 CMLR 1687 Leible, Gewinnbestätigung aus Luxemburg – Zur internationalen Zuständigkeit bei Gewinnmitteilungen aus dem Ausland, IPRax 2003, 28. Lopez-Tarruella Martinez, International consumer contracts in the new Rome I Regulation: how much does the Regulation change?, Rev. eur. dr. consomm. 2007–2008, 345

454

Rome I Regulation Magnus/Mankowski, Brussels I Regulation (2nd ed. München 2012) Mankowski, Das Herkunftslandprinzip als Internationales Privatrecht der e-commerce-Richtlinie, ZvglRWiss 100 (2001), 137 Mankowski, Consumer Contracts under Article 6 of the Rome I Regulation, in: Cashin-Ritaine/Bonomi (éds.), Le nouveau règlement européen Rome I relative à la loi applicable aux obligations contractuelles (2008), p. 121 Mankowski, Neues zum Ausrichten unternehmerischer Tätigkeit unter Art. 15 Abs. 1 lit. c EuGVVO, IPRax 2009, 238 Mankowski, Finanzverträge und das neue Internationale Verbrauchervertragsrecht des Art. 6 Rom I-VO, RIW 2009, 98 Morse, The EEC Convention on the Law Applicable to Contractual Obligation, (1982) 2 Yb. Eur. L. 107 North (ed.) Contract Conflicts (1982) Plender/Wilderspin, European Private International Law of Obligations (EPILO) (4th ed. 2014) Ragno, The Law Applicable to Consumer Contracts under the Rome I Regulation, in: Ferrari/Leible (eds.), Rome I Regulation (München 2009), p. 29 Remy-Corlay, Contrats à distance et conflits de lois, Rev. dr. consomm. 2004, 11 Rühl, Kausalität zwischen ausgerichteter Tätigkeit und Vertragsschluss: Neues zum situativen Anwendungsbereich des Art. 15 EuGVVO, IPRax 2014, 41 Schulte-Nölke/Twigg-Flessener/Ebers, EC Consumer Law Compendium (München 2008) Sinay-Cytermann, La protection de la partie faible en droit international privé, in: Mélanges en l’honneur de Paul Lagarde (2005), p. 737 Øren, International Jurisdiction over Consumer Contracts in e-Europe, (2003) 52 ICLQ 665 van Huffel, Protection du consommateur par le droit applicable – Obstacles et perspectives, Rev. aff. eur. 2001–2002 440 Wasserer/Wittwer, Gewinnsagen als Ansprüche aus Vertrag, Eur. L. Rpter 2005, 275 Wilderspin, Le règlement (CE) 44/2001 du Conseil: conséquences pour les contrats conclus par les consommateurs, Rev. eur. dr. consomm. 2002, 5 Wilderspin/X Lewis, Les relations entre le droit communautaire et les règles de conflits de loi des Etats membres, RCDIP 91 (2002), 1 and 289.

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Article 6

Chapter II: Uniform Rules I.

II.

Introduction 1. Ratio legis of Art. 6 . . . . . . . . . . . . . . . . . . . . . . . 1 2. Legislative history of Art. 6 . . . . . . . . . . . . . . 2 Operation of Art. 6 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2. Personal scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 a) The “consumer” . . . . . . . . . . . . . . . . . . . . . . . . . 10 b) Assignment of rights . . . . . . . . . . . . . . . . . . . . 18 c) The Professional . . . . . . . . . . . . . . . . . . . . . . . . . 19 3. The requirement that a contract be concluded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4. The material scope of Art. 6 . . . . . . . . . . . . 31

III.

a) Excluded Consumer Contracts . . . . . . . . . 32 5. The circumstances in which Art. 6 applies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 6. The Protection Afforded to Consumer Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 The Relationship between the Conflict of Law Rules in Art. 6 and Consumer Protection Provisions in EU Legislation 84 1. International Conventions . . . . . . . . . . . . 99 2. Uniform Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 100 3. Private International Law Conventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

I. Introduction 1. Ratio legis of Art. 6 In many legal systems the principle of party autonomy is subject to certain restrictions 1 imposed in order to protect the weaker party to a transaction, such as employees or consumers, who are typically less well-off economically and less experienced in legal matters than their contracting partners. In the field of substantive law, consumers in Member States of the European Union are protected by various techniques, which typically include outlawing certain standard terms, in particular exemption clauses, requiring a contractor to provide the consumer with relevant information and granting the consumer a period in which to withdraw from the contract without penalty.1 In the field of private international law, the European Union has extended the scope of consumer protection by enabling a consumer to sue businesses in the Member State where the consumer is domiciled (where litigation is thus cheapest for him)2 and under the law of his habitual residence (with which he is deemed to be most familiar).3 2. Legislative history of Art. 6 Art. 5 Rome Convention, the predecessor of Art. 6, was inspired by Section 4 (Arts. 13–15) 2 Brussels Convention4 which sought to protect the consumer by ensuring, in respect of contracts falling within its scope, the protection of the courts of the Contracting State of

1 2

3 4

See below. Section 4 (Arts. 13–15) of the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters [1998] OJ C 27/1 (consolidated version), (the “Brussels Convention”), since replaced by Section 4 (Arts. 15–17) Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, [2001] OJ LO 12/1, (the “Brussels I Regulation”) and from 10 January 2015 by Arts. 17–19 of the similarly entitled Regulation 1215/2012, [2012] OJ L 351/1 (the “Brussels Ibis Regulation”). Art. 5 Rome Convention and Art. 6 of the Rome I Regulation. Plender/Wilderspin, The European Contracts Convention, at 142.

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his domicile.5 Art. 5 Rome Convention6 pursued the same objective by ensuring (in situations to which that Art. applied) that, when the parties had not chosen the law applicable to a consumer contract, that law was to be the law of the consumer’s habitual residence and, when the parties had chosen a different law, that choice was without prejudice to the mandatory provisions of the law which would have been applicable in the absence of choice. 3 In summary, Art. 5 Rome Convention applied to contracts for the supply of goods or

services to a consumer and to contracts for the provision of credit for that object, subject to certain exceptions. It applied only to contracts concluded in one or more of three specific circumstances, namely i) where the conclusion of the contract was preceded in the country of the consumer’s habitual residence by a specific invitation or by advertising and the consumer had, in that country, taken all the steps necessary on his part for the conclusion of the contract or ii) if the other party or his agent had received the consumer’s order in that country or iii) in the case of a contract for the sale of goods and the consumer travelled from his country to another country to place his order where the journey was arranged by the seller with the purpose of inducing the customer to buy. 4 In the Green Paper on the conversion Rome Convention of 1980 on the law applicable to

contractual obligations into a Community instrument and its modernisation,7 the European Commission drew attention to certain difficulties in the application of Art. 5 Rome Convention and to the criticism that the criteria used to distinguish between consumers eligible for protection and those subject to the normal regime of unrestricted party choice and the law of the closest connection was not adapted to modern distance selling techniques, in particular the Internet. It suggested some solutions8 and asked interested parties to state their preferences.9 In its Proposal for a Regulation on the law applicable to contractual obligations (Rome I),10 the Commission proposed the following text: “Art. 5: Consumer contracts 1. Consumer contracts within the meaning and in the conditions provided for by

5

6 7 8

9

10

456

The Brussels I Regulation, which replaced the Brussels Convention, entered into force on 1 March 2002. Relevant differences between the two texts are discussed below. Plender/Wilderspin, The European Contracts Convention, Chapter VII. COM (2002) 654 final (14.1.2003). In summary, the solutions proposed were i) maintenance of the status quo, ii) a slight broadening of the existing regime, iii) application of the “normal” regime, i.e. party choice and the law of the seller’s habitual residence, without prejudice to the mandatory provisions of the consumer’s law, iv) a refinement of option iii) with the refinement that mandatory rules of the consumer’s law would apply only in areas where no Community harmonisation existed, v) automatic application of the entirety of the consumer’s law, vi) adaptation of the existing system to the “directing activities” criterion used in Art. 15 Brussels I Regulation, vii) a variant of option vi) and viii) a complex solution which would be more favourable to sellers established within the Community than to those established elsewhere. Some 80 replies to the Green Paper were received and are available at http://ec.europa.eu/justice_home/ news/consulting_public/rome_i. Predictably, the viewpoints of interested parties on this issue were very polarised. COM (2005) 650 final.

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Article 6

paragraph 2 shall be governed by the law of the Member State in which the consumer has his habitual residence. 2. Paragraph 1 shall apply to contracts concluded by a natural person, the consumer, who has his habitual residence in a Member State for a purpose which can be regarded as being outside his trade or profession with another person, the professional, acting in the course of his trade or profession. It shall apply on condition that the contract has been concluded with a person who pursues a trade or profession in the Member State in which the consumer has his habitual residence or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities, unless the professional did not know where the consumer had his habitual residence and this ignorance was not attributable to his negligence. 3. Paragraph 1 shall not apply to: a) a contract for the supply of services where the services are to be supplied to the consumer exclusively in a country other than that in which he has his habitual residence; b) contracts of carriage other than carriages relating to package travel within the meaning of Directive 90/314/EEC of 13 June 1990; c) contracts relating to a right in rem or a right of user in immovable property other than contracts relating to a right of user on a timeshare basis within the meaning of Directive 94/47/EC of 26 October 1994.” As can be seen, the Commission’s proposal contained a number of significant departures 5 from the text of Art. 5 Rome Convention. In the first place, the personal scope of the provision was to be cut down since it was to apply only to consumers habitually resident in a Member State of the European Union (as opposed to those habitually resident in any country). In the second place, its material scope was extended in that (subject to the specific exclusions contained in paragraph 3) it was to apply to all contracts concluded between a consumer and a professional (as opposed to merely contracts for goods and services and the provision of credit). In the third place, the conditions of its application were extended and brought into line with those in Art. 15 (1) (c) Brussels I Regulation (the “pursuing or directing trade or professional activities” criterion)11 and, lastly, the operation of the art. was changed in that, when it applied, it was entirely to exclude party autonomy as to the choice of the applicable law: that law was invariably to be the law of the consumer’s habitual residence. The Commission justified the last change on the (undoubtedly correct) ground that the dépeçage which Art. 5 Rome Convention permitted could lead to complexity (determination of what is a mandatory rule, comparison of provisions of the chosen law with those of the otherwise applicable law) out of all proportion to the likely size of the claim. 11

Magnus/Mankowski, Brussels I Regulation at 315. The “directing activities” criterion was introduced primarily to take account of the advent of the internet. It unleashed a hysterical reaction on behalf of the e-commerce lobby which asserted that any rule allowing the consumer to bring proceedings in his home country was contrary to basic principles of Community law and would strangle e-commerce at birth. The first of these propositions was demonstrably incorrect and the second has proved quite unfounded. See Wilderspin/Lewis, Les relations entre le droit communautaire et les règles de conflits de loi des Etats membres 3–5.

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6 This draft Article was controversial in the Council Working Group. In the negotiations on

Art. 15 Brussels I Regulation which had taken place in 1999 and 2000, controversy had surrounded the “directing activities” condition; however, while the Rome I Regulation was being negotiated, industry focussed on the point that the freedom of the parties to choose the applicable law was, according to the Commission’s proposal, to be abolished entirely. In the face of such opposition, this aspect of the proposal was ultimately dropped. II. Operation of Art. 6 1. Introduction 7 There are obvious similarities between the language, the purpose and the operation of Art. 6

and of Art. 1512 Brussels I Regulation. Not only are both Articles intended to protect the weaker party to a contract,13 they also create a special rule that derogates from the general principles underlying the instrument of which it forms part.14 As derogations, these provisions are liable to be interpreted strictly, but not so strictly as to deprive them of any substance. 8 Given the strong links between these two provisions, the interpretation of a given term of

Art. 15 (1) Brussels I Regulation should, it is thought, provide reliable guidance on the interpretation of the same term in Art. 6 (1). This conclusion is buttressed by Recital (7) which stresses that “the substantive scope and the provisions of this Regulation should be consistent with Council Regulation (EC) No 44/2001 of December 2000 (‘Brussels I’) […]”. Furthermore, given that the Brussels I Regulation constitutes a development of the 1968 Brussels Convention, it is reasonable to think that the interpretation of the notion of a “consumer contract” in Art. 6 (1) can equally be guided by the interpretation given to that term by the case-law on Art. 13 Brussels Convention, provided that one takes due account of any differences in wording between the three instruments.15

12

13

14

15

458

Art. 15 (1) Brussels I Regulation reads: “1. In matters relating to a contract concluded by a person, the consumer, for a purpose which can be regarded as being outside his trade or profession, jurisdiction shall be determined by this section, without prejudice to Art. 4 and point 5 of Art. 5, if: it is a contract for the sale of goods in instalment credit terms; or it is a contract for a loan repayable by instalments, or for any other form of credit, made to finance the sale of goods; or in all other cases, the contract has been concluded with a person who pursues commercial or professional activities in the Member State of the consumer’s domicile or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities […].” This provision is substantially unchanged in the Brussels Ibis Regulation. Recital (23) states that contracts concluded with parties who are regarded as being weaker should be protected by conflict rules that are more favourable to those parties’ interests than the general rules. Recital 13 the Brussels I Regulation likewise stresses that the purpose of Art. 15 thereof is to protect the weaker party to the contract. Art. 6 derogates from the principle of freedom of choice, a cornerstone of the Regulation as Recital (11) emphasises. Art. 15 Brussels I Regulation derogates from the principle that in legal proceedings the defendant should be sued in the country where is domiciled (Art. 2 (1) Brussels I Regulation). Case C-180/06, Ilsinger [2009] ECR I-3961.

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Article 6

2. Personal scope Art. 6 applies to “a contract concluded by a natural person for a purpose which can be 9 regarded as being outside his trade or profession (‘the consumer’) with another person acting in the exercise of his trade or profession (‘the professional’) […]”. a) The “consumer” The definition of a consumer corresponds broadly to that contained in Art. 13(1) Brussels 10 Convention, Art. 15 (1) Brussels I Regulation and Art. 5 Rome Convention in that a consumer is defined as a person who concludes a contract “for a purpose which can be regarded as being outside his trade or profession”. Art. 6 is admittedly more explicit than the earlier provisions in that it specifies that only a “natural person” may be a consumer. However, that limitation had already been read into the earlier provisions by the European Court. In Benincasa v. Dentalkit16 it held that the term ‘consumer’ in Art. 13(1) Brussels Convention covers “only a private final consumer […]. Consequently, only contracts concluded for the purpose of satisfying an individual’s own needs in terms of private consumption come under the provision […]”.17 Thus, merely because one of the parties to a contract is an individual, this does not in every 11 case suffice to characterise the contract as a consumer contract. This point is illustrated by a German judgment holding that a sole director and sole personal guarantor of a company which had concluded a franchise contract with an American corporation was not a consumer within the meaning of Art. 15 Brussels I Regulation.18 Although the director was an individual, the franchise contract was a business contract. Furthermore, since the expression was to be interpreted without reference to national law, the German interpretation of ‘consumer’ (which tends to be broad in scope), was not relevant to the determination of the scope of the same term within the meaning of the Regulation. The judgment is clearly correct and the reasoning can be transposed to the Rome I Regulation. When an individual, acting outside his normal trade or profession, concludes a contract the 12 ultimate purpose of which is to enable him to make a profit, it is not straightforward to determine whether the contract can be said to satisfy his own needs in terms of private consumption. In Standard Bank of London v. Apostolakis,19 a Greek couple invested their money in foreign currency via a contract with an English bank. The English High Court held that the contract was a consumer contract. However, on the same facts a Greek court held that the couple were not consumers because (i) the contract was objectively for a commercial purpose20 (ii) the couple were in a strong position in relation to the bank and thus did not need the protection of the special consumer rule on jurisdiction, and (iii) the objective of increasing wealth by investing funds is not one of private consumption.

16 17

18 19 20

Case C-269/95, [1997] ECR 1–3767, at paragraphs 16 and 17. The principles laid down in this case have been subsequently followed by the European Court in Case C-96/00, Gabriel [2002] ECR I-06367, Case C-464/01, Gruber v. Bay Wa AG [2005] ECR I-439 infra and Case 27/02, Engler v. Janus Versand GmbH [2005] ECR I-481. Case 1U 991/04 in the Oberlandesgericht Nürnberg. In the High Court: [2001] Lloyd’s Rep. Bank. 240; in the Polimedes Protodikeio Athens: [2003] I. L. Pr. 29. Namely, the purchase of movable property for investment purposes in order to generate a profit.

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13 It is unlikely that the reasoning of the Greek court can be reconciled with the terms. Recital

26 the Rome I Regulation states that “[…] services such as investment services and activities and ancillary services provided by a professional to a consumer […] and contracts for the sale of units in collective investment undertakings […] should be subject to the provision on the law applicable to consumer contracts” (emphasis added). This clearly implies that investment-for-profit contracts concluded by natural persons acting outside their trade or profession are examples of ‘private consumption’.

14 Thus, the problem can probably be treated as settled as regards investment advice and the

like. However, the problem remains as regards for profit contracts concluded by a person acting outside his normal trade or profession. For example, in an Austrian case,21 the purchase by a gardener of frozen stallion sperm for the purposes of breeding horses was held to fall within Art. 13 Brussels Convention because horse breeding was not one of the professional activities of a gardener. However, the OGH did not appear to give any consideration to the question whether the claimant bred horses for profit or purely as a hobby. If the activity was engaged in for profit, even if it was not the claimant’s main activity, it would be difficult to maintain that the purchase was for “private consumption” within the meaning of the Benincasa judgment. 15 A cognate problem arises when a purchaser acts partly for a business purpose and partly for

a private purpose (a “dual purpose contract”). The judgment in Gruber22 (a case in which a farmer purchased roof tiles, some of which were to be used for his dwelling and some for his farm) suggests that the contract is not a ‘consumer contract’ unless the business purpose plays a negligible role: the fact that the private purpose is merely predominant will not suffice. The European Court based its reasoning upon the policy behind the special consumer rule, namely the protection of weaker contracting parties. It held that when a business party contracts with another person who acts partly for a business purpose and partly for a private purpose, both purposes being of significant importance to the transaction, that person may be taken to have economic resources and knowledge that put him on an equal footing with the business party. That he also contracts for a private purpose does not alter this point.

16 On the other hand, Recital (17) Directive 2011/83 on consumer rights23 adopts the opposite

principle: in the case of a dual purpose contract, the purchaser is to be considered a consumer unless the trade purpose is predominant. It may thus be wondered whether Gruber is still good law and, if so, whether its reasoning can be transposed to Art. 6. It is thought that the answer is probably yes to both questions since i) the Consumer Rights Directive does not purport to affect the interpretation of the Brussels I and the forthcoming Brussels Ibis Regulations and ii), as regards the Rome I Regulation, the need to provide for congruency with the Brussels I Regulation should prevail. However, the point cannot be regarded as settled. 21 22

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OGH, 25 October 2000–8 Nd 502/00. Case C-464/01, Gruber v. Bay Wa AG [2005] ECR I-439. This judgment might be thought to provide some support for the proposition that the individual’s need for protection is, contrary to what is suggested above, a relevant factor in determining whether the protective regime should apply. However, the case can be distinguished since there was no doubt that at least part of the contract was for a business purpose. Directive 2011/83 on consumer rights, [2011] OJ L 304/64.

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Assuming that the principles enunciated in Gruber are still good law and apply to the 17 interpretation of Art. 6, there may be difficult borderline cases, as we can see if we take as an illustration the frozen stallion sperm case, supra. If a person owns a retired race horse that has been put out to stud and he orders materials to build a stable for the horse, the purchase is clearly for professional purposes. At the other end of the scale, let us suppose that a person owns a horse which he keeps primarily so that his daughters can ride it; however, from time to time, upon the request of owners of mares of the same breed he allows the horse to mate and accepts a small sum of money in return. If he orders materials for a stable for the horse, it seems reasonably clear that he acts as consumer; even if the occasional use of the horse as a stud can be treated as a professional purpose, the significance of that purpose is so marginal as to play a negligible role in the use of the stable. A more difficult intermediate case arises when an individual who works, for example, as a tax inspector owns two horses which he exploits for commercial breeding purposes, albeit on a comparatively small scale, in his spare time. If he orders stables for those horses, it can be argued that, although the activity of horse breeding is unconnected to the individual’s main profession and may assume little significance as a source of income in comparison with the exercise of that profession, it is nevertheless the primary purpose of the contract in question. It is thus tentatively suggested that such a contract should not fall within the scope of Art. 6.24 b) Assignment of rights If a consumer assigns his rights under a contract falling within the scope of Art. 6 to another 18 person, in particular a legal person, will the contract continue to be governed by that provision? At first sight, by analogy with case-law on the Brussels Convention, the answer might be thought to be in the negative. In Shearson Lehman Hutton,25 a bank to which rights had been assigned by a customer was held not to be entitled to enjoy the benefit of the rules of special jurisdiction conferred by Arts. 13–15 Brussels Convention. However, it is doubtful whether the reasoning in that case can be transposed to the context of applicable law. In Shearson Lehmann Hutton, the European Court took the view that the special jurisdictional regime for consumers was established inter alia so as not to discourage the consumer from suing by being obliged to bring his action before the courts of the seller’s domicile. It thus treated those rules as a kind of personal privilege which was lost once the rights under the contract are assigned to a legal person.26 The Court was also clearly influenced by its characteristic fear of creating a forum actoris. Neither of those factors is present as regards the determination of the applicable law in which, by contrast, legal certainty should play a 24

25

26

Cf. judgment of the Austrian Oberster Gerichtshof of 25 October 2000, supra, the reasoning in which would lead to the contrary conclusion. Case C-89/91, Shearson Lehman Hutton, [1993] ECR I-139. Followed in Case C-167/00, Verein für Konsumenteninformation v. K.H. Henkel, [2002] ECR I-8111, in which the action of a consumer association that was litigating on behalf of Austrian consumers was held not to come within that provision. Paragraphs 18 and 23. Instead, the Court held that the matter was delictual. Cf. judgment of 28 July 2016 in VKI v. Amazon, C-191/15, in which the Court held that, where such an association brought proceedings (in Austria) on behalf of consumers resident in that country against a firm established in Luxembourg, the applicable law was, in principle, to be determined by Article 6(1) of the Rome II Regulation (864/2007), i.e. the matter was treated as an issue pertaining to unfair competition. However, insofar as the action aimed to have the defendant ordered to remove certain contractual terms from its standard form contracts as proposed to consumers living in Austria, the legality of those terms was to be judged by the national law designated by Article 6 of the Rome I Regulation.

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decisive role. That principle militates in favour of the law applicable to any contract being determined once and for all at the time that the contract is concluded (subject to the possibility that the parties to that contract may themselves agree to change the applicable law)27. Nowhere does the Rome I Regulation explicitly contemplate the possibility that the law applicable to a claim may change simply because one party has assigned a cause of action to another. What is more, while removing a contract from the scope of Art. 6 might be assumed always to be to the disadvantage of the consumer and his assignee, it is easy to imagine concrete cases where it might in fact operate to the disadvantage of the professional. For example, if a contract to which Art. 6 applies contains no choice of law clause, the law of the country of the consumer’s habitual residence will be applicable. If in fact that law is less protective of the consumer than is the law of the seller’s habitual residence, (which would be the applicable law if the situation did not fall within the scope of Art. 6),28 to hold that the assignment of the rights under that consumer contract displaced the law applicable by virtue of Art. 6 in favour of the law otherwise applicable by virtue of Art. 4 for example would allow the consumer unilaterally to vary the applicable law to the detriment of the other contracting party by the simple expedient of assigning his rights under it. This cannot have been the intention of the Union legislature. c) The Professional 19 Art. 5 Rome Convention did not state whether it was a condition of its application that the

other contracting party be a professional. Nevertheless, since the purpose of that provision was to protect the weaker party there was no reason to apply it to contracts between two private individuals (for example the sale by one individual to another individual of his car).29 Art. 6 makes that condition explicit. 20 However, it does not expressly state whether, in order for a contract to come within its scope,

the professional must know or must reasonably be aware that the other party is acting for a private purpose. On this question, the starting point must be that a professional contemplating the conclusion of a contract with a natural person should be put on notice that he may be dealing with a consumer. Thus, even if it has not been specifically brought to his attention that his contracting partner is acting as a consumer, the professional should not be able to escape the application of Art. 6 unless the consumer has done something to create the impression that he himself is acting as a professional. This conclusion is supported by the Giuliano/Lagarde Report: “Where the receiver of goods or services or credit in fact acted primarily outside his trade or profession but the other party did not know this and, […], should not reasonably have known it, the situation falls outside the scope of Art. 5. Thus if the receiver of goods or services holds himself out as a professional, e.g. by ordering goods which might well be used in his trade or profession on his professional paper the good faith of the other party is protected and the case will not be governed by Art. 5.” 27

28 29

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Rome I Regulation, Art. 3(2). When the parties avail themselves of this option it may not adversely affect the rights of third parties. See Art. 4(1). See Fineschi contre Bouchired (Cour d’Appel, Rouen, 1st September 2005). That court decided that a contract for the rental of a race boat, concluded between a Belgian lessor and a French lessee, was not a consumer contract under Art. 15 (1) Brussels I Regulation. Although the lessee was a consumer, the lessor by trade was in the bakery business so that rental of race boats was outside his trade i.e. he had not concluded the contract as a ‘professional’.

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This approach is confirmed in Gruber which sets out a two stage test in order to determine 21 whether a contract falls within the scope of Art. 13 Brussels Convention.30 Even if the contract is, objectively speaking, a consumer contract, Art. 13 Brussels Convention does not apply when the professional “could reasonably have been unaware of the private purpose […] because the supposed consumer had […] by his own conduct with respect to the other party, given the impression that he was acting for business purposes” such as ordering goods which could be used for business purposes, the use of business stationery, the delivery of goods to the business address or mentioning the possibility of recovering VAT.31 Thus, even if the purchaser is, objectively speaking, a consumer, Art. 6 will not apply if the consumer himself has created the impression that he is acting for business purposes. In this respect, it is suggested, in line with the criteria set out in the Giuliano/Lagarde Report and Gruber, that the test should be whether the seller could have reasonably formed this impression by virtue of the consumer’s own conduct. There seems to be no requirement in this regard that the consumer must have deliberately set out to deceive the professional as to his status. However, if the consumer has deliberately set out to deceive the seller, a fortiori he is not entitled to rely on Art. 6.32 3. The requirement that a contract be concluded A further condition for the application of Art. 6 is that a contract must have been conclu- 22 ded.33 Art. 6 provides no further clues as to how this question should be determined. However, Art. 10(1) provides that inter alia the existence of a contract is to be determined by the law that would govern it if the contract were valid (the putative applicable law). However, Art. 10(2) goes on to provide that a party may invoke the law of his country of habitual residence if it would not be reasonable to determine the effect of his conduct in accordance with the putative applicable law. Should a dispute arise between the parties as to whether they have agreed on the applicable law, Art. 3(5) provides that that question shall likewise be determined inter alia by Art. 10. Those provisions apply to consumer contracts as to any other contract falling within the scope. Their application may give rise to a certain amount of difficulty in a number of situations.34 First, let us imagine that a seller, A, who is habitually resident in country X, claims that he 23 and a buyer, B, who is habitually resident in country Y, have concluded a contract whereby B has agreed to buy goods from A. The putative contract contains no choice of law clause. B disputes that a contract has been concluded but also claims in the alternative that if, quod non, a contract had come into existence it would fall within the scope of Art. 6 and A disagrees on this point too. We are thus faced with the preliminary difficulty of determining 30 31 32

33

34

Case C-464/01 [2005] F-439. Gruber at paragraphs 52 and 53. Cf. Case VIII ZR 91/04 (BGH) in which the applicant, holding himself out as a professional car dealer, had bought a second hand car from the defendant. The Bundesgerichtshof, referring to the passage in the Giuliano/Lagarde Report cited in the previous paragraph, decided that the consumer was not entitled to the benefit of a national consumer protection rule because he had violated the principle of good faith which, it held, deserved precedence over the interests of the dishonest contractor. This point seems obvious but it assumes importance where one party disputes that a contract has in fact been concluded, in particular in the context of bogus prize notifications: see below. See Plender/Wilderspin, (EPILO) Chapter 14, paragraphs 14–060-14–071.

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whether the putative contract falls within the scope of Art. 4 of the Regulation (in which case the applicable law will in all probability be that of the country of habitual residence of the seller, namely country X)35 or of Art. 6, in which case it will be that of country Y. The resolution of this particular point should not pose too much difficulty: the court will simply need to determine within which Art. the putative contract would fall if it were proved to have been concluded. If the putative contract satisfies the conditions for the application of Art. 6, the law of the consumer’s habitual residence will determine whether a contract has in fact been concluded. If the contract, if concluded, would fall within Art. 4, that question will be determined by the law of the seller’s residence as the putative applicable law. Even if under that law the contract has been concluded, the purchaser has a second bite at the cherry since Art. 10(2) allows him to invoke, where reasonable, the law of his habitual residence to show that no contract has come into existence. 24 Secondly, we can refine the first scenario by imagining that the contract contains a choice of

law clause selecting the law of country X (the seller’s law). Assuming that the putative contract would fall within the scope of Art. 6, we have to ask if the issue of whether the contract has come into existence is to be determined by the selected law (country X) or by the law which would apply in the absence of the choice of law clause (that of country Y). There is a strong a priori argument for saying that it should be that of country Y so as to prevent the seller circumventing the ex hypothesi stricter rules of that country as to the conclusion of a contract; this is a fortiori the case in a consumer contract in which the choice of one law by the parties may not have the effect of depriving the consumer of the protection of non-derogable provisions of the law of his habitual residence. However, this is not what Art. 3(5), read in conjunction with Art. 10(1), says. Art. 3(5) refers the existence of consent to the choice of the applicable law to the law designated by Art. 10, paragraph 1 of which refers this question to the law which would apply if the term (in casu the choice of law clause) were valid. Art. 6 does not prevent the parties from choosing the lex causae; it merely circumscribes the effect of that choice and it contains no special rules to select the law determining the issue of whether the consumer has consented to the contract coming into existence. Thus, on a strict reading of Arts. 3(5) and 10(1), the law of country X is the putative lex causae and will determine whether a contract has been concluded. Moreover, the concern that this solution may allow the rules of the “objectively applicable” law to be circumvented is at least partially assuaged by the existence of Art. 10(2) which gives the consumer some protection by allowing him to rely on the law of his habitual residence “if it would not be reasonable to determine the effects of his conduct in accordance with the law specified in paragraph 1”. In our example, the fact that the putative applicable law is that of the seller’s country only by virtue of the choice of law clause, allied to the fact that the contract is a consumer contract, strengthen the argument for concluding that it would not be reasonable to determine the issue of the consumer’s consent by the seller’s law.36 25 Thirdly, Art. 10(2) may be invoked by the seller in particular in the case of bogus prize

notifications where a mail order company sends a communication to a consumer ostensibly informing him that he has won a prize and that, in order to claim the prize, he need only return the ostensible notification or, in some cases, order goods from the company. In reality, as a careful reading of the “notification” reveals, no such promise is made but a 35 36

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Plender/Wilderspin (EPILO) Chapter 7. Plender/Wilderspin, (EPILO) Chapter 14.

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reasonably alert consumer would conclude that it had been. The problem of determining which jurisdictional rules apply in this scenario has already exercised national courts and the European Court in Gabriel, Engler and Ilsinger.37 In Gabriel, the claimant had sent an order for goods to the defendant company which had 26 made this a condition for delivery of the cash prize. As the claimant had demonstrated “his acceptance of the offer – including all conditions attaching thereto” – a contract of sale had been concluded and Art. 13 Brussels Convention thus applied to the claimant’s action to recover the prize.38 In Engler, the defendant had not made it a condition for delivery of the cash prize that the 27 claimant send it an order for goods. The European Court nevertheless held that the matter was contractual within the meaning of Art. 5(1) Brussels Convention since the defendant had “freely assumed” the obligation flowing from the prize notification that it sent to the consumer, who had expressly accepted that notification. Thus, implicitly, the Court seems to accept an objective approach to offer and acceptance: what is important is not the subjective intention of the offeror (who never had the intention of awarding the prize) but, rather, the reasonable belief of the offeree, who believed the contrary. Notwithstanding this characterisation, the Court held that Art. 13 Brussels Convention did not apply to the case since, on its view, that provision applied only to contracts for the sale of goods or services which have given rise to reciprocal and interdependent obligations (paragraph 34). As the claimant had not in fact assumed any obligation towards the defendant because she had not sent an order for goods, the conditions for the application of Art. 13 were not satisfied. The judgment can thus be explained on the comparatively narrow ground that the putative contract (a unilateral contract whereby one party offered to send a cash prize to a consumer if the consumer returned a form) did not fall within the scope of Art. 13 Brussels Convention. In Ilsinger, the facts were similar to those in Engler, but the relevant provision was not Art. 13 28 Brussels Convention but Art. 15 Brussels I Regulation. The Court held (correctly) that the latter provision (like Art. 6) is broader than the former in that it covers all contracts (subject to specific exceptions); it is thus not limited to cases where parties assume reciprocal obligations (paragraph 51). In other words it can apply to unilateral contracts. Thus, if the party that sent the prize notification declares itself unconditionally willing to pay the prize to consumers who request it and a consumer does in fact request that prize, a contract has been concluded within the meaning of Art. 15 (paragraphs 54 and 55). However, the Court went on to hold that where the defendant has not clearly expressed its intention to be bound by a legal commitment that it contracts, “a commercial practice of the kind which has given rise to this dispute could not, without more” fall within Art. 15 (paragraph 56). What precisely does the Court mean by this cryptic formulation? Is it alluding to the fact that, as in all of the mail order cases, the defendant had simply created the impression, without stating it explicitly, that the consumer had won the prize but in fact had no intention of honouring its apparent promise?39 If this is the case, it is difficult to reconcile with the underlying reason37

38 39

Case C-96/00, Gabriel [2002] ECR I-06367; Case 27/02, Engler v. Janus Versand GmbH [2005] ECR I-481; and Case C-186/06, Ilsinger v. Dreschers [2009] E.C.R I-3961. Gabriel at paragraph 48. This point is made more clearly in Engler, where it is stated categorically at paragraph 15 that the consumer was misled into thinking that he had won a prize.

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ing in Engler, which is that such a situation is contractual in nature, despite the real lack of consensus ad idem. Thus, on the basis of the Court’s own reasoning, once the consumer has accepted the offer by returning the notification, a (unilateral) contract should be regarded as having come into existence and, since the restrictive condition that the contract give rise to reciprocal obligations no longer exists, Art. 15 Brussels I Regulation should be applicable to the case. The Court seems vaguely aware of the problem that it has created since it cites Engler at paragraph 57 but it then goes on to state that “such a situation would at most be liable to be classified as pre-contractual or quasi contractual and might therefore, where appropriate, be covered by Art. 5(1)” Brussels I Regulation, a provision which the Court claims has a broader scope than Art. 15 (paragraph 57). This dictum is difficult to reconcile not only with the reasoning in Engler but also with Tacconi,40 in which it was held that culpa in contrahendo liability does not fall within the scope of Art. 5(1) Brussels Convention (or, by parity of reasoning, of the same art. Brussels I Regulation).41 The basic flaw in the Court’s reasoning in Ilsinger is that it fails properly to segregate the question of the characterisation of the issue (Is it contractual or tortious? If contractual does it fall within the scope of Art. 15 Brussels I Regulation?) which should be determined on the basis of uniform criteria, from the concrete question of whether in fact a contract has been concluded (which one would expect to be carried out on the basis of the rules set out in Arts. 3(5) and 10, supra). Instead, the Court laid down the rule of thumb explained above which, if we have understood it correctly, appears to lay down uniform conditions for the purpose of determining whether (at least for the purposes of Art. 15 Brussels I Regulation) a contract has been concluded. 29 For that reason, a certain amount of caution must be used if we attempt to apply the Court’s

reasoning in Engler and Ilsinger to the question whether the factual situations arising in those cases fall within the scope of Art. 6.42 On the hypothesis that the characterisation of the nature of the claim at issue must be carried out according to the methodology employed by the European Court in those cases, the issue is contractual in nature,43 although the obligation is a unilateral one. However, simply determining that the issue is a contractual one does not of itself resolve the question whether a contract has been concluded. Instead, in order to determine the methodology to resolve this issue we must look to Arts. 3(5) and 10. Let us take the case of a putative contract (containing no choice of law clause) that falls within the scope of Art. 6. If the consumer’s law analyses the issue of offer and acceptance on the basis of the objective manifestations of the parties’ apparent consent, it will, in the Engler and Ilsinger type situation, treat a contract as having been concluded. If the seller’s law requires subjective consensus to be proven, the seller may try to invoke Art. 10(2) in order to claim that no contract came into existence. However, it is thought that in such a case (involving not only targeting, but also deliberately misleading, the consumer) it would be unreasonable to allow him to rely on that provision. A more difficult conundrum arises in 40 41

42 43

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Case C-334/00, Tacconi, [2002] ECR I-7357. As regards the Rome I Regulation, “obligations arising out of dealings prior to the conclusion of a contract” are specifically excluded from the scope of that Regulation (Art. 1(2)(i)). The following analysis assumes that the contracts do not contain any choice of law clause. The difficulties that arise when determining whether a relationship is sufficiently contractual to fall within Art. 5 Rome Convention are illustrated by the German cases of: 7 U 199/01 (Oberlandesgericht Brandenburg), 21 U 108/02 (Oberlandesgericht Düsseldorf), and 4 U 686/01 (Oberlandesgericht Saarbrücken). Each case concerned a prize notification sent by a foreign company to a German consumer. Each Court reached a different conclusion using different reasoning.

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the opposite case, where the seller’s law treats a putative consumer contract as having been concluded but the consumer’s law does not. In that case, application of Art. 10(1) leads to the conclusion that no contract has been concluded (since, ex hypothesi, the putative applicable law is that of the country of the consumer) and thus the seller cannot be held liable for breach of contract.44 Of course, in such a situation, the law of the consumer’s country (assuming that it is validly 30 seised of the case) might not characterise the issue as contractual, instead imposing tortious or statutory liability. Given that the Rome I Regulation characterises the issue as contractual but the contract rules that it contains dictate the conclusion that no contract has been concluded, this would raise the difficult issue of whether a national court can impose tortious liability in a situation which Union law regards as contractual but in which national law imposes liability irrespective of whether a contract exists.45 Alternatively, the forum might simply treat its rule as an overriding mandatory provision applicable irrespective of the lex causae. Application of such rules is permitted by both the Rome I Regulation (Art. 9 (2)) and by the Rome II Regulation (Art. 16). 4. The material scope of Art. 6 By contrast with Art. 5 Rome Convention, which applied only to contracts for the sale of 31 goods, supply of services or provision of credit for that purpose,46 Art. 6 applies to all types of contract concluded between a consumer and a professional, with the exception of those specifically excluded. This resolves the problems that courts in Member States had experienced in ascertaining whether, inter alia, contracts for financial trading transactions,47 contracts for loans48 and contracts for timeshare interests in real estate49 were ‘contracts for the supply of services’ within the meaning of Art. 5 Rome Convention. However, even under the Regulation, the definition of “services” retains residual significance since, as we shall see, certain categories of contracts for the supply of services are excluded from the scope of Art. 6. Types of contract which have been held to come within the scope of private international law consumer contract rules include a contract for marriage brokering services,50 a contract for the loan of money which was to be used to fund building works in the consumer’s home state,51 and a contract for the rental of a car which was to be driven in a third country.52

44

45 46 47 48 49

50

51 52

Paradoxically, if the seller had inserted a choice of law clause designating his law as applicable law, Art. 10 (1) in conjunction with Art. 6 (2) would treat the contract as having been concluded. (One assumes that in such circumstances the consumer would have no interest in invoking Art. 10(2)). Plender/Wilderspin (EPILO) Chapter 2. Art. 5(1). 17 U 129/93 (Bundesgerichtshof), RIW 1994, 420. X1 ZR 82/05 (Bundesgerichtshof). VIII ZR 316/96, RIW1997, 875; 20 S 185/98 (Landgericht Bielefeld); and C-423/97, Travel-Vac SL v. Sanchis [1999] ECR 1–2195. Plinert c. Philippen, (Cour de Cassation Chambre Civile I, 12 July 2005) Bulletin Civil 2005 I No 322 p. 287, noted by Lagarde, in: Revue critique de droit international privé [2006] p. 94. Commerzbank A.G. c Knopf (Cour d’Appel Metz, 16 January 2007). Gondallier de Tugny c. Hertz Alisa Car Rental, (Cour d’Appel Paris, 29 April 2003).

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a) Excluded Consumer Contracts 32 Art. 6 Rome I operates without prejudice to Art. 5 (contracts of carriage) and Art. 7 (in-

surance contracts). Recital 31 of the preamble explains that the particular nature of contracts of carriage and insurance contracts means that they should be dealt with by specific provisions and that Art. 6 should therefore not apply to them. Nevertheless, Recital 31 cannot be taken entirely at face value. For example, as regards contracts of carriage, by virtue of Art. 6 (4)(b), package travel may fall within Art. 6. As regards insurance contracts, Art. 7 omits from its scope one important category, namely contracts relating to mass risks (i.e. risks other than large risks) situated outside the territory of a Member State).53 There is no reason in principle to exclude from the scope of Art. 6 insurance contracts which do not fall within the scope of Art. 7 and the wording of Art. 6 does not compel such a conclusion.54 33 By virtue of Art. 6 (4), paragraphs 1 and 2 do not apply to:

(a) a contract for the supply of services where the services are to be supplied exclusively in a country other than that in which the consumer has his habitual residence; (b) a contract of carriage (other than a contract relating to package travel within the meaning of Directive 90/314/EEC); (c) a contract relating to a right in rem in immovable property or a tenancy of immovable property (other than timeshare contracts); (d) rights and obligations which constitute a financial instrument, rights and obligations which constitute the terms and conditions of an issuance or offer to the public/public take-over bid of transferable securities, and subscription/redemption of units in collective investment undertakings in so far as each of these does not constitute provision of a financial service; (e) a contract concluded within the scope of Art. 4(1)(h).55 34 The contracts mentioned in Art. 6 (4)(a) and (b)were equally excluded from Art. 5 Rome

Convention. The exclusion by point (a) of contracts for services to be supplied entirely outside the consumer’s country of habitual residence (an obvious example of which is the provision of hotel accommodation) was defended in the Giuliano/Lagarde Report on the ground that in such cases the consumer cannot reasonably expect the protection of his own law.56 35 Regarding point a), the first question to ask, then, is whether a particular contract is “for the

supply of services”. In Falco Privatstiftung,57 the European Court held that the notion of service in Art. 5(1) Brussels I Regulation is not synonymous with the concept of services within the meaning of Art. 49 of the EC Treaty. Instead, it required some activity or active conduct on the part of the putative provider.58 Thus, the grant of a licence to work a patent 53 54 55

56

57

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Art. 7(1). Plender/Wilderspin, (EPILO, chap 10). Namely a contract concluded within a multilateral system which brings together or facilitates the bringing together of multiple third party buying and selling interests in certain financial instruments. It should be noted that there is no such proviso in the Brussels I Regulation. Thus it is entirely possible that a contract for the provision of hotel accommodation might fall within the scope of Art. 15 of that Regulation but not fall within the scope of Art. 6 of the Rome I Regulation. For an example, see the facts of Case C-144/09, Hotel Alpenhof v. Heller, discussed infra. Case C-533/07, Falco Privatstiftung, [2009] ECR I-3327.

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was not a service. The same argument might be put forward in the case of the loan of money in which there is arguably no activity by the bank. In the judgment in XI ZR 82/05 referred to above, the Bundesgerichtshof indeed came to the conclusion that a loan was not a service within the meaning of Art. 5 Rome Convention. It remains to be seen whether the European Court will restrict the scope of the concept of services so much. If a loan is not a service, such a contract will fall within the material scope of Art. 6 and will thus fall outside the scope of the exclusion established by Art. 6 (4)(a). The exclusion seems perfectly reasonable where the service is easily defined and of necessity 36 provided outside the consumer’s country (such as the provision of a hotel room). However, where the service is of a more mobile nature and is capable of being performed in the consumer’s country, Art. 6 (4)(a) is capable of excluding contracts that merit such protection. Let us suppose that a bank in country A offers mortgage loans to consumers resident in country B for the purpose of enabling the latter to finance the purchase of holiday homes in country A. Once the contract is concluded, the money lent by the bank is transferred directly to the account, in country A, of the seller or his representative. If the loan of money is indeed a service,59 its provision, in this example, has taken place entirely in country A. In that case, the contract would be caught by point a), whereas it would not if the money had initially been paid into the consumer’s account in country B. Thus, in this example, whether Art. 6 is applicable would depend on entirely fortuitous circumstances. It might be possible to avoid this conclusion by holding that the granting of a loan is not a service or, alternatively, if it is a service, by treating the service as consisting not merely in the provision of the loan but in the entire package, including the accompanying advice, at least some of which would in all probability have been provided to the consumer in country B. As regards point (b), the authors of the Giuliano/Lagarde Report purported to explain the 37 exclusion of contracts of carriage from the scope of Art. 5 Rome Convention by the statement that “the special protective measures for which provision is made in Art. 5 are not appropriate for governing contracts of this type”. It was uncertain, however, whether Art. 5 (4) applied only to contracts of the carriage of persons or whether it also applied to contracts for the carriage of goods. As regards the Regulation, this point is now clearly settled by the fact that both types of contract fall within the scope of Art. 5 of that Regulation which applies to contracts of carriage. Point (b) contains an exception to the exclusion for “contracts relating to package travel”. 38 Unlike the cognate provision in Art. 15 (3) Brussels I Regulation, the scope of the exception to the exclusion for package travel is explicitly defined by reference to Directive 90/314/EEC on package travel, package holidays and package tours.60 The drafting of point (b) is rather sloppy in this respect since that directive does not in fact contain a definition of a “contract relating to package travel” but merely defines a “package” as consisting of a combination of at least two of the following, namely transport, accommodation and other services which 58 59

60

See now Case C-469/12, Krejci Lager (the storage of goods constitutes a service). This assumption is open to some doubt since the judgment of the European Court in Falco Privatstiftung, supra. [1990] OJ L 158/59. In the judgment of 7 December 2010, Joined Cases C-585/08 and C-144/09, Pammer/ Alpenhof, [2010] ECR I-12527, Art. 15 (3) Brussels I Regulation was interpreted as having the same scope as Art. 6 (4) (a) of the Rome I Regulation.

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involves overnight accommodation or which lasts at least 24 hours. It is thus possible for a package not to contain any transport component. It is not entirely clear whether packages that contain only services (other than transport) which are entirely carried out outside the consumer’s country (such as a residential French language course in France) is excluded from the scope of Art. 6 by virtue of point (a) or whether it is included by virtue of the exception to point (b). On balance, the second solution is perhaps more likely.61 39 A further category of contracts excluded from the scope of the consumer protection rule is

contracts relating to rights in rem in immovable property or tenancies of immovable property, other than timeshare contracts (Art. 6 (4)c)). Recital 26 of the Regulation refers to this exception but offers no explanation as to why such contracts are excluded. The reason is no doubt that contracts related to immovable property are traditionally subject to the lex situs and, indeed, Art. 4(1)c) of the Regulation subjects such contracts, in the absence of choice by the parties, to the law of the country where the property is situated. 40 The expression “a contract relating to a right in rem in immovable property or a tenancy of

immovable property” is very similar to the expression in Art. 22(1) Brussels I Regulation, which grants exclusive jurisdiction in “proceedings which have as their object a right in rem in immovable property or a tenancy of immovable property” to the courts of the situs. In Webb v. Webb,62 the European Court held that an action brought by a father against his son for a declaration that the latter held property as trustee and an order that the father execute documents to vest legal ownership of the property in the son did not fall within the predecessor of Art. 22(1) Brussels I Regulation since the action was not in rem but in personam. Similarly, jurisdiction relating to disputes arising in connection with a contract for the sale of land would not be determined by that provision.63 However, it is not entirely certain that the same result would apply in relation to the cognate expression in Art. 4(1)c) which refers to “a contract relating to a right in rem” as opposed to the right in rem itself. It could be argued that this expression is broader than its counterpart in the Brussels I Regulation: since the whole point of concluding a contract for the sale of land is to commit the vendor to transfer to the purchaser a right in rem it could be maintained that the contract “relates to such a right”. On the other hand, it may be that the desire to achieve congruency between the two Regulations might lead the European Court to overlook the difference in wording between the two instruments. In any event, a loan of money by, for example, a bank, the purpose of which is to allow the borrower to finance the acquisition of immovable property would not, it is submitted, be regarded as “relating to a right in rem” even if the loan is secured by a charge on the property: the fact that the ultimate purpose of the loan is to permit the borrower to acquire a right in rem is irrelevant to the agreement between the borrower and lender. 41 Timeshare contracts within the meaning of Directive 94/4764 are the subject of a carve out 61

62 63 64

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Mankowski, Consumer Contracts under Art. 6 of the Rome I Regulation, p. 155; Ragno, The Law Applicable to Consumer Contracts under the Rome I Regulation, p. 142; Plender/Wilderspin (EPILO, Chapter 9, para. 9–024). Case C-294/92, Webb v. Webb, [1994] ECR I-1717. Case C-518/99, Gaillard v. Chekili, [2001] ECR I-2771. Directive 94/47/EC on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis, [1994] OJ L 280/83.

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from the scope of Art. 6 (4)(c). However, it is not certain that all timeshare contracts thereby fall within the scope of Art. 6. By virtue of Art. 2 of that Directive, timeshare contracts are defined as “contracts […] under which […] a real property right or any other right relating to the use of one or more immovable properties for a specified or specifiable period of the year.”65 This broad definition encompasses a contract for the provision of services (such as membership of a club entitling the member inter alia to use a property during a specified period). Where such provision represents the essence of a timeshare contract, such a contract does not create a right in rem or a “tenancy of immovable property” within the meaning of Art. 22(1) Brussels I Regulation.66 If this reasoning can be transposed to Arts. 4 and 6, some timeshare agreements will admittedly be characterized as tenancies and, thanks to the explicit “exception to the exclusion” in paragraph 4 c), fall within the scope of Art. 6. On the other hand, timeshare contracts that are essentially contracts for the provision of services will fall within the scope of paragraph 4 (a) of Art. 6 and, where they are supplied exclusively outside the country of the consumer’s habitual residence, they will thus be excluded from the scope of Art. 6. The result is unsatisfactory and probably not what the legislature intended. It may perhaps be avoided if the expression “tenancy of immovable property” in Arts. 4 and 6 is to be interpreted differently from the same expression in Art. 22(1) Brussels I Regulation (which, likewise, cannot have been the intention of the legislature)67 or by a more contextual interpretation that applies the timeshare contracts exclusion by analogy to such contracts even where they are contracts for services (and thus fall within the scope of Art. 6 (4)(a). Art. 6 paragraphs 4(d) and 4(e), which exclude certain contracts pertaining to financial 42 instruments, have no counterpart in Art. 5(4) Rome Convention. Points d) and e) were inserted in order to ensure the correct functioning of financial markets which might otherwise have been jeopardised by the extension of the material scope of Art. 6 to embrace the sale of securities and other financial transactions.68 Point (d) excludes “rights and obligations which constitute a financial instrument and rights 43 and obligations constituting the terms and conditions governing the issuance or offer to the public and public take-over bids of transferable securities and the subscription and redemption of units in collective investment undertakings in so far as these activities do not constitute provision of a financial service”. To the non-initiate, this provision is utterly bewildering and its meaning opaque. 65

66 67

68

Directive 94/47 has been repealed by Directive 2008/122/EC on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange products (“Timeshare II”) (applicable from 23 February 2011). In that directive, the definition of a timeshare contract is simplified: it now means “a contract […] under which a consumer […] acquires the right to use one or more overnight accommodation […].” This change does not affect the point made in the text. Case C-73/04, Klein v. Rhodos Management, [2005] ECR I-8667. In any event, if a timeshare contract falls within the scope of Directive 94/47/EC, where the immovable property is situated in a Member State Member States are obliged by Art. 9 not to allow the purchaser to be deprived of the protection conferred by the Directive whatever the applicable law (in other words Member States must confer the status of an overriding mandatory rule on the national law transposing the Directive). The Timeshare II Directive adds a further circumstance in which the Member States must confer the status of an overriding mandatory rule on contracts falling within its scope: however, that rule is not directly relevant to the point in issue. Garcimartín Alférez, The Rome I Regulation, 89.

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44 One point which is clear is that financial services provided by a professional to a consumer

are not excluded from the scope of Art. 6. This is highlighted by Recital 26 of the preamble, which states that financial services such as investment services and activities referred to in Section A of Annex A to Directive 2004/39/EC on markets in financial instruments69 and ancillary services referred to in Section B of the same Annex should fall within the scope of Art. 6. Examples of investment services and activities in Section A are portfolio management and investment advice and examples of ancillary services within the meaning of Section B are safekeeping and administration of financial instruments and foreign exchange services. 45 As regards the meaning of the first category of contracts falling within the scope of Art. 4(1)

(d), namely “rights and obligations which constitute a financial instrument”, Recital 30 of the preamble specifies that financial instruments and transferable securities are the instruments referred to in Art. 4 of Directive 2004/39. Art. 4 (1), point 17 of that Directive refers to Section C of Annex A, which defines financial instruments as inter alia transferable securities, money-market instruments, units in collective investment undertakings, certain options, futures, swaps, etc, derivative instruments for the transfer of credit risk and financial contracts for differences. This provision excludes only the instrument itself and not contracts for the purchase of such instruments.70 Such contracts will thus fall within the scope of Art. 6 unless they are caught by either the second head of point (d) (public offers) or by point (e).

46 As regards the second category, namely “rights and obligations constituting the terms and

conditions governing the issuance or offer to the public and public take-over bids of transferable securities, transferable securities are defined by point 18 of Art. 4(1) of Directive 2004/39 as ‘those classes of securities which are negotiable on the capital market’, subject to certain exceptions”.71 47 The third category, namely “the subscription and redemption of units in collective invest-

ment undertakings” in so far as these services do not constitute provision of a financial service is probably of limited compass. Units in collective investment undertakings fall within the definition of financial instruments and thus fall within point (a), supra. However, that definition does not extend to certain rights and obligations which do not constitute the instrument as such and thus it was thought prudent to add the third head, which ensures that all subscribers are governed by the same rules as regards issues such as the right to redeem etc.72 48 Recitals 28 and 29 give some explanation as to the ratio legis of the exceptions in Art. 6 (4)

(d). Recital 28 provides that “it is important to ensure that rights and obligations which constitute a financial instrument are not covered by the general rule applicable to consumer contracts, as that could lead to different laws being applicable to each of the instruments 69 70 71

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[2004] OJ L 145/1. Garcimartín Alférez, op. cit., 90. According to Garcimartín Alférez, op. cit., although the Regulation contains no definition of the expressions “issuance or offer to the public” or “public takeover bids”, the definitions of the expressions “offer of securities to the public” and “takeover bid” in the Prospectus Directive and the Takeover Bid Directive respectively may provide a useful starting point. Garcimartín Alférez, op. cit. at 96.

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issued, therefore changing their nature and preventing their fungible trading and offering”. Equally, as regards the issuing or offering of such instruments, “there is a need to ensure uniformity in the terms and conditions of an issuance or offer”. Art. 6 (4) (e) excludes contracts concluded within the type of system falling within the scope 49 of Art. 4(1)(h), namely contracts “concluded within a multilateral system which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments, as defined by Art. 4(1), point 17, of Directive 2004/39/EC in accordance with non-discretionary rules and governed by a single law”. The determination of the contracts falling within the scope of Art. 6 (4)(e) is clearly mod- 50 elled on Art. 4(1), point 15, of Directive 2004/39 which defines the expression “multilateral trading facility” (a key concept to the operation of the Directive) as “a multilateral system, operated by an investment firm or a market operator, which brings together multiple thirdparty buying and selling interests in financial instruments – in the system and in accordance with non-discretionary rules – in a way that results in a contract in accordance with the provisions of Title II”. This exclusion is explained by the third sentence of Recital 28 as being to ensure “that the law of the country of habitual residence of the consumer will not interfere with the rules applicable to contracts concluded within those systems or with the operator of such systems”. In essence, the exclusions in points d) and e) are concerned with financial derivatives and 51 similar instruments; these consist not of tangible money or segmented shares but of a set of promises that can be executed at a later date. As these promises are contractual rights and obligations, they would otherwise fall within the scope of Art. 6. However, because these sets of promises also amount to alike bundles that may be transferred to investors in many different countries, it would be inappropriate to apply different consumer rules to them. The same reasoning applies to multilateral financial trading systems, which conduct multiple sales and purchases of financial instruments with many investors who are resident in different countries, and to public issuances, offers and take-over bids which may involve many investors who are resident in different countries. 5. The circumstances in which Art. 6 applies Art. 6 applies in the following circumstances73: 52 (a) where the professional pursues his commercial or professional activities in the country where the consumer has his habitual residence, or (b) where the professional, by any means, directs such activities to that country or to several countries including that country, 73

Compare Art. 5 Rome Convention which applied: Where, in the country of the consumer’s habitual residence, the conclusion of the contract was preceded by a specific invitation addressed to him or by advertising, and he had taken in that country all the steps necessary on his part for the conclusion of the contract, or Where the other party or his agent received the consumer’s order in that country, or Where the contract is for the sale of goods, and the consumer travelled from that country to another country and there gave his order, provided that the consumer’s journey was arranged by the seller for the purpose of inducing the consumer to buy.

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and the contract falls within the scope of such activities. 53 The interpretation of point (a) should not pose particular problems. It is thought that this

requirement covers inter alia the second situation specified in Art. 5 Rome Convention, namely where the professional or his agent74 receives the consumer’s order in the consumer’s country. In a French case,75 a French consumer reserved a rental car from a German company at one of its offices in France. As the company received the consumer’s reservation in France, this contract fell within Art. 5(3) Rome Convention. 54 Point (b), i.e. where the professional directs his commercial or professional activities towards

the country of the consumer’s habitual residence has been adopted from Art. 15 (1)(c) Brussels I Regulation. It is thought that this subsumes, among other situations, the first and third situations in Art. 5 Rome Convention, namely where the contract has been preceded by a specific invitation addressed to the consumer or by advertising in the country of the consumer’s habitual residence, and where a seller of goods has induced a consumer to buy by arranging for him to travel to another country and to place his order there. 55 Having said that, Art. 6 (1)(b) is broader in scope than the Rome Convention in one im-

portant way. It is intended to deal more precisely with so-called distance contracts, including contracts concluded via the Internet.76 It thus encompasses those situations in which the professional does not have a presence in the consumer’s country of habitual residence, but does make itself known to the consumers in that country through, for example, television broadcasts, telephone calls, the distribution of paper advertising in that country or Internet websites. 56 It is in the nature of the Internet that commercial websites can be viewed in almost any

country. This can result in companies obtaining business from consumers in countries which they had not specifically targeted, thereby entailing the risk of litigation abroad subject to a foreign law. Equally, a consumer may, without leaving the comfort of his armchair, be subject to the same risk if he is not protected. The risk for consumers is even more acute with Internet sales since Internet sellers normally demand pre-payment.77 Furthermore, the risk to which the commercial party is subjected is inherent in cross-frontier business and is in no way peculiar to electronic commerce78 or to business to consumer contracts. Lastly, of course, sellers are quite at liberty not to contract with a particular consumer or more generally with consumers resident in a particular country or countries. Thus the spectre of unwanted liability being thrust upon an unsuspecting seller is at best incongruous and at worst entirely disingenuous. While the business lobby has sought to paint an improbable picture of small companies being deterred from selling on the Internet by the prospect of malevolent consumers lying in wait to harass them with vexatious law74

75 76 77 78

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The term “agent” was intended to cover all persons acting on behalf of the trader – Giuliano Lagarde Report [1980] O.J. C282/1. Gonallier de Tugny v. Hertz Alisa Car Rental (Cour D’Appel Paris) 29 April 2003. Recital 24 of the Rome I Regulation. Magnus/Mankowski, op. cit., 306. Øren, International Jurisdiction over Consumer Contracts in e-Europe 670. See also J Hill, Cross-Border Consumer Contracts at 149–150. The author points out, quite correctly that there is considerably less to ecommerce, from a legal point of view, than meets the eye.

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suits in far-flung lands, this scenario is in reality, given the small amount of money typically at stake, most implausible.79 On the other hand, the argument that consumers are likely to be deterred from purchasing on the Internet unless they are guaranteed the protection of their own law is equally unconvincing. Ultimately, the reason to extend protection to the consumer in the e-commerce field is broadly the same as with any contract, namely the simple fact that the professional is in a stronger position than the consumer and thus better placed to cope with the risks of litigation abroad and under a foreign law.80 As regards the cognate provision in Art. 15 (1)(c) Brussels I Regulation, national courts have 57 tended to interpret the “directed activities” criterion broadly. For example, the Oberlandesgericht Dresden held that, given the nature of the Internet, the only scenario in which websites are not directed towards a particular country is when they explicitly or impliedly exclude commercial contact with consumers in other states. Thus, the website of an undertaking established in the English speaking world which is both in the German language and accessible within Germany is directed to that country even if it can be taken to be directed also to other German speaking countries such as Austria or Switzerland.81 In a well-reasoned judgment, the Landgericht Feldkirch held, quite correctly, that Art. 15 Brussels I Regulation should not be interpreted as conferring in any way less protection on the consumer than did its predecessor.82 Since under the Brussels Convention even advertising could trigger off the application of the consumer protective provisions, it followed that, under the Brussels I Regulation, even a passive website was not ipso facto precluded from being treated as an activity directed towards a particular Member State. Like the Oberlandesgericht Dresden, the Landgericht Feldkirch instead took the view that a contract should be excluded from the scope of Art. 15 only if it could be regarded as an “unplanned-for exceptional phenomenon83”, which would be the case only if the undertaking had implicitly or explicitly excluded commercial contact with consumers in other countries and had, furthermore, behaved in a manner consistent with such an exclusion. This aspect of the judgment was specifically approved by the German Bundesgerichtshof which has ruled that a disclaimer specifying that the products or services are not intended for consumers domiciled in certain Member States is only effective if the subsequent business practice of the website owner conforms to that disclaimer.84 Finally, a Dutch court has held that a website is directed to the Netherlands if the wording and content do not raise any doubt that it is.85 79

80 81 82 83 84

85

Øren, International Jurisdiction over Consumer Contracts in e-Europe, points out that catalogue-sale companies have been facing this risk for years, with no apparent ill effect. Nevertheless, now that the Internet is being used for the sale of more valuable items, such as cars, the risk of litigation may increase. Farah, Allocation of Jurisdiction and the Internet in EU law at 269, describes this as “fairness theory”. 15th December 2004, U 1855/04, 2006 IPRax 44, noted von Hein IPRax (2006) 16. LG Feldkirch, Decision of 20 October 2003, 3 R 259/03s. “Unplanmäßige Ausnahmeerscheinung” in the original German text. A judgment of 30th March 2006, JZ 2006, 1187, 1188. In that case, the jurisdiction of the national court was based not on Art. 15 Brussels I Regulation but on Art. 5(3) Brussels Convention. However, the reasoning of the Bundesgerichtshof is equally applicable to the former provision. In that case, the web-site of a Dutch company was available in German. Although the website indicated that deliveries would not be made to German addresses, the price of the goods offered was nevertheless quoted in Deutsche Mark and in practice deliveries were made to German addresses. In such circumstances, the Bundesgerichtshof had no difficulty in upholding the jurisdiction of German courts. VznGr Den Haag. NJPR 2005, 168.

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58 At the moment of adoption of Brussels I Regulation, the Commission and Council adopted a

Joint Statement on Art. 15 Brussels I Regulation which was not formally published86 and whose value as an aid to interpretation of that instrument might thus be thought to be uncertain. However, Recital 24 of the Rome I Regulation incorporates the essence of that Joint Statement, the status of which is thereby upgraded and whose terms thus repay careful study. The Joint Statement reads in pertinent part: “… for Art. 15 (1)(c) to be applicable it is not sufficient for an undertaking to target its activities at the Member State of the consumer’s residence, or at a number of Member States including that Member State; a contract must be concluded within the framework of its activities. This provision relates to a number of marketing methods, including contracts concluded at a distance through the Internet. In this context, […] the mere fact that an Internet site is accessible is not sufficient for Art. 15 to be applicable, although a factor will be that this Internet site solicits the conclusion of distance contracts, and that a contract has actually been concluded at a distance, by whatever means. In this respect, the language or currency which a website uses does not constitute a relevant factor.”87 59 The first paragraph of the Joint Statement merely restates the terms of the relevant part of

Art. 6 and is thus of limited value as an aid to its construction. 60 The second paragraph, which deals more specifically with the Internet, expressly states that

the mere fact that a company’s website is accessible is not sufficient for Art. 15 Brussels I Regulation (and thus Art. 6) to be applicable.88 It goes on to specify that “a factor” will be that the website ‘solicits distance contracts and that a contract has actually been concluded at a distance, by whatever means’ (emphasis added). It can be seen from this wording that the second paragraph does not distinguish precisely between the two criteria of “directing activities” towards a particular country and the “conclusion of the contract falling within the scope of such activities”. Nevertheless, the context would suggest that the “soliciting distance contracts” factor relates to the first criterion and the “conclusion at a distance” factor to the second. 61 A website must surely solicit the conclusion of contracts at a distance when it induces the

consumer to contract with the company presenting itself on that website by providing an online contracting system through which the consumer can order and pay. The situation is marginally less obvious when the website states that a consumer can purchase goods or 86 87 88

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It is nevertheless available at ec.europa.eu/civiljustice/homepage/homepage_ec_en_declaration. The words in italics are present in the Statement itself but are missing in Recital 24. In its proposal for the Rome I Regulation the Commission states that the sites to which the Declaration refers are not necessarily interactive sites; a site inviting buyers to fax an order aims to conclude distance contracts, in contrast to a site which offers information but which refers customers to a local distributor for the purpose of concluding contracts does not. Cf. the judgment of the Landgericht Feldkirch supra which correctly points out that to exclude from the scope of Art. 6 all contracts the conclusion of which has been induced by a passive website could in some circumstances entail conferring less protection on the consumer than under the regime Rome Convention, which can scarcely have been the intention of the legislature.

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services by telephoning, faxing or posting an order, and publishes alongside the relevant telephone number, fax number or postal address.89 However, the Statement does not make any distinction between interactive and passive websites and so it can be concluded that such websites do solicit the conclusion of distance contracts.90 The Joint Statement is silent, as regards the identification of other factors that may be 62 relevant in determining whether the professional has directed its activities towards the consumer’s country of habitual residence, except that it contains the counter-intuitive and unhelpful statement that the language and currency used by the website are not relevant.91 It has been suggested that the commercial party must be “fishing” for customers in that country.92 This may be a useful starting point, but it still leaves unresolved the question of the precision with which the activities must be directed to a particular country. On this point, the views of the business lobby and those of the consumer lobby are poles apart: at one extreme it can be argued that a professional does not direct his activity to, for example, Lithuania unless he states this explicitly (for example “Dear residents of Lithuania”) or by necessary implication (for example a version of the web-site in Lithuanian, a Lithuanian flag, quotation of the price in Litas and/or the indication of a Lithuanian toll-free telephone number).93 At the other extreme, it can be argued that, given the ubiquity of the Internet, a seller must be taken to intend (or at the very least contemplate) the conclusion of contracts with consumers anywhere in the world unless he can show that he has taken reasonable steps to prevent this possibility as regards consumers resident in a particular country or countries. This second approach seems to have been that of the German and Dutch courts as regards the cognate expression in Art. 15 Brussels I Regulation. The first approach outlined in the previous paragraph would permit a seller easily to evade 63 the operation of Art. 6 by reducing the degree of country-specific targeting while still arranging the website in such a way as to permit the conclusion of contracts with consumers in any country. The second approach would provide a workable solution but would at the same time rob the “directing activities” criterion of any real meaning. It is tentatively suggested that a more balanced approach is needed and that the best route to this is to enunciate a two-stage test. At the first stage, in order to exclude contracts concluded by a website that has a purely local or national vocation, it should be asked whether it can reasonably be concluded that the website owner was intending to solicit contracts outside the country in which he is established. Relevant factors might be the nature of the business, whether the operators of the site are willing to deliver goods to addresses outside that country, whether the website is available only in the language used in the country of the website owner or is also available in a widely used foreign language and whether payment by an internationally 89

90 91 92 93

In this regard, the critical question is whether the website invites the consumer to conclude a contract by one of the means mentioned in the text rather than the provision of the contact details as such. Internet sellers are in any event required to provide on their website inter alia their name and e-mail address (see Art. 5 of the Electronic Commerce Directive 2000/31/EC, [2000] OJ L 178/1). Cf decision of LG Feldkirch of 20 October 2003, footnote 76. Cf judgment of Oberlandesgericht Dresden of 15 December 2004, supra. Magnus/Mankowski, op. cit. at 313. Gillies, Choice of Law Rules for Electronic Consumer Contracts: Replacement Rome Convention by the Rome I Regulation, suggests that ‘directs activities towards’ the consumer’s country of habitual residence means ‘intentionally targets’ that country.

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common credit card is possible. If it can, on the basis of these or other factors, be concluded that the website is soliciting distance contracts abroad, it can prima facie be assumed that the website owner is envisaging selling to consumers resident in any country, including that of the consumer’s country. The second stage would therefore consist in establishing whether the seller has demonstrated that he has taken reasonable steps to prevent this possibility. 64 Such steps might include a disclaimer published on the website stating that the products are

only intended for countries A, B, C or are not intended for country X; a drop down list of countries, excluding country X, with which the professional is prepared to contract; restrictions on access to the website, or relevant parts of the website, when a computer in country X is used; an express statement that a seller of goods will only deliver to countries A, B, C and thus not country X or a declaration, that purchasers are required to sign, that they are not resident in country X or, if they are resident there, are not purchasing as consumers. If one or more such express factors are present then, provided that subsequent business practice conforms to them,94 it can be concluded that the website is not directed towards country X. 65 It is somewhat paradoxical that the Council and Commission dismissed website language

and currency as irrelevant. Common sense would suggest that they cannot simply be ignored but their relevance may depend on the context and should, it is submitted, be restricted to the first stage of the test, i.e. to determining whether the website has an international vocation. For example, if the website of a German company is available in German and in English, this must, it is thought, given the status of English as a widely used international language, indicate that the company is envisaging sales outside its home country. The same conclusion could not be drawn in the case of an English or Irish company’s website which is available only in English. 66 The European Court has now given guidance on the interpretation of the “directed activ-

ities” criterion within the meaning of Art. 15 Brussels I Regulation in Joined Cases C-585/08 and C-144/09, Pammer v. Reederei Schlüter and Hotel Alpenhof v. Heller.95 The Court held, first, that for an activity to be directed towards a particular Member State there must be evidence, before the contract was concluded, that the trader was envisaging doing business with consumers domiciled in other Member States, including that of the consumer’s domicile. Merely providing an e-mail address, a geographical address or a telephone number without an international code would not be relevant evidence to this effect. 67 Despite the fact that merely providing an international dialling code might, if unsupported

by any other indiciae, be thought to be a weak indicator, this criterion was regarded as determinative by national courts in the cases of Mühlleitner96 and Emrek,97 without the conclusion being criticised by the European Court.

94 95 96

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Cf judgment of the Bundesgerichtshof of 30 March 2006, supra. [2010] ECR I-12527. Case C-190/11: Where an Austrian consumer seeking a car of a German make made her research via a German search platform with the indication “de.”, an Austrian court found that the German defendant had directed its activity to Austria solely on the basis of an international dialling code having been affixed. Case C-218/12: French website held to be directed to Germany solely on the basis of an international dialling prefix and the German mobile number of an employee.

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Secondly, the Court held that evidence of such an intention was not restricted to clear and 68 obvious mentions of intention, such as mentioning that state by name, but could include other indiciae, such as the nature of the activity, mention of international telephone codes, use of neutral top level domain names, indicators of itineraries and routes from another Member State and testimonials from foreign customers.98 Thirdly, as regards the use of languages and currencies, the Court accepted the distinction 69 suggested above that the language or currency used on the website could be a relevant factor but only when it was a language or currency other than that generally used in the trader’s country.99 The Court somewhat elides the distinction between directing an activity outside the trader’s 70 country and directing it towards a particular other country. It is thus not entirely clear, where it can be established that the activity is directed abroad, with what degree of precision it must target a given country before it can be said to be directed there. However, it seems to be implicit in the judgment that the degree of precision need not be very great. For example, in paragraphs 82–84 of the judgment, the criteria listed as possible evidence of directing an activity towards another Member State or States are, with the exception of the example of itineraries from other countries, not country specific. It is therefore suggested cautiously that the approach suggested above, namely that once the activity is shown to be international the onus is on the trader to exclude countries with which it does not wish to trade, is the correct one.100 Finally, the contract in question must fall “within the scope of those activities”. It is sub- 71 mitted that this expression means not only that the contract must be within the substantive trade of the professional in general. It must also be within the ‘directing’, in other words the process of marketing undertaken by the professional in the consumer’s country of habitual residence. Only then can the contract be said to be closely connected to that country. For example, if a seller in France sells both cars and bicycles but only advertises cars on the German version of his website, the purchase by a German consumer of a bicycle would not, it is thought, fall within the scope of the directed activity. More problematic is the question whether the presence of this expression means that there must be a causal link between the directed activity and the purchase. As regards the Brussels I Regulation the point is settled by the Emrek judgment, supra, where the Court held that this was not the case. Thus, where the consumer learnt of the existence of the seller through friends he was not precluded from availing himself of Art. 15 of that Regulation provided that the other conditions were met. Logically, the same principle should apply to the Rome I Regulation. However, Recital 25 of the preamble suggests that the contract must be concluded as a result of the directed activity for the situation to fall within the scope of Art. 6. It is thought that the congruency between 98

99 100

Paragraphs 82 and 83. This list is not exhaustive. For a clearly correct application of the Alpenhof criteria, see McDonald v. AZ Sint Elizabeth Hospital [2014] IEHC 88: web-site of Belgian hospital in English, quoting prices in Euros and containing an address for an initial consultation in Ireland as well as an Irish telephone number and testimonials from Irish patients held to be addressed to Ireland. Contra, Harkin v. Towpik [2013] IEHC 351: Polish hospital advertising its services in English through a UK based website and quoting prices in Sterling held not to be directed to Ireland. Paragraph 84. But see Harkin v. Towpik, supra.

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the two Regulations should prevail over the indicator in the preamble which is, moreover, not borne out by the text of Art. 6 of Rome I. 72 It might be contended that consumers should be entitled to receive the protection of special

choice-of-law rules only when they are in the country of their habitual residence when the contract is concluded, since businesses lose their ability to detect the geographical location of the consumer once he moves outside his country of habitual residence.101 However, the requirement in Art. 5(2) Rome Convention that the consumer must have taken “all the steps necessary to conclude the contract” in the country of his habitual residence, is absent from Art. 6. The European Commission gave the reason that “this is a superfluous condition in terms of contracts concluded via the Internet”.102 This overlooks the point that Art. 6 applies to all contracts, not merely those concluded through the Internet. Thus, logically, if a consumer has been enticed by a directed activity, such as a website, to purchase goods but, instead of ordering them over the Internet, goes to the seller’s premises to buy them, this factor should not disentitle him from reliance on Art. 6. This proposition might be thought to be put in doubt by the wording of the Joint Statement, supra, now to be found in Recital 24 of the Rome I Regulation, to the effect that “a factor will be that this Internet site solicits the conclusion of distance contracts, and that a contract has actually been concluded at a distance, by whatever means”. One possible reading of this phrase might be that, where the directed activity consists in an Internet site, the application of Art. 6 is excluded unless the contract is concluded at a distance (not necessarily through the website, but also for example by telephone). 73 The English text does not compel this conclusion: it does not require this condition to be

met, since it merely states that conclusion of the contract at a distance is “a factor”. However, the French and German texts are more prescriptive: they imply that the conclusion of the contract at a distance is a condition for the application of Art. 6.103 Normally, it is a principle of Union law that each language text is equally authentic; however, in this particular instance, it is common ground that the Joint Statement was drafted only in English. Logically then, the English text should prevail.

74 If this conclusion is wrong, and the French and German texts prevail, the result is that the

Joint Statement is reading in a condition that is flatly contrary to the wording of Art. 6 and, given its lack of formal status, should be ignored on this point. This is effectively what the Court did in Mühlleitner,104 a case on the interpretation of Art. 15 Brussels I Regulation, in which it referred to the travaux préparatoires, but not to the Joint Statement, to support its conclusion that that provision applied to contracts concluded in the presence of the seller. As to the point that the text of the Joint Statement is now to be found in Recital 24, it still remains the case that a Recital cannot be relied on to support a meaning that is contrary to the Article to which that Recital refers. Thus, it is suggested, the ratio of Mühlleitner can be transposed to the context of Art. 6.

101

102 103 104

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For perspectives on this issue see Gillies, Choice of Law Rules for Electronic Consumer Contracts: Replacement Rome Convention by the Rome I Regulation, at page 108–109. COM/2005/0650 Final – COD 2005/0261. French text: “encore faut-il que” and German text: “vielmehr ist erforderlich”. Case C-190/11.

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Finally, it is worth reserving a short word about the supposed impact of the Electronic 75 Commerce Directive on the conflict of law rules established by the Rome I Regulation. There is still a lively (and somewhat ill-tempered) dispute as to whether that Directive lays down tacit conflict of law rules for electronically concluded contracts that fall within its inaptly named “coordinated field”. Detailed consideration of this debate is beyond the scope of this chapter105 but the orthodox (and better) view that it does not106 has been placed in some doubt by the delphically worded judgment of the European Court in eDate v. Martinez.107 In any event, this dispute has no relevance to consumer contracts since these are specifically excluded from the operation of the provisions of that Directive (Art. 3(1) and (2)) which proponents of the other (incorrect) view claim to contain tacit conflict rules. 6. The Protection Afforded to Consumer Contracts Two consequences flow from the fact that a concluded contract falls within the scope of 76 Art. 6. By virtue of paragraph (1), in the absence of an express or implied choice of law, the contract will be governed by the law of the country of habitual residence of the consumer. By Art. 6 (2), an express or implied choice of law in accordance with Art. 3 does not deprive the consumer of the protection afforded by those rules of the country in which he has his habitual residence which cannot be derogated from by agreement. The result of this technique is that the consumer may rely on the rules which cannot be derogated from by agreement of either the chosen law, or those of the law of his habitual residence, whichever are the more favourable to him.108 The words “provisions that cannot be derogated from by agreement”, as in Art. 3(3) are rules 77 from which the parties cannot opt out in a purely domestic situation, in a contract containing no choice of foreign law.109 The question whether a particular rule is a “provision that cannot be derogated from by contract” within the meaning of Art. 6 must be determined in accordance not with the lex fori or the lex causae (i.e. the chosen law) but with the law of the country in which the consumer is habitually resident. This may present the judge with difficult problems of interpretation if that law is not also the lex fori. In practice, in a large proportion of cases where Art. 6 falls to be applied, the consumer will 78 have been able to avail himself of the possibility, offered by the regime of Arts. 15–17 105

106

107 108

109

For a succinct résumé of the different schools of thought, see Hellner, The Country of Origin Principle in the E-commerce Directive: A Conflict with the Conflict of Laws?. Plender/Wilderspin (EPILO) 360–361; J Hill, Cross-Border Consumer Contracts, 335–336. For the contrary view see for example Mankowski, Das Herkunftslandprinzip als Internationales Privatrecht der ecommerce Richtlinie. Joined Cases C-509/09 and C-161/10, [2011] ECR I-10269. Morse, The EEC Convention on the Law Applicable to Contractual Obligation, at 136–137. For a contrary view see Philip, Mandatory Rules, Public Law (Political Rules) and Choice of Law in the EEC Convention on the Law Applicable to Contractual Obligations, in: Contract Conflicts at p. 81, and Moquin contre Deutsche Bank, (19 October 1999 Cour de Cassation); Case X1 ZR 82/05 (Bundesgerichtshof); and Case 20 S 185/98 (Landgericht Bielefeld). Recital 37 of the Rome I Regulation reads: “The concept of ‘overriding mandatory provisions’ should be distinguished from the expression ‘provisions which cannot be derogated from by agreement referred to for example in Art. 3(3) and should be construed more restrictively’”.

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Brussels I Regulation, of suing the seller in the country where the consumer is domiciled. If he has availed himself of that option, the country whose provisions that cannot be derogated from by agreement will also be the forum.110 This will mean that the court that has jurisdiction will more easily be able to determine whether one of its own national rules is a provision that cannot be derogated from by contract for the purpose of Art. 6 (2). 79 With regard to the question whether the provisions that cannot be derogated from by

contract for the purpose of Art. 6 (2) can be applied in the alternative as overriding mandatory rules of the forum,111 opinion is divided. Some commentators and judges have drawn distinctions between private law consumer protection provisions, public law provisions to do with Regulation of society, and public policy provisions enacted for political or economic purposes.112 According to this school of thought, private consumer protection laws can be applied as provisions that cannot be derogated from by contract under Art. 6 (2)113 but, when the conditions of Art. 6 are not fulfilled, those provisions cannot be applied under Art. 9 as overriding mandatory provisions of the forum. The Cour de Cassation stated in the case of Moquin v. Deutsche Bank114 that Art. 7 Rome Convention (the predecessor of Art. 9) relates to public law rules only and not laws protecting consumers. The Bundesgerichtshof decided in Case X1 ZR 82/05115 that in order to fall within the scope of Art. 34 of the EGBGB (the German Civil Code’s version of Art. 7(2) Rome Convention), provisions must (unless the national legislature has explicitly stipulated that they are to apply irrespective of the applicable law) have the common weal as their main purpose. The Landgericht Bielefeld had taken a similar approach in an earlier judgment,116 holding that Art. 34 EGBGB could not apply where Art. 29 EGBGB (Art. 5 Rome Convention) conditions were not fulfilled, because Art. 34 should not circumvent the non-applicability of Art. 29.117 80 On the other hand, it can be argued that Art. 9(2) Rome Convention is not subordinate to

Art. 6 thereof. Thus, where the country of the consumer’s habitual residence is also the forum, even if the conditions for the application of Art. 6 are not satisfied, a mandatory 110

111 112

113

114 115 116 117

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Subject to the rather remote possibility that the country of the consumer’s domicile, within the meaning Brussels I Regulation, is not the same as that of his habitual residence within the meaning of the Rome I Regulation. Under Art. 9(2) of the Rome I Regulation. Morse, The EEC Convention on the Law Applicable to Contractual Obligation, at 136–137 and Philip, Mandatory Rules, Public Law (Political Rules) and Choice of Law in the EEC Convention on the Law Applicable to Contractual Obligations, at p. 84–94. Morse, The EEC Convention on the Law Applicable to Contractual Obligation, at 136–137. For a contrary view see Philip, Mandatory Rules, Public Law (Political Rules) and Choice of Law in the EEC Convention on the Law Applicable to Contractual Obligations, at p. 81, and see Moquin contre Deutsche Bank (19 October 1999 in the Cour de Cassation); X1 ZR 82/05 in the Bundesgerichtshof; and 20 S 185/98 in the Landgericht Bielefeld 1999. 19 October 1999, reported Bulletin Civil 1999 I No 281 page 183. 13 December 2005. 20 S 185/98 27th May 1999. By contrast with these cases see Richt contre Societe Commerzbank (Cour de Cassation, 23 May 2006), in which it was held that the French consumer protection rules applied as mandatory rules of the forum under Art. 7(2) Rome Convention, even though the conditions for the application of Art. 5 Rome Convention were not met.

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consumer protection rule of that country can nevertheless be applied pursuant to Art. 9(2), on condition of course that by virtue of the lex fori that rule was applicable irrespective of the law applicable to the contract.118 The point may thus be regarded as still open. However, Art. 9 introduces a definition of overriding mandatory rules that is more restrictive than its counterpart in the Rome Convention and which may thus reduce the scope for overlap between the two types of mandatory rule. Where no choice of law has been made, a contract to which Art. 6(2) applies, if entered into 81 in the circumstances described in Art. 6 (1), is governed by the law of the country in which the consumer has his habitual residence. The formal validity of a contract to which Art. 6 applies, concluded in the circumstances 82 described in Paragraph 1 of that Art., is governed by the law of the country in which the consumer has his habitual residence.119 The effect of these provisions, taken as a whole, is to secure for the consumer the protection 83 of the mandatory rules of the country of his habitual residence whether litigation is brought in that country or in any other country in which the Regulation is in force; moreover it achieves this end without depriving the consumer of the protection of any law chosen in accordance with Art. 3. III. The Relationship between the Conflict of Law Rules in Art. 6 and Consumer Protection Provisions in EU Legislation A number of European Union directives that have been enacted to protect consumers 84 contain provisions which interact with Art. 6. Early directives of this kind did not clearly articulate their impact on the conflict of laws process. For example, the now repealed Directive 85/577120 to protect the consumer in respect of contracts negotiated away from business premises required the Member States to ensure that consumers have a right of cancellation within not less than seven days (Arts. 4 and 5). The directive followed the then prevailing technique of establishing minimum standards only and it specifically left the Member States free to apply provisions more favourable to consumers (Art. 8). The directive contained no specific provisions regarding its application to contracts not 85 governed by the lex fori. However, its Art. 6, which specified that consumers might not waive the rights conferred by the directive, implied that national transposition measures should be considered to be non-derogable rules within the meaning of Art. 6, but that the directive did not require its protection to be extended to other situations.121

118

119 120 121

The same conclusion is reached by the editors of Dicey, Morris and Collins (14th edition, Sweet and Maxwell, 2006) at 1648, Plender/Wilderspin (EPILO), Chapter 9, paragraph 9–067 and Sinay-Cytermann, La protection de la partie faible en droit international privé, 745–746. Art. 11(4). [1985] O.J. L372/31. In a judgment of 19 March 1997 the Bundesgerichtshof accepted that the national provisions transposing the directive were mandatory rules within the meaning of Art. 5 and left open the question whether they might be “internationally mandatory rules” within the meaning of Art. 7.

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86 The first and second wave of Gran Canaria cases122 decided by German courts indicate that

there may be situations where the failure to include any specific conflict of laws provisions in a directive permits contracting parties to evade the minimum standards which the directive seeks to ensure for consumers, even when all, or the majority, of the relevant circumstances are connected with one or more European Union Member States. 87 In the first generation of cases, the basic scenario was as follows: A German firm, acting via

an agent in Spain, concluded transactions away from business premises whereby household goods were sold to German tourists holidaying in the Canary Islands. Those goods were to be delivered to the holidaymakers on their return to Germany. In the majority of cases it was stipulated that the law applicable to the contract was Spanish law. Upon their return home, the tourists wished to avail themselves of their right under German law,123 and in conformity with Directive 85/577, to cancel the contracts. However, at the material time Spain had not transposed the directive and thus the right of cancellation was not guaranteed by the lex causae. Nor had the contracts been concluded in the conditions required by Art. 5 Rome Convention. A proper application of Art. 5 of the Convention therefore failed to guarantee the consumers the right of cancellation to which they should have been entitled under the directive. 88 The facts of the second generation of cases involved German tourists who, while on holiday

in Spain, had been persuaded to sign contracts for the acquisition of an interest in real property on a timeshare basis in that country. The vendors were companies established in the Isle of Man. The purchasers later wished to cancel the contracts. This would have been possible under both German and Spanish law124 but the contracts contained a choice of law clause selecting Manx law, which apparently did not provide for such a possibility. Leaving aside the question whether the contracts fell ratione materiae within Art. 5 Rome Convention, they had not been concluded in the circumstances envisaged by that Art. and the provisions of German law could not therefore be applied as mandatory rules within the meaning of that Art.125 Nor was there any reason to apply the provisions of Spanish law, although the contract related to the right to use real property in that country.126 89 Assuming that the Bundesgerichtshof was correct in its conclusion that Art. 6 of the Direc-

tive merely contained a non-derogable, as opposed to an overriding, rule,127 the Gran Ca122

123

124 125

126

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For an extremely thorough discussion of the legal problems raised by the first generation of Gran Canaria cases see “Das IPR der Gran-Canaria-Fälle” in Brödermann/Iversen, Europäisches Gemeinschaftsrecht und Internationales Privatrecht Part II, Chapter 3, pp. 387–418. Art. 1(1)(3) of the Gesetz über den Widerruf von Haustürgeschäften und ähnlichen Geschäften (Law on the cancellation of Doorstep and similar sales, known as the “Haustürwiderrufsgesetz”). Spain had in the intervening period transposed Directive 85/577. Lower German courts displayed considerable ingenuity in trying to find ways to apply German law. In a judgment of July 13, 1995 (19 O 21/95, RIW 1996, 424), the LG Stuttgart applied German law via Art. 8(2) of the Convention, and in a judgment of February 13, 1996 (17 U 28/95, RIW 1996, 963) the OLG Celle applied Art. 1 of the Haustürwiderrufsgesetz as a mandatory rule under Art. 7(2) of the Convention. Both these routes were firmly barred by the judgment of the BGH of 19 March 1997, BGHZ 135, 124, discussed supra. Presumably Spanish law would have been applicable, by virtue of the presumption of Art. 4 (3) of the Convention, if the parties had not chosen another law.

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naria cases show that it was comparatively simple for a seller to evade the application of the minimum standard of protection which the Directive aimed to ensure, by inserting in the contract a clause selecting either the law of a Member State which had not transposed the Directive or that of a non-member country which did not apply an equivalent provision. Neither Art. 5 nor Art. 3(3)128 Rome Convention was adapted to dealing with this type of situation. The lacunae revealed by the Gran Canaria cases have been tackled in a twofold manner by 90 the legislature. First, Art. 3(4) preserves the application of non-derogable provisions of Union law in situations where the parties have chosen the law of a third country, and the contract has connections with more than one Member State but no connections with any third country. That provision is the logical extension of Art. 3(3) of the Regulation to intraUnion situations.129 It may be useful, but its compass is limited since it applies only i) where the law chosen is that of a third country and ii) there is no objective connection with any third country. Thus, in the second Gran Canaria case, it is questionable whether Art. 3(4) would have guaranteed the operation of Directive 85/577 since there was an objective connection with the Isle of Man in that the vendor was registered there albeit the overwhelming preponderance of factors were connected with a Member State (place of conclusion of contract, location of the property, nationality and residence of the buyer). Second, consumer protection directives adopted since the 1990’s have sought to address this 91 type of problem by inserting explicit conflict of laws provisions which enact what may be regarded as a kind of overriding mandatory provision. However, the connecting factor used to define the spatial application of the relevant rule in the appropriate Directive is not the same in each Directive. The first of these, Directive 93/13/EEC on unfair terms in consumer contracts,130 approximates the laws of the Member States relating to unfair terms in contracts concluded between a seller or supplier and a consumer (Art. 1). Art. 3(1) provides that a “[…] contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer”, and Art. 3(2) stipulates that a term shall always be regarded as not individually negotiated when it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term. An indicative and non-exhaustive list of terms which may be regarded as unfair is contained 92 in the Annex. Art. 6 (1) of the directive obliges the Member States to provide that unfair terms used in a consumer contract do not bind the consumer, and Art. 6 (2) provides that: 127

128

129 130

Cf. judgment in Ingmar reference (similarly worded provision in a directive containing no specifications as to its spatial application held to have the status of an overriding mandatory rule). A strict interpretation of Art. 3(3) would exclude its application in limine in this type of case, since there were connections with at least two countries, namely Germany and Spain. Even if Art. 3(3) were to be interpreted broadly, so as to assimilate the Community to a single country-at least where the mandatory rule finds its origin in Community law-it might still have been of no avail to the purchasers in this type of case, since the vendors were a company established in the Isle of Man. The selection of that country’s law was not therefore entirely unconnected with the situation. Plender/Wilderspin (EPILO) Chapter 6. [1993] O.J. L95/29.

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“Member States shall take the necessary measures to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-Member country as the law applicable to the contract if the latter has a close connection with the territory of the Member States.” 93 Secondly, Directive 2008/122/EC on the protection of consumers in respect of certain as-

pects of timeshare, long-term holiday product, resale and exchange contracts131 which replaces Directive 94/47/EC on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis132 lays down certain obligations concerning the information which a vendor of timeshare rights must make available to a purchaser of such rights and the procedures and arrangements for cancellation and withdrawal from timeshare contracts. The Directive requires the Member States inter alia to ensure that vendors supply the purchasers with relevant information, that the purchaser has the right of withdrawal from the contract within 14 days of its being signed and that the advance payments by the purchaser during the cooling off period are prohibited. Art. 12 stipulates that: “1. Member States shall ensure that, where the law applicable to the contract is the law of a Member State, consumers may not waive the rights conferred on them by this Directive. 2. Where the applicable law is that of a third country, consumers shall not be deprived of the protection granted by this Directive, as implemented in that Member State of the forum, if: – any of the immovable properties is situated within the territory of a Member State, or, – in the case of a contract not directly related to immovable property, the trader pursues commercial or professional activities in a Member State or, by any means, directs such activities to a Member State and the contract falls within the scope of such activities.” 94 There is no clear articulation between the directives in question and the Rome Regulation,

Art. 23 of which stipulates that: “With the exception of Art. 7 this Regulation shall not prejudice the application of provisions of Community law which, in relation to particular matters, lay down conflict-of-law rules relating to contractual obligations.” 95 The clear intention of that provision is to allow the choice of law rules contained in directives

to prevail over the rules contained in the Rome I Regulation, whenever the two sets of rules conflict. 96 The following points need to be borne in mind. First, neither directive directly affects the

way in which the Regulation’s choice of law rules operate. They do not therefore have a direct impact on Art. 6 which continues to apply in appropriate cases. What the directives do is require the Member States to enact what may be regarded as a form of “overriding” rule, to 131 132

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[2009] OJ L 33/10. [1994] O.J. L280/83.

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be applied in the circumstances envisaged by the relevant directive and which, so far as the application is concerned, may probably best be regarded as a type of overriding mandatory rule within Art. 9. In the second place, the formula used to define spatial application of the overriding rule is different.133 This factor, allied to the point that the scope of the directives may overlap,134 may cause difficulties if an international consumer contract falls within the scope of more than one directive, since each directive may contain a different conflict rule and hence dictate a different answer. More recently, the Union legislature enacted a new, more encompassing, Consumer Rights 97 Directive.135 The consumer protection conferred by the Directive contains more uniform rules, as opposed to minimum standards, than did its predecessors, which ipso facto reduces the scope for intra-Union conflict of laws problems. Unlike its predecessors, the Directive attempts to ensure a better articulation with the choice of law rules in the Rome I Regulation. Art. 25, entitled “Imperative nature of the Directive” provides that “if the law applicable to the contract is the law of a Member State, consumers may not waive the rights conferred by the national measures transposing this Directive”. If read alone, that provision might imply that the intention of the legislature was to permit parties to evade the provisions of the Directive by selecting the law of a third country. That this is not the case is implied by Recital 58 which states that “Where the law applicable to the contract is that of a third country, [the Rome I Regulation] should apply in order to determine whether the consumer retains the protection granted by this Directive”. The intention is thus clear: the rules of the proposed Directive cannot be derogated from by 98 agreement (i.e. are domestically mandatory or non-derogable within the meaning of Art. 3 (3) and (4) and Art. 6 Rome I), but are not overriding mandatory provisions in the sense of Art. 9 of that Regulation. If the parties choose the law of a third country where all the elements are relevant to one or none Member States, the protection of the Directive will be ensured by the operation of Art. 3(3) or, as the case may be, Art. 3(4). If the parties choose the law of a third country in circumstances in which Art. 6 applies, the protection of the directive will apply, qua domestically mandatory rules, by virtue of Art. 6 (1) and (2). 1. International Conventions International conventions on sales have tended not to contain specific provisions on con- 99

133

134

135

The formula used in Directive 93/13 applies only on condition that the applicable law is that of a third state by virtue of the choice of the parties, and would therefore not apply either if the law of a third country were the applicable law by virtue of Art. 4 of the Rome I Regulation or if the applicable law were that of a Member State which had not transposed the Directive. A further condition is that the contract must have a “close connection” with the territory of one or more Member States. How close this connection must be is not defined. The rule formulated in Directive 2008/122 is in one respect simpler in that it defines more precisely the connecting factor (namely the fact that the immovable property is situated in a Member State) where the applicable law is that of a third country. See Travel Vac, (C-423/97, Travel-Vac SL v. Sanchis [1999] ECR 1–2195) in which the European Court stated that the fact that a type of contract is specifically covered by one consumer protection directive (in casu Directive 94/47) does not preclude it falling within the scope of another (in casu Directive 85/577). Directive 2011/83 on consumer rights [2011] OJ L 304/64.

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sumer sales or the law applicable to such sales. However, certain of those conventions do contain provisions which are capable of interfering with the operation of Art. 6.136 2. Uniform Laws 100 The first potentially relevant convention is the Convention of July 1964 relating to a Uni-

form Law on the International Sale of Goods,137 conducted under the auspices of UNIDROIT. The Uniform Law applies to contracts for the sale of goods entered into by parties whose places of business or habitual residence are in the territories of different States: (a) where the contract involves the sale of goods which are at the time of the conclusion of the contract in the course of carriage or will be carried from the territory of one State to the territory of another; (b)where the acts constituting the offer and acceptance have been effected in the territories of different States; or (c) where delivery of the goods is to be made in the territory of a State other than that within whose territory the acts constituting the offer and acceptance have been effected. 101 The Uniform Law establishes a self-contained code of the obligations of buyer and seller. By

Art. 2: “Rules of private international law shall be excluded for the purposes of the application of the present Law, subject to any provision to the contrary in the said Law”. By virtue of Art. 4, the Uniform Law applies by virtue of a choice by the parties even if their places of business are not in States Parties to the Convention, without prejudice to the application of mandatory provisions of the otherwise applicable law. Art. 5(2) provides that the Uniform Law shall not affect the application of any mandatory provision of national law for the protection of a party to a contract which contemplates the purchase of goods by that party by payments of the price by instalments.

102 The only parties to the 1964 Convention are the Gambia, Israel, San Marino and the United

Kingdom.138 Since the United Kingdom has availed itself of its right to declare i) that the Uniform Law shall apply only if the parties have their places of business in different Contracting States139 and ii) that it shall apply only by virtue of a choice of the parties,140 the scope for the Uniform Law to interfere in any way with the operation or of Community consumer protection rules is very limited. 103 The United Nations (UNCITRAL) Convention on Contracts for the Sale of Goods141 con136

137 138

139 140 141

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By virtue of Art. 25(1), the Rome I Regulation does not prejudice the application of international conventions which lay down conflict of law rules relating to contractual obligations to which one or more Member States are parties at the moment of adoption of the Regulation. It is unlikely that uniform law conventions fall within the scope of that provision: however, insofar as such conventions merely lay down uniform rules and define the spatial application of those rules, they are unlikely to affect the operation of the rules of the Rome I Regulation. Available at www.unidroit.org. Belgium, Germany, Italy, Luxembourg and the Netherlands, which were formerly parties to the Convention, have since denounced it. This right is established by Art. III of the Convention. This right is established by Art. V of the Convention. Vienna, 11 April 1980, Cmnd 8074 (1980) 19 I.L.M. 671.

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tains an exclusion in favour of sales of goods bought for person, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use.142 3. Private International Law Conventions Art. 25 (1) provides that the Regulation does not prejudice the application of “international 104 conventions to which one or more Member States are parties at the time when this Regulation is adopted and which lay down conflict-of-law rules relating to contractual obligations”. That provision thus accords precedence to any private international law conventions whose scope overlaps inter alia with that of Art. 6. Five Member States143 are parties to the 1955 Hague Convention of 15 June 1955 on the law 105 applicable to the International Sale of Goods. That convention applies, subject to certain specifies exceptions, to all contracts, including consumer contracts. In particular, it allows the parties an unrestricted right to choose the applicable law (Art. 3) and contains no saving for the mandatory rules of the law of the purchaser’s country other than an across the board possibility of invoking ordre public (Art. 6). Since the Convention contains no provision permitting different conflict rules to prevail the potential for it to conflict with the conflict rules designated by the Rome I Regulation is manifest. However, at its Fourteenth Session in 1980, the Hague Conference declared that Contracting States to the 1955 Convention could enact specific conflict of law rules for consumer contracts without infringing their obligations under that convention. On the same occasion, the Hague Conference adopted a draft convention referred to as the 106 Hague Arts. on the law applicable to certain consumer sales. The Hague Arts. would apply to certain contracts for the international sale of goods bought primarily for personal, family or household use, where the seller acts in the course of his business or profession and knew or ought to have known that the goods were being bought primarily for any such use. By Art. 5, the Hague Arts. would apply: (1) where the negotiations were conducted mainly in the country in which the consumer had his habitual residence and he took there the steps necessary on his part for the conclusion of the contract; (2) where the seller or his representative received the order in the country of the consumer’s habitual residence; (3) where the order was preceded by a specific invitation addressed to the consumer in his country of habitual residence or by advertising or other marketing activities undertaken in and directed to that country, and the consumer there took the steps necessary on his part for the conclusion of the contract; (4) where the seller arranged for the consumer to travel from his country of habitual residence to another country to induce the consumer to give his order there. The internal law chosen by the parties would govern but would not deprive the consumer of 107 the protection afforded by the mandatory rules of the internal law of the country in which he had his habitual residence at the time the order was given. In the absence of such a choice of 142 143

Art. 2 (a). Denmark, France, Finland, Italy and Sweden.

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law, the contract would be governed by the law of the country in which the consumer had his habitual residence.144 108 As can be seen, the Hague Arts. contain rules which are similar but not identical to those in

the Rome I Regulation. If they, or any similar rules, were ever to be adopted as an international convention, it is clear that they would “affect” the operation and, by virtue of the principle of pre-emption, could thus be adopted only by the Community (as opposed to its Member States).145 109 Finally, the Hague Convention of 14 March 1978 on the Law of Agency has been ratified by

Argentina, France, the Netherlands and Portugal. That Convention allows unrestricted party choice, in the absence of which the applicable law is that of the agent’s habitual residence. 110 Although that convention might not be expected to interfere with the operation of Art. 6, it

nevertheless has the potential to do so. In Plinert v. Philippen,146 a marriage broking contract was held, correctly it is submitted, to fall within the scope of Art. 5 (3) Rome Convention. However, the scope of the contract went beyond merely providing a list of names: the agency undertook to seek a potentially suitable bride from among its pool of clients and it thus fell within the scope of the Agency Convention as a case “where the function of the agent is to receive and communicate proposals or to conduct negotiations on behalf of other persons”. 111 To this limited extent, the 1978 Hague Agency Convention would prevail over Art. 6 and,

moreover, the overlap between the two instruments would preclude further ratification of the Convention by any Member States which might wish to do so.147 Article 7: Insurance contracts 1. This Article shall apply to contracts referred to in paragraph 2, whether or not the risk covered is situated in a Member State, and to all other insurance contracts covering risks situated inside the territory of the Member States. It shall not apply to reinsurance contracts.

144 145

146

147

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Arts. 6 and 7. On this point, see Case 22/70, Commission v. Council, [1971] ECR 263; Opinion 1/03 of the European Court, [2006] ECR I-1145, Wilderspin/Rouchaud-Joët, La compétence externe de la Communauté européenne en droit international privé, 2004 Revue critique de droit international privé, 1, Plender/Wilderspin, (EPILO), Chapter 1, paragraphs 1–049-1.057. Such a convention would not fall within the scope of Regulation (EC) No 662/2009 establishing a procedure for the negotiation and conclusion of agreements between Member States and third countries on particular matters concerning the law applicable to contractual and non-contractual obligations (2009 OJ L 2000/25) since that Regulation applies only to Member States’ bilateral agreements with third countries and to agreements with third countries which border on the Member States concerned and which is designed only to address local issues. Cour de cassation, 1ère Chambre civile, 12 juillet 2005, 2006 Revue critique de droit international privé, note Lagarde p. 94. The remark concerning the relationship between the draft Hague Articles and Regulation 662/2009 applies equally to the Hague Agency Convention.

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2. An insurance contract covering a large risk as defined in Article 5(d) of the First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance1 shall be governed by the law chosen by the parties in accordance with Article 3 of this Regulation. To the extent that the applicable law has not been chosen by the parties, the insurance contract shall be governed by the law of the country where the insurer has his habitual residence. Where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with another country, the law of that other country shall apply. 3. In the case of an insurance contract other than a contract falling within paragraph 2, only the following laws may be chosen by the parties in accordance with Article 3: a) the law of any Member State where the risk is situated at the time of conclusion of the contract; b) the law of the country where the policy holder has his habitual residence; c) in the case of life assurance, the law of the Member State of which the policy holder is a national; d) for insurance contracts covering risks limited to events occurring in one Member State other than the Member State where the risk is situated, the law of that Member State; e) where the policy holder of a contract falling under this paragraph pursues a commercial or industrial activity or a liberal profession and the insurance contract covers two or more risks which relate to those activities and are situated in different Member States, the law of any of the Member States concerned or the law of the country of habitual residence of the policy holder. Where, in the cases set out in points (a), (b) or (e), the Member States referred to grant greater freedom of choice of the law applicable to the insurance contract, the parties may take advantage of that freedom. To the extent that the law applicable has not been chosen by the parties in accordance with this paragraph, such a contract shall be governed by the law of the Member State in which the risk is situated at the time of conclusion of the contract. 4. The following additional rules shall apply to insurance contracts covering risks for which a Member State imposes an obligation to take out insurance: a) the insurance contract shall not satisfy the obligation to take out insurance unless it complies with the specific provisions relating to that insurance laid down by the Member State that imposes the obligation. Where the law of the Member State in which the risk is situated and the law of the Member State imposing the obligation to take out insurance contradict each other, the latter shall prevail; b) by way of derogation from paragraphs 2 and 3, a Member State may lay down that the insurance contract shall be governed by the law of the Member State that imposes the obligation to take out insurance. 5. For the purposes of paragraph 3, third subparagraph, and paragraph 4, where the contract covers risks situated in more than one Member State, the contract shall be considered as constituting several contracts each relating to only one Member State. 6. For the purposes of this Article, the country in which the risk is situated shall be determined in accordance with Article 2(d) of the Second Council Directive 88/357/EEC of 22 June 1988 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to 1

OJ L 228, 16.8.1973, p 3. Directive as last amended by Directive 2005/68/EC of the European Parliament and of the Council (OJ L 323, 9.12.2005, p 1).

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provide services2 and, in the case of life assurance, the country in which the risk is situated shall be the country of the commitment within the meaning of Article 1(1)(g) of Directive 2002/83/EC.

Bibliography* Armbrüster, Privatversicherungsrecht (2013) Armbrüster, in: Prölss/Martin (eds.), Versicherungsvertragsgesetz: VVG (2015) Armbrüster, Versicherung des Finanzinteresses in internationalen Versicherungsprogrammen, VersR 2008, 853 Ballardino, Il Regolamento Roma I – CDT Vol. 1 No. 1 (2009), 5 Barlow/Lyde & Gilbert LLP., Reinsurance Practice and the Law (2009) (cit.: Barlow/Lyde/Gilbert) Barroso de Mello, Contrato de Resseguro (2013) Basedow, Die Gesetzgebung zum Versicherungsvertrag zwischen europäischer Integration und Verbraucherpolitik, in: Reichert-Facilides/Schnyder (eds.), Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (2000), 13 Basedow/Birds/Clarke/Cousy/Heiss/Loacker (eds.), Principles of European Insurance Contract Law (PEICL) (2nd ed 2016) Basedow/Drasch, Das neue Internationale Versicherungsvertragsrecht, NJW 1991, 785 Basedow/Fock/Janzen, Europäisches Versicherungsvertragsrecht (2002) Basedow/Scherpe, Das internationale Versicherungsvertragsrecht und “Rom I”, in: Lorenz/Trunk/ Eidenmüller/Wendehorst/Adolf (eds.), FS Andreas Heldrich (2005), 511 Beck-online Großkommentar (editorial directors: Gsell/Krüger/Lorenz/Mayer) zur Rom I-VO (eds.: Budzikiewicz/Weller/Wurmnest), version of: 15.2. 2016 Bělohlávek, Rome Convention, Rome I Regulation, Commentary, New EU Conflict of Law Rules for Contractual Obligations (2010) Bialowons/Kerst, Rahmenbedingungen bei der Gestaltung von internationalen Haftpflicht-Versiche-

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rungsprogrammen – Die non-admitted-Problematik, r+s 2011, 317 Blackaby/Partasides et al., Redfern and Hunter on International Arbitration (2015) Bonnamour, Article 7 – Contrats d’assurance, in: Nourissat (dir.), Le nouveau droit des contrats internationaux: le règlement (CE) n° 593/2008 sur la loi applicable aux obligations contractuelles, Rev. Lamy dr. aff. No. 29 (2008), 76 Born, International Arbitration: Law and Practice (2015) Born, International Commercial Arbitration (2014) Böttger, Verbraucherversicherungsverträge – Vergleich der beiden Anknüpfungsregime nach Art 6 und Art 7 Rom-I-Verordnung und Vorschlag für eine zukünftige einheitliche Anknüpfung, VersR 2012, 156 Caamiña Domínguez, Los contratos de seguro del Art 7 del Reglamento Roma I, CDT Vol. 1 No. 2 (2009), 30 Calero, in: Calero/Suárez/Rozas/Hermida/Camacho (eds.), Ley de Contrato de Seguro, Comentarios a la Ley 50/1980, de 8 de octubre, y a sus modificaciones (4th ed 2010) Calliess, Rome Regulations (2nd ed 2015) Carrascosa González, La ley aplicable a los contratos internacionales: el Reglamento Roma I (2009) Cashin Ritaine/Bonomi (eds.), Le nouveau règlement européen “Rome I” relative à la loi applicable aux obligations contractuelles (2008) Castellanos Ruiz, El Reglamento “Roma I” sobre la ley aplicable a los contratos internacionales y su aplicación por los tribunals españoles (2009) Cian/Maffei Alberti/Schlesinger (eds.), Le nuove leggi civili commentate (2009) Cox, Choice of law: New York and English approaches to insurance and reinsurance contracts, in: Re-

OJ L 172, 4.7.1988, p 1. Directive as last amended by Directive 2005/14/EC of the European Parliament and of the Council (OJ L 149, 11.6.2005, p 14). The author would like to thank Mandeep Lakhan for translating the commentary into English as well as Sascha Drobnjak, Rhea Specogna and Oliver William for preparing most of the footnotes.

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Chapter II: Uniform Rules search Handbook on International Insurance Law and Regulation (2011) Cox/Merrett/Smith, Private International Law of Reinsurance and Insurance (2006) Dicey/Morris/Collins, The Conflict of Laws (2012) Dobiás, The new Czech Private International Law, RDIPP 2015, 109 Dörner, Nachträgliche Wahl des Versicherungsvertragsstatuts und Anknüpfung vorvertraglicher Informationspflichten, IPRax 2005, 26 Edelman/Burns, The Law of Reinsurance (2013) Falconi, La legge applicabile ai contratti di assicurazione nel regolamento Roma I (2016) Ferrari/Leible (eds.), Ein neues Internationales Vertragsrecht für Europa (2007) (cit.: Author, in: Ferrari/ Leible, Internationales Vertragsrecht) Ferrari/Leible (eds.), Rome I Regulation – The Law Applicable to Contractual Obligations in Europe (2009) (cit.: Author, in: Ferrari/Leible, Rome I Regulation) Fricke, Das Internationale Privatrecht der Versicherungsverträge nach Inkrafttreten der Rom-I-Verordnung, VersR 2008, 443 Ganzer, Internationale Versicherungsprogramme (2012) Garcimartín Alférez, The Rome I Regulation: Much ado about nothing?, The European Legal Forum No. 2 (2008), 61 Gerathewohl, Rückversicherung, Grundlagen und Praxis, Vol. 1 (1976) Giuliano/Lagarde, Report on the Convention on the law applicable to contractual obligations, OJ 1980 C282/1 Graber/Lang/Kunszt, Switzerland, in: European Lawyer Reference Series, Insurance and Reinsurance (2012) Hagopian, in: Mélanges en l’honneur du Professeur Jean Bigot, Liber amicorum (2010) Heinze, Insurance contracts under the Rome I Regulation, NIPR No. 4 (2009), 445 Heiss, Die Richtlinie über den Fernabsatz von Finanzdienstleistungen an Verbraucher aus Sicht des IPR und des IZVR, IPRax 2003, 100 Heiss, Das Kollisionsrecht der Versicherungsverträge nach Rom I und II, VersR 2006, 185 Heiss, Reform des internationalen Versicherungsvertragsrechts, ZVersWiss 2007, 503 Heiss, Versicherungsverträge in Rom I: Neuerliches

Helmut Heiss

Article 7 Versagen des europäischen Gesetzgebers, in: Baetge/ von Hein/von Hinden (eds.), FS Jan Kropholler (2008), 459 (cit.: Heiss, in: FS Jan Kropholler (2008)); English version: Insurance Contracts in “Rome I”: Another Recent Failure of the European Legislature, in: Yearbook of Private International Law Vol. 10 (2008), 261 = EJCCL 2009, 61 Heiss, Transnationales Versicherungsrecht – Eine Skizze, in: Kronke/Thorn (eds.), FS Bernd von Hoffmann (2011), 803 (cit.: Heiss, in: FS Bernd von Hoffmann) Heiss, Insurance Contract Law (International), in: Basedow/Hopt/Zimmermann/Stier (eds.), The Max Planck Encyclopedia of European Private Law (2012), 912 Heiss, Optionales europäisches Versicherungsvertragsrecht, RabelsZ 76 (2012), 316 Heiss/Loacker, Anwendbares Recht, in: Liebscher/ Oberhammer/Rechberger (eds.), Handbuch des Schiedsrechts, Vol. II (2016) Heiss/Loacker, Die Vergemeinschaftung des Kollisionsrechts der außervertraglichen Schuldverhältnisse durch Rom II, JBl 2007, 613 Hoffman, On the Use and Abuse of Custom and Usage in Reinsurance Contracts, Tort & Ins. L.J. Vol. 33 No. 1 (1997), 33 Karrer, in: Honsell/Vogt/Schnyder/Berti (eds.), Basler Kommentar, Internationales Privatrecht (2013) Katschthaler/Leichsenring, Neues internationales Versicherungsvertragsrecht nach der Rom-I-Verordnung, r+s 2010, 45 Keller/Kren Kostkiewicz, Zürcher Kommentar zum IPRG, Kommentar zum Bundesgesetz über das Internationale Privatrecht (IPRG) vom 18. Dezember 1987, Kommentar zum schweizerischen Zivilrecht (2004) Kightlinger, A Solution to the Yahoo! Problem? The EC E-Commerce Directive as a Model for International Cooperation on Internet Choice of Law, Mich. J. Int’l L Vol. 24 (2003), 719 Koch, Kollisions- und versicherungsvertragsrechtliche Probleme bei internationalen D & O-Haftungsfällen, VersR 2009, 141 Kotula/Kniffen, Recent Developments in Excess Insurance and Reinsurance, Tort & Ins. L.J. Vol. 50 No. 2 (2015), 349 Kramer, The New European Conflict of Law Rules on Insurance Contracts in Rome I: A Complex

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Article 7 Compromise, The Icfai University Journal of Insurance Law Vol. VI No. 4 (2008), 23 Lando/Nielsen, The Rome I Regulation, Common Market Law Review Vol. 45 No. 6 (2008), 1687 Langheid/Wandt (eds.), Münchner Kommentar zum VVG, Vol. 1 (2010) Leible/Lehmann, Die Verordnung über das auf vertragliche Schuldverhältnisse anzuwendende Recht (“Rom I”), RIW No. 8 (2008), 528 Looschelders, Grundfragen des deutschen und internationalen Rückversicherungsvertragsrechts, VersR 2012, 1 Looschelders/Smarowos, Das Internationale Versicherungsvertragsrecht nach Inkrafttreten der RomI-Verordnung, VersR 2010, 1 Lüer/Schwepcke (eds.), Rückversicherungsrecht (2013) (cit.: Author, in: Lüer/Schwepcke) Mächler-Erne, Internationale Versicherungsverträge – Formen und Inhalte, in: Reichert-Facilides/ Schnyder (eds.), Versicherungsrecht in Europa – Kernperspektiven am Ende des 20. Jahrhunderts (2000) 153 Magnus/Ebke/Hausmann et al. (eds.), Staudinger BGB, Einleitung zur Rom I-VO; Art 1–10 Rom I-VO (15th ed 2016) Mankowski, Internationales Rückversicherungsvertragsrecht, VersR 2002, 1177 Mankowski, Die Rom I-Verordnung – Änderungen im europäischen IPR für Schuldverträge, IHR No. 4 (2008), 133 McParland, The Rome I Regulation on the Law Applicable to Contractual Obligations (2015) Merkin, A guide to reinsurance law (2007) Merkin, Colinvaux’s Law of Insurance (2014) (cit.: Merkin, Colinvaux’s Law of Insurance) Merkin, The Rome I Regulation and Reinsurance, JPIL Vol. 5 (2009), 69 (cit.: Merkin, JPIL Vol. 5 (2009)) Merret, Choice of Law in Insurance Contracts under the Rome I Regulation, JPIL Vol. 5 (2009), 49 Micha, Der Direktanspruch im europäischen Internationalen Privatrecht (2010) Miquel Sala, El “Nuevo Derecho” internacional privado de los seguros en el Reglamento Roma I, in: Iprolex (ed.), AEDIPr 2008, 425 Miquel Sala, Los contratos de seguro en el Proyecto de Ley Modelo OHADAC de Derecho internacional

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Rome I Regulation privado: ¿Un modelo a seguir para el Reglamento Roma I?, in: Iprolex (ed.), AEDIPr 2016, 793 Mönnich, Europäisierung des Privatversicherungsrechts, in: Beckmann/Matusche-Beckmann (eds.), Versicherungsrechts-Handbuch (3rd ed 2015), 77 Nebel, Internationale Rückversicherungsverträge aus der Perspektive des schweizerischen Rechts, SVZ 66 (1998), 54 Noussia, Reinsurance Arbitrations (2013) Ondo, Gerichtsstandsklauseln, Rechtswahl und Schiedsgerichtsbarkeit in Rückversicherungsverträgen, SVZ 63 (1995), 39 Panopoulos, The Influence of the E-Commerce Directive on Conflict-of Laws and Jurisdiction Rules regarding the Protection of Tort Victims and Consumers, Zbornik radova Pravnog fakulteta u Nišu Vol. 70 (2015), 823 Perner, Das Internationale Versicherungsvertragsrecht nach Rom I, IPRax No. 3 (2009), 218 Pinheiro, Sobre a lei aplicável ao contrato de seguro perante o regulamento Roma I, CDT Vol. 4 No. 2 (2012), 202 Piroddi, in: Boschiero (ed.), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009) Plender/Wilderspin, The European Private International Law of Obligations (3rd ed 2015) Ragno, in: Ferrari (ed.), Rome I Regulation, Pocket Commentary (2014) Reichert-Facilides, Zur Kodifikation des deutschen internationalen Versicherungsvertragsrechts, IPRax 1990, 1 Reichert-Facilides (ed.), Aspekte des internationalen Versicherungsvertragsrechts im Europäischen Wirtschaftsraum (1994) Reichert-Facilides, Gesetzgebung in Versicherungsvertragsrechtssachen: Stand und Ausblick, in Reichert-Facilides/d’Oliveira (eds.), International Insurance Contract Law in the EC (1993) Reithmann/Martiny (eds.), Internationales Vertragsrecht (8th ed 2015) Roth, Internationales Versicherungsvertragsrecht (1985) Roth, Internationales Versicherungsvertragsrecht, in: Beckmann/Matusche-Beckmann (eds.), Versicherungsrechts-Handbuch, (3rd ed 2015), 197

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Chapter II: Uniform Rules Roth, Eingriffsnormen im internationalen Versicherungsrecht nach Unamar, in: Wandt/Reiff/Looschelders/Bayer (eds.), FS Egon Lorenz (2014), 421 Roth, Internationales Versicherungsvertragsrecht in der Europäischen Union – Ein Vorschlag zu seiner Neuregelung, in: Wandt/Reiff/Looschelders/Bayer (eds.), FS Egon Lorenz (2014), 631 Salerno/Franzina (eds.), Regolamento CE n. 593/ 2008 del Parlamento europeo e del Consiglio del 17 giugno 2008 sulla legge applicabile alle obbligazioni contrattuali (“Roma I”), Le Nuove Leggi Civili Commentate No. 3–4 (2009), 521 Schnyder, Europäisches Banken- und Versicherungsrecht (2005) Schmalz, in: Böckstiegel/Kröll (eds.), Arbitration in Germany: The Model Law in Practice (2015) Seatzu, Insurance in Private International Law: A European Perspective (2003) Stahl, The Principles of European Insurance Contract Law (PEICL) and their application to insurance I.

II.

III.

IV. V.

Introduction 1. Origins of Article 7 . . . . . . . . . . . . . . . . . . . . . . . 1 2. Internal market goals . . . . . . . . . . . . . . . . . . . . . 8 3. The future of Article 7 . . . . . . . . . . . . . . . . . . 14 Material scope: Specific insurance contracts 1. Definition of insurance contract . . . . . . . 15 2. Insurance contracts excluded from the outset: Art 1(2)(j) of Rome I . . . . . . . 23 3. Included insurance contracts a) Insurance contracts covering large risks (Art 7(2)) . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 b) Insurance contracts governing mass risks situated in Member States (Art 7(3)) . . 29 4. Insurance contracts governing mass risks situated in third countries . . . . . . . . 35 5. Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Territorial scope 1. EU Member States without Denmark . 39 2. Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 3. EEA Contracting States . . . . . . . . . . . . . . . . . 42 Temporal scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Relationship of Art 7 to other conflict rules 1. Art 6 (consumer contracts) . . . . . . . . . . . . . 49 2. Conflicts of law in the consumer protection directives . . . . . . . . . . . . . . . . . . . . . 52 3. Rome II Regulation a) Culpa in contrahendo (Art 12 Rome II) 56

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contracts for large risks, Veröffentlichungen aus dem LL.M.-Studiengang Internationales Wirtschaftsrecht der Universität Zürich und des Europa-Instituts an der Universität Zürich, Vol. 71 (2013) Staring/Hansell, Law of Reinsurance (2016) Stone, EU Private International Law (2014) Strnad, Neue Ausgestaltung internationaler Versicherungsprogramme – Gründe, Formen und Rückschlüsse auf die grenzüberschreitende Schadenabwicklung, HAVE 2007, 345 Thiede/Koch/Ortner (eds.), Conflict of Laws: Texts and Materials (4th ed 2016) van Calster, European Private International Law (2016) von Hein (ed.), Münchener Kommentar zum BGB, Vol. 10: Rom I-VO; Rom II-VO; Art 1–24 EGBGB (6th ed 2015) Wenner, Internationales Vertragsrecht (3rd ed 2013)

VI.

b) Direct action (Art 18 Rome II and Art 9 Hague Traffic Accident Convention) . . 57 c) Subrogation (Art 19 Rome II) . . . . . . . . . . 60 4. Motor Insurance Directive and Green Card System a) General information . . . . . . . . . . . . . . . . . . . . . 61 b) Regulation of “domestic accidents” (Green Card System) . . . . . . . . . . . . . . . . . . . . 63 c) Regulation of “accidents abroad” (Motor Insurance Directive) . . . . . . . . . . . . 66 d) Compensation for accidents caused by unidentified or uninsured vehicles . . . . . 68 5) Conflicts of law in the E-Commerce Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 6) Conflicts of law in the Data Protection Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 7) Regulation on key information documents for inter alia insurance-based investment products (PRIIP) . . . . . . . . . . . 73 Scope of the proper law of contract 1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 2. Special connections for specific issues a) Formalities (Art 11) . . . . . . . . . . . . . . . . . . . . . 78 b) Agency (Art 1(2)(g) Rome I) . . . . . . . . . . . 80 c) Legal subrogation (Art 15) . . . . . . . . . . . . . . 83 d) Multiple liability (Art 16) . . . . . . . . . . . . . . . 84 e) Further issues (Arts. 13, 14, 17 and 18) 85

495

Article 7 3. In focus: Special connections of overriding mandatory provisions . . . . . . 86 4. In focus: Protection of mortgage creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 VII. Insurance of large risks (Art 7(2)) 1. Legal policy considerations . . . . . . . . . . . . . 95 2. Free choice of law (first subparagraph of Art 7(2)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 3. Objective connection (second subparagraph of Art 7(2)) . . . . . . . . . . . . 102 4. In focus: International insurance programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 5. Financial interest cover . . . . . . . . . . . . . . . 109 6. Co-insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 7. Excess of loss insurance . . . . . . . . . . . . . . . 120 8. Market-related connections . . . . . . . . . . 122 9. Importance of arbitration . . . . . . . . . . . . . 124 VIII. Insurance contracts covering mass risks situated in Member States 1. Choice of law a) Limitations on the choice of law . . . . . 126 b) Duty of the insurer to inform about the proposed choice . . . . . . . . . . . . . . . . . . . 127 c) Choice of law 1: Law of any Member State where the risk is situated (Art 7(3)(a)) 128 d) Choice of law 2: Law of the country in which the policyholder has his habitual residence (Art 7(3)(b)) . . . . . . 133 e) Choice of law 3: Law of nationality for life insurance (Art 7(3)(c)) . . . . . . . 136 f) Choice of law 4: Choice of the law at the place the damage occurs (Art 7(3)(d)) 139 g) Choice of law 5: Risks in multiple locations in the pursuit of commercial or industrial activities or liberal professions (Art 7(3)(e)) . . . . . . . . . . . . . . 142 h) Extension of the Choice of Law by Individual Member States . . . . . . . . . . . . 144 2. Objective connection . . . . . . . . . . . . . . . . . . 148 3. In focus: Consumer insurance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 4. Critical issues of legal policy in Art 7(3) a) No free choice of law for active policyholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 b) No choice of law option in favour of principles of insurance contract law/optional instruments . . . . . . . . . . . . . 155 c) No special rules for group insurance 157

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X.

Compulsory insurance (Art 7(4)) 1. Obligations to insure . . . . . . . . . . . . . . . . . . 162 2. Issues of demarcation . . . . . . . . . . . . . . . . . 167 3. Compulsory insurance governed by Art 7(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 4. Starting point: Proper law of insurance contracts pursuant to Art 7(2) and (3) 175 5. Additional rule: Point (a) . . . . . . . . . . . . . 177 6. Additional rule: Point (b) a) Option of creating a general conflict rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 b) Unilateral conflict rules and rules of recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 c) Overview of national legislation using or not using the option set out under Art 7(4)(b) . . . . . . . . . . . . . . . . . . . . . . 190 d) Voluntary extensions of cover . . . . . . . . 191 7. Harmonised compulsory insurance law and Art 7(4) a) Examples of (harmonised) compulsory insurance law in secondary Union legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 b) The relationship between insurance obligations in directives and Art 7(4) 196 c) The relationship between insurance obligations in the Air Transport Regulations and Art 7(4) . . . . . . . . . . . . . 197 d) The relationship between conflicts of law in the Directive 2009/138/EC (Solvency II) for substitute health insurance and compulsory insurance against accidents at work and Art 7(4) 199 8. Compulsory insurance outside of the scope of Art 7(4) . . . . . . . . . . . . . . . . . . . . . . . 201 Insurance contracts covering mass risks situated in third countries 1. Conflict rules applicable . . . . . . . . . . . . . . 202 2. Choice of law a) Choice of law pursuant to Art 3 . . . . . 205 b) Limitations on the choice of law for consumer contracts pursuant to Art 6 209 c) Further limitations on the choice of law due to special conflict rules . . . 215 3. Objective connection a) Objective connection pursuant to Art 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 b) Objective connection pursuant to Art 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221

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Reinsurance contracts 1. Definition and features . . . . . . . . . . . . . . . . 2. Conflict rules applicable . . . . . . . . . . . . . . 3. Choice of law . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Objective connection . . . . . . . . . . . . . . . . . .

222 229 230 237

5. In focus: Reinsurance customs . . . . . . . 241 6. Overriding mandatory provisions (Art 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 7. Special features in arbitration . . . . . . . . 245

I. Introduction 1. Origins of Article 7 Article 7 represents the insertion of a new rule into the Rome I Regulation.1 There is no 1 equivalent provision in the European Convention on the law applicable to contractual obligations (Rome Convention) from 1980.2 Art 1(3) of the Rome Convention excludes from its scope direct insurance contracts “which cover risks situated in the territories of the Member States of the European Economic Community”. The Rome Convention therefore only applies to insurance contracts covering risks situated outside those territories.3 The provision in Art 1(4) clarifies that the Rome Convention also applies to contracts of reinsurance. The reason for excluding insurance contracts covering risks situated within the internal 2 market appears simply to be that there was no chance, at that time (1980), of coming to an agreement about the content of such rules. After all, the Report Giuliano/Lagarde confirms that the question of including such insurance contracts had been discussed at length. The work “being done within the Community in the field of insurance” was ultimately cited as the reason for the exclusion.4 This is, in fact, evidenced by the adoption of the First Non-Life Insurance Directive5 and the First Life Insurance Directive6 in 1980.7 However, these still did not contain provisions governing international insurance contract law.8 It is likely that the ECJ’s “insurance ruling” of 4 December 19869 triggered the inclusion of a 3 provision governing European insurance conflict law in the directives. In this judgment, the 1

2

3 4 5

6

7 8 9

For a detailed discussion of its legislative development and implementation, see McParland, notes 13.61 et seq. or also Plender/Wilderspin, notes 10–010 et seq. Gruber, in: Calliess, Art 7 Rom I-VO, note 2: “The Rome Convention on the Law Applicable to Contractual Obligations of 1980 was of minor importance in the field of insurance contracts.”; McParland, note 13.03. See Giuliano/Lagarde, 13 at note 10. Giuliano/Lagarde, 13 at note 10. First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, OJ L 228, 16.8.1973, p 3–19; see also Reichert-Facilides, IPRax 1990, 1, 4 et seq. First Council Directive 79/267/EEC of 5 March 1979 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance, OJ L 63, 13.3.1979, p 1–18. Discussed in more detail by McParland, notes 13.14 et seq. See also Gruber, in: Calliess, Art 7 Rom I-VO, note 2. Commission v. Federal Republic of Germany (Case 205/84) [1986] ECR 3755.

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ECJ declared that the requirement of permanent establishment imposed under German insurance supervisory law was incompatible with the freedom to provide services.10 In so doing, the Court paved a path for the cross-border sale of insurance products as services. The freedom to provide services was further strengthened in the so-called Second and Third Non-Life Insurance Directives11 and the Second and Third Life Insurance Directives.12 These directives introduced the principle of home country control. A licence issued in the country of origin now operates like a European passport, which permits insurance activity to be pursued in the entire internal market (single licence).13 Furthermore, ongoing supervision is now conducted by the authority in the country of origin (home country control).14 This was accompanied by steps towards deregulation, for example the elimination of prior review of insurance policy terms and conditions.15 In order to counterbalance these deregulatory measures somewhat, these directives also included conflict of law provisions which, in contrast to supervisory law, essentially established the host country principle:16 in most cases, the law of the Member State in which the policyholder was habitually resident would apply under conflicts of law. Choice of law was only available in a limited number of situations. The provisions of the various previous Life Insurance Directives were consolidated in the Life Insurance Directive17 in 2002, but the contents remained unchanged. 4 Upon its entry into force on 17 December 2009, Rome I transformed the conflict of laws-

provisions of the Non-Life Directives as well as the Life Directive into regulation provisions, again without significantly amending the contents of the previous directive provisions. For the Member States to whom Rome I applied, the provisions of the directive were thereby 10 11

12

13

14

15

16

17

498

See Art 56 et seq. TFEU. Second Council Directive 88/357/EEC of 22 June 1988 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/ EEC, OJ L 172, 4.7.1988, p 1–14 and Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (third non-life insurance Directive), OJ L 228, 11.8. 1992, p 1–23. Council Directive 90/619/EEC of 8 November 1990 on the coordination of laws, regulations and administrative provisions relating to direct life assurance, laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 79/267/EEC, OJ L 330, 29.11.1990, p 50– 61 and Council Directive 92/96/EEC of 10 November 1992 on the coordination of laws, regulations and administrative provisions relating to direct life assurance and amending Directives 79/267/EEC and 90/ 619/EEC (third life assurance Directive), OJ L 360, 9.12.1992, p 1–27. See (today) the first sentence of Art 15(1) Directive 2009/138/EC (Solvency II); for the development of the single licence principle see Mönnich, in: Beckmann/Matusche-Beckmann, § 2 note 49. See (today) Art 30(1) and Art 155 Directive 2009/138/EC (Solvency II); for the development and details of the home country control principle see Mönnich, in: Beckmann/Matusche-Beckmann, § 2 notes 52 et seq. See (today) Art 21 Directive 2009/138/EC (Solvency II); details at Mönnich, in: Beckmann/MatuscheBeckmann, § 2 notes 53 et seq. See the overview on the conflict rules of the directives by Reichert-Facilides, in: Reichert-Facilides/d’Oliveira, 11 et seq. Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance, OJ L 345, 19.12.2002, 1–51.

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repealed.18 As Denmark is not bound by Rome I, the directives initially remained in force. However, the conflict of law provisions set out in the directives were repealed upon the entry into force of the Directive 2009/138/EC (Solvency II)19 on 1 January 2016. In respect of any insurance contracts falling within the scope of Art 7 of Rome I, Art 178 of the Directive 2009/ 138/EC (Solvency II) now binds Denmark and the EEA Contracting States to the conflicts of law in Rome I. Consequently, a uniform set of conflict rules now applies to the Member States party to Rome I, Denmark and the EEA Contracting States.20 In paragraphs 2 and 6 of Art 7, there are still references to the directives which have since 5 been repealed by the Directive 2009/138/EC (Solvency II). Art 1(2)(j) also contains such a reference. Since the coming into effect of the Directive 2009/138/EC (Solvency II) on 1 January 2016, such references must – pursuant to Art 310(2) of the Directive 2009/138/EC (Solvency II) – be construed as references to the corresponding provisions in Solvency II. These corresponding provisions can be viewed in the correlation table in Annex VII of the Directive 2009/138/EC (Solvency II). The reference in Art 7(2) to the definition of large risks must now be construed as a reference 6 to Art 13(27) of the Directive 2009/138/EC (Solvency II). The location of the risk referred to in Art 7(6) is now defined in Art 13(13) and (14) of the Directive 2009/138/EC (Solvency II).21 The concept of undertakings within the meaning of Art 1(2)(j) is now determined by reference to Arts. 1, 2(1) and 3 of the Directive 2009/138/EC (Solvency II). By virtue of the references in Art 1(2)(j) and Art 7(2) and (6), the provisions cited indirectly 7 constitute part of the Regulation. Within the scope of the references, the corresponding directive provisions therefore apply directly as regulation provisions. In principle, their application and interpretation does not depend on any relevant implementing legislation in the Member States. 2. Internal market goals The conflict of law provisions set out in Rome I serve the internal market by ensuring that 8 there is consistency in court decisions on conflict matters.22 In particular, it is intended to prevent forum shopping for the application of a more beneficial law. These goals also apply in relation to all contracts of insurance. With regard to insurance contracts concerning mass risks situated in the internal market, 9 the concept of policyholder protection must be especially highlighted. In its insurance ruling of 4 December 1986, the ECJ recognised policyholder protection as a general good, which 18 19

20

21 22

See Art 23 of the Rome I Regulation. Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (Text with EEA relevance), OJ L 335, 17.12.2009, p 1–155. Cf. Gruber, in: Calliess, Art 7 Rom I-VO, note 4; with regard to the situation in Denmark, see also McParland, notes 13.175 et seq. See Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 46. See Recital 6 of Rome I; with regard to the “objective of the rule”, see Armbrüster, in: Staudinger BGB, preliminary remarks Art 7 Rom I-VO, notes 3 et seq.

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may even justify a restriction on the freedom to provide services.23 By virtue of Art 7(3) of Rome I, the protection provided to policyholders under the conflict of law provisions is communitarised. It is, so to speak, a re-regulation of conflicts of law in order to counterbalance the deregulation which took place in the relation to supervisory law. 10 This approach of using conflicts of law to realise the internal insurance market is now

considered to have basically failed.24 While the use of predominantly mandatory connections protects the policyholders of mass risk insurance from the application of foreign insurance contract law, such protection, at the same time, leads to greater caution among insurance undertakings in offering insurance products cross-border as services. This is because the insurance products created by them under their home country law will, upon sale in another Member State, usually be subject to the law at the policyholder’s place of residence.25 Considering that insurance contract law provisions are often mandatory in nature, insurers wishing to provide services will have to adapt to the law at the policyholder’s place of residence. This applies firstly to the contents of the products, as insurance contract law often also governs such contents.26 It applies no less to the sale and the administration of insurance contracts. In addition, the associated costs are multiplied where insurers provide their services in several or even all of the Member States. Insurance undertakings, therefore, predominantly use subsidiaries or dependent branches, rather than the cross-border provision of services, to pursue their activity in other countries. In most cases, these subsidiaries and branches do not offer the same products as its parent company, but instead products which have been designed especially for the target market, i.e. to some extent nationalised.27 In addition to the costs of operating the foreign subsidiary or branch, costs therefore also arise in relation to product design, product sales and product administration for each Member State in which the insurance undertaking carries on business. At the same time, it is not possible for policyholders to use foreign insurance services in the same form as they are offered in the country of origin.28 11 If the policyholder-friendly connection set out in Art 7(3) is regarded as working against the

internal market, a de lege ferenda solution to this problem could, at first glance, be to remove the largely mandatory conflict provision contained in Art 7(3) of Rome I and to permit a free choice of law. An insurance undertaking could then use a choice of law clause in its insurance terms and conditions for cross-border insurance sales to ensure that the law at the place of its head office would apply and would, in principle, not have to deal with the mandatory contract law provisions in the host country. However, such a legislative measure would be indefensible as a matter of legal policy. This would remove the protection provided under conflicts of law to policyholders in the mass market. It would no longer be explicable why a consumer should enjoy protection under Art 6 of Rome I for a relatively trivial transaction, for example an online purchase of a pair of shoes, while a policyholder holding life insurance protecting his family or of essential fire insurance covering a home should not. It is also 23 24 25 26 27 28

500

Commission v. Federal Republic of Germany (Case 205/84) [1986] ECR 3755, notes 30 et seq. Reichert-Facilides, in: Reichert-Facilides/Schnyder, 10. Basedow, in: Reichert-Facilides/Schnyder, 17 et seq. Heiss, Introduction, in: Basedow/Birds/Clarke/Cousy/Heiss/Loacker, PEICL, 3. Heiss, Introduction, in: Basedow/Birds/Clarke/Cousy/Heiss/Loacker, PEICL, 3. As to the aim to provide access to foreign insurance products: Basedow, in: Reichert-Facilides/Schnyder, 19.

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doubtful whether the internal market goal – the strengthening of service business – would be achievable. Even if the caution displayed by insurance undertakings in relation to crossborder insurance sales could be overcome through a free choice of law, this would likely be replaced by caution on the part of policyholders upon purchasing insurance contracts governed by – from their standpoint – foreign law.29 It appears that the internal insurance market also cannot be realised in this manner. The desired internal market effects may therefore only be achieved by harmonising insur- 12 ance contract law in Europe. In 2016, the Project Group for a “Restatement of European Insurance Contract Law”30 published the second expanded edition of the “Principles of European Insurance Contract Law (PEICL)”,31 in which it presented a model law governing insurance contracts in general, indemnity insurance and insurance of fixed sums in particular and also liability insurance, life insurance and group insurance. This model law is not intended to replace national insurance contract laws, but rather to present an alternative in the form of an optional instrument.32 The proposal is therefore to provide the parties with the option of replacing national (including mandatory) insurance contract law through a choice made in favour of the PEICL.33 By this means, insurance undertakings could sell their insurance products, created on the basis of the PEICL, in every Member State without the need to adapt them to local national insurance contract law. Policyholders would receive effective access to foreign insurance products. They would be afforded a high level of protection upon choosing in favour of the PEICL. The PEICL have received a great response from European politics. At the end of 2004, for 13 example, the European Economic and Social Committee agreed with the internal market analysis reached by the Project Group and supported the efforts towards a European insurance contract law.34 It supported the idea of creating optional instruments in its Opinion on a 28th Regime in 2010.35 The European Parliament expressly demanded the creation of an optional European insurance contract law on the basis of the PEICL in its resolution from 29 30 31

32

33 34

35

See Basedow, in: Reichert-Facilides/Schnyder, 20. See http://www.restatement.info (last accessed on 7 June 2016). Basedow/Birds/Clarke/Cousy/Heiss/Loacker (eds.), Principles of European Insurance Contract Law (PEICL) (2nd ed 2016). For details see Heiss, in: Basedow/Birds/Clarke/Cousy/Heiss/Loacker, PEICL, 13 et seq.; see also 5: “The overall purpose of the work done by the Project Group is to provide the European legislature with a model law designed to overcome the existing barriers to an integrated European insurance market.” As to technical aspects of private international law see Heiss, RabelsZ 76 (2012), 316. Opinion of the European Economic and Social Committee on ‘The European Insurance Contract’, OJ C 157, 28.6.2005, p 1–15. Note 8.4: “A degree of harmonisation of the mandatory rules of what is known as the ‘general part’ of insurance law could contribute decisively to removing an entire series of obstacles and difficulties facing insurance companies, insurance intermediaries, insured persons and policyholders, whether professionals or individual customers, in carrying out cross-border insurance transactions.” And note 8.9: “On the basis of the comments made in the present opinion, the EESC urges the Commission to reopen this dossier and begin examining comparative law and national practices in the area of insurance contracts, in order to confirm that it is necessary, advisable and possible to continue with efforts to harmonise insurance contract law at Community level.” Opinion of the European Economic and Social Committee on The 28th regime – an alternative allowing less lawmaking at Community level (own-initiative opinion), OJ C 21, 21.1.2011, p. 26–32.

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2011.36 The Commission expressed its openness towards the topic in 2013, by consulting leading personalities from the insurance sector and subsequently establishing the Expert Group on European Insurance Contract law.37 The ensuing report was published in early 2014 and using individual examples reflects the legal obstacles arising in the internal market due to the differences between national contract laws.38 The report also clearly illustrates that, since a European insurance contract law based on the completed preliminary academic work has been made possible, concerns can be detected in the sentiments of stakeholders. Their position remains unclear at present. Nevertheless, the Commission has continued its own work. At the end of 2015, it sent out a renewed positive signal, or at least documented its continued commitment to this matter by publishing the ‘Green Paper on retail financial services: better products, more choice, and greater opportunities for consumers and businesses’,39 which was aimed at the insurance branch in several ways. It remains to be seen whether it will be possible to adopt a legislative proposal eventually. 3. The future of Article 7 14 As was the case previously with the conflicts of law in the directives,40 Article 7 of Rome I has

been strongly criticised in legal commentary.41 There are now several proposals for amendments.42 Despite knowledge of this criticism, the European legislature has largely retained 36

37

38

39

40

41

502

European Parliament resolution of 8 June 2011 on policy options for progress towards a European Contract Law for consumers and businesses (2011/2013(INI)), note 25: “[…] stresses that, in the field of insurance contract law, preliminary work has already been performed with the Principles of European Insurance Contract Law (PEICL), which should be integrated into a body of European contract law and should be revised and pursued further […]”. Commission Decision of 17 January 2013 on setting up the Commission Expert Group on a European Insurance Contract Law, OJ C 16, 19.1.2013, p 6–8. Final Report of the Commission Expert Group on European Insurance Contract Law, adopted on 24 January 2014; available at http://ec.europa.eu/justice/contract/files/expert_groups/insurance/final_repor t.pdf (last accessed on 7 June 2016). European Commission, Green Paper on retail financial services – Better products, more choice, and greater opportunities for consumer and business, COM(2015) 630 final. See e.g. Seatzu, 262; on the complexity of the old system of the conflict of laws on insurance see Kramer, The Icfai University Journal of Insurance Law Vol. VI No. 4 (2008), 23, 25 et seq. For details see Heiss, in: FS Jan Kropholler (2008); Merret, Journal of Private International Law (2009), 49, 50 et seq.; cf. Mankowski, IHR No 4 (2008), 133, 144, who states that more thought out concepts were on the table but probably not even seriously discussed; Kramer, The Icfai University Journal of Insurance Law Vol. VI No 4 (2008), 23, 44, who critically concludes: “The conflict of law rules relating to insurance contracts have always constituted one of the bottlenecks of European private international law. Because the conflict rules emanate from diverse sources and lack any cohesion or well-considered system, determining the applicable law to an insurance contract is like trying to find one’s way through a labyrinth. […]The conversion of the Rome Convention into the Rome I Regulation was an excellent opportunity to get rid of this maze and to formulate uniform conflict rules for insurance contracts. However, the Commission failed to take up the challenge, despite serious criticism of the current situation.”; Leible/ Lehmann, RIW No. 8 (2008), 528, 538, referred to the old system of the conflict of laws on insurance as hell of private international law. Applying this metaphor to the new rules as well, they state that hell’s fire might have gotten a little cooler but paradise still is far away; with regards to the old system cf. also Basedow/Drasch, NJW 1991, 785, 794 et seq.

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the contents of the previous directives. However, under the review clause in Art 27(1)(a), it obliged the Commission to submit a report, which was due for submission by 17 June 2013, including “a study on the law applicable to insurance contracts and an assessment of the impact of the provisions to be introduced, if any”. This report has regrettably still not been submitted.43 Nevertheless, at least a willingness to reform conflicts law in relation to insurance contracts is articulated in Rome I.44 II. Material scope: Specific insurance contracts 1. Definition of insurance contract Art 7 has the heading “Insurance contracts”. The provision does not contain a definition of 15 this term. The same applies in relation to Chapter II Section 3 of the Regulation No 1215/ 2012 (Brussels Ibis), which governs jurisdiction in insurance matters. Similarly, Art 13 of the Directive 2009/138/EC (Solvency II) provides definitions, yet does not define insurance contracts as such. Consequently, there is currently no authoritative definition of insurance in European law.45 A description of the term is contained in Art 1:201(1) PEICL. Accordingly, an “insurance 16 contract” is “a contract under which one party, the insurer, promises another party, the policyholder, cover against a specified risk in exchange for a premium”. The comments accompanying the provision clarify that the definition should be understood as a general guide, rather than a comprehensive definition.46 Art 1:201(1) PEICL may also function as a guide for the interpretation of Art 7. A key point under Art 1:201(1) PEICL is that the insurer undertakes to bear the economic 17 effects of a risk in exchange for the payment of a premium.47 The existence of a risk, i.e. an uncertainty, is consequently essential. The uncertainty can take the form of a feared event 42

43 44

45

46

47

E.g., Heiss, in FS Jan Kropholler (2008), 471, 479 et seq.; Gruber, in: Ferrari/Leible, Rome I Regulation, 111, who opines that “[…] there should be one rule in the Rome I Regulation which deals with all insurance contracts.” See also 125 et seq. with a proposal of a “new comprehensive rule”; Rome I did not follow earlier proposals which are still of significance today, see Roth, in: FS Egon Lorenz (2004), 631, 640 et seq.; Basedow/Scherpe, in: FS Andreas Heldrich (2005), 511; Böttger, VersR 2012, 156, 160 et seq. See also Roth, in: Beckmann/Matusche-Beckmann, § 4 note 25. In this regard, see McParland, notes 13.108 et seq.; for policy considerations in international insurance contract law, relevant also in respect of a future reform of Art 7, see Seatzu, 28 et seq. Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 8b; McParland, note 13.114; cf. also Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 18. Reichert-Facilides/Heiss/Norio-Timonen, in: Basedow/Birds/Clarke/Cousy/Heiss/Loacker, PEICL, C1 on Art 1:201: “The term ‘insurance contract’ is not always defined in insurance contract law because the scope of the concept in national contexts is well-known and sufficiently clear or because a definition may be considered as dangerous because of its exclusionary effect.” The same view is taken in Försäkringsaktiebolaget Skandia (publ) (Case C-240(99) [2001] ECR 2001 I-01951, note 37; Assurandør-Societetet v. Skatteministeriet (Case C-8/01) [2003] ECR 2003 I-13711, note 39; BGZ Leasing sp. z o.o. v. Dyrektor Izby Skarbowej w Warszawie (Case C-224/11) [2013] of 17 January 2013, note 58; in context see also Card Protection Plan Ltd (CPP) v. Commissioners of Customs & Excise (Case C-349/96) [1999] ECR I-973 (all concerning tax law).

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(loss or damage; accident; death) or a desired event (surviving until a specific time; marriage). Moreover, the uncertainty may relate to the question of whether a specific event occurs, when it occurs or even merely how long the insurer will receive the premium for the insurance sum which will have to be paid with certainty (fixed-term insurance). The occurrence of the risk means that the insurer must perform. The duty to perform usually requires a monetary payment; it may however also take the form of goods and services. The latter applies to European insurance contract law under Art 2(2) of the Directive 2009/138/EC (Solvency II), according to which any assistance provided by an insurer falls within the scope of the directive.48 The insurer’s duty to perform corresponds to the policyholder’s duty to pay the premium. Premium also includes the contribution made in mutual insurance, so that this is also governed by Art 7 of Rome I.49 18 Assistance with the definitions is furthermore provided to legal practitioners in Annex I

(Classes of non-life insurance) and Annex II (Classes of life insurance) of Directive 2009/ 138/EC (Solvency II). The extensive list of classes of insurance represents a situation-based guide for determining the definition of an insurance contract.50 19 From Annex II (Classes of life insurance) of Directive 2009/138/EC (Solvency II) mentioned

above, it is very clear that inter alia insurance-based investment products, such as insurance linked to investment funds, must be encompassed by the definition of insurance contracts. The Austrian Supreme Court, for example, has already held so in relation to the applicability of jurisdiction provisions in insurance matters under, what is today, the Regulation No 1215/2012 (Brussels Ibis Regulation).51 The German Federal Court of Justice equally submitted a unit-linked insurance policy to the conflict rules transposing the previous directive law on insurance;52 the rules now contained in Art 7. This is irrespective of the fact that the underlying intention behind investment in such types of insurance often outweighs the purpose of the risk cover. It also applies despite the fact that unit-linked insurance is increasingly considered to be, and regulated as, an investment product. The new Insurance Distribution Directive, for example, contains provisions in Chapter VI53 which impose additional requirements in relation to the distribution of “insurance-based investment products”. The Regulation on key information documents for packaged retail and insurance-based investment products54 is also applicable to so-called “insurance-based investment products”. None of this changes the fact that they are insurance products and therefore fall within the scope of Art 7 of Rome I. 20 The situation concerning so-called tontines, capital redemption operations and further

operations, as referred to in Art 2(3)(b) of the Directive 2009/138/EC (Solvency II), is not 48

49

50 51 52 53 54

504

This is irrespective of the fact that certain types of assistance are excluded from the scope of the directive under Art 6 of Directive 2009/138/EC (Solvency II); see also Card Protection Plan Ltd (CPP) v. Commissioners of Customs & Excise (Case C-349/96) [1999] ECR I-00973, note 18 (concerning tax law). Compare also Art 1:101(1) PEICL, which expressly emphasises that the PEICL also applies to mutual insurance. See Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 8b. Austrian Supreme Court 25 November 2008, 1 Ob 112/08i, ZfRV 2009, 28. German Federal Court of Justice 1 June 2016, IV ZR 80/15, VersR 2016, 1099 (1100 in note 20). Art 26 et seq. IDD. PRIIP.

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completely clear. These operations are listed as classes of life insurance in Annex II of the Directive 2009/138/EC (Solvency II) (esp. V. Tontines and VI. Capital redemption operations). However, their definitions in Art 2(3)(b)(i) (Tontines) and (ii) (Capital redemption operations) of Directive 2009/138/EC (Solvency II) make clear that they cannot be considered as constituting insurance contracts in the narrow sense. Pursuant to the definition set out in Art 2(3)(b)(i) of Directive 2009/138/EC (Solvency II), tontines are defined as “operations whereby associations of subscribers are set up with a view to capitalising their contributions jointly and subsequently distributing the assets thus accumulated among the survivors or among the beneficiaries of the deceased”. This definition clearly illustrates that the profitability of the tontines for the subscriber depends in one form or another on the duration of his life, but that the operator of the tontine (the insurer) does not take on any biometric risk whatsoever. His role is restricted to distributing the sums paid in accordance with the contractual terms agreed. Similar principles apply to capital redemption operations. Under Art 2(3)(b)(ii) of Directive 2009/138/EC (Solvency II), these are “based on actuarial calculation whereby, in return for single or periodic payments agreed in advance, commitments of specified duration and amount are undertaken”. Due to the specification of the duration and the amount of payments, there is no assumption of risk by the insurer in a technical sense. Conceptually, therefore, tontines and capital redemption operations should not fall within 21 the scope of Art 7. On the other hand, it would make sense on a systematic basis to subject them to Art 7. Under Art 2(3)(b)(i) and (ii), tontines and capital redemption operations are subject to the provisions of the directive “where they are on a contractual basis, in so far as they are subject to supervision by the authorities responsible for the supervision of private insurance”. Consequently, they are treated as quasi-insurance transactions, even though it is clearly illustrated by the differentiation in Art 2(3)(a), which refers to “life insurance activities”, and (b), which refers to “following operations”, that these transactions do not constitute genuine life insurance contracts. Within the system of law, this is an argument in favour of also treating these transactions as quasi-insurance ones in the rest of Community law and therefore also with regard to Art 7. Art 7 only governs private insurance contracts. It does not apply to social insurance.55 This is 22 irrespective of whether the social insurance concerned is offered by state entities or private companies. 2. Insurance contracts excluded from the outset: Art 1(2)(j) of Rome I Under Art 1(2)(j), certain insurance contracts are excluded from the scope of the Regulation 23 from the outset. These, therefore, do not fall within the scope of Art 7 or the general provisions, especially Arts. 3, 4 and 6 of Rome I. Excluded are “insurance contracts arising out of operations carried out by organisations other than undertakings referred to in Art 2 of Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance56 the object of which is to provide benefits for employed or self55

56

Where this constitutes administrative matters, it is completely excluded from the scope of the Rome I Regulation under the second subparagraph of Art 1(1); cf. also the exclusion in Art 3 of Directive 2009/ 138/EC (Solvency II) (with a restriction in Art 2(3)(c)). Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life

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employed persons belonging to an undertaking or group of undertakings, or to a trade or group of trades, in the event of death or survival or of discontinuance or curtailment of activity, or of sickness related to work or accidents at work.” A similar, albeit slightly more restricted exception is set out in Art 9(2) of Directive 2009/138/EC (Solvency II). The reference made is to pension and benefit plans which are organised by an undertaking or a trade. These are governed by national conflicts law.57 3. Included insurance contracts a) Insurance contracts covering large risks (Art 7(2)) 24 Art 7(2) comprehensively governs insurance contracts covering large risks. In Art 7(1), it is

made particularly clear that Art 7(2) will apply irrespective of whether or not the risk is situated in a Member State. Therefore, the law applicable under Rome I to insurance contracts covering large risks is always determined pursuant to Art 7(2), irrespective of whether or not the insurance contract has a special connection to the internal market.58 25 For the purposes of definition, Art 7(2) refers to Art 5(d)59 of the First Council Directive 73/

239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance.60 Upon entry into force of the Directive 2009/138/EC (Solvency II), the definition in Art 13(27) was adopted.61 Accordingly, “large risks” are: “(a)risks classified under classes 4(1), 5(2), 6(3), 7(4), 11(5) and 12(6) in Part A of Annex I; (b) risks classified under classes 14(7) and 15(8) in Part A of Annex I, where the policy holder is engaged professionally in an industrial or commercial activity or in one of the liberal professions and the risks relate to such activity; (c) risks classified under classes 3(9), 8(10), 9(11), 10(12), 13(13) and 16(14) in Part A of Annex I in so far as the policy holder exceeds the limits of at least two of the following criteria: (i) a balance-sheet total of EUR 6,2 million; (ii) a net turnover, within the meaning of Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies(15), of EUR 12,8 million; (iii) an average number of 250 employees during the financial year. If the policy holder belongs to a group of undertakings for which consolidated accounts within the meaning of Directive 83/349/EEC(16) are drawn up, the criteria set out in

57

58

59

60 61

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assurance, OJ L 345, 19.12.2002, p 1–51, last amended by Directive 2008/19/EC of the European Parliament and of the Council of 11 March 2008 amending Directive 2002/83/EC concerning life assurance, as regards the implementing powers conferred on the Commission, OJ L 76, 19.3.2008, p 44–45; now Art 1 and Art 2(1) and (3) of Directive 2009/138/EC (Solvency II). In this regard, see also Armbrüster, in: Staudinger BGB, preliminary remarks Art 7 Rom I-VO, note 12; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 10; McParland, note 13.112. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 90; Falconi, 76 et seq.; Gruber, in: Calliess, Art 7 Rom I-VO, note 18. See, e.g., the German implementation in § 210(2) of the Insurance Contract Act (VVG) together with Part A of the Annex to the Insurance Supervision Act (VAG). The so-called First Non-Life Insurance Directive. Schnyder/Grolimund, in: Reithmann/Martiny, note 6.2736; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 6.2; see also Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 20.

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point (c) of the first subparagraph shall be applied on the basis of the consolidated accounts. Member States may add to the category referred to in point (c) of the first subparagraph the risks insured by professional associations, joint ventures or temporary groupings; (1) Railway rolling stock (All damage to or loss of railway rolling stock). (2) Aircraft (All damage to or loss of aircraft). (3) Ships (sea, lake and river and canal vessels) (All damage to or loss of river and canal vessels; lake vessels; sea vessels). (4) Goods in transit (including merchandise, baggage, and all other goods) (All damage to or loss of goods in transit or baggage, irrespective of the form of transport). (5) Aircraft liability (All liability arising out of the use of aircraft (including carrier’s liability)). (6) Liability for ships (sea, lake and river and canal vessels) (All liability arising out of the use of ships, vessels or boats on the sea, lakes, rivers or canals (including carrier’s liability)). (7) Credit (insolvency; export credit; instalment credit; mortgages; agricultural credit) (8) Suretyship (suretyship (direct); suretyship (indirect)). (9) Land vehicles (other than railway rolling stock) (All damage to or loss of land motor vehicles; land vehicles other than motor vehicles). (10) Fire and natural forces (All damage to or loss of property (other than property included in classes 3, 4, 5, 6 and 7) due to: fire; explosion; storm; natural forces other than storm; nuclear energy; land subsidence). (11) Other damage to property (All damage to or loss of property (other than property included in classes 3, 4, 5, 6 and 7) due to hail or frost, and any event such as theft, other than that included in class 8). (12) Motor vehicle liability (All liability arising out of the use of motor vehicles operating on the land (including carrier’s liability)). (13) General liability (All liability other than those referred to in classes 10, 11 and 12). (14) Miscellaneous financial loss (employment risks; insufficiency of income (general); bad weather; loss of benefits; continuing general expenses; unforeseen trading expenses; loss of market value; loss of rent or revenue; other indirect trading loss; other nontrading financial loss; other forms of financial loss). (15) OJ L 222, 14.8.1978, p 11. (16) OJ L 193, 18.7.1983, p 1.” This very technical and exceedingly complex definition of “large risks” is an attempt by the 26 European legislature to describe in positive terms the situations in which policyholders negotiate with insurers on equal terms and therefore do not require the protection provided under conflicts of law.62 Due to the references to the directives, the threshold for protection is directly in line with 27 Directive 2009/138/EC (Solvency II). Art 16(5) of Regulation No 1215/2012 (Brussels Ibis Regulation) also refers to the definition of large risks provided in Directive 2009/138/EC (Solvency II). However, Art 16(1)-(4) Regulation No 1215/2012 (Brussels Ibis Regulation) 62

For a detailed discussion, see Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 91 et seq.; in respect of the individual categories, see McParland, notes 13.124 et seq.; Gruber, in: Calliess, Art 7 Rom I-VO, note 20; Armbrüster, in: Staudinger BGB, Art 7 Rom I-VO, notes 4 et seq.

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must also be taken into account, as it also provides for party autonomy. These cases are not dissimilar to the large risks defined in Art 13(27) of the Directive 2009/138/EC (Solvency II), yet they are not identical to cases of large risks as defined by reference in Art 16(5). Hence, Rome I and Regulation No 1215/2012 (Brussels Ibis Regulation) regrettably do not completely correspond on this point. 28 The third subparagraph of Art 13(27) of Directive 2009/138/EC (Solvency II) gives Member

States the option of extending the category of large risk insurance. This gives rise to the danger of inconsistencies in relation to the approach taken by the individual Member States with regard to the provision. b) Insurance contracts governing mass risks situated in Member States (Art 7(3)) 29 Insurance contracts governing risks which are not large risks within the meaning of Art 7(2)

together with Art 13(27) of Directive 2009/138/EC (Solvency II) (so-called “mass risks”)63 only fall within the scope of Art 7 if the risks covered are “situated inside the territory of the Member States”.64

30 The Member States party to the Rome I Regulation are in principle all the EU Member States

with the exception of Denmark. The EEA Contracting States do not count among the Member States for this purpose. According to this definition of Member State, insurance contracts covering a risk situated in Denmark or one of the EEA Contracting States would not fall within the scope of the conflict of law provisions in Art 7(3). For insurance conflicts of law, this is an undesired result, running contrary to the intended purpose of the provision. Art 7(3) is intended to provide special conflict of law provisions for policyholder protection in the internal insurance market. However, this internal market also naturally includes Denmark and the EEA Contracting States. Consequently, the European legislature has developed a separate definition of Member State, which is set out in the second sentence of Art 1(4), specifically for the purposes of Art 7. Under this definition, Member State means all the EU Member States for the purposes of Art 7. This, therefore, also includes Denmark.65 31 In contrast, the EEA Contracting States of Iceland, Liechtenstein and Norway are not en-

compassed by the definition.66 The exclusion of these states also runs contrary to the purpose of Art 7(3). The internal insurance market namely also extends to the EEA Contracting States by virtue of the EEA Agreement and the EU insurance law directives with EEA relevance, especially Directive 2009/138/EC (Solvency II). If a risk is situated in an EEA Contracting State, Art 7(3) should without a doubt also apply in this case.67 Prior to the adoption of Rome I, this was the situation under the conflicts of law in the directives, which applied to both EU Member States and EEA Contracting States equally. It can also be seen in the new provision in Art 178 of Directive 2009/138/EC (Solvency II).68 This provision obliges the EEA Contracting States to ensure the application of the rules in Rome I to 63 64

65 66 67 68

508

Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 103. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 104; Gruber, in: Calliess, Art 7 Rom I-VO, note 29; cf. Falconi, 77; Caamiña Domínguez, CDT Vol. 1 No. 2 (2009), 30, 38. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 50; Falconi, 79. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 51. See also Falconi, 80. Falconi, 80.

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insurance contracts falling within the scope of Art 7.69 This applies in particular to mass risk insurance within the meaning of Art 7(3). It would be quite extraordinary if, under Art 178 of Directive 2009/138/EC (Solvency II), the EEA Contracting States were required to apply the conflicts of law rules in Rome I when a risk is situated in an EU Member State, but not when it is situated in an EEA Contracting State. It would be equally incompatible for a court in an EU Member State not to have to consider Art 7(3) when the risk is situated in an EEA Contracting State. In my opinion, the Member State term used in Art 7(3) must extend beyond the definition provided in the second sentence of Art 1(4) to encompass the EEA Contracting States.70 Under Art 7(6), the “location” of the risk is determined pursuant to the definition provided 32 in Art 2(d) of the Second Non-Life Insurance Directive, while in the case of life insurance, it is deemed to be the country of the “commitment” within the meaning of the Life Insurance Directive.71 With the entry into force of the Directive 2009/138/EC (Solvency II), these definitions were replaced by Art 13(13) (risk location in non-life insurance) and (14) (Member State of the “commitment” in life insurance) of Directive 2009/138/EC (Solvency II).72 These definitions are: “(13) ‘Member State in which the risk is situated’ means any of the following: (a) the Member State in which the property is situated, where the insurance relates either to buildings or to buildings and their contents, in so far as the contents are covered by the same insurance policy; (b) the Member State of registration, where the insurance relates to vehicles of any type; (c) the Member State where the policy holder took out the policy in the case of policies of a duration of four months or less covering travel or holiday risks, whatever the class concerned; (d)in all cases not explicitly covered by points (a), (b) or (c), the Member State in which either of the following is situated: (i) the habitual residence of the policy holder; or (ii)if the policy holder is a legal person, that policy holder’s establishment to which the contract relates;73 (14) ‘Member State of the commitment’ means the Member State in which either of the following is situated: (a) the habitual residence of the policy holder; (b) if the policy holder is a legal person, that policy holder’s establishment, to which the contract relates;”

69 70

71

72 73

See also Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 51. Heiss, in: FS Jan Kropholler (2008), 459, 462 et seq.; this view is shared by Gruber, in: Calliess, Art 7 Rom I-VO, note 76; Miquel Sala, AEDIPr 2016, 793, 799. For greater detail, see McParland, notes 13.141 et seq. and Plender/Wilderspin, notes 10–050 et seq.; cf. Gruber, in: Calliess, Art 7 Rom I-VO, note 30; Armbrüster, in: Staudinger BGB, preliminary remarks Art 7 Rom I-VO, note 15; Caamiña Domínguez, CDT Vol. 1 No. 2 (2009), 30, 38; Bonnamour, Rev. Lamy dr. aff. No. 29 (2008), 76, 79. See supra note 6. Note the difference in wording (“[…] to which the contract relates […]”) to Art 19(2) (“concluded in the course of the operations of a branch […]”); as to Art 13(13)(d)(ii), see Kvaerner plc v. Staatssecretaris van Financiën (Case C-191/99) [2001] ECR I-04447.

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33 These definitions, too, have turned out to be technical and complex. In most cases, they lead

to the result that the risk is situated in the country in which the policyholder is habitually resident or the establishment of the policyholder concluding the contract is located.74 34 The differentiation made between insurance contracts covering risks situated in a Member

State and others covering risks situated outside of the Member States raises special problems of demarcation in cases of multiple locations of risk. For example, if a policyholder were to use a single insurance contract to insure a building situated in an EU Member State (e.g. France) and, at the same time, another building in a third country (e.g. in the USA), it is unclear as to whether, or the extent to which, Art 7(3) would apply to such a contract. The solution to this demarcation problem is provided in Recital 33. This states that the insurance contract shall be subject to Art 7(3) only to the extent that it covers risks situated in the Member States. In effect, the result is that the contract will be considered to constitute separate contracts in these cases (dépeçage).75 4. Insurance contracts governing mass risks situated in third countries 35 In the first sentence of Art 7(1), it is clear by e contrario reasoning that insurance contracts

covering mass risks not situated in EU Member States or EEA Contracting States are not governed by Art 7. They are therefore subject to the general rules provided, in particular Arts. 3, 4 and, as the case may be, 6 or 9.76 5. Reinsurance 36 Pursuant to the second sentence of Art 7(1), reinsurance is generally excluded from the

scope of application of Art 7. Thus, the result in relation to reinsurance is in effect consistent with Art 10 et seq. Regulation No 1215/2012 (Brussels Ibis Regulation), which also does not apply to reinsurance contracts.77 There is very obviously no need to provide any protection to a direct insurer taking out insurance, nor – in the case of retrocession – to a reinsurer.78 37 Unlike insurance covering large risks, reinsurance does not require inclusion within the

scope of application, even with regard to Art 7(4) of Rome I. Reinsurance does not constitute compulsory insurance within the meaning of paragraph 4. 38 Reinsurance contracts are, therefore, generally governed by Arts. 3, 4 and, if necessary, also

9.79 However, reinsurance contracts very commonly contain arbitration clauses, meaning that the law governing the reinsurance contract is determined by the conflict of law rules 74 75

76

77

78 79

510

Cf. Falconi, 78. Cf. Plender/Wilderspin, notes 10–054 et seq.; see also Pinheiro, CDT Vol. 4 No. 2 (2012), 202, 207; Bonnamour, Rev. Lamy dr. aff. No. 29 (2008), 76, 78. See infra notes 202 et seq.; see Martiny, in: MüKo BGB, Art 7 Rom I-VO, notes 12 and 28; Gruber, in: Calliess, Art 7 Rom I-VO, note 14, cf. also note 77; Pinheiro, CDT Vol. 4 No. 2 (2012), 202, 207; Bonnamour, Rev. Lamy dr. aff. No. 29 (2008), 76, 78 et seq. Group Josi Reinsurance Company SA v. Universal General Insurance Company (UGIC) (Case C- 412/98) [2000] ECR I- 05925. Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 17; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 35. Bonnamour, Rev. Lamy dr. aff. No. 29 (2008), 76, 78; Martiny, in: MüKo BGB, Art 7 Rom I-VO, notes 18

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applied by the arbitral tribunal. In accordance with what is likely still the prevailing majority academic opinion on the matter, arbitral tribunals are not obliged80 to apply Rome I; therefore the arbitral tribunal will determine the matter pursuant to the conflict of law provisions it deems relevant. In this regard, it should be noted that many national arbitration laws follow the model set out in Art 28 of the UNCITRAL Model Law. Compared with Rome I, this has three distinguishing features: first, Art 28(2) of the UNCITRAL Model Law permits both a choice of law in favour of the law of a state and a choice in favour of a non-state law. For reinsurance contracts, for example, the UNIDROIT Principles of International Commercial Contracts (PICC)81 may be chosen as global principles of general contract law. Furthermore, a project group is currently working on special Principles of Reinsurance Contract Law (PRICL),82 which will be made available as special, global principles of reinsurance contract law upon their completion. Art 28(3) of the UNCITRAL Model Law goes further. It also expressly permits in particular the setting aside of legal considerations in favour of equitable ones (“ex aequo et bono” or as “amiable compositeur”). Second, an arbitral panel does not determine an objective connection in accordance with the conflict of law rules of the lex arbitri, but in accordance with the conflict of law rules it considers applicable. Third, arbitrators will always take into account the applicable trade practices.83 This is especially important because reinsurance contract law remains largely uncodified and is therefore markedly dominated by trade practices.84 These always have to be taken into consideration under Art 28(4) of the UNCITRAL Model Law, i.e. irrespective of how the law applicable governs its relationship to trade practices.85 III. Territorial scope 1. EU Member States without Denmark Art 7 applies directly in all the “Member States”. In this context, Member States means all the 39 EU Member States with the exception of Denmark.86 2. Denmark Under Art 178 of Directive 2009/138/EC (Solvency II), Denmark is required to adopt the 40 application of Rome I87 for the insurance contracts falling within the scope of Art 7 (large risk insurance and mass risk insurance covering risks situated in a Member State, including

80 81

82 83 84 85

86 87

et seq.; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 152 and 156; Gruber, in: Calliess, Art 7 Rom I-VO, notes 86 et seq. It may nevertheless do so. International Institute for the Unification of Private Law (UNIDROIT), UNIDROIT Principles of International Commercial Contracts (2010). For details, see http://www.rwi.uzh.ch/oe/PRICL.html (last accessed on 7 June 2016). See Art 28(4) of the UNCITRAL Model Law. In more detail, infra notes 241 et seq. In respect of the special features of arbitration agreements, see also Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 154 et seq. Cf. the first sentence of Art 1(4) of the Rome I Regulation; see also Recital 46 of the Rome I Regulation. Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 15; McParland, notes 13.175 et seq.

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Denmark and EEA Contracting States).88 Denmark has in fact implemented Art 178 of the Directive by executive order no. 1117 of 17 September 2015 concerning the law applicable to certain insurance contracts89 by referring to Rome I for insurance contract which are subject to Directive 2009/138/EC (Solvency II).90 The conflict of law provisions in Rome I, therefore, apply as directive provisions and consequently in accordance with national implementing legislation. 41 For insurance contracts which do not fall within the scope of Art 7 (mass risk insurance

covering risks situated in third countries; reinsurance), the Rome Convention continues to apply in Denmark pursuant to Art 24(1).91 Consequently, Arts. 3, 4 and, where appropriate, 5 or 7 of the Rome Convention apply to mass risk insurance, and Arts. 3, 4 and, where appropriate, 7 of the Rome Convention apply to reinsurance if no special conflict of law provisions apply in arbitration as a result of arbitration agreements. The conflict of law situation in relation to Denmark is therefore on the whole almost the same as it is in the other EU Member States. 3. EEA Contracting States 42 Under Art 178 of Directive 2009/138/EC (Solvency II), the EEA Contracting States are also

bound to apply Rome I to insurance contracts falling within the scope of Art 7. Like Denmark, they must therefore ensure the application of the Regulation through the adoption of implementing legislation on Art 178 of Directive 2009/138/EC (Solvency II). The conflict of law rules in Rome I therefore apply as directive provisions and consequently pursuant to the national implementing legislation.92 It should, however, be noted that certain insurance contracts are excluded from the scope of Directive 2009/138/EC (Solvency II).93 The implementing legislation could include these exceptions. A uniform rule applying to all insurance contracts, i.e. also governing excluded areas, would clearly be more sensible. For example, this occurred in the Principality of Liechtenstein through the enactment of the Law of 12 June 2015 governing International Insurance Contract Law,94 which makes no exceptions to the scope of its application for the purposes of Directive 2009/138/EC (Solvency II). This appears to be the case also with the Norwegian Act on Choice of Law in Insurance95 as well as the Icelandic Act on Insurance Contracts, No 30/2004, Arts. 143–145.96 Both laws transform the previous conflict of law rules set out in the directives but do not appear to have been changed following the entry into force of Directive 2009/138/EC (Solvency II).97 88 89

90 91 92 93 94 95

96

97

512

With regard to the extended meaning of Member State, see supra notes 30 et seq. See section 1 of the executive order; I am very grateful to the Danish Ministry of Justice for providing this information. Cf. esp. Arts. 4–10 of Directive 2009/138/EC (Solvency II). For details Roth, in: Beckmann/Matusche-Beckmann, § 4 notes 5 et seq. Cf. McParland, note 13.177; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 16. Cf. esp. Arts. 4–10 of Directive 2009/138/EC (Solvency II). (IVersVG) LGBl 2015 in R 233. An English translation is provided at http://www.finanstilsynet.no/Global/English/Laws_and_regulation s/Insurance_Pensions/Act_Choice_Law_Insurance.pdf (last accessed on 7 June 2016). An English translation is provided at https://eng.atvinnuvegaraduneyti.is/laws-and-regulations/nr/nr/74 72 (last accessed on 7 June 2016). See the list of relevant Norwegian laws at http://www.finanstilsynet.no/no/Forsikring-og-pensjon/Skadef

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Insurance contracts which do not fall within the scope of Art 7 (mass risk insurance covering 43 risks situated in third countries; reinsurance contracts) are governed by the autonomous international contract law of the EEA Contracting States, especially since these countries are not signatories to the Rome Convention. In the Principality of Liechtenstein, for example, the Law of 12 June 2015 governing International Insurance Contract Law also applies to such insurance contracts (including reinsurance). This appears to be the case, except for reinsurance, also with the Norwegian Act on Choice of Law in Insurance as well as the Icelandic Act on Insurance Contracts, No 30/2004, Arts. 143–145. It is, however, necessary to highlight again that the commonly agreed arbitration clauses in 44 reinsurance contracts lead to the application of special arbitration conflicts of law, which correspond to Art 28 of the UNCITRAL Model Law in many countries. Thus, there is a high degree of legal uniformity in many countries. IV. Temporal scope Pursuant to Art 28, Rome I only applies to contracts which were concluded “after 17 45 December 2009”.98 Contracts concluded prior to this date are subject to the old conflicts of law; in the Member States of the EU that means the previous provisions implementing directive law or the Rome Convention.99 Due to the long duration of insurance contracts, particularly in the branches of personal insurance (life insurance, accident insurance, health insurance), this intertemporal provision carries special importance in this field.100 Difficulties may arise where insurance contracts concluded prior to 17 December 2009 are 46 later renewed. The question arises as to whether a contract has remained the same, albeit with amendments and extensions, and therefore continues to be subject to the law determined under the old conflicts of law or whether a new insurance contract has been concluded, for which the law applicable must be determined in accordance with Rome I. The problem can be illustrated by reference to life insurance policies which are sold by the 47 original policyholder to a new policyholder (“second hand policies”). Since this entails more than a mere assignment of rights under the policy, namely also a complete substitution of one of the parties to the insurance contract, the transaction requires the consent of the insurer. This poses the question of whether the contractual relationship between the new policyholder and the insurer is based on a new or additional insurance contract or just a continued albeit modified relationship under the original insurance contract. This question has recently been addressed by the EFTA Court in cases concerning the transfer of unit-

98

99 100

orsikring/Regelverk/Lover (last accessed on 7 June 2016) which states that it was last updated on 3 February 2016. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 8; Armbrüster, in: Staudinger BGB, preliminary remarks Art 7 Rom I-VO, note 8; Katschthaler/Leichsenring, r+s 2010, 45, 46. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 8; McParland, note 13.111. E.g., the German Federal Court of Justice decided a case on the basis of the (old) conflict rules which were based on directive law in 2016 because it concerned an insurance contract concluded in 2006; Federal Court of Justice of 1 June 2016, IV ZR 80/15, VersR 2016, 1099 at note 20.

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linked life insurance policies under Liechtenstein law.101 The question was not raised in relation to Art 7, but with a view to the pre-contractual information duties of the insurer under the insurance directives, now Art 185 of the Directive 2009/138/EC (Solvency II). However, the issue of whether or not there was a new contract and, thus, the insurer owed pre-contractual information duties towards the buyer of the policy, is essentially the same as the one concerning the temporal scope of Art 7. The EFTA Court held: “Moreover, it is a prerequisite for a legal transaction to be considered an ‘assurance contract’ within the meaning of the Directive that it entails a new and independent assumption of risk in return for payment. In the present case, it appears that the legal transactions at issue have transferred the underlying assurance contracts from one party to another without there being a change of the pre-existing risk assumption. Notably, the insured person, agreed on by the original parties to the contract, remains the same after the transfer. Accordingly, the Court finds that such a legal transaction does not involve any new and independent assumption of risk.”102 48 The EFTA Court decision provides helpful guidelines for determining the applicability of

Art 7 to contracts which were originally concluded before and including 17.12.2009. Nevertheless, there are further issues to be considered, such as whether the insured sum and/or the scope of cover (risks insured) are changed in the course of the renewal of a policy. V. Relationship of Art 7 to other conflict rules 1. Art 6 (consumer contracts) 49 Art 7(3) protects the policyholder as the weaker party. Such protection is afforded to both

consumer and non-consumer policyholders, with the exception of large risk insurance policyholders. This poses the question of whether consumers will enjoy the protection provided by Art 6 on top of the protection provided by Art 7.103 A precise answer can be read in Art 6(1), which expressly excludes inter alia Art 7 from its scope.104 The reason for this exception is specifically set out in Recital 32 of Rome I: a reference is made to the particular nature of insurance contracts, due to which policyholders require special protection in conflicts of law. For this reason, Art 6 does not apply in this context. This means that Art 7(3) applies exclusively to consumer contracts and recourse to Art 6 is not available.105 This definitely applies to Art 7(3), i.e. to insurance covering mass risks situated in Member States. 50 In respect of mass risks, there is absolutely no connection in Art 7 to insurance covering such

risks situated in third countries; it therefore provides no special policyholder protection in 101

102

103

104 105

514

Franz-Josef Hagedorn v. Vienna-Life Lebensversicherung AG (Joined Cases E-15/15 and E-16/15) [2016] EFTA Court Report. Franz-Josef Hagedorn v. Vienna-Life Lebensversicherung AG (Joined Cases E-15/15 and E-16/15) [2016] EFTA Court Report, note 61 (emphasis added). For detailed information about consumer contracts within the meaning of Art 6, see Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 168 et seq.; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 55; Armbrüster, in: Staudinger BGB, Art 7 Rom I-VO, note 16; Plender/Wilderspin, note 10–094. See as well the second sentence of Recital 32 of Rome I. Gruber, in: Calliess, Art 7 Rom I-VO, note 56.

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such cases. As such, it is doubtful whether Recital 32 represents the true intention of the European legislature to leave policyholders without protection in such cases or whether Recital 32 is formulated excessively and must therefore be interpreted narrowly as applying to insurance within the meaning of Art 7 only. The latter appears to be correct for at least three reasons. First and foremost, the wording of Art 6 only excludes Art 7 from its scope of application, not insurance contracts outside the substantive scope of application of Art 7. Second, the protection provided by Art 6 is granted in an all-encompassing manner, i.e. it also protects consumers from third countries. There would therefore be no reason to grant protection to consumers from third countries, which would have to be removed where insurance contracts are concerned. Third, this gap in protection could also affect consumers from Member States.106 For example, if a French policyholder insures his holiday home in Florida with an English insurer, the insurance contract will cover a risk situated in a third country. If, due to Recital 32, Art 6 were not applicable in such a case, the French consumer would be afforded no protection under conflicts of law. This cannot reflect the true intention of the European legislature. It must therefore be concluded that Art 6 does not apply merely to the extent that Art 7 governs specific insurance contracts. Since there is no specific rule in Art 7 governing insurance contracts covering a mass risk situated in a third country, the application of Art 6 to such cases is not prejudiced. With regard to the large risks also governed by Art 7, Art 6 does not apply due to the 51 European legislature’s opinion that there is no need to provide protection. While Art 6 does not apply in most cases simply due to the fact that a large risk policyholder does not fulfil the consumer requirement set out in Art 6, this is not always the case. For example, large risk insurance within the meaning of Art 13(27)(a) in connection with class 6 of Part A of Annex I (Classes of Insurance) (Ships (sea, lake and river and canal vessels)) may be taken out for private purposes and therefore by a consumer. This is the case, for example, where insurance is taken out to cover a private ocean yacht. Nevertheless, on the wording of the definition, the insurance definitely falls under large risks. In accordance with the conception of Art 7, a private policyholder is exceptionally afforded no special consumer protection. Due to this special rule, Art 6 also does not apply in such cases. 2. Conflicts of law in the consumer protection directives Various directives on consumer protection also apply to consumer insurance contracts. 52 Directive 2002/65/EC concerning the distance marketing of consumer financial services107 and Directive 93/13/EEC on unfair terms in consumer contracts108 are especially important in this regard. Both directives contain special conflict of law rules, Art 12(2) of Directive 2002/65/EC (Distance Marketing Directive)109 and Art 6(2) of Directive 93/13/EEC (Unfair Contract Terms Directive). These restrict a choice made under Rome I in favour of a law of a third country if – without the choice of law (i.e. through an objective connection) – the law of 106 107

108

109

See also Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 168. Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC, OJ L 271, 9.10.2002, p 16–24. Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ L 95, 21.4.1993, p 29–34. As to aspects of private international law of the Directive in general, see Heiss, IPRax 2003, 100.

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a Member State would apply. In such cases, it is prohibited for a choice of law to lead to the consumer losing the rights afforded by virtue of the directive through a choice in favour of a third country’s law.110 53 Pursuant to Art 23, such conflict of law rules contained in the directives supersede the

Rome I Regulation. This definitively clarifies that the conflict of law rules in the directives apply to any consumer insurance which does not fall within the scope of Art 7 of Rome I. In respect of consumer insurance falling within the scope of Art 7 of Rome I, it should be noted that Art 23 creates a special exception for Art 7 from the precedence otherwise granted to directive law. This exception is worded very generally: “With the exception of Art 7 […]”. By virtue of this wording, no “provisions of Community law which, in relation to particular matters, lay down conflict-of-law rules relating to contractual obligations” will apply to insurance falling within the scope of Art 7. This was the position taken so far by me111 and several other authors.112 54 It must, however, be enquired as to whether the wording of Art 23 actually reflects the

intention of the legislature accurately. This can be rebutted by taking into account the purpose of this provision. In this regard, it is necessary to recall that insurance conflict of law rules for the internal market were formerly contained in the insurance directives. Following the transposition of these conflict rules into Art 7, the conflict of law rules contained in the directives nevertheless had to remain in force, because they continued to bind Denmark and the EEA Contracting States. As a consequence of keeping the conflict rules of the directives in force, Art 23 would have given precedence to these conflict rules, even in the Member States to which Art 7 applies. It appears that the exception made in Art 23 in relation to Art 7 was intended to apply to the predecessor provisions to Art 7 contained in the insurance directives, but not to any other conflict of law rules applicable to insurance contracts. Consequently, the result must be that the exception made in Art 23 must be construed narrowly as only governing the old conflict rules in the insurance directives, but not the conflict of laws rules contained in the consumer protection directives which will prevail over Art 7. Following the entry into force of Directive 2009/138/EC (Solvency II), which no longer contains the previous conflict of law rules, Art 23 has become obsolete. 55 The result obtained in relation to the directives on consumer protection must, on the basis of

the same considerations, also apply to other special conflict of law rules in Union law.113 3. Rome II Regulation a) Culpa in contrahendo (Art 12 Rome II) 56 Matters relevant to insurance law are at times not governed by Rome I, but instead by

Rome II. Pursuant to Art 1(2)(i) Rome I, this applies to “obligations arising out of dealings prior to the conclusion of a contract”.114 The exclusion of this topic, which is particularly 110 111 112

113 114

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Cf. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 167. Heiss, in: FS Jan Kropholler (2008), 459, 471 et seq. Cf., e.g., Martiny, in: MüKo BGB, Art 23 Rom I-VO, note 11; Schulze, in: BeckOGK, Art 23 Rom I-VO, note 4; Magnus, in: Staudinger BGB, Art 23 Rom I-VO, note 31; Perner, IPRax No. 3 (2009), 218, 219. See infra notes 69 and 71. With regard to the meaning of culpa in contrahendo, see Recital 30 of the Rome II Regulation.

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relevant to the insurance sector,115 from the scope of Rome I can be explained by the fact that pre-contractual liability is governed specifically under Rome II.116 In this context, Art 12 Rome II is relevant. Art 12(1) Rome II, of course, itself refers to the (real or, where the contract has not been concluded, hypothetical) proper law of contract which must be determined pursuant to Rome I. This achieves a considerable degree of consistency between Rome I and Rome II.117 b) Direct action (Art 18 Rome II and Art 9 Hague Traffic Accident Convention) Art 18 Rome II, which determines the law applicable to any direct action taken by an injured 57 party against the liability insurer of the person liable, plays a particularly important role. The provision encompasses the right of the injured party to take direct action in relation to motor vehicle insurance, in the same way that it is already guaranteed across Europe by virtue of Art 18 of the Motor Insurance Directive.118 However, the provision also encompasses all other direct action rights provided under national law, which may, in particular in France,119 Belgium120 and in Spain,121 be afforded very generally to the injured party. Other legal systems, e.g. Germany122 but also the PEICL,123 do not provide a direct action claim in all cases of liability insurance, but do extend it far beyond motor insurance. Thus, Art 18 Rome II is not at all restricted to motor vehicle liability insurance. Moreover, there is also a view based on convincing arguments that the provision also includes other proprietary rights of an injured party to the insurance sum, for example, a statutory lien.124 For direct claims made by an injured party, Art 18 Rome II provides access to the most 58 favourable outcome principle by containing an alternative connection. Thus, the right to direct action exists when such a right is granted by either the proper law of the insurance contract as determined according to Rome I or the liability law determined according to Rome II (for contractual liability under Rome I).125 For the signatory states to the Hague Convention on the Law Applicable to Traffic Acci- 59

115

116

117 118

119 120 121

122 123 124

125

Its relevance arises from the great importance attributed to information and advice duties in insurance law. See in particular Art 2(1) of the Rome II Regulation, according to which the concept of damage for the purposes of Rome II also “cover[s] any consequence arising out of […] culpa in contrahendo”. See also Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 26. Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009 relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to insure against such liability (Text with EEA relevance), OJ L 263, 7.10.2009, p 11–31./11. See Art 124–3 French Insurance Contract Act (Code des Assurances). Art 151 Belgian Insurance Act 2014 (Loi du 4 avril 2014 relative aux assurances). See Art 76 Spanish Insurance Contract Act (Ley 50/1980, de 8 de octubre, de Contrato de Seguro) as amended. § 115 Insurance Contract Act 2008 (Versicherungsvertragsgesetz 2008). See Art 15:101 PEICL. Micha, 83 et seq.; Gruber, in: Calliess, Art 7 Rom I-VO, note 67; Armbrüster, in: Staudinger BGB, preliminary remarks Art 7 Rom I-VO, note 10. Cf. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 88 and 194.

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dents,126 it is also necessary to refer to Art 28 Rome II. In these signatory states, the Hague Convention prevails over the rule in Art 18 Rome II. This is because the Hague Convention contains a special conflict provision governing direct claims in Art 9. Art 9 of the Hague Convention on the Law Applicable to Traffic Accidents reads: “Persons who have suffered injury or damage shall have a right of direct action against the insurer of the person liable if they have such a right under the law applicable according to Articles 3, 4 or 5.127 If the law of the State of registration is applicable under Articles 4 or 5 and that law provides no right of direct action, such a right shall nevertheless exist if it is provided by the internal law of the State where the accident occurred. If neither of these laws provides any such right it shall exist if it is provided by the law governing the contract of insurance.”

c) Subrogation (Art 19 Rome II) 60 In addition to the above, Art 19 of Rome II (Subrogation) is also an important provision. It

represents a rule parallel to that of Art 15 Rome I.128 Both provisions require the application of the proper insurance contract law of the paying insurer in respect of the question of “whether, and the extent to which,” the insurer may exercise the contractual (Art 15 Rome I) or non-contractual (Art 19 Rome II) rights of the insured against a third party. The proper law of the insurance contract as determined under Rome I therefore governs the issue of the 126

127

128

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19. Convention on the Law Applicable to Traffic Accidents of 4 May 1971, available at https://www.hcch. net/en/instruments/conventions/full-text/?cid=81 (last accessed on 7 June 2016). These Articles determine the law governing liability in tort. They read: “Article 3; The applicable law is the internal law of the State where the accident occurred. Article 4: Subject to Article 5, the following exceptions are made to the provisions of Article 3 –a) where only one vehicle is involved in the accident and it is registered in a State other than that where the accident occurred, the internal law of the State of registration is applicable to determine liability – towards the driver, owner or any other person having control of or an interest in the vehicle irrespective of their habitual residence, – towards a victim who is a passenger and whose habitual residence is in a State other than that where the accident occurred, – towards a victim who is outside the vehicle at the place of the accident and whose habitual residence is in the State of registration. Where there are two or more victims the applicable law is determined separately for each of them. b) Where two or more vehicles are involved in the accident, the provisions of a) are applicable only if all the vehicles are registered in the same State. c) Where one or more persons outside the vehicle or vehicles at the place of the accident are involved in the accident and may be liable, the provisions of a) and b) are applicable only if all these persons have their habitual residence in the State of registration. The same is true even though these persons are also victims of the accident. Article 5: The law applicable under Articles 3 and 4 to liability towards a passenger who is a victim governs liability for damage to goods carried in the vehicle and which either belong to the passenger or have been entrusted to his care. The law applicable under Articles 3 and 4 to liability towards the owner of the vehicle governs liability for damage to goods carried in the vehicle other than goods covered in the preceding paragraph. Liability for damage to goods outside the vehicle or vehicles is governed by the internal law of the State where the accident occurred. However the liability for damage to the personal belongings of the victim outside the vehicle or vehicles is governed by the internal law of the State of registration when that law would be applicable to the liability towards the victim according to Article 4.” See infra note 83.

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insurer’s right to recourse vis-à-vis a third party who is liable contractually or non-contractually.129 4. Motor Insurance Directive and Green Card System a) General information The law applicable to an insurance contract, including the one applicable to direct claims for 61 motor vehicle accidents, is not directly affected by the Motor Insurance Directive and the Green Card System. In this regard, reference is therefore made to the relevant conflict of law rules in Rome I and Rome II. This was confirmed by the ECJ with a view to Art 14(b) of the Motor Insurance Directive according to which Member States must make sure that motor insurance will “guarantee […] in each Member State, the cover required by its law or the cover required by the law of the Member State where the vehicle is normally based when that cover is higher”. The ECJ held that this provision “does not contain any specific conflict-oflaw rule intended to determine the law applicable to the action for indemnity between insurers in circumstances such as those at issue in the main proceedings.”130 However, traffic accident victims receive special protection under the Motor Insurance 62 Directive and the Green Card System and especially so in cases of cross-border motor vehicle accidents. For this reason, the instruments will be briefly outlined below. b) Regulation of “domestic accidents” (Green Card System) As part of the Green Card System, there is a “national insurers’ bureau” in each of the 63 participating countries. The insurers’ bureaux together constitute the “Council of Bureaux”, which drew up the so-called “Internal Regulations” in 2002, which were last amended in 2013.131 The aim of these Internal Regulations is to guarantee that injured parties are compensated in line with the law at the place of the accident on the one hand, but also to guarantee that the handling bureau will be compensated by the liability insurer responsible for the damages paid.132 In accordance with the Internal Regulations, a person who is injured or harmed by a foreign 64 vehicle in his country of residence (“domestic accident”) may demand compensation from the “handling bureau” in his country of residence. Compensation will be paid pursuant to the rule applicable locally and to an amount corresponding at least to the locally applicable minimum insurance sum limits.133 The handling bureau may demand reimbursement of the claims expenses from the liability insurer responsible in a process described separately.134 129

130

131

132 133

134

Cf. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 88 and 194; see also “ERGO Insurance” SE v. “If P & C Insurance” AS and “Gjensidige Baltic” AAS v. “PZU Lietuva” UAB DK (Joined Cases C-359/14 and C-475/14) [2006] ECLI:EU:C:2016:40. “ERGO Insurance” SE v. “If P & C Insurance” AS and “Gjensidige Baltic” AAS v. “PZU Lietuva” UAB DK (Joined Cases C-359/14 and C-475/14) [2006] ECLI:EU:C:2016:40. Available at http://www.cobx.org/content/default.asp?PageID=58&DocID=66953 (last accessed on 7 June 2016). See (4)(c) of the Preamble to the Internal Regulations. See Art 3(4) of the Internal Regulations; discussed in detail by, e.g., the Austrian Supreme Court in OGH 21.10.2015, 2 Ob 35/15h. Arts. 5 et seq. of the Internal Regulations.

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65 The Green Card System does not extend to cases where a person is injured abroad. In such

cases, the special provisions set out in the Motor Insurance Directive apply. c) Regulation of “accidents abroad” (Motor Insurance Directive)

66 Where a person is injured outside of his country of residence (“accident abroad”) by a motor

vehicle which is insured and normally based in another Member State,135 the Motor Insurance Directive grants injured parties the opportunity to present their claims to the claims representative of the motor liability insurer responsible in their own country of residence.136 The claims representative must provide the injured party with a reasoned decision on the claim within three months of its presentation.137 However, an injured party does not have an enforceable claim against the claims representative. 67 The appointment of a claims representative in the injured party’s country of residence does

not constitute an establishment of the liability insurer within the meaning of Art 10 together with Art 7(5) of Regulation No 1215/2012 (Brussels Ibis Regulation).138 However, the latter provision is of almost no importance, because, under the case law of the ECJ,139 the injured parties are granted jurisdiction at their place of residence for direct claims against liability insurers under Art 13(2) together with Art 11(1)(b) of Regulation No 1215/2012 (Brussels Ibis Regulation).140 d) Compensation for accidents caused by unidentified or uninsured vehicles 68 Where an accident is caused by a vehicle which cannot be identified or is not insured,

Member States are obliged to set up a body responsible for compensation, which must provide compensation “up to the limits of the insurance obligation”.141 Pursuant to Art 10 (4) of the Motor Insurance Directive, each Member State “shall apply its laws, regulations and administrative provisions to the payment of compensation by the body, without prejudice to any other practice which is more favourable to the victim”. 5) Conflicts of law in the E-Commerce Directive 69 The country of origin principle is incorporated in Art 3(1) of the E-Commerce Directive.142

It is a matter of dispute as to whether this directive provision should be considered a conflict of law rule.143 If its conflict of law nature is accepted, the provision will prevail over Rome I pursuant to Art 23.

135

136

137 138 139 140 141 142

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First subparagraph of Art 20(1) of the Motor Insurance Directive (2009/103/EC); situations involving third countries are also governed in part, see the second subparagraph of the same provision. In respect of insurers’ duty to “[…] appoint a claims representative in each Member State other than that in which they have received their official authorisation.”, see Art 21(1) Motor Insurance Directive. See Art 22 of the Motor Insurance Directive. Art 21(6) of the Motor Insurance Directive. FBTO Schadeverzekeringen NV v. Jack Odenbreit (Case C-463/06) [2007] ECR I-11321. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 57 et seq. Art 10(1) of the Motor Insurance Directive. Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’), OJL 178, 17.7.2000, p 1–16.

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6) Conflicts of law in the Data Protection Directive Insurers are ultimately also data processors. The collection and handling of data of insured 70 persons constitutes an essential element of their business activity. It is therefore also rather common to find data protection clauses in the companies’ insurance terms and policy conditions. Consequently, data protection rules are of direct legal relevance to the insurance contract. Finally, data processing by insurers is affected by the scope of Directive 95/46/EC on the 71 protection of individuals with regard to the processing of personal data and on the free movement of such data.144 There is a special conflict of law rule in Art 4 of the Directive, which again prevails under Art 23 of the Regulation, insofar as it is of relevance to contracts. The same applies to the conflict of law rule set out in Art 3 of the General Data Protection 72 Regulation,145 which will replace Directive 95/46/EC on 25 May 2018. 7) Regulation on key information documents for inter alia insurance-based investment products (PRIIP) As mentioned above, the Regulation (EU) No 1286/2014 on key information documents for 73 packaged retail and insurance-based investment products (PRIIP)146 also governs specific insurance contracts. It applies to so-called “insurance-based investment products”, as they are referred to in the Regulation, i.e. in particular, but not solely, to unit-linked life insurance. The Regulation is especially also relevant to private law, because it imposes liability on the manufacturers of the key information document, i.e. the insurer, in Arts. 11(1) and 12. Under Art 11(2), a buyer of an insurance-based investment product may claim damages for a loss resulting from reliance on an insufficient key information document, when buying the insurance-based product for which that key information document was produced. However, PRIIP only prescribes that there must be such liability (Art 11(2)), that insurers 74 will not be allowed to contract out of this liability (Art 11(5)) and that insurers will only be liable towards the policyholder (Art 12). It leaves all the other details of liability subject to national law. This includes the interpretation of the terms “loss” and “damages” according to Art 11(3). Under Art 11(4) of PRIIP, national law can also afford further civil liability claims.

143

144

145

146

Cf. Kightlinger, Mich. J. Int’l L. Vol. 24 (2003), 719, 728 et seq. or Panopoulos, Zbornik radova Pravnog fakulteta u Nišu 2015, 823, 831. Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, OJ L 281, 23.11.1995, p 31–50. Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (Text with EEA relevance), OJ L 119, 4.5.2016, p 1–88. Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) (Text with EEA relevance), OJ L 352, 9.12.2014, p 1–23.

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75 The territorial scope of application of PRIIP and, thus, of Arts. 11 and 12 is not regulated

explicitly. However, it can be taken from the purpose of the Regulation that all the insurance-based investment products marketed in the Union are subject to it. Quite in line with this view, Art 15 PRIIP provides that “EIOPA shall monitor the market for insurance-based investment products which are marketed, distributed or sold in the Union” and the “[c] ompetent authorities shall monitor the market for insurance-based investment products which are marketed, distributed or sold in or from their Member State”. Thus, in my view, civil liability arises whenever the product is marketed, distributed or sold in a Member State. 76 As far as the details of such liability are concerned, the applicable national law must be

determined in accordance with the applicable rules of private international law. This raises a preliminary question, namely which conflict rules govern the liability of the manufacturer of an insurance-based investment product, i.e. the insurer. In my view, the conflict rule set out in Art 12 of Rome II (culpa in contrahendo) in connection with the conflict rules of Rome I should apply for the following reasons: The first sentence in Art 6(1) states that the “key information document shall constitute pre-contractual information”. The insurer will not only act as the manufacturer of the key information document, but also as the policyholder’s contracting partner (referred to as “retail investor” under PRIIP). Since liability can only occur upon an actual investment by the retail investor (Art 11(2) PRIIP), it will only apply where the insurer and policyholder have entered into a contract based on the key information document. Thus, at least as far as insurance-based investment products are concerned, the insurer’s civil liability may be classified as a “non-contractual obligation arising out of dealings prior to the conclusion of a contract” within the meaning of Art 12(1) of Rome II. According to Art 12(1) of Rome II, the law governing pre-contractual liability shall be the law that applies to the insurance contract as determined in accordance with the conflict rules of Rome I. VI. Scope of the proper law of contract 1. General 77 The scope of the proper law of the contract is determined, as it is for other contracts, by Arts.

10 and 12. 2. Special connections for specific issues a) Formalities (Art 11) 78 Art 11 provides a special connection for the question of the formal effect of contracts. By

providing a variety of alternative connections, it generally favours finding a contract formally valid. The rule also applies to insurance contracts governed by Art 7. However, almost no formal requirements have been set out in the insurance contract law of the EU Member States.147 79 In contrast, there is widespread inclusion in insurance laws of the insurer’s duties vis-à-vis

the policyholder to certify the contract as a policy (insurance certificate).148 Furthermore, 147 148

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Basedow/Fock/Janzen, 27 et seq. See also Art 2:501 PEICL with Comments and Notes.

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information duties, which must often be fulfilled in writing, are commonly imposed on the insurer.149 Both the insurer’s duty to issue a policy and his information and advice duties serve to protect the policyholder. Therefore, it does not make sense to make several alternative connections in Art 11 in favorem valididatis available to such formal requirements. These should not, in my opinion, be connected separately by virtue of Art 11 of Rome I, but rather be governed exclusively by the proper law of the insurance contract. b) Agency (Art 1(2)(g) Rome I) Legal issues concerning agency are particularly important in insurance contract law. Tra- 80 ditionally, sales of insurance are namely made either by an insurance broker or by an insurance agent. For both types of intermediary, national insurance contract laws may contain special provisions in respect of the extent to which their conduct is attributable to the insurer. The provisions also serve to protect the policyholder. Among these, for example, is the statutory definition in both German and Austrian laws of the insurance agents’ minimum scope of power, which not only governs that the receipt of declarations of intent and notifications from the policyholder, but also any knowledge received by the agent in his professional capacity can be attributed to the insurer.150 For sales by an insurance broker, similar attributions can be made by national law, if on the facts of the case the insurance broker is not independent, but acts rather as a “pseudo”-broker.151 Matters regarding agency are generally excluded from the scope of the Regulation under 81 Art 1(2)(g). Therefore, the law governing agency must be determined pursuant to the applicable national conflicts of law.152 In my opinion, specific provisions in insurance contract law concerning the scope of the power of attorney granted to the insurance agent should constitute one exception. As such rules represent specific provisions for the purpose of protecting the policyholder, which is the same purpose served by Art 7, the special connection provided for insurance contracts should apply. The insurance agent’s role in acting as a representative of the insurer when concluding the 82 insurance contract must be distinguished from the role played in relation to the fulfilment of the insurer’s pre-contractual and contractual duties. Insurance agents are namely not only active in concluding the contract, but also undertake the tasks of supporting and therefore informing and advising the customers – both prior to and following contract conclusion. In the latter role, an intermediary may be acting as the insurer’s vicarious agent. In such cases, any fault on the part of the intermediary will be attributed to the insurer in accordance with the national law applicable to vicarious liability. Where pre-contractual duties are concerned, this attribution is subject to Art 12(1) of Rome II and consequently usually to the proper law of the insurance contract under Rome I. In respect of the support provided in fulfilling the insurer’s duties following conclusion of the contract, the proper law of the contract applies directly pursuant to Rome I.

149 150

151

152

See Arts. 183 et seq. Directive 2009/138/EC (Solvency II). See § 69 VVG (German Insurance Contract Law, RGBl 263, 7632–6) and § 43 VersVG (Austrian Insurance Contract Law BGBl 2/1959). See, e.g., the specific rule on “pseudo-brokers” in § 43a Austrian Insurance Contract Act (Versicherungsvertragsgesetz). Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 86.

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c) Legal subrogation (Art 15) 83 It was mentioned above that the paying insurer’s right to recourse, arising from subrogation,

vis-à-vis a liable party is determined under Art 15 for contractual claims for compensation and Art 19 of Rome II for non-contractual claims for compensation. The vast majority of the cases concern non-contractual claims for compensation and are therefore governed by Art 19 of Rome II.153 d) Multiple liability (Art 16) 84 Art 16 governs the connection for recourse against jointly liable debtors. Translated into

insurance law, it governs cases of double insurance in particular. Where a policyholder brings a claim against an insurer on the basis of his insurance contract and there is double insurance, the duties of the insurer against whom the claim is made vis-à-vis his policyholder are determined in accordance with the proper law of the contract. The question of “whether and the extent to which the paying insurer may have recourse to the other insurers” is, pursuant to Art 16 of Rome I, generally determined by the same law. Defences which had been available to the sued insurer against the policyholder remain available to the extent allowed by the proper law governing his insurance contract. e) Further issues (Arts. 13, 14, 17 and 18) 85 The special connections under Art 13 (Incapacity), Art 14 (Voluntary assignment and

contractual subrogation), Art 17 (Set-off) and Art 18 (Burden of proof) can be applied without problems and without any inconsistencies in relation to other forms of contract. 3. In focus: Special connections of overriding mandatory provisions 86 The special connections made for overriding mandatory provisions154 within the meaning of

Art 9(2) (overriding mandatory provisions of the lex fori) and Art 9(3) (certain overriding mandatory provisions applying in the country where the obligations must be performed) also fall within scope of Art 7.155 In some cases, it may be difficult to determine the place of performance. Next to the place where the insured actually receives payment or service by the insurer, the place where the risk is situated as well as the policyholder’s place of residence may be considered. In view of the purpose of Art 9(3) to take into consideration mandatory rules of states which might actually impact the performance of a contract, each one of the places (place of payment; location of the risk; policyholder’s place of residence) should be considered. 87 The issue of which national and, where necessary, supranational provisions should be

deemed overriding mandatory provisions is a contentious one both for insurance contracts and other types of contracts.156 Generally, regulatory rules come into mind.157 It must, of course, be taken into consideration that the regulatory country of origin principle applies extensively under Directive 2009/138/EC (Solvency II). Therefore, even a special connection 153 154 155

156 157

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Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 88 and 194. With regard to the meaning of this term, see Art 9(1) of the Rome I Regulation. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 183; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 56; cf. Armbrüster, in: Staudinger BGB, Art 7 Rom I-VO, notes 32 et seq. See in more detail Roth, in: FS Egon Lorenz (2014), 421. Such as, e.g., sanctions for non-admitted business; see Ganzer, 255 et seq.

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under Art 9 may not prevent the country of origin principle established in the directives from being rendered meaningless. Consequently, only provisions which protect specific general interests as defined under regulatory law may be enforced against the country of origin principle.158 Irrespective of its implementation in the civil or regulatory law of the Member States, the 88 principle of non-discrimination following the Test-Achats ruling passed down by the ECJ159 is likely to satisfy the conditions for an overriding mandatory provision set out in Art 9 of Rome I.160 This clearly does not apply to the Member States’ laws in relation to each other, as these are all already bound to the principle of non-discrimination. Where, however, the law of a third country comes into application by virtue of a choice of law, a special connection to the principle of non-discrimination via Art 9 of Rome I can be made and the principle therefore enforced. Furthermore, a special connection also appears suitable for compulsory insurance provi- 89 sions, especially as these are usually adopted to protect the interests of third parties (victim protection). The application of Art 9 is ousted from the scope of Art 7(4). However, a special connection by virtue of Art 9 appears both possible and necessary outside of the scope of Art 7(4).161 It should be noted that insurance contract law rules may also have the character of over- 90 riding mandatory provisions.162 In respect of life insurance, for example, national insurance contract laws regularly specifically protect the person on whose life the insurance has been taken out (person at risk). Austrian and German laws, for example, require the consent of the person at risk for insurance to be taken out on that person’s life.163 Since such rules intend to protect persons at risk against speculation upon their life, they may be considered to be mandatory rules within the meaning of Art 9.164 In most other cases in the insurance sector, a special connection under Art 9 can be con- 91 sidered for almost all of the same rules as for other types of contract. This applies especially to antitrust and competition law rules. 4. In focus: Protection of mortgage creditors Mortgage creditors have a strong interest in that immovable property is insured. Often, the 92 underlying loan contract will oblige the debtor to take out and maintain insurance. Moreover, mortgage creditors often enter into a separate contract with the insurer of the relevant 158 159

160 161 162

163 164

Cf. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 185. Association Belge des Consommateurs Test-Achats ASBL and Others v. Conseil des ministres (Case C-236/ 09) [2011] ECR I-773. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 186. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 187. See Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note, 185; Schnyder, 210; see in context Commission Interpretative Communication, Freedom to provide services and the general good in the insurance sector, OJ C 43, 16.2.2000, p 5–27. § 150(2) German Insurance Contract Act 2008; § 159(2) Austrian Insurance Contract Act. See also Roth, in: Beckmann/Matusche-Beckmann, § 4 note 123.

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immovable property. The insurer often obliges itself not to make any payments without the mortgage creditor’s consent. Such agreements are not part of the property insurance contract and, thus, the law governing these agreements must be assessed independently. 93 Some jurisdictions grant special statutory protection to the mortgage creditor. Notably,

§§ 142–149 of the German Insurance Contract Act (ICA) impose several duties on the insurer, especially when mortgage creditors have informed the insurer about the mortgage. According to § 142 German ICA, the insurer has to notify the mortgage creditor about nonpayment of premium by the policyholder. The insurer will remain liable vis-à-vis the mortgage creditor for the period of time specified in § 143 German ICA. Termination of the insurance contract by the policyholder is restricted by § 144 German ICA. The insurer is obliged to inform about the existence of cover and the insured sum in accordance with § 146 German ICA. Insofar as the insurer has paid out insurance money to the mortgage creditor, it will acquire the mortgage by subrogation (§ 145 German ICA). All these statutory rights relate directly to the insurance contract and, thus, should be subject to the law governing the insurance contract.165 In my view, these rules will not apply to insurance contracts covering immovable property situated in Germany, yet governed by a law other than German law, e.g. due to a choice of law in accordance with Art 7(3)(b). 94 German and Austrian laws go beyond the aforesaid by holding, inter alia, that a mortgage

over land will at the same time constitute a right of lien to the insurance claim.166 This raises a classification issue: Will the right of lien to the insurance claim be subject to the law governing the mortgage, i.e. usually the lex rei sitae, or rather to the law governing the insurance contract? The question is under dispute in German legal literature.167 In my view, the German or Austrian lex rei sitae cannot impose such right of lien on an insurance claim governed by foreign law. Whether such right of lien exists should be decided by the law governing the insurance contract. In my view, there is also no compelling reason to treat the privileges of mortgage creditors as “mandatory rules” within the meaning of Art 9.168 VII. Insurance of large risks (Art 7(2)) 1. Legal policy considerations 95 The rule set out in Art 7(2) is based on the fundamental consideration that policyholders of

insurance covering large risks do not require protection under conflicts of law.169 They may be exposed to the risk that the insurance contract will be governed by a law foreign to them. This applies not only due to the economic strength typically held by the customer in large risk business, but also due to the fact that it is often the international business activities of these clients which form the basis of large risk insurance in the first place.170 Large risks within the meaning of Art 13(27)(a) of Directive 2009/138/EC (Solvency II) (various trans165 166 167 168

169 170

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See also Roth, 649. § 1127 of the German Civil Code (BGB); § 100(1) of the Austrian Insurance Contract Act (VersVG). See Roth, in: Beckmann/Matusche-Beckmann, § 4 note 114 with further references. See also Roth, in: Beckmann/Matusche-Beckmann, § 4 note 114, who does not give a definite answer on the application of Art 9, however. Bonnamour, Rev. Lamy dr. aff. No. 29 (2008), 76, 79. Bělohlávek, note 07.57.

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port risks) are often international risks, because cross-border transport has become routine. Yet, even large risks under Art 13(27)(c) of Directive 2009/138/EC (Solvency II), which specifically makes a connection to the economic size of the policyholder, will often cover international risks, especially because international groups of companies ultimately achieve the performance indicators for large risks. At the same time, such international groups are also most likely to insure risks situated in different countries.171 Consequently, it is quite a commonplace phenomenon for such policyholders to be confronted with foreign laws. The fact that policyholders in large risk business do not require protection leads to a free 96 choice of law being permitted. However, it also leads to an objective connection which not only deviates from, but ultimately contradicts the connection in mass risk business. In such cases, Art 7(2) can pursue the general principles for the objective connection applied to contracts in general under Art 4 (in particular paragraph 1(b) and paragraph 2). Thus, in principle the law of the country at the habitual place of residence of the insurer (as defined in Art 19) will apply. This is, however, subject to an escape clause in the second subparagraph of Art 7(2) as well as Art 7(4) and Art 9. Yet, various insurance contracts do not constitute large risk insurance, even if they have been 97 concluded by large policyholders. This is true of insurance of persons (life, accident and private health insurance), which is often taken out by international groups for their employees. The protection provided under Art 7(3) is afforded in such cases without regard to the bargaining power of the policyholder. The fact that no protection is required means that the connection made pursuant to Art 7(2) 98 also applies in relation to large risks situated in a Member State and those situated in third countries.172 Since risks in third countries and risks in Member States are thus treated in the same way under conflicts of law, there is no need for contracts concerning large risk business to be split in the manner described in Recital 33 (dépeçage) in situations where an insurance contract covers both risks situated in Member States and in third countries. Consequently, large risk insurance has been expressly excluded in Recital 33 from the process of dividing a contract into severable parts, as discussed in relation to mass risks.173 The same is true of insurance programmes covering risks situated in multiple Member States. Again, Art 7(2), which in principle uniformly connects to the country of the insurer’s habitual residence, also applies to these. Thus, a uniform connection is generally made available for insurance programmes concerning large risks. In this context, it should again be noted that insurance of persons, even those concluded by 99 large policyholders, do not cover large risks. Dépeçage will be applied to a contract for which the risks are situated in multiple locations, where the insurance contract refers to several establishments located in different Member States or partly in Member States and partly in

171

172

173

In this respect, see the discussion concerning “international insurance programmes” at infra notes 106 et seq. See the first half of the first sentence of Art 7(1); as to dépeçage before the entry into force of the Rome I Regulation see American Motorists Insurance Co v. Cellstar Corp [2003] EWCA Civ 206. See Recital 33: “[…] not covering a large risk […]”.

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third countries. Dépeçage may be avoided by way of choice of law where such choice is available to the parties.174 2. Free choice of law (first subparagraph of Art 7(2)) 100 In the absence of the policyholder requiring protection, the first subparagraph of Art 7(2)

affords a free choice of law to be made in relation to large risk insurance. It is expressly required that such a choice of law be made in accordance with Art 3.175 If the policyholder is a natural person,176 the insurer shall inform the policyholder about a proposed choice of law in its pre-contractual information in accordance with Art 183(1)(b) Directive 2009/138/EC (Solvency II). 101 A choice of law made pursuant to the first subparagraph of Art 7(2) is subject to the

restrictions set out in Art 3. This means inter alia that a choice in favour of a non-state law, for example the Principles of European Insurance Contract Law (PEICL),177 to govern large risks will not have the effects of a choice of state law. A choice of law clause in favour of the PEICL does not lead to a waiver of the law applicable to the insurance contract, but rather to an incorporation of the Principles into the insurance contract. By this means, the mandatory provisions of the law applicable prevail over the PEICL.178 3. Objective connection (second subparagraph of Art 7(2)) 102 The objective connection established in the second subparagraph of Art 7(2) corresponds to

the principles underlying Art 4. In principle, the law of the country in which the insurer has his habitual residence applies.179 In such cases, as elsewhere, the insurer’s habitual residence must be determined in accordance with Art 19. By virtue of this provision, the place of the insurer’s central administration is generally relevant.180 Where, in contrast, a contract is concluded “in the course of the operations of a branch, agency or any other establishment” or if one of the “branch offices” is responsible for performance under the contract, the place at which this branch office is located will be treated as the place of the insurer’s habitual residence.181 174 175

176 177

178 179

180

181

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See infra notes 142 and 206. Caamiña Domínguez, CDT Vol. 1 No. 2 (2009), 30, 34; Bonnamour, Rev. Lamy dr. aff. No. 29 (2008), 76, 79; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 97; Falconi, 84; Gruber, in: Calliess, Art 7 Rom I-VO, note 24; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 21; Armbrüster, in: Staudinger BGB, Art 7 Rom I-VO, note 7; McParland, note 13.131; Plender/Wilderspin, note 10–032; Katschthaler/ Leichsenring, r+s 2010, 45, 49. When a natural person takes out ocean marine insurance, this is considered large risk insurance. Cf. Stahl, The Principles of European Insurance Contract Law (PEICL) and their application to insurance contracts for large risks. Falconi, 90. First sentence of the second subparagraph of Art 7(2); Gruber, in: Calliess, Art 7 Rom I-VO, note 25; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 22; Schnyder/Grolimund, in: Reithmann/Martiny, note 6.2754; McParland, note 13.135; Plender/Wilderspin, note 10–040. The first subparagraph of Art 19(1); Caamiña Domínguez, CDT Vol. 1 No. 2 (2009), 30, 36; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 98; McParland, note 13.136; Plender/Wilderspin, note 10–042. Art 19(2); Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 22.

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The connection to the insurer’s habitual residence is flexible. In conformity with Art 4(3),182 103 the contract is governed by the law of another country where it is clear that the contract is “manifestly more closely connected” with this other country.183 In order to assume that the contract is “manifestly more closely connected” with another 104 law, it does not suffice for the risk to be situated in that country. This becomes clear by comparing the connection pursuant to the first sentence of the second subparagraph of Art 7 (2) with the standard connection to the location of the risk established in the third subparagraph of Art 7(3). This intended difference in treatment of large risks and mass risks within the internal market would be obliterated if reference were always made to the law of the country in which the risk is situated by virtue of the second sentence of the second subparagraph of Art 7(2).184 If the policyholder is a natural person,185 the insurer shall inform the policyholder about the 105 law governing the insurance contract in its pre-contractual information in accordance with Art 183(1)(b) Directive 2009/138/EC (Solvency II). 4. In focus: International insurance programmes International insurance programmes are often tailor-made for international groups of com- 106 panies. Due to the size of such groups of companies, these programmes often offer large risk insurance within the meaning of Art 7(2). The goal of international insurance programmes is to provide uniform insurance cover to all of the group’s companies equally. The means by which this is achieved in individual cases depends on the circumstances. A common element among the insurance programmes is that a group company, usually the parent company, secures uniform insurance cover for the entire group by means of an insurance contract for its own benefit and for the benefit of the other group companies. The concept of international programmes varies in individual cases depending on the 107 circumstances and not least on the regulatory framework.186 Sometimes the various subsidiaries take out their own local insurance policies with local insurers and the parent of the group will add cover through an umbrella or master policy which tops up local cover so that, in sum, equivalent cover is provided for every subsidiary (“coordinated programmes”187).188 Sometimes, the parent company takes out a master policy which also determines the cover to be taken out locally by the parent company or the local subsidiary. Local cover provided by a local insurer, frequently a subsidiary of the insurer leading the insurance programme, will sometimes be reinsured up to 100 % by the leading insurer, making the local insurer a 182 183

184

185 186 187 188

On this point, see Gruber, in: Calliess, Art 7 Rom I-VO, note 28. Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 23; Armbrüster, in: Staudinger BGB, Art 7 Rom I-VO, note 9; McParland, note 13.137. See also Gruber, in: Calliess, Art 7 Rom I-VO, note 26; McParland, note 13.138; Plender/Wilderspin, note 10–044; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 99 et seq. with further references; cf. Bělohlávek, note 07.59. When a natural person takes out ocean marine insurance, this is considered large risk insurance. As to regulatory concerns, see, e.g., Armbrüster, notes 2076 et seq. Ganzer, 13 et seq.; Mächler-Erne, in: Reichert-Facilides/Schnyder, 162; Armbrüster, note 2075. Cf. Strnad, HAVE 2007, 345, 346.

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“fronter” only (so-called “fronting”). Therefore, programmes enforced through such master policies are frequently called “integrated” programmes.189 Accordingly, the local policies will be of less importance in integrated programmes. 108 Since a free choice of law is available in such cases, the law applicable to both the master or

umbrella policy and the local policies depends on the choice of law agreement made by the parties. Reports from the field demonstrate that the master or umbrella policy is regularly governed by the law of the country in which the policyholder and the insurer have their habitual residence.190 In contrast, local policies are regularly governed by the law applicable at the place of the subsidiary’s habitual residence or the place of establishment.191 5. Financial interest cover 109 Centrally managed international insurance programmes will sometimes push at the bound-

aries of local insurance supervisory law.192 One way to avoid having to switch to a decentralised insurance programme is to make so-called financial interest cover available. Essentially, there is an agreement between the insurer and the policyholder, usually the parent company of a group, to the effect that it is not the interests of the subsidiaries abroad which will be insured, but rather the financial interest of the parent company. Such financial interest may in particular be a negative impact on the parent company’s balance sheet which arises by the fact that loss occurs to one of its subsidiaries. Such negative impact may result because the loss occurring to the subsidiary will cause the value of the shares held by the parent company to drop.193 It is this negative impact and only this negative impact on the parent company’s balance sheet which is covered by the financial interest cover. In this way, the insurance undertaking providing the cover does not at all become active abroad in a formal sense. This method appears to avoid any conflict with local insurance supervisory law. The extent to which such constructions can withstand the argument made in legal commentary to the effect that these represent avoidance tools has yet to be finally determined and ultimately depends on the respective local insurance supervisory law concerned.194 110 In respect of private international law, the construction could, in principle, raise the ques-

tion as to where the risk is situated within the meaning of Art 7(6). However, financial interest cover is usually granted in contracts qualifying as large risk insurance within the meaning of Art 7(2), which does not refer to the location of the risk at all. Thus, from a conflict of laws perspective, few additional problems will be created by insurance policies granting financial interest cover.

189 190 191

192 193 194

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Ganzer, 16 et seq.; Strnad, HAVE 2007, 345, 346. Mächler-Erne, in: Reichert-Facilides/Schnyder, 163 (umbrella policy) and 164 (master policy). Mächler-Erne, in: Reichert-Facilides/Schnyder, 163 (coordinated programme) and 164 (integrated programme); Strnad, HAVE 2007, 345, 346. In more detail Armbrüster, notes 2076 et seq. Ganzer, 288 et seq., for the calculation of the damage 295 et seq.; Armbrüster, note 2082. For Swiss supervisory law see Ganzer, 290 et seq.; see also the positions taken by Armbrüster, VersR 2008, 853 on the one hand, Bialowons/Kerst, r+s 2011, 317, 324 on the other hand (with further references).

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6. Co-insurance Cases of co-insurance are much more difficult to deal with under conflicts of law. It is 111 characteristic in such cases that a specific, usually large risk is provided total cover by a number of different insurers. According to common construction, the policyholder concludes a formal independent insurance contract with each of the co-insurers. Each co-insuring undertaking underwrites a certain amount of limited liability, without however sharing any joint and severable co-liability with the other insurance undertakings involved. The policyholder has each of the co-insurers cover an independent part of his risk; ideally, he will receive full cover from all of the insurers together. In the event of an insurance claim, this in principle means that the policyholder must make claims against each of the co-insurers on the basis of the respective insurance contract concluded with each one. Due to such constructions, these separate contracts must in principle be considered indi- 112 vidually in respect of the effect of conflicts of law.195 It is therefore necessary to determine whether the parties made a choice of law for each individual contract.196 In the absence of a choice of law, the law at the place of the insurer’s habitual residence applies to each of the insurance contracts.197 The contract law applicable may be very different depending on the choice of law or the habitual residence of the individual insurer. This formally independent construction of each separate co-insurance contract cannot, 113 however, obscure the fact that the individual contracts were in fact concluded in a coordinated manner. In particular, the individual insurance contracts often contain so-called lead clauses naming one of the co-insurers as the so-called leading insurer. This simplifies the handling process as the policyholder only has to send notifications and declarations to the leading insurer, upon receipt by whom the declaration is regularly held to have been received by all of the co-insurers. In the other direction, the leading insurer often undertakes the handling of the claims settlement for both itself and, at the same time, on behalf of the coinsurers. In respect of issues of international jurisdiction, the Regulation No 1215/2012 (Brussels Ibis 114 Regulation) draws the appropriate consequences from the actual coordination of co-insurance contracts. Pursuant to Art 11(1)(c) of Regulation No 1215/2012 (Brussels Ibis Regulation), the claimant may bring an action against all of the co-insurers in the Member State court in which the leading insurer is sued. The insured is thereby enabled to enforce claims against all of the co-insurers in a joint legal action. However, the policyholder does not have to make use of this option. In contrast, Art 7(2) does not contain a special rule for co-insurance. It may therefore be 115 doubtful whether – in the absence of an express choice of law clause in the co-insurance contracts – an implicit choice in favour of the law governing the leading insurance contract can be made by virtue of the leading clause. If it cannot, it will also be necessary to examine whether a co-insurance contract based on a leading contract is “manifestly more closely connected” with the country whose law governs the leading insurance contract. 195 196 197

See also Roth, 596. Art 7(2). Second subparagraph of Art 7(2).

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116 An implicit choice of law can only be accepted where it “clearly” results from the terms of the

contract or from the circumstances of the case.198 Any deviation from the connection to the habitual residence of the respective insurer under the second sentence of the second subparagraph of Art 7(2) may only be made where it is clear from all the circumstances of the case that the contract is “manifestly more closely connected” with another country. A clear overall picture is required in order to accept either an implicit choice of law or a deviation from the standard connection. 117 Travelers Casualty & Surety Co Europe Ltd. v. Sun Life Assurance Co Canada (UK) Ltd199 is

an illustrative case. In this case, the parent company, Sun Life Canada, took out an insurance programme organised in various layers. Each layer was insured by means of co-insurance constructions. The lead insurer in the primary layer at the time of contract conclusion was Gulf Insurance Company UK Ltd. It underwrote 20 % of the insurance sum of the primary layer. This lead insurer was later replaced by Travelers Canada. A Lloyd’s syndicate underwrote 40 % of the cover of the primary layer. The remaining 40 % of the cover of the primary layer were divided amongst American Home Assurance, Job Insurance Company of Canada and Liberty Mutual Insurance Company. As a result, the contract had links to several countries, in particular Canada and England. By means of a “follow all the terms and conditions” clause, the insurances issued in a single policy referred to three other policies which had been issued by Canadian insurers or by the establishments of insurers in Canada. Furthermore, the policy referred to an insurance policy which had probably been issued by a US American insurer. Moreover, the judge, Jonathan Hirst, QC, listed a variety of other contacts: The following connections (apart from the underlying policies) emerge from the Policy: – The policy is entitled “Sun Life Financial Services of Canada Inc. Blended Excess Program”; – Sun Life Canada is named as the Parent Organisation with its principal address in Ontario; – The currency of the policy is in US dollars, but currencies are to exchanged at the US$ rates published in the Globe and Mail, a daily newspaper published in Toronto. – The policy period is by reference to Toronto time; – The named Lead Insurer, writing 20 % on the primary and first excess layers and 10 % on the second excess layer was a company incorporated in England & Wales carrying on business in London. I have already mentioned that there was a novation whereby Travelers Canada was substituted for Gulf UK, but this occurred long after the issue of the Policy and both parties agreed that the applicable law had to be ascertained as at the issue of the Policy, and that it did not change as a result of the novation. – The next 40 % on the primary and first excess layers and 35 % on the second excess layer was written by Lloyd’s underwriters. Substantial following lines were written in the Canadian market. – The brokers are named as Marsh Canada Limited in Ontario. – The language (and particularly the spelling in the policy) is perhaps more US/Canadian

198 199

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Second sentence of Art 3(1); see also Recital 12. Travelers Casualty & Surety Co Europe Ltd. v. Sun Life Assurance Co Canada (UK) Ltd [2004] EWHC 1704 (Comm).

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than English, but the General Conditions of Section 1B and the Master General Conditions state that the policy is in the language of the insurers, so this may be a neutral point. – The Lead Insurer (Gulf UK) was to receive notification of all Claims notices and to deal with all Claims. A clear choice of law could not be identified on these facts by the judge. With regard to the 118 objective connection, i.e. the determination of the closest connection, there was also no clear result for the judge. In effect, he left the question as to whether the contract was governed by English or Canadian law unanswered. This, as well as expressing a reservation in respect of his assessment as to whether a choice of law had been made, was easily possible, because the proceedings were only incidentally concerned with the question of the law applicable. The real question relevant in the judgment was whether the court was a forum non conveniens. From the determination that no clear picture could be obtained, it is obviously possible to deduce that the contract was not “manifestly more closely connected” with another country, so that the standard connection to the respective insurer’s habitual residence would have been made. It is also remarkable that the English judge did not identify a choice of law by the fact alone of a term stating that the contract follows all the terms and conditions of another insurance contract. Instead, the term was considered (only, but nevertheless) to be an indication, which taken together with all of the other indications formed all of the circumstances to be evaluated. Considering the many and heterogeneous connections of co-insurance structures to various jurisdictions, a completely uniform connection appears difficult to obtain at the very least. When the case was decided in substance by Christopher Clarke200 the outcome was different. 119 Clarke relied on a list of contacts very similar to the one drawn up by Jonathan Hirst.201 However, Clarke added a few contacts to Ontario, Canada. Overall, Clarke concluded that there was an implicit choice in favour of the law of Ontario.202 Alternatively, the contract would be most closely connected with Ontario.203 I will neither discuss whether Hirst or Clarke was right, nor do I wish to comment on the list used by the judges to identify an implicit choice or manifestly closer connection. What I believe is important is the fact that neither Hirst nor Clarke consider a “leading clause” to imply a choice of the law which governs the leading insurance contract. Equally, the leading clause does not by itself establish a “manifestly closer connection”. A determination of these questions must be based on all the circumstances of the case. 7. Excess of loss insurance As demonstrated in the case Travelers Casualty & Surety Co Europe Ltd. v. Sun Life Assur- 120 ance Co Canada (UK) Ltd. discussed above, large risks are often not merely underwritten in the form of co-insurance, but also as excess of loss insurance. In the latter form, the risk to be 200

201 202

203

Travelers Casualty & Surety Co Europe Ltd. v. Sun Life Assurance Co Canada (UK) Ltd [2004] EWHC 1704 (Comm). Supra notes 117 et seq. Travelers Casualty & Surety Co Europe Ltd. v. Sun Life Assurance Co Canada (UK) Ltd [2004] EWHC 1704 (Comm), notes 23–25. Travelers Casualty & Surety Co Europe Ltd. v. Sun Life Assurance Co Canada (UK) Ltd [2004] EWHC 1704 (Comm), note 26.

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insured is divided into multiple vertical layers of cover.204 In the event of damage, the insurers of the primary layer are initially liable up to a specific amount. Within the framework of the contracts for the first excess layer, the amount also constitutes the excess, so that a claim may only be made against the insurers in the first excess layer once the cover provided by the primary layer has been exhausted. This can continue to take place over multiple layers. The conditions set out in the insurance contracts pertaining to the individual layers are often coordinated substantively. For instance, by means of a drop-down clause,205 it is possible to provide that, after the insurance sum of the primary layer has been exhausted, the first excess layer will undertake the function of the primary layer for the rest of the insurance period. 121 In these cases, the question arises of whether the policies of the excess layers are governed by

the law governing the primary layer.206 There is no single, generally valid answer to this question, which must be answered on a case-by-case basis. However, the question only arises when no express choice of law has been made in the individual insurance contracts. In such cases, each separate insurance contract is governed by the law at the place of the respective insurer’s habitual residence unless the judge holds in favour of a tacit choice of law or accepts a manifestly closer connection with another country. The decisive factor in this situation will be whether the very exacting standards placed on an implicit choice of law or the very strict requirements for a deviation from the objective connection have been met. Where, as in the Travelers Casualty & Surety Co Europe Ltd. v. Sun Life Assurance Co Canada (UK) case, it is unclear which law governs the first layer policy, it will be difficult to accept that the excess layers should be treated in similar fashion to the primary layer even with regard to the law applicable. 8. Market-related connections 122 Lastly, it is questionable as to whether large risk insurance is governed by the law of a

particular country by the fact that the contract was entered into within the framework of the specific insurance market native to that country. For example, where risks are placed on the London market via Lloyd’s Syndicates and possibly other insurers, London brokers will mediate and/or the standard terms common to the London market will be incorporated into the contract. 123 In my opinion being active on a particular market cannot intrinsically represent an implicit

choice of law in favour of this market’s law and therefore also does not justify any deviation in favour of the market’s law. Rather, the placement of insurance cover on a particular market is only (but nevertheless) one indication in favour of recognising an implicit choice of law or a manifestly closer connection with this marketplace. In addition, all the terms and conditions of the contract must clearly be examined in this case too, for example whether the terms of the contract are obviously based on a particular law, what arbitral and choice of forum clauses are used, the language of the contract, the currencies in which payment has 204 205

206

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Mächler-Erne, in: Reichert-Facilides/Schnyder, 165. Cf. Canal Insurance Co. v. Montello Inc. [2013] WL 6732658; Kotula/Kniffen, Tort & Ins. L.J. Vol. 50 No. 2 (2015), 349, 357 et seq. In this sense, Mächler-Erne, in: Reichert-Facilides/Schnyder, 165 for excess of loss insurance which follows the terms of the primary layer entirely.

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been agreed, the habitual residence of the parties, the location of the risks, etc. A decision can consequently only be made on the facts of a particular case. 9. Importance of arbitration As a final remark, it should be noted that arbitration clauses have great practical importance 124 in relation to large risk insurance. According to prevailing opinion in legal commentary, an arbitral tribunal will not be bound by Rome I.207 In such cases, the law applicable must be determined by the national conflicts of law relevant to arbitral courts. Many of the national conflicts of law follow the model set out in Art 28 of the UNCITRAL 125 Model Law. This also permits, in particular, a choice of law in favour of a non-state law, such as the Principles of European Insurance Contract Law (PEICL). In the absence of a choice of law by the parties, Art 28 of UNCITRAL Model Law does not bind the arbitrators to a particular conflicts of law, but instead leaves it to the arbitral tribunal to choose which conflict of law rules to apply. VIII. Insurance contracts covering mass risks situated in Member States 1. Choice of law a) Limitations on the choice of law The first subparagraph of Art 7(3) affords the parties merely a restricted choice of law in 126 respect of insurance contracts covering mass risks situated in Member States. Unlike the situation under Art 3, the parties cannot choose any – and therefore also a neutral – law; they must instead choose from the exhaustive, enumerated list of laws which demonstrate a particular connection to the contract.208 In other respects, the choice of law available under Art 7(3) will follow Art 3.209 The intention behind placing such limitation on the choice of law is to provide protection to the policyholder and any third parties involved on his side (insureds; beneficiaries) within the internal insurance market.210 The internal market enables insurance companies to offer and provide their insurance services cross-border. In doing so, they are subject to supervision in the country of their head office (principle of home country control). In respect of the contract law applicable, however, the opposite applies: in this case, protection is afforded to the policyholder under the third subparagraph of Art 7(3) by the fact that, in general, his home law will be applied. Furthermore, the protection cannot be lost through a choice of

207

208

209 210

As to the dispute in legal literature, see Heiss/Loacker, in: Liebscher/Oberhammer/Rechberger, notes 10/31 et seq. Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 25; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 106; Gruber, in: Calliess, Art 7 Rom I-VO, notes 29 et seq.; McParland, note 13.148; Plender/Wilderspin, note 10–058; Armbrüster, in: Staudinger BGB, Art 7 Rom I-VO, note 10. See the first sentence of Art 7(3). Caamiña Domínguez, CDT Vol. 1 No. 2 (2009), 30, 39; Bonnamour, Rev. Lamy dr. aff. No. 29 (2008), 76, 79; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 107 discussing the “protection afforded to the weaker party in conflicts of law”; Bělohlávek, note 07.62; critical e.g. Seatzu, 154.

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law, because only jurisdictions which the policyholder can reasonably expect to encounter are made available for the choice.211 b) Duty of the insurer to inform about the proposed choice 127 A choice of law proposed by an insurer must be part of the pre-contractual information to be

provided by the insurer under Art 183(1)(b) Directive 2009/138/EC (Solvency II) in non-life insurance (to policyholders who are natural persons only) and Art 185(3)(m) Directive 2009/138/EC (Solvency II) in life insurance (to all policyholders, i.e. natural persons as well as legal entities). c) Choice of law 1: Law of any Member State where the risk is situated (Art 7(3)(a)) 128 The first option available to the parties under point (a) is in favour of the law of any Member

State where the risk is situated at the time of conclusion of the contract.212 This does not, however, constitute a real option for a choice of law, especially as the law of the country in which the risk is situated comes into application pursuant to the third subparagraph of Art 7 (3) even without a choice of law.213 129 This indirectly increases the importance of the option provided by virtue of the second

subparagraph of Art 7(3). The country in which the risk is located namely counts among one of the countries which may extend the choice of law.214 130 Point (a) would gain independent substance if – in cases of insurance contracts covering

multiple risks situated in different Member States – it made available a choice in favour of the law of the country in which the risks are situated for both or all of the risks insured. This, however, appears to be excluded by the wording alone. There is only a reference to “the risk”, in the singular, in point (a). This can be contrasted to point (e) and to paragraph 5. The fact that this is intended is illustrated by a substantive comparison of the provision with point (e). The latter expressly refers to the case in which a contract covers more than one risk situated in different Member States. In such cases, point (e) permits a choice in favour of one of the laws concerned in relation to the entire contract, but only for such policyholders who pursue “a commercial or industrial activity” or “liberal profession”. Inversely, it must be concluded that such a choice of law is not available to, in particular, policyholders acting in their private capacity. Point (a) can therefore not be interpreted to read as making the same choice of law available to all policyholders. Otherwise, point (e) would be made redundant.215

131 Consequently, point (a) can only have any meaning if one and the same insured risk could be

situated in multiple Member States at the same time. Looking at the definition of location of the risk in Art 13(13) of Directive 2009/138/EC (Solvency II), it can be questioned whether, for example, insurance covering several buildings situated in different Member States can 211 212

213 214 215

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In respect of policyholder protection, see also Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 25. Gruber, in: Calliess, Art 7 Rom I-VO, note 31; Schnyder/Grolimund, in: Reithmann/Martiny, note 6.2747; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 29; Armbrüster, in: Staudinger BGB, Art 7 Rom I-VO, note 11; McParland, note 13.149. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 109; Gruber, in: Calliess, Art 7 Rom I-VO, note 31. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 109. On this point, see also Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 110 et seq.; McParland, note 13.150.

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represent one and the same risk in multiple Member States. Similarly, the same consideration comes into play when one and the same contract covers several vehicles registered in different Member States. Finally, the same may also apply where the policyholder in the situation set out in Art 13(13)(d) of Directive 2009/138/EC (Solvency II) is a legal entity and the contract refers to several establishments of this legal entity. This is, however, not the case. In accordance with the ECJ’s case law, the term of “location of the risk” must be understood literally. This is demonstrated by the Kvaerner case,216 in which the ECJ dealt with the insurance of several subsidiaries as a case of insurance covering multiple risks for taxation purposes.217 This, however, then favours regarding an insurance contract covering multiple – albeit homogeneous – objects as one covering multiple risks. Yet, on the other hand, this means that there are cases which would lead to dépeçage by virtue of an objective connection and cases which would fall within the further restricted scope of point (e) (policyholders pursuing commercial, industrial activities or liberal professions) by virtue of a choice of law. One case remains, namely one in which one and the same policyholder has several habitual 132 residences or insurance is taken out by several policyholders who are liable jointly for payment of the premium (for example a married couple) whose habitual residences are situated in different Member States. In the latter case, it is one and the same risk, which cannot be split in any manner, which is situated in two different Member States. In this case, it seems possible to permit a choice of the law in favour of one of the Member States concerned under point (a). d) Choice of law 2: Law of the country in which the policyholder has his habitual residence (Art 7(3)(b)) Point (b) makes a second choice of law available in favour of the law of the country in which 133 the policyholder has his habitual residence.218 This choice of law option is always important where the location of the risk and the policyholder’s habitual residence do not correspond to each other (cases of divergence).219 This may be the case in the situations governed by Art 13 (13)(a), (b) and (c) of Directive 2009/138/EC (Solvency II), for example, where a policyholder takes out insurance for a building which is situated in a country different to the country in which the policyholder has his habitual residence.220 The same applies to vehicles registered in a different Member State and also where the policyholder concludes a contract “of a duration of four months or less covering travel or holiday risks” in a Member State other than the country of his habitual residence.221 From the discussion above, the following can be deduced: in cases where an insurance 134 contract covers risks situated in multiple Member States and the location of the risks only partially corresponds to the policyholder’s habitual residence in one and the same Member 216 217 218

219 220 221

Kvaerner plc v. Staatssecretaris van Financiën (Case C-191/99) [2001] ECR I-04447. See McParland, note 13.143. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 112; Gruber, in: Calliess, Art 7 Rom I-VO, note 32; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 30; Armbrüster, in: Staudinger BGB, Art 7 Rom I-VO, note 12; McParland, note 13.152. Heiss, in: FS Jan Kropholler (2008), 459, 466. Cf. Gruber, in: Calliess, Art 7 Rom I-VO, note 34. In relation to building, motor vehicle, travel and holiday insurance, see Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 113.

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State, the law at the place of the policyholder’s habitual residence can be chosen to govern all the risks uniformly. These are likely to be fairly typical of the situations in which the policyholder requires a choice of law. 135 It should be highlighted that there is a reference in point (b) to the law of the “country” and

the choice is thus not restricted to the law of a Member State.222 If, for example, a policyholder with his habitual residence in Switzerland takes out insurance for a building situated in France, a choice in favour of Swiss law would be available under point (b).223 e) Choice of law 3: Law of nationality for life insurance (Art 7(3)(c)) 136 In relation to life insurance only, the parties are afforded a further choice of law under point

(c). In such cases, the parties may also choose to apply the law of the country of which the policyholder is a national. This only applies, however, if the law in question is one of a Member State.224 It may, however, lead to a choice between two or more laws if the policyholder is a citizen of more than one Member State.225 137 The European legislature apparently assumes that having the nationality of a particular

Member State provides a sufficiently close relationship for a choice in favour of the law of this country not to represent a danger to the policyholders concerned. The option in favour of a choice of law is also likely to be based on a further consideration: it allows a euromobile policyholder to retain a life insurance contract on the basis of his home law even after moving to another EU/EEA country. This especially applies where the contract is later novated.226 This aspect is likely to be quite important considering the typically long-term nature of life insurance.227 138 In contrast, when considering insurance contracts which are concluded cross-border from

the outset, the assessment made by the European legislature is not completely convincing. There are certainly citizens living abroad who still have such close contacts to their home country that a choice in favour of the law of the country of which they are nationals appears unobjectionable. However, there are also many inhabitants in the EU who were born and raised in one Member State, but who have the nationality of another Member State. The people concerned sometimes maintain very few relations to the country to which they formally belong. Upon imagining the situation where such a policyholder concludes a life insurance contract with an insurer and in so doing chooses the law of his nationality, the reason for providing this policyholder with less protection than other policyholders with their habitual residence in the same Member State is unclear. It is not necessarily possible to

222 223 224

225 226

227

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Falconi, 111. See also Gruber, in: Calliess, Art 7 Rom I-VO, note 36; McParland, note 13.155. Caamiña Domínguez, CDT Vol. 1 No. 2 (2009), 30, 40; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 115; Gruber, in: Calliess, Art 7 Rom I-VO, note 37; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 31; McParland, note 13.156. For details Roth, in: Beckmann/Matusche-Beckmann, § 4 note 65. The same problem was discussed in relation to the prohibition of discrimination following the ECJ’s ruling in the Test-Achats case, Association Belge des Consommateurs Test-Achats ASBL and Others v. Conseil des ministres (Case C-236/09) [2011] ECR I-773. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 116 et seq. with further references.

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deduce a person’s real connections to the Member State concerned merely by virtue of that person’s nationality.228 f) Choice of law 4: Choice of the law at the place the damage occurs (Art 7(3)(d)) Under point (d), a choice of law is permitted in relation to insurance contracts aimed at 139 providing cover for events of damage which occur exclusively in a single Member State which is not the country in which the risk is located. It is clear from the outset that this provision does not concern situations in which the policyholder’s habitual residence and the location of the risk do not correspond to each other (so-called cases of divergence). Rather, it is concerned with situations where the Member State in which the risk is situated and the Member State in which the event of damage occurs are different.229 The latter is the case, for example, where liability insurance is taken out by a manufacturer of 140 dangerous products whose habitual residence and therefore the location of risk is in Member State A exclusively for the event of damage which may occur in Member State B. This may be the case, for example, where the purchaser has his habitual residence in Member State B and insists upon such liability insurance with cover in Member State B as a prerequisite to the purchase agreement.230 The choice of law under point (d) may (only) be made in favour of the law of the Member 141 State in which the events of damage may exclusively occur.231 g) Choice of law 5: Risks in multiple locations in the pursuit of commercial or industrial activities or liberal professions (Art 7(3)(e)) The final choice of law option granted under point (e) ensures that a contract is not con- 142 sidered as constituting several contracts due to an objective connection pursuant to Art 7(5). In cases where multiple risks are situated in different Member States, this is done by ensuring that either the law of each Member State concerned or the law of the country of the policyholder’s habitual residence may be chosen.232 This choice is only available to policyholders pursuing a “commercial” or “industrial” activity or a “liberal profession”. The terms of “commercial”, “industrial” activity or “liberal profession” have not been spe- 143 cifically defined. It is, however, clear that insurance taken out for private purposes is excluded from the scope of point (e). Commercial activity is regularly understood as an activity offered on the market by an entrepreneurial organisation, which does not have to, but commonly does aim to achieve long-term success and make profits. An industrial activity exists where large quantities of certain goods are manufactured using machines. On the basis of the reference to industrial activities, it should, in my opinion, not be concluded that a nonindustrial, i.e. manual, manufacturing process does not fall within the scope of point (e). 228

229

230 231 232

Also voicing criticism, Gruber, in: Calliess, Art 7 Rom I-VO, note 38; cf. Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 31 and McParland, notes 13.157 et seq. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 118 et seq.; Gruber, in: Calliess, Art 7 Rom I-VO, note 42; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 32; McParland, note 13.159. See also Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 120 et seq. Cf. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 122; Gruber, in: Calliess, Art 7 Rom I-VO, note 43. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 123; Gruber, in: Calliess, Art 7 Rom I-VO, note 46; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 33; McParland, note 13.160.

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Instead, such work will often constitute a commercial activity within the meaning of this provision. Liberal professions is a term used to describe the activities offered on the market by entrepreneurs, whose substance however falls in the liberal professions sector, such as the profession of doctors, lawyers, civil engineers, architects, etc.233 h) Extension of the Choice of Law by Individual Member States 144 Notwithstanding the fact that the list enumerating the choice of law options in the first

subparagraph of Art 7(3) is exhaustive, the second subparagraph expressly permits this list to be extended through national legislation enacted by individual Member States.234 This illustrates clearly that international insurance contract law is still not fully harmonised despite the fact that the rule in Art 7(3) applies directly in every Member State, as it is laid down in a regulation. The second subparagraph does, nevertheless, secure uniformity in court decisions made within the internal market, especially as an extension of the choice of law by a Member State must also be observed by courts in other Member States.235 145 This guarantee of conformity in decisions comes at a price, however, because the court

recognising the extension must also observe Member State, possibly foreign, conflict rules in addition to Art 7. This is illustrated by the following example: for a policyholder who is habitually resident in Germany and insures a building situated in Austria, the choice of law available in relation to this insurance contract can be extended by Austrian law on the basis of the second subparagraph of Art 7(3) together with point (a) of the first subparagraph of the same provision. This has, in fact, also occurred in the amended version of § 35a of the Austrian Federal Private International Law Act (IPRG).236 In the event that the policyholder later brings an action based on the insurance contract, the court inter alia at the place of the claimant’s residence would have jurisdiction under Art 11(1)(b) of the Regulation No 1215/ 2012 (Brussels Ibis Regulation). In determining the law applicable, this German court would also have to observe the second subparagraph of Art 7(3) and therefore the extended choice of law provided under § 35a of the Austrian IPRG.237 146 The ability to extend the choice of law is provided to any Member State where the risk is

situated within the meaning of point (a), the Member State where the policyholder has his habitual residence within the meaning of point (b) and any Member State in which one of multiple risks is located within the meaning of point (e).238 147 Overview of national legislation using or not using the option provided under the second

subparagraph of Art 7(3):

233

234

235

236 237 238

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With regard to the terms of “commercial” and “industrial” activity or “liberal” profession, see Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 123.1 et seq.; cf. Gruber, in: Calliess, Art 7 Rom I-VO, note 47. Bonnamour, Rev. Lamy dr. aff. No. 29 (2008), 76, 80; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 128; Gruber, in: Calliess, Art 7 Rom I-VO, note 50; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 34; for the UK see McParland, note 13.162. Heiss, in: FS Jan Kropholler (2008), 459, 475 et seq.; in general Falconi, 116 et seq.; see also Miquel Sala, AEDIPr 2016, 793, 800 et seq.; Caamiña Domínguez, CDT Vol. 1 No. 2 (2009), 30, 42. BGBl. Nr. 304/1978 idF BGBl. I Nr. 87/2015. See also Gruber, in: Calliess, Art 7 Rom I-VO, note 53. Gruber, in: Calliess, Art 7 Rom I-VO, note 52; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 34.

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– Austria: option used; Section 35a of the Federal Act on Private International Law239 reads:240 “Extended Contractual Choice of Law for Certain Insurance Contracts § 35a. (1) Parties to an insurance contract allowing a contractual choice of law according to Art 7(3) of the Regulation (EC) No 593/2008 can select any other law expressly or impliedly in the cases set out in Art 7(3)(a), (b) and (e) of the Regulation. (2) Where the insurer conducts activities in the state of the habitual residence of the insured person or directs such activities to that state or to several states including that state, the contractual choice of law made by the parties shall not have the result of depriving the insured person of the protection afforded to him by the mandatory rules of the law which would be applicable in the absence of choice.” – Bulgaria: the new Insurance Code which entered into force on 1 January 2016 does not make use of the option;241 – Cyprus: “The Law on Insurance and Reinsurance Services and Other Related Issues of 2016” does not make use of the option (see in particular section 220);242 – Czech Republic: Art 87 (3) of Act 91/2012/Coll. on Private International Law refers to the party autonomy granted by Rome I, but does not use the option to extend autonomy;243 the provision reads244: “Insurance policies are subject to the law of the state in which the policyholder has his or her habitual place of residence. The contractual parties can select the applicable law for the insurance policy; if this involves an insurance policy which is subject to a directly applicable European Union regulation, the contractual parties may select the applicable law within the scope allowed by this regulation.” – Denmark: Section 1 of the executive order no. 1117 of 17 September 2015 refers to Art 7 Rome I, but does not use the option to extend party autonomy;245 – England: option used; reg. 4 of the Financial Services and Markets Act 2000 (Law applicable to contracts of insurance) Regulations 2009, SI 2009/3075, reads: “4. Where, in the case of a contract of insurance to which Article 7(3) of the Rome I Regulation applies, the law referred to in sub-paragraph (a) or (b) of that Article, or one of the laws referred to in sub-paragraph (e) of that Article, is a law of any part of the United Kingdom, the parties to that contract may also choose as the law ap plicable to the contract – (a) the law of another country; or (b) the law of another part of the United Kingdom, if that choice complies with Article 3, Article 6 and Articles 9 to 22 of that Regulation.”246 239

240 241

242

243

244 245 246

Bundesgesetz vom 15.6.1978 über das internationale Privatrecht (IPR-Gesetz) idgF/Federal Act of 15 June 1978 on Private International Law, as amended. Translation provided by Thiede/Koch/Ortner, 5. I am very grateful to the Financial Supervision Commission of the Republic of Bulgaria for providing this information. I am very grateful to the Superintendent of Insurance, Insurance Companies Control Service, Ministry of Finance of Cyprus for providing this information. I am very grateful to the Czech National Bank (CNB) for providing this information; see also Dobiás, RDIPP 2015, 109, 123. I am very grateful to Prof. Petr Dobiás (Prague) for providing this (unofficial) translation. I am very grateful to the Danish Ministry of Justice for providing this information. I am very grateful to Prof. John Birds (Sheffield) for providing this information.

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– Finland: option not used;247 – France: no new legislation on the law applicable to insurance contracts has been enacted following the entry into force of Rome I; the old conflict rules (Arts. L 181-1 to 181-4, Art. L 182-1 and Arts. L 183-1 to 183-2 Insurance Contract Act [Code des Assurances]) have not been formally repealed; they do not, however, extend party autonomy beyond the scope provided by Art 7 (3);248 – Germany: option not used; – Greece: Section 145 (1) of the new Law 4364/2016 (entry into force on 1 January 2016) refers to Rome I but does not use the option to extend party autonomy;249 – Hungary: option not used;250 – Iceland: Arts. 144(1), (3) and (4) as well as Art 145(1) of the Act on Insurance Contracts, No 30/2004, which is still in force, take use of the option; they read251: “Article 144: Choice of legislation in life insurance contracts The law of the state where the commitment was effected shall apply to a contract on life insurance. The insurance company, or the party concluding the contract on its behalf, and the policyholder may, however, reach agreement that the legislation of the home state of the insurance company shall apply to the obligation, provided the legislation of this state authorises such agreements, cf. however the third and fourth paragraphs of Article 143. Where a life insurance policyholder is a natural person who is not a national of the state of his habitual residence, the parties may choose to be bound by the law of the state of which he is a national. Where a life insurance policyholder is a legal entity and the obligation was effected in Iceland, although the insured has his habitual residence in another state or is a national of that state, the parties may also select the legislation of this state. When the obligation was effected outside of Iceland and the law of that state allow for more extensive contractual rights than are provided for in the first and second paragraphs, the parties may choose legislation to the extent allowed by the law of that state. Article 145: Choice of legislation in direct insurance other than life insurance contracts In direct insurance other than life insurance, the legislation of the state where the risk is situated shall apply to the insurance contract where this is also the state where the policyholder has his habitual residence. The insurance company, or the party concluding the contract on its behalf, and the policyholder may, however reach agreement that the legislation of the home state of the insurance company shall apply to the obligation, provided the legislation of this state authorises such agreements, cf. however the third and fourth paragraphs of Article 143.” – Italy: no new legislation on the law applicable to insurance contracts has been enacted following the entry into force of Rome I; the old conflict rules (Art 180 [non-life insurance] and Art 181 [life insurance] Code of Private Insurance) have not been formally repealed; they permit a free choice of law in cases where the risk is situated in Italy 247

248 249

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I am very grateful to the Finnish supervisory board, the Finanssivalvonta, and Prof. Jaana Norio Timmonen (Helsinki) for providing this information. I am very grateful to Prof. Jérôme Kullmann (Paris) for providing this information. I am very grateful to the Bank of Greece, Department of Insurance Supervision, as well as Dr. Antonios Tsavdaridis (Athens) for providing this information. I am very grateful to Prof. Dr. Peter Takáts (Budapest) for providing this information. Translation provided at https://eng.atvinnuvegaraduneyti.is/laws-and-regulations/nr/nr/7472 (last accessed on 7 June 2016).

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–

– –

252 253

254

255 256

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(Art 180 (2) Code of Private Insurance) or where Italy is the Member State of the commitment (Art 181 (2) Code of Private Insurance);252 it seems unclear whether these provisions can still be relied on as rules using the option granted in the second subparagraph of Art 7(3) but in my view the answer should be to the affirmative; Latvia: a draft law proposes to grant parties a choice of law in favour of the law of the insurer’s home (registration) state in cases of Art 7 (3)(a),(b) and (e);253 Liechtenstein: option used; Art 3(3) and (4) and Art 4(3) and (4) of the Liechtenstein IVersVG254 read: “Art 3: Choice of Law in Non-Life Insurance 3) Where, in the cases set out in paragraph (2)(a), (b) or (d), the EEA Contracting States concerned grant greater freedom of choice in relation to the law applicable to the insurance contract, the parties may take advantage of that freedom. 4) Where the question arises under paragraph (3) as to whether greater freedom of choice is available under Liechtenstein law, this must be affirmed as there is com prehensive free choice of law. Art 4: Choice of Law in Life Insurance 2) Where the EEA Contracting State in which the risk is situated at the time of con tract conclusion grants greater freedom of choice, the parties may take advantage of that freedom. 3) Where the question arises under paragraph (2) as to whether greater freedom of choice is available under Liechtenstein law, this must be affirmed as there is com prehensive free choice of law.”255 Lithuania: the conflict rules in the Civil Code have not been repealed upon the entry into force of Rome I; Art 1–.37 Civil Code grants free choice of law (for contracts in general and, apparently also for insurance contracts);256 it appears doubtful whether this general choice of law provision can be interpreted as using the options set out under the second subparagraph of Art 7(3); Luxembourg: Art 5 of the law of 27th July 1997 on the insurance contract, as amended, was amended on 7th December 2015; it now refers to Rome I, but does not use the options granted under the second subparagraph of Art 7 (3);257 Norway: Section 8(3) and (4) as well as section 9a(4) and (5) of the Act on Choice of Law in Insurance, which is still in force, make use of the option; they read258: “Section 8 Choice of law in life insurance (3) Where the policyholder is a legal person and the obligation is situated in Norway, the parties may, where the policyholder has his habitual residence in or is a cit izen of another country, also choose the law of that country. I am very grateful to Prof. Diana Cerini (Milan) for providing this information. I am very grateful to the Financial and Capital Market Commission of Latvia for providing this information. Gesetz vom 12.6.2015 über das internationale Versicherungsvertragsrecht (IVersVG)/Law of 12th June 2015 on international insurance contract law. I am very grateful to Mandeep Lakhan for providing this translation. I am very grateful to the Financial Service and Markets Supervision Department at the Bank of Lithuania for providing this information. I am very grateful to the Luxembourg Commissariat aux Assurances for providing this information. Translation provided at http://www.finanstilsynet.no/Global/English/Laws_and_regulations/Insurance _Pensions/Act_Choice_Law_Insurance.pdf (last accessed on 7 June 2016).

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–

Rome I Regulation

(4) Where the obligation is situated in a country other than Norway, and that coun try’s law permits freedom to contract over and above what follows from the first and second paragraphs, the parties may choose such law to the extent this is permitted by the law of the said country. Section 9a Extended right to agree choice of law in insurance other than life insurance” In cases where Norwegian law is applicable pursuant to section 9 first paragraph, or could be applicable pursuant to the parties’ choice of law under section 9 second or third paragraph, the following applies: 1. For insurance encompassed by the Act on Insurance Activity section 1–3 second paragraph c), the parties may choose the law of any country whatsoever. 2. For personal insurance where the insured has his habitual residence in or is a citizen of a country other than Norway, the parties may, in addition to the freedom of choice following from section 9 second and third paragraph, choose the law of such country. In cases where the law of a country other than Norway could be applicable pursuant to section 9 first paragraph, or could be applicable pursuant to the parties’ choice under section 9 second or third paragraph, the parties may also choose the law of a third country to the extent this is permitted by the law of the first-mentioned country.” Poland: option not used;259 Slovakia: option not used;260 Spain: no new legislation on the law applicable to insurance contracts has been enacted following the entry into force of Rome I; the old conflict rules (Art 107 [non-life insurance] and Art 108 [life insurance] of the Insurance Contract Act)261 have not been formally repealed; they do not, however, extend party autonomy beyond the scope provided by Art 7(3);262 Sweden: option not used.263

2. Objective connection 148 Contracts for which parties have not or not effectively determined the law by making a

choice pursuant to the first or second subparagraph of Art 7(3) will be governed by the law of the Member State in which the risk is situated at the time of contract conclusion.264 In short, for building insurance, the law of the Member State in which the building is situated;265 for vehicles, the law of the country in which the insured vehicle has been registered;266 for 259 260 261

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I am very grateful to Prof. Dariusz Fuchs (Warsaw) for providing this information. I am very grateful to the Ministry of Justice of the Slovak Republic for providing this information. No new legislation on the law applicable to insurance contracts has been enacted following the entry into force of Rome I; the old conflict rules (Art 180 [non-life insurance] and Art 181 [life insurance] Code of Private Insurance) have not formally been repealed. I am very grateful to Prof. Juan Bataller Grau (Valencia) and the Dirección General de Seguros y Fondos de Pensiones at the Ministerio de Economía y Competitividad for providing this information. Im am very grateful to the Swedish supervisory board Finansinspektionen for providing this information. Falconi, 123 et seq. with further references; Gruber, in: Calliess, Art 7 Rom I-VO, note 59; McParland, note 13.163; Plender/Wilderspin, note 10-071. See Martiny, in: MüKo BGB, Art 7 Rom I-VO, notes 48 et seq.; Armbrüster, in: Staudinger BGB, preliminary remarks Art 7 Rom I-VO, notes 16 et seq. See Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 50; Armbrüster, in: Staudinger BGB, preliminary remarks Art 7 Rom I-VO, notes 19 et seq.

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holiday and travel risks, the law of the country in which the policyholder concluded the contract;267 in all other cases, the law at the place of the policyholder’s habitual residence, head office or the establishment concerned with the contract will apply.268 Where an insurance contract covers multiple risks situated in different Member States, the 149 laws potentially applicable on the basis of the objective connection conflict with one another. In such cases, Art 7(5) determines that the contract will be deemed to constitute several contracts. For the purposes of conflicts of law, it is therefore assumed that there are just as many insurance contracts as there are countries in which a risk is situated. In this case, there is also a contract split (dépeçage).269 The insurer must make the applicable law as part of the pre-contractual information to be 150 provided to the applicant under Art 183(1)(a) Directive 2009/138/EC (Solvency II) in nonlife insurance (to policyholders who are natural persons only)270 and Art 185(3)(m) Directive 2009/138/EC (Solvency II) in life insurance (to all policyholders, i.e. natural persons and legal entities). 3. In focus: Consumer insurance contracts As demonstrated, a policyholder concluding an insurance contract for private purposes 151 within the meaning of Art 6 will not enjoy the consumer protection provided under Art 6 in addition to the limitations on the choice of law and the objective connection pursuant to Art 7(3).271 In contrast, conflict rules in consumer directives applicable to insurance will apply even within the substantive scope of Art 7.272 Consequently, an exceptional choice in favour of the application of a third country law pursuant to Art 7(3) would also be restricted by Art 6(2) of the Unfair Contract Terms Directive and Art 6(2) of the Distance Marketing of Financial Services Directive.273 4. Critical issues of legal policy in Art 7(3) a) No free choice of law for active policyholders On the basis of legal policy, the discrepancy between the rule governing the choice of law and 152 Art 6 is particularly striking. Under Art 6, an “active” consumer is permitted to freely choose the law applicable. The requirement for a consumer to be considered active is that such a person contacts a foreign provider of his own accord and chooses the path towards foreign

267

268

269

270 271 272 273

See Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 51; Armbrüster, in: Staudinger BGB, preliminary remarks Art 7 Rom I-VO, notes 20 et seq. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 135; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 38; Armbrüster, in: Staudinger BGB, preliminary remarks Art 7 Rom I-VO, notes 22 et seq. American Motorists Insurance Co v. Cellstar Corp [2002] EWHC 421 (Comm); cf. Gruber, in: Calliess, Art 7 Rom I-VO, note 68; McParland, note 13.164; Bělohlávek, note 07.96. See Art 183(2) Directive 2009/138/EC (Solvency II). Supra note 49. Supra notes 53 et seq. With regard to these conflict rules in the directives, see supra note 52.

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law himself.274 In my opinion, this option should also have been offered to policyholders.275 If it were made available, it would permit consideration of the question of whether the choice of law catalogue under paragraphs 1 and 3 are even required any longer. There are a number of good reasons in favour of deleting it.276 153 Such a choice of law option would in particular be required in order to realise the policy-

holder’s so-called passive freedom of services. For a policyholder wishing to actively request insurance products abroad, in particular because he cannot obtain such a product on his home market or can do so only on unfavourable conditions, foreign products would be made immensely more accessible if he – as an active cross-border policyholder – could also choose the law at the place of the insurer’s head office. Where this is not the case, such as pursuant to the current rules, insurers will be especially cautious in providing insurance cover even to active cross-border policyholders. 154 A choice of law option for active cross-border policyholders would also correspond to the

spirit of Art 180 of Directive 2009/138/EC (Solvency II), which guarantees the freedom of obtaining insurance abroad:277 “Neither the Member State in which a risk is situated nor the Member State of the commitment shall prevent a policy holder from concluding a contract with an insurance undertaking authorised under the conditions of Article 14 as long as that conclusion of contract does not conflict with legal provisions protecting the general good in the Member State in which the risk is situated or in the Member State of the commitment.”278 b) No choice of law option in favour of principles of insurance contract law/optional instruments 155 Prevailing academic opinion in relation to Art 3 continues to consider a choice in favour of a non-State law (rules or principles of law) as only having the effect of incorporating the relevant rules into the contract, denying it any effect in conflicts of law.279 This must be all the more so in the context of Art 7(3). 156 A choice in favour of, for example, the Principles of European Insurance Contract Law

(PEICL) would therefore only be possible under the mandatory provisions of the law deemed applicable pursuant to Art 7(3).280 It is only where a choice of law relevant for 274

275

276 277

278

279

280

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Art 6(1) requires that the professional does not pursue its activities in the country of the consumer’s habitual residence or that it does not direct such activities to that country by any means. See also Roth, in: Beckmann/Matusche-Beckmann, § 4 notes 23 et seq. and – with a view to Art 7(3)(c) – note 66. For a detailed discussion of the arguments, see Heiss, in: FS Jan Kropholler (2008), 459 et seq. Even if this provision is not of immediate relevance for conflict of laws; see (with further references) Roth, in: Beckmann/Matusche-Beckmann, § 4 note 14. See in this context also German Federal Court of Justice 1st June 2016, IV ZR 80/15, VersR 2016, 1099 (1100 in notes 41 et seq.). Martiny, in: MüKo BGB, Art 3 Rom I-VO, note 32; Calliess, in: Calliess, Art 3 Rom I-VO, notes 21 et seq.; Lando/Nielsen, Common Market Law Review Vol. 45 No. 6 (2008), 1697 et seq. On this point, see also Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 39.

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conflicts of law were available, whether by virtue of an amendment to Art 7(3) or through the creation of an optional instrument within the body of an EU regulation, that the choice in favour of the Principles would also prevail over mandatory national insurance contract law.281 With regard to the internal market, this would be a desirable option. c) No special rules for group insurance Rome I and, in particular, Art 7(3) contain no special rules whatsoever for group insur- 157 ance.282 Such insurance is an insurance construction whereby a number of persons (insureds), who form a group on the basis of a common feature (e.g. employees of the same company), are insured by means of one and the same contract. Group insurance must be distinguished from a mere framework contract. The latter is not 158 used to insure a large number of insureds within the framework of a single insurance contract. Rather, a framework contract is negotiated first and subsequently incorporated into a large number of individual insurance contracts. Using a framework contract, each insured is, therefore, also simultaneously a policyholder and is thus afforded the policyholder protection under Art 7(3). In relation to group insurance, in contrast, only the so-called group organiser is the policy- 159 holder. The policyholder protection provided in Art 7(3) is afforded to him. Assume, for example, that a customer from France requests and is issued a credit card from a German bank and that the credit card also includes insurance cover arising from a group insurance contract which has been negotiated by this German bank with a German insurer. In this case, the bank will be the policyholder. Often, an insurance contract concluded by a bank will be concerned with large risk insurance, meaning that a free choice of law is available under the first subparagraph of Art 7(2) or, in the absence of such a choice, the law at the place of the insurer’s head office will be applied under the second subparagraph. This raises some concerns, especially as an individual insured who joins the group often requires the same amount of protection as the policyholder who concludes the insurance contract directly with the insurer.283 First, such group insurance contracts are often drafted in an optional manner, so that only group members who have declared their accession to the insurance policy are insured (“elective group insurance”)284. Furthermore, it is often or normally the individual insured in elective group insurance who undertakes the burden of paying the premium, which entails making proportionate payments of the premium to the group organiser. Functionally, the role of a group member is quite similar to the role of a policyholder.285 At the same time, group organisers often resemble insurance intermediaries, who mediate and manage the insurance relations between the insurer and a large number of customers, which may include tasks concerning claims settlement. Moreover, it is not uncommon for group organisers to receive remuneration for their administrative work from 281 282

283 284 285

See also Pinheiro, CDT Vol. 4 No. 2 (2012), 202, 207. For more details, see Heiss, in: FS Jan Kropholler (2008), 459, 475 et seq.; cf. also Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 87 and Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 7. See also the solution in substantive insurance contract law as proposed in Art 18:301 PEICL. A definition of this term is provided by Art 1:201(9) PEICL. Heiss, in: FS Jan Kropholler (2008), 459, 476; with reference to a circular of the German supervisory board, Rundschreiben R 3/90 of 31 July 1990, Veröffentlichung des Bundesaufsichtsamtes für das Versicherungswesen 1990, 339.

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the insurance undertaking providing the cover. In such cases, an individual group member appears to require just as much protection as an individual policyholder. As a matter of legal policy, it would therefore make sense to allow the individual insurance relations to be governed by their own proper law.286 This is also the principle pursued in the Regulation No 1215/2012 (Brussels Ibis Regulation): under Art 11(1)(b) of this Regulation, each insured has his own home jurisdiction for bringing legal actions against the insurer.287 160 The result may be different if the group insurance represents a welfare measure taken by an

employer for the benefit of his employees. In such a case, it is the employment relationship and the employer’s fiduciary duties arising therefrom which guarantee that the group insurance contract will be negotiated in the interests of the insureds. A choice in favour of the employer’s head office or the country where the work is habitually carried out should be provided.288 161 The cases of group insurance described above in which individual insureds voluntarily

choose to join and to do so by undertaking a duty to pay the premium must be distinguished from cases in which the group insurance contract is concluded by the organiser for the benefit of a group, without requiring the individual members to join and pay their share of the premium. In such cases of “accessory” group insurance,289 the general rule provided in Art 7(3) appears to be appropriate and suitable. IX. Compulsory insurance (Art 7(4)) 1. Obligations to insure 162 Compulsory insurance must be taken out by policyholders due to a legal obligation.290

Despite the fact that the insurance must be taken out, it still represents private insurance. Although social insurance is often also a form of compulsory insurance, it does not fall within the scope of Rome I from the outset.291 163 The reason underlying the creation of an obligation to take out insurance is, for the most

part, based on social considerations. Compulsory liability insurance serves to protect the injured party by enabling or facilitating the enforcement of their legitimate liability claims.292 This avoids an externalisation of liability costs by persons engaging in hazardous activity who, however, lack the resources to cover the liability arising from such activity. 164 Other types of compulsory private insurance functionally resemble social insurance. They

serve to safeguard policyholders and their families or employees socially. This includes, for 286 287 288

289 290

291 292

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See the proposal for a new Art 7(3) Rome I provided by Heiss, in: FS Jan Kropholler (2008), 459, 480. See Heiss, in: FS Jan Kropholler (2008), 459, 476. See the proposal for a new second sentence of Art 7(3) Rome I provided by Heiss, in: FS Jan Kropholler (2008), 459, 480. See the definition provided by Art 1:201(8) PEICL. See Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 138 et seq.; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 39. On this point, see supra note 22. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 137.

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example, health293 and long-term care insurance,294 compulsory insurance of buildings295 and compulsory insurance for accidents at work.296 Such types of insurance are covered by paragraph 4 whose scope is not restricted to compulsory liability insurance. An obligation to take out insurance is usually expressly governed by statutory law. It may in 165 particular ensue on the basis of public law provisions, such as social law, trade law or (street) police law. Even in the cases where such an obligation is governed by contract law, such as the obligation to take out health insurance under § 193(3) of the German Insurance Contract Act,297 the subject matter does not have a contractual character, because the obligation to take out insurance is not imposed on the insureds as against their insurers and definitely not to their benefit. Therefore, even such purported contract law provisions demonstrate at least a very close relation to public law. Compulsory insurance provisions often also govern the mandatory scope of cover to be 166 provided by the compulsory insurance concerned and sometimes some special aspects of contract law. However, they are always restricted to special issues which result from their character as compulsory insurance provisions. Any other issues concerning compulsory insurance contracts are governed by general insurance law. As it is possible for the law imposing the insurance obligation to be different from the law which otherwise governs the insurance contract, it is necessary for both of these to be aligned. This is the task of paragraph 4. 2. Issues of demarcation In individual cases, problems may arise in demarcating voluntary insurance from compul- 167 sory insurance. Statutory duties to conclude liability insurance, for example, often only represent one of two or more ways of ensuring that the injured party receives compensation. In Art 10(4) of Directive (EU) 2016/97 (Insurance Distribution), for example, there is a reference to a duty to take out “professional indemnity insurance […] or some other comparable guarantee against liability arising from professional negligence”. In this case, if rather than taking out professional indemnity insurance, the insurance distributor obtains a guarantee, this does not constitute insurance and is therefore not deemed compulsory insurance within the meaning of Art 7(4). However, if the insurance distributor takes out professional indemnity insurance, this corresponds to the legal obligation, thereby constituting compulsory insurance under Art 7(4). The fact that a policyholder may choose to obtain a guarantee as an alternative does not prevent the insurance from being compulsory in nature. Problems of demarcation are also raised in cases where a policyholder takes out insurance 168 for which the quantity or quality cover provided exceeds the scope prescribed by statutory law. For example, a policyholder may take out compulsory insurance with a higher sum insured than prescribed by law or extend compulsory health insurance in relation to its 293 294 295 296 297

See the obligation to insure imposed under § 193(3) of the German Insurance Contract Act (VVG). See the obligation to insure imposed under § 23 of the German Social Security Code XI (SGB XI). See the obligation to insure under the Liechtenstein Building Insurance Act (GVersG). Cf. Art 207 of Directive 2009/138/EC (Solvency II). For further examples, see Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 140.

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material or territorial scope. In such cases, it is clear that the insurance is compulsory, because it was concluded in order to fulfil an obligation to insure as imposed by a Member State. Therefore, Art 7(4) applies. Where point (a) of Art 7(4) applies, the voluntary excess insurance cover provided by the policy concerned does not ever play any role whatsoever. The extent to which the application of the law of the Member State imposing the obligation to insure can be imposed upon the excess amount will be discussed in relation to point (b) of Art 7(4).298 169 Compulsory insurance, in my opinion, also includes private insurance substituting other-

wise compulsory social insurance. If, namely, a policyholder only has a choice between submitting to social insurance and taking out an equivalent private insurance policy, the private insurance will constitute compulsory insurance. On the basis of conflicts of law, there is no reason to treat such insurance differently. This is clearly illustrated by the rule in Art 206 of Directive 2009/138/EC (Solvency II) governing substitute health insurance. Notwithstanding the fact that Recital 84 refers to “private or voluntary” health insurance in this context, the countries concerned are permitted, under Art 206, to require that (inter alia) “those contracts comply with the specific legal provisions adopted by that Member State to protect the general good in that class of insurance”. This rule, which is set out in international supervisory law, by and large corresponds to the rule set out in Art 7(4) in relation to international contract law. In my opinion, there are, therefore, good arguments in favour of also applying Art 7(4) to substitute health insurance. This is clearly true in respect of the most important situation referred to in Art 206 of Directive 2009/138/EC (Solvency II), i.e. the case of substitute health insurance in Germany, because Germany imposes a general duty to take out health insurance by way of § 193(3) of the German Insurance Contract Act (VVG). 170 In my view, it is necessary to distinguish cases of substitute health insurance from cases in

which persons living only temporarily in another Member State are excluded from the duty to take out social insurance, because they hold private health insurance in their country of origin. In this case, the exception depends on an existing insurance contract, which in most cases will be governed by a different law. By virtue of this exception, the contract does not constitute compulsory insurance and the existing health insurance does not fall within the scope of Art 7(4). 171 The same must, in my opinion, be true of liability insurance for lawyers who pursue their

profession abroad, but under the professional title used in their country of origin. The duty to take out insurance imposed by Art 6(3) of Directive 98/5/EC (Lawyers) does not apply to a lawyer, insofar as he has concluded a comparable insurance contract “in accordance with the rules of his home Member State”. The pre-existing insurance contract in the home Member State repels the duty in the host Member State, so that it does not constitute compulsory insurance within the meaning of Art 7(4) in the host Member State, but may represent compulsory insurance in the home Member State. However, the host Member State may require additional insurance in the absence of equivalent insurance and this additional part would constitute compulsory insurance in this Member State for the purposes of Art 7(4).

298

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Infra notes 191 et seq.

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3. Compulsory insurance governed by Art 7(4) As is true for Art 7 on the whole, the special rule for compulsory insurance only applies to 172 insurance contracts falling within the scope of paragraph 1. The rule can therefore be applied to any insurance contracts covering large risks, irrespective of where the insured risk is situated. In contrast, it can only apply to insurance contracts covering mass risks where the insured risk is situated in a Member State. The fact that these, and only these contracts are governed is clear from the wording of paragraph 1, which defines the scope of Art 7 in its entirety, thereby including paragraph 4, in the manner described. This is confirmed by the introductory sentence of paragraph 4, pursuant to which the “following additional299 rules” apply to compulsory insurance. “Additional” can only be interpreted as a reference to the preceding paragraphs 2 (large risks) and 3 (mass risks situated in a Member State). Furthermore, paragraph 4(b) expressly refers to paragraphs 2 and 3 of Art 7. This only makes sense if all of the insurance contracts listed in paragraphs 2 and 3, but at the same time only the contracts listed therein, are governed by it. This means that paragraph 4 will not apply to a mass risk situated in a third country, even if a 173 Member State imposes a relevant duty to insure. This is, for example, true in the following case: a trained German lawyer lives in Switzerland and wishes to pursue his profession as a lawyer there using the German professional title. He receives a licence to practice in Germany and must take out professional indemnity insurance as a condition of the licence. A duty to insure has clearly been imposed under the law of a Member State. As the lawyer’s registered law office is in Switzerland, however, the risk is situated in Switzerland and therefore in a third country. Art 7 and consequently also paragraph 4 thereof do not apply to this case for this reason alone.300 This result is reached completely independently of the question of whether the lawyer is required to take out further or additional insurance under Swiss law. A special situation is presented by insurance obligations stemming not from provisions in 174 national law, but instead from supranational EU law.301 Insofar as such obligations to insure are contained in directives, they require implementation by the Member States, so that a Member State ultimately imposes the duty to take out insurance and paragraph 4 can be applied if the other requirements have been met. If, however, the duty is imposed by a regulation, which is directly applicable and whose application takes precedence, there is no insurance contract for which “a Member State” has imposed an obligation to insure. The extent to which paragraph 4 may be applied in such cases will be discussed separately below.302 4. Starting point: Proper law of insurance contracts pursuant to Art 7(2) and (3) Paragraph 4 only contains a reference to “additional rules”, meaning that, subject to these 175 additional rules, the law applicable to a compulsory insurance contract will be determined

299 300 301 302

Emphasis added. As to the conflict of laws treatment of such compulsory insurance, infra note 201. For more information on this point, see infra note 198. See infra note 196.

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pursuant to Art 7(2) and (3) depending on the nature of the risk. In these regards, there are no special provisions for compulsory insurance.303 176 Furthermore, the insurer must highlight the applicable law as part of the pre-contractual

information to be provided to the applicant under Art 183(1)(a) and (b) Directive 2009/138/ EC (Solvency II) in non-life insurance304 (to policyholders who are natural persons only).305 5. Additional rule: Point (a) 177 The rule in point (a) does not affect the proper law of the contract as determined under

paragraph 2 or 3. The first sentence of the provision merely determines that it is only the law imposing the obligation to take out insurance and not the proper law of the contract nor any other law which can determine whether or not that obligation has been satisfied. In this context, point (a) clearly distinguishes between the proper law of the contract and the law imposing the compulsory insurance.306 178 The second sentence of point (a) resolves a conflict between the proper law of the contract

and the law requiring the compulsory insurance by giving precedence to rules of the latter.307 As a general observation, point (a) tries to balance the relationship between the law imposing the obligation to take out insurance with the law of the insurance contract by granting preference to the compulsory insurance provisions “as little as possible and as much as necessary”. 179 Regrettably, the wording only articulates this in a very inadequate manner. It namely refers

to a contradiction between the mandatory provisions of the Member State imposing the duty to insure and those of the law of the Member State in which the risk is situated. The law of the Member State where the risk is situated is however only relevant to the situations governed by the first subparagraph, points (a) and (e), as well as by the second subparagraph of Art 7(3), i.e. in cases of mass risk insurance in which the choice of law or the objective connection lead to an application of the law of the country in which the risk is situated. Where this is not the case, the rule in point (a) of paragraph 4 appears to lack any substance from the start. How is it possible for the law of the Member State in which the risk is situated to contradict the law of the Member State imposing the duty to insure when it is not even applicable? In my opinion, this must be due to a drafting error. It is likely that the intention was to refer to the conflict between the law of the Member State imposing the duty to

303

304 305

306

307

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Cf. Gruber, in: Calliess, Art 7 Rom I-VO, note 61; Armbrüster, in: Staudinger BGB, Art 7 Rom I-VO, note 19; Bělohlávek, note 07.72. See Art 183(2) Directive 2009/138/EC (Solvency II). The duty of the insurer to inform the applicant about the law applicable in life insurance in accordance with Art 185(3)(m) Directive 2009/138/EC (Solvency II) will play no role in the area of compulsory insurance. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 146; Gruber, in: Calliess, Art 7 Rom I-VO, note 62; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 40; McParland, note 13.168; Armbrüster, in: Staudinger BGB, Art 7 Rom I-VO, notes 23 et seq.; Bělohlávek, note 07.72. Bonnamour, Rev. Lamy dr. aff. No. 29 (2008), 76, 80; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 146; Gruber, in: Calliess, Art 7 Rom I-VO, note 63; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 41.

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insurance (law of the insurance obligation) and the law governing the insurance contract pursuant to paragraph 2 or 3 (law of the insurance contract).308 Point (a), especially its first sentence, is of little importance. As long as the proper law of the 180 compulsory insurance only contains administrative law duties having no effects whatsoever in contract law, e.g. by imposing fines or prohibiting access to certain professions such as lawyers or medical doctors, the insurance contract will simply be governed by its proper law as determined in accordance with Art 7(2) and (3), while the law governing the compulsory insurance will utilise administrative law means for enforcing the compulsory insurance law regime.309 Evidently and in line with the first sentence in point (a), the competent authorities in the Member State imposing the duty to take out insurance will consider an insurance contract to be compliant only if it satisfies all the specific provisions imposed. Evidently and in line with the second sentence in point (a), the competent authorities in the Member State imposing the duty to take out insurance will give priority to the specific provisions concerning compulsory insurance. Nevertheless, there are situations in which the law imposing the duty to insure also governs 181 the contractual relationship between the insurer and the policyholder, including the status of third parties, such as the validity of exclusion clauses, whether to permit an insurer’s claim of discharge vis-à-vis the injured party and, if not permitted, the insurer’s right of recourse to the policyholders or insureds, etc.310 In such cases, the provisions governing contract law aspects of the compulsory insurance will thus supersede the law of the contract in accordance with the second sentence in point (a).311 Another situation to be considered is that compulsory insurance covering a risk is required 182 in multiple Member States. In this case, the question arises of whether, among the laws imposing the duty to insure, a stricter law will prevail over a more lenient one under the rule in point (a). While there is, in principle, a chance of this situation arising, it is unlikely that the problem will come up. Consider, for example, the situation where a law firm in Member State A takes out compulsory insurance and subsequently opens an establishment in Member State B, thereby also subjecting it to the duty to insure there. If it concludes a second policy in order to fulfil this duty, there will be no conflict. The law firm may, on the other hand, extend the insurance cover existing in Member State A to include its activity in Member State B, while Member State B may impose stricter requirements. Insofar as these requirements are not met and are punishable under administrative and criminal law, these provisions will prevail. Member State B will prohibit the firm from carrying out any local activity and possibly impose penalties. As a general rule, these will have no effect on the contract and the firm’s activity in Member State A. As far as the private law effects are concerned, there is no need to apply the stricter contract law provisions of Member State B comprehensively to the contract, but only as far as professional activities in Member State B 308 309

310

311

See Heiss, in: FS Jan Kropholler (2008), 459, 476 in fn. 83; Gruber, in: Calliess, Art 7 Rom I-VO, note 64. Indeed, legal literature tends to treat sentence 1 of point (a) mainly as a rule of “supervisory law”; see Roth, in: Beckmann/Matusche-Beckmann, § 4 note 97 with references in fn. 356. This is largely the case, e.g., with the Austrian Law on Motor Vehicle Liability Insurance 1994 (Kraftfahrzeug-Haftpflichtversicherungsgesetz 1994 (KHVG 1994)) as amended. Some authors argue that even the second sentence of point (a) is only a rule of “supervisory law”; see Roth, in: Beckmann/Matusche-Beckmann, § 4 note 97 with references in fn. 362.

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are concerned. In reality, it will often be a case of the risk being situated in multiple locations under paragraph 5 and the contract must therefore be considered as constituting several separate contracts.312 6. Additional rule: Point (b) a) Option of creating a general conflict rule 183 Under point (b), Member States are afforded the option of extending the application of the

solution set out in point (a) from specific compulsory law provisions to the entire contract law, so that the law imposing the obligation to insure applies to any and every issue. This avoids the problems of adapting between the laws; however, it also leads to the parties’ choice of law being restricted more than is required to ensure that the compulsory insurance law prevails.313 This approach is questionable, especially in respect of large risk insurance. 184 According to the wording of point (b), any Member State may (only?) create a general

conflict rule applicable to any compulsory insurance requiring an assessment on a conflicts of law basis by the authorities or courts of this Member State, for example, due to a direct action brought by the injured party in his/her home jurisdiction pursuant to Art 13(2) together with Art 11(1)(b) of Regulation No 1215/2012 (Brussels Ibis Regulation).314 It is, therefore, conceivable for a party injured in Member State A to sue the insurer of the tortfeasor with compulsory insurance at the place of the injured party’s residence in Member State B. Where Member State B has made use of the option set out in point (b), any issues of insurance law emerging incidentally in proceedings before the court in Member State B must without fail be determined pursuant to the law of Member State A as the country imposing the duty to insure. This is the result even if Member State A does not make use of the option in point (b) and therefore does not require its law to be enforced comprehensively in such situations. 185 The effect of the option set out in point (b) is to favour forum shopping. For instance, in the

example chosen above, a direct claim brought against the liability insurer at the place of the tort in Member State A under Art 13(2) together with Art 11(1)(b) of Regulation No 1215/ 2012 (Brussels Ibis Regulation) could lead to the application of a law more favourable to the claimant than where an action is brought at the place of the injured party’s home jurisdiction pursuant to Art 13(2) together with Art 11(1)(b) of Regulation No 1215/2012 (Brussels Ibis Regulation) and vice versa.315 b) Unilateral conflict rules and rules of recognition 186 The option made available in point (b) is based on a tendency to overshoot. The wording of

the rule provides Member States with the option of allowing compulsory insurance as a whole to be governed by the law of the Member State imposing the duty to take out insur312 313

314

315

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On this point, cf. McParland, note 13.171; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 44. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 148; Gruber, in: Calliess, Art 7 Rom I-VO, note 65; Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 42; McParland, note 13.169; Armbrüster, in: Staudinger BGB, Art 7 Rom I-VO, note 27. With regard to the jurisdiction of the injured party, see FBTO Schadeverzekeringen NV v. Jack Odenbreit (Case C-463/06) [2007] ECR I-11321. See also Gruber, in: Calliess, Art 7 Rom I-VO, note 66.

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ance, even where this is not demanded by this Member State itself. Conversely, the wording of the option in point (b) also falls short of the mark. If Member State A, having imposed the obligation to take out insurance, wishes for its own compulsory law provisions and entire insurance law to apply, it has no right under point (b) vis-à-vis other Member States to ensure that this wish is respected.316 It is reasonable to ask whether point (b) represents a drafting error and should therefore be 187 interpreted as meaning, on the one hand, that only the Member State imposing the compulsory insurance may lay down that the insurance contract is governed entirely by its law and that, on the other hand, all of the other Member States are required to respect this – in this regard, it is similar to any extensions made to the choice of law by Member States under the second subparagraph of Art 7(3). Yet, it is not clear as to whether there really has been a drafting error. The rule may, namely, be intended as an opt-out option for Member States not wishing for their courts to have to apply a “law mix” between the law governing the compulsory insurance and the proper law of the insurance contract. Consequently, the option in favour of an alternative interpretation of point (b) cannot be proved. Nevertheless, it cannot be proscribed under point (b) for a Member State to exercise the 188 option partially with effect only upon its own courts. Germany, for example, has done so in Art 46c of the Introductory Act to the Civil Code. This reads317: “Art 46c: Insurance contracts (Compulsory insurance contracts) (1) An insurance contract covering risks for which a Member State of the European Union or another Contracting State of the Agreement on the European Economic Area has imposed an obligation to insure is governed by the law of this state, provided that this law requires its own application. (2) A contract concluded for compulsory insurance is governed by German law, if the statutory obligation to conclude the contract is imposed by German law.” Paragraph 1 of Art 46c only makes use of the option in point (b) to the extent that the 189 Member State imposing the obligation to take out insurance may require the application of its own law to issues concerning the insurance contract. This is less invasive in comparison to the broad version of point (b) and therefore appears to be permitted. The same is true with regard to paragraph 2. This provision only requires the application of German law to obligations to insure originating in German law. This too is less invasive, as are paragraphs 1 and 2 taken together, than the option made available under point (b). Considered in relation to point (b), this rule therefore appears to be permitted under the regulation. It should be noted, however, that Germany does not have the right to demand that other Member States respect the option set out in paragraph 2 in favour of the application of its own law. c) Overview of national legislation using or not using the option set out under Art 7(4)(b) – Austria: option not used; 190 – Bulgaria: the new Insurance Code which entered into force on 1 January 2016 makes use

316 317

Cf. Martiny, in: MüKo BGB, Art 7 Rom I-VO, note 43. I am grateful to Mandeep Lakhan (Zurich) for providing this (unofficial) translation.

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of the option in its Art 463 with respect to compulsory insurance against accidents at work; it reads318: “Each insurer offering compulsory accident insurance against accidents at work under the right of establishment or the freedom to provide services shall be required to determine the Bulgarian legislation as the law applicable to the insurance contract”; Cyprus: “The Law on Insurance and Reinsurance Services and Other Related Issues of 2016” does not make use of the option (see in particular section 220);319 Czech Republic: option not used;320 Denmark: option not used;321 England: option not used;322 Finland: option was used in “Laki eräisiin kansainvälisluonteisiin vakuutussopimuksiin sovellettavasta laista (91/1993) § 8”;323 France: no new legislation on the law applicable to insurance contracts has been enacted following the entry into force of Rome I; the old conflict rules (Arts. L 181-1 to 181-4, Art. L 182-1 and Arts. L 183-1 to 183-2 Insurance Contract Act [Code des Assurances]) have not been formally repealed; they contain a rule on public policy which includes a (partial rule) on compulsory insurance and a special rule on French compulsory insurances; they read (in their original French version):324 “Art. L 181-3 Les articles L. 181-1 et L. 181-2 ne peuvent faire obstacle aux dispositions d’ordre public de la loi française applicables quelle que soit la loi régissant le contrat. Toutefois, le juge peut donner effet sur le territoire de la République française aux dispositions d’ordre public de la loi de l’Etat membre de l’Espace économique eu ropéen où le risque est situé ou d’un Etat membre qui impose l’obligation d’assur ance, si, selon le droit de ces pays, ces dispositions sont applicables quelle que soit la loi régissant le contrat. Lorsque le contrat couvre des risques situés dans plusieurs Etats membres de l’E space économique européen, le contrat est considéré, pour l’application du présent article, comme constituant plusieurs contrats dont chacun ne se rapporte qu’à un seul Etat.” Art. L 183-1 “Les contrats destinés à satisfaire à une obligation d’assurance imposée par une loi française sont régis par le droit français”; Germany: option used as described supra note 188; Greece: Section 145(2) of the new Law 4364/2016 (entry into force on 1 January 2016) provides that Greek law applies to any insurance which is compulsory under Greek law;325

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320 321 322 323

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I am very grateful to the Financial Supervision Commission of the Republic of Bulgaria for providing this information and the (unofficial) translation. I am very grateful to the Superintendent of Insurance, Insurance Companies Control Service, Ministry of Finance of Cyprus for providing this information. I am very grateful to the Czech National Bank (CNB) for providing this information. I am very grateful to the Danish Ministry of Justice for providing this information. I am very grateful to Prof. John Birds (Sheffield) for providing this information. I am very grateful to the Finnish supervisory board, the Finanssivalvonta, and Prof. Jaana Norio Timmonen (Helsinki) for providing this information. I am very grateful to Prof. Jérôme Kullmann (Paris) for providing this information. I am very grateful to the Bank of Greece, Department of Insurance Supervision, as well as Dr. Antonios Tsavdaridis (Athens) for providing this information.

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– Hungary: Section 8(4) of the Law No. LXII of 2009 on compulsory motor vehicle liability insurance of motor provides for the application of Hungarian law;326 – Iceland: option used; Art 143(4) of the Act on Insurance Contracts, No 30/2004, reads:327 “In the case of compulsory insurance, the mandatory rules of law of the state which imposed the insurance obligation shall apply”; – Italy: no new legislation on the law applicable to insurance contracts has been enacted following the entry into force of Rome I; the old conflict rules (Art 180 [non-life insurance] and Art 181 [life insurance] Code of Private Insurance) have not been formally repealed; they contain a rule which is in line with point a) of Art 7(4) in Art 180 (3) Code of Private Insurance which is in line with Art 7(4)(a), but do not use the option provided under Art 7(4)(b);328 – Liechtenstein: option used; Art 10(1) of the Liechtenstein IVersVG329 transposes Art 7(4) (a) into Liechtenstein law; the option granted in point (b) is used in Art 10(2) and (3); these provisions read330: “Art 10: Additional Rules for Compulsory Insurance 2) In the absence of a choice of law, the compulsory insurance contract will, in derogation of Art 9, be subject to the law of the state imposing the duty to insure. 3) Where an insurance undertaking in a state imposing a duty to insure must notify the competent authority about the discontinuance of insurance cover, the non- existence of insurance cover may only be invoked against a third party in accord ance with the law of this state”; – Lithuania: the conflict rules of the Law on Insurance have not been repealed upon the entry into force of Rome I; Art 134(1) and (5) make use of the option granted in Art 7(4) (b); they read:331 “Article 134. Law Applicable to Compulsory Insurance Contracts 1. A compulsory insurance contract shall be subject to the law of the European Eco nomic Area Member State which provides for the obligation to conclude the insur ance contract. 5. Where a Member State provides for compulsory insurance and the insurer is obliged to notify the supervisory authorities about the expiry of insurance cover, the expiry of insurance cover shall have legal effects on the third parties only under the circumstances specified in the legal acts of that European Economic Area Member State”; – Luxembourg: in spite of an amendment to the law on the insurance contract of 7th December 2015, Art 6(4), which uses the option set out in Art 7(4)(b) in a very limited way, remained in force; it reads:332 “If an insurance undertaking must notify the authorities of any cessation of cover in respect of compulsory insurance imposed by Luxembourg law, such cessation may only be enforce326 327

328 329

330 331

332

I am very grateful to Prof. Dr. Peter Takáts (Budapest) for providing this information. Translation provided at https://eng.atvinnuvegaraduneyti.is/laws-and-regulations/nr/nr/7472 (last accessed on 7 June 2016). I am very grateful to Prof. Diana Cerini (Milan) for providing this information. Gesetz vom 12.6.2015 über das internationale Versicherungsvertragsrecht (IVersVG; LR 291)/Law of 12 June 2015 on international insurance contract law. I am grateful to Mandeep Lakhan (Zurich) for providing this (unofficial) translation. I am very grateful to the Financial Service and Markets Supervision Department at the Bank of Lithuania for providing this information and translation. I am very grateful to the Luxembourg Commissariat aux Assurances for providing this information and translation.

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able against injured third parties in accordance with the conditions laid down by Luxembourg law”; Norway: option used; Section 6 of the Act on Choice of Law in Insurance reads333: “In the case of compulsory insurances, all mandatory rules of the country imposing the obligation to take out insurance shall be applied”; Poland: option not used;334 Slovakia: Section 789(4) of the Act no. 40/1964 (Civil Code) provides:335 “(4) If a special legal regulation of a Member State stipulates compulsory contrac tual insurance, and at the same time the law of that Member State imposes an obli gation to inform competent bodies about the insurance benefit expiration on the in surer, the insurer may assert such expiration against injured third parties only under the conditions set out in a special regulation of that Member State”; Spain: no new legislation on the law applicable to insurance contracts has been enacted following the entry into force of Rome I; the old conflict rules (Art 107 [non-life insurance] and Art 108 [life insurance] of the Insurance Contract Act)336 have not been formally repealed; Art 107(1)(b) of the Insurance Contract Act provides for the application of Spanish law if a duty to take out insurance is imposed by it;337 Sweden: option used; according to Section 3 of the “lag (1993:645) om tillämplig lag för vissa försäkringsavtal”/Act on Applicable Law to Certain Insurance Contacts, as amended, provides for the application of the law of the Member State which imposes the duty to take out insurance.338

d) Voluntary extensions of cover 191 Once a Member State has made use of the option provided in point (b), it is necessary to

enquire into whether the law governing the compulsory insurance also applies to the parts of the contract which were concluded voluntarily and exceed the scope of the duty to insure. This is the case, for example, where an insurance sum is agreed upon which is higher than required under the compulsory insurance provisions. The same applies to situations in which the cover exceeds the territorial, personal and/or temporal scope of cover required by the compulsory insurance provisions. 192 In such cases, there are some arguments in favour of separating the contract (dépeçage).

However, this will often not be possible. For reasons of practicability, on the basis of which the option was made available to the Member States in the first place, the entire contract should, at least in general, be governed by the law governing the compulsory insurance.

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334 335

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Translation provided at http://www.finanstilsynet.no/Global/English/Laws_and_regulations/Insurance _Pensions/Act_Choice_Law_Insurance.pdf (last accessed on 7 June 2016). I am very grateful to Prof. Dariusz Fuchs (Warsaw) for providing this information. I am very grateful to the Ministry of Justice of the Slovak Republic for providing this information and translation. No new legislation on the law applicable to insurance contracts has been enacted following the entry into force of Rome I; the old conflict rules (Art 180 [non-life insurance] and Art 181 [life insurance] Code of Private Insurance) have not been formally repealed. I am very grateful to Prof. Juan Bateller Grau (Valencia) and the Dirección General de Seguros y Fondos de Pensiones at the Ministerio de Economía y Competitividad for providing this information. I am very grateful to the Swedish supervisory board Finansinspektionen for providing this information.

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7. Harmonised compulsory insurance law and Art 7(4) a) Examples of (harmonised) compulsory insurance law in secondary Union legislation Within the scope of its harmonisation competence, the European legislature has repeatedly 193 created insurance obligations. The most important example is the duty to insure imposed by Art 3 of Directive 2009/103/EC (Motor Insurance Directive).339 Other provisions imposing the obligation to take out insurance include Art 4 of Directive 2009/20/EC (Maritime Insurance Directive),340 the Regulation (EC) No 785/2004 (Aircraft Insurance Regulation),341 Arts. 4(h) and 11 of the Regulation (EC) No 1008/2008 (Air Services Operation Regulation)342 and Art 10(4) and (5) of Directive (EU) 2016/97 (Insurance Distribution).343 Other directives do not make the taking out of liability insurance compulsory, but permit 194 Member States to create or maintain duties to insure. One such rule is, for example, contained in Art 6(3) of Directive 98/5/EC (Lawyers). This provision permits host Member States to assess a foreign lawyer’s professional indemnity insurance in accordance with its own obligation to take out insurance and, if necessary, to require additional insurance to be taken out. Similar special rules are contained in Arts. 206 (substitute health insurance) and 207 (com- 195 pulsory insurance against accidents at work) of Directive 2009/138/EC (Solvency II). These enable the Member States concerned to apply their relevant rules to foreign insurers providing such cover on the basis of their freedom to provide services or by means of an establishment. b) The relationship between insurance obligations in directives and Art 7(4) The special rules on compulsory insurance contained in European law raise, in particular, 196 the question as to their relationship to Art 7(4) of Rome I. As far as insurance obligations in the directives are concerned, these only establish a duty for Member States to impose compulsory insurance by means of national implementing legislation. Once this has taken place, the insurance contracts concluded on the basis of the national implementing provisions are subject to the conflicts of law in Art 7(4).344 In this regard, the requirement laid down for the application of Art 7(4) that “a Member State” imposes the obligation to insure is satisfied.

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Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009 relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to insure against such liability, OJ L 263, 7.10.2009, p 11–31. Directive 2009/20/EC of the European Parliament and of the Council of 23 April 2009 on the insurance of shipowners for maritime claims, OJ L 131, 28.5.2009, p 128–131. Regulation (EC) No 785/2004 of the European Parliament and of the Council of 21 April 2004 on insurance requirements for air carriers and aircraft operators, OJ L 138, 30.4.2004, p 1–6. Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the Community (Recast), OJ L 293, 31.10.2008, p 3–20. Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (recast), OJ L 26, 2.2.2016, p 19–59. See supra note 174.

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c) The relationship between insurance obligations in the Air Transport Regulations and Art 7(4) 197 The Air Transport Regulations apply directly and determine their own scope of application. Pursuant to Art 2(1) of Regulation (EC) 785/2004, the Regulation applies “to all air carriers and to all aircraft operators flying within, into, out of, or over the territory of a Member State to which the Treaty applies.” However, the application of the Regulation only means that the duty to insure, i.e. the obligation to take out sufficient insurance, must be satisfied. The Regulation does not deal with the issue of the law applicable to the insurance contract. The law applicable is, in principle, determined in accordance with Art 7(2) of Rome I, because the air transport risks concerned are large risks within the meaning of Art 7(2) together with Art 13(27)(a) of Directive 2009/138/EC (Solvency II). 198 Within the scope of application of Art 7(2) of Rome I, the special rule in paragraph 4

concerning compulsory insurance also generally applies. It may, however, be enquired into whether Art 7(4) can be applied to insurance obligations imposed under EU regulations, especially as it is not “a Member State”, but the “EU” imposing a supranational obligation to take out insurance. The answer to the question must, in my opinion, be distinguished: the rule in point (a), in particular the rule giving precedence to the compulsory insurance law, is just as suitable for duties to insure imposed by EU regulations as it is for such obligations imposed at Member State level.345 There is, in my opinion, no reason to exclude from the scope of point (a) any compulsory insurance imposed by the regulations. Point (b), in contrast, is not suitable. Placing the insurance contract under the law of the Member State imposing the obligation to take out insurance fails simply because no Member State alone created the duty. An attempt to place the insurance contract under European law as the law imposing compulsory insurance also fails because a supranational insurance contract law does not exist. d) The relationship between conflicts of law in the Directive 2009/138/EC (Solvency II) for substitute health insurance and compulsory insurance against accidents at work and Art 7(4) 199 Similar issues of demarcation arise in respect of Arts. 206 (substitute health insurance, where it constitutes compulsory insurance) and 207 (compulsory insurance against accidents at work) of Directive 2009/138/EC (Solvency II). These permit the application of relevant rules in the host country of the service in deviation from the country of origin principle, which is otherwise standard under Directive 2009/138/EC (Solvency II). Thus, the objective of the provision corresponds to Art 7(4) of Rome I. The rules are also in line with Art 7(4)(a) and insofar no conflict must be resolved because the Member State imposing the duty to take out insurance within the meaning of Art 7(4)(a) will be the host country within the meaning of Arts. 206 and 207 Directive 2009/138/EC (Solvency II). 200 Nevertheless, the wording of Arts. 206 and 207 Directive 2009/138/EC (Solvency II) appears

to be narrower than the wording of Art 7(4) especially in view of point (b) thereof. However, in my view Arts. 206 and 207 Directive 2009/138/EC (Solvency II) do not in any way interfere with Art 7(4) and (b) thereof. Arts. 206 and 207 of Directive 2009/138/EC (Solvency II) only breach the country of origin principle established in this Directive. Similarly 345

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It will, however, be shown that the wording of point (a) is unfortunate and a correction is therefore also required in relation to obligations to insure imposed by Member States.

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to Directive 2009/138/EC (Solvency II) in general, Arts. 206 and 207 of this Directive do not themselves determine the contract law applicable to the insurance contract. The latter must be determined in accordance with Art 7(2) or (3), as the case may be, in connection with (4). For the same reason the relationship of Arts. 206 and 207 Directive 2009/138/EC (Solvency II) and Art 7(4)(b) is not a matter for Art 23. 8. Compulsory insurance outside of the scope of Art 7(4) It has been demonstrated that only certain, and therefore not all, types of compulsory 201 insurance fall within the scope of the rule in paragraph 4: mass risk insurance taken out to fulfil an obligation imposed by a third country is not covered by paragraph 4. There is no special rule in Rome I for compulsory insurance falling outside the scope of paragraph 4. In this respect, an analogy to paragraph 4 would be worth considering. In fact, this should not be excluded a priori.346 The results under point (a) may however also be obtained through a special connection of overriding mandatory provisions under Art 9 of Rome I. An analogous application of paragraph 4 is therefore not required, at least to the extent that the problem is resolved satisfactorily by Art 9. X. Insurance contracts covering mass risks situated in third countries 1. Conflict rules applicable For an insured mass risk situated in a third country, the conflicts of law for the insurance 202 contract is not to be assessed under Art 7, but instead in accordance with the general conflict rules in Rome I.347 Where one or only a part of multiple insured risks are situated in one or several third countries, the contract must be split and the part of the contract covering the risks situated in third countries must be assessed in accordance with the general conflict rules in Rome I.348 This leads to Art 7 not being applied, as for example in the following case: a policyholder 203 with habitual residence in Member State A insures his properties, which are situated in Member States A and B, another one in EEA Contracting State C and a final one in third country D. The insurance is taken out with an insurer who also has his habitual residence in Member State A. The conflicts of law assessment of the insurance must be made in accordance with Art 7(3) of Rome I, provided that the property situated in the Member States is insured. Due to the broad understanding of “Member State” within the meaning of the second sentence of Art 1(4), the same applies to the insurance covering the property situated in the EEA Contracting State. The part of the contract referring to the property located in third country D will, in contrast, be split and assessed in accordance with the general conflict rules in Rome I.

346

347 348

See, however, Roth, in: Beckmann/Matusche-Beckmann, § 4 note 96 holding that no regulatory gap exists in Rome I and, thus, an analogous application of Art 7(4) was not possible. Falconi, 125; Bělohlávek, note 07.70. Gruber, in: Calliess, Art 7 Rom I-VO, note 71; cf. Martiny, in: MüKo BGB, Art 7 Rom I-VO, notes 44 et seq.; McParland, note 13.174.

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204 The question arises, as to what extent the insurer’s duty to inform the applicant about the

proposed choice of law or the law applicable in the absence of a choice, as the case may be, under Art 183(1)(b) Directive 2009/138/EC (Solvency II) in non-life insurance (to policyholders who are natural persons only ) and Art 185(3)(m) Directive 2009/138/EC (Solvency II) in life insurance (to all policyholders, i.e. natural persons as well as legal entities) applies to insurance contracts covering mass risks located outside the EU/EEA. The answer will depend on the way such rules have been transposed by Member States. Germany, for example, has transposed such duties by means of s. 7 Insurance Contract Act 2008 (in connection with the “Regulation on Information Obligations for Insurance Contracts”). As a consequence, the duties to inform will apply whenever German contract law governs a particular insurance contract. In contrast, Austria has transposed the duty to inform in s. 252(1) no. 2 Insurance Supervisory Act 2016 and limited the scope of application to insurance covering risks situated in Austria. 2. Choice of law a) Choice of law pursuant to Art. 3 205 The parties to an insurance contract covering risks situated in third countries generally have

a free choice of law pursuant to Art 3.349 The parties may therefore choose any law, if desired also a neutral law, unlike under Art 7(3), which only permits a choice in favour of certain laws.350 206 In particular, the choice of law may also be made in favour of the law of the country in which

the policyholder has his habitual residence. For contracts covering both risks situated in Member States and those situated in third countries, this is the most comprehensive method of ensuring that the same contract law applies to all of the parts of the contract by means of a choice of law. In respect of mass risk situated in Member States, Art 7(3)(b) permits a choice to be made in favour of the law at the place of the policyholder’s habitual residence and this is available irrespective of whether this is in a Member State or a third country. Such a choice of law option is also made available in Art 3 in respect of mass risk situated in third countries.351 The limitations set out in Art 3(3) and (4) are not relevant in this situation, as the elements relevant to the situation at the time of the choice are not located exclusively in one country (paragraph 3) and also not exclusively in Member States (paragraph 4). 207 The choice of law option described is available even in relation to a consumer insurance

contract as defined by Art 6.352 In respect of the part of the contract covering risks located in third countries, a choice of law by the parties is restricted by Art 6(2) to the law of the country in which the consumer has his habitual residence. In such cases, this is the law chosen anyway.353

349 350

351 352 353

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Falconi, 125. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 176; Gruber, in: Calliess, Art 7 Rom I-VO, note 77; Looschelders/Smarowos, VersR 2010, 1, 8. Caamiña Domínguez, CDT Vol. 1 No. 2 (2009), 30, 46. The restriction on the choice of law under Art 6 is discussed in more detail at infra notes 209 et seq. Gruber, in: Calliess, Art 7 Rom I-VO, note 77; see also McParland, note 13.174; see also Miquel Sala, AEDIPr 2016, 793, 799 et seq.

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Where the chosen law is the law of a third country, this choice of law will be restricted at 208 most partially by the special conflicts rules established in Art 6(2) of Directive 93/13/EEC (Unfair Terms) and/or Art 12(2) of Directive 2002/65/EC (Distance Marketing of Financial Services) .354 This applies to the parts of the contract which would have been governed by the law of a Member State in the absence of the choice of law. If the contract would not be governed by the law of a Member State even in the absence of a choice, the consumer is not deprived of the protection afforded by the directives through the choice in favour of a third country law and, thus, the special conflict rules of the directives will not apply. b) Limitations on the choice of law for consumer contracts pursuant to Art. 6 The choice of law available in relation to consumer contracts as defined by Art 6 is limited 209 under the second sentence of Art 6(2) by the more favourable mandatory provisions of the law in the country in which the consumer has his habitual residence. Therefore, the result may be a law mix, consisting of the law chosen and the more favourable provisions in the consumer’s home law.355 Pursuant to Art 6(4)(a), however, this limitation does not apply to “a contract for the supply 210 of services where the services are to be supplied to the consumer exclusively in a country other than that in which he has his habitual residence”. The exception is justified on the basis that a consumer accepting a service exclusively in a country other than the country in which he has his habitual residence has established a prior connection to a foreign country and therefore does not require special protection from the application of foreign law. Such consumers are put on the same footing as active cross-border consumers. It is reasonable to enquire as to whether insurance services count among the services men- 211 tioned in point (a). In my opinion, this is the case. The provision of insurance is a financial service; it therefore also falls within the scope of the freedom to provide services under Arts. 56 et seq. TFEU.356 In respect of the former Art 5 of the Rome Convention, which, from the outset, only governed certain consumer contracts, including also contracts concerning the provision of services, prevailing opinion assumed that insurance as a service also fell within its scope. This also applied to the partial exception made for contracts of service in Art 5(4) (b) of the Rome Convention,357 the predecessor provision to Art 6(4)(a) of Rome I, which also governed insurance contracts. This cannot have changed, simply because the scope of Art 6 has been extended in comparison to that of Art 5 of the Rome Convention. For this reason, where the other requirements have been met, insurance contracts fall under the exception provided by Art 6(4)(a). It is also necessary to discuss the conditions under which an insurance service must be 212 supplied exclusively in a country other than the one in which the consumer has his habitual residence. In answering this question, problems arise by the fact that insurance law scholars remain divided as to the actual service provided by the insurer. While some rather abstractly refer to the bearing of the insured risk, others perceive a service specifically in a conditional 354 355

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As to aspects of private international law of the Directive in general, see Heiss, IPRax 2003, 100. Critical Miquel Sala, AEDIPr 2016, 793, 804; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 171 et seq.; cf. also Schnyder/Grolimund, in: Reithmann/Martiny, note 6.2776. See Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 178. Cf. Calliess, in: Calliess, Art 6 Rom I-VO, note 59.

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monetary payment.358 For the purposes of Art 6(4)(a), reference should be made to the place where the services are received by the consumer, which is an argument in favour of referring to the place at which the specific monetary payment will be received where insurance services are concerned.359 213 It is necessary to add that insurance services are commonly, but not always provided

through monetary payments. The insurer’s service may, in particular, also consist of providing assistance in case of an accident. In this context, class 18 in Part A of Annex I of Directive 2009/138/EC (Solvency II) refers to “Assistance” as an independent class of insurance as part of which assistance is provided “for persons who get into difficulties while travelling, while away from their home or their habitual residence.” Examples of such assistance include the procurement of medical care or legal support, the repair of damaged vehicles, return transport, etc. Furthermore, the service provided by the insurer may also comprise a combination of monetary and non-monetary services. 214 In determining the relevant place, it is not the contractually or statutorily determined place

of performance which is relevant according to the ratio of point (a).360 For example, if an insurer in country A transfers the insurance money to the policyholder’s account in country B, it is the receipt of the payment in B which is relevant, not the fact that the insurance contract designates A as the place of performance. The same applies where the insurer’s employees in country A provide assistance in country B via telephone and/or internet. In such cases, a contractual term designating A as the place of performance cannot be the determining factor. Following this train of thought, it is unnecessary to deal with the question regarding which law should be used to determine the place of performance for the purposes of Art 6(4)(a). c) Further limitations on the choice of law due to special conflict rules 215 In addition to Art 6, consumer contracts are subject to the various special conflict rules

contained in the directives on consumer protection. In respect of insurance law, Art 6(2) of Directive 93/13/EC (Unfair Terms) and Art 12(2) of Directive 2002/65/EC (Distance Marketing of Financial Services)361 are relevant in particular. Both have the same wording: “Member States shall take the necessary measures to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-Member country as the law applicable to the contract if the latter has a close connection with the territory of the Member States.” 216 One requirement for the application of these special conflict rules is that a choice is made in

favour of the law of a third country. This choice of law must lead to the consumer losing the protection granted by the respective directive, i.e. it must deviate from a Member State law which would apply on the basis of an objective connection. Where, in the absence of a choice of law, the law of a third country – albeit perhaps a different one – would apply, the consumer is not afforded protection by the directive and therefore cannot lose such protec358 359 360 361

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As to the discussion in German law, see Armbrüster, notes 1103 et seq. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 179 et seq. See supra note 212. As to aspects of private international law in the Directive in general, see Heiss, IPRax 2003, 100.

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tion through the choice of law made. The final requirement is that the contract has a close connection with the territory of the Member States. 3. Objective connection a) Objective connection pursuant to Art. 4 In respect of the objective connection, the question may be raised as to whether insurance 217 contracts represent contracts of service pursuant to paragraph 1(b) or are governed by the general rule in paragraph 2.362 For systematic reasons alone, insurance contracts should, in my opinion, be included within the category of service contracts.363 Consequently, the law of the country in which the service provider, the insurer, has his habitual residence must be applied to the insurance contract.364 The same would also apply if insurance contracts were not classified under paragraph 1 218 (b),365 leaving them to be assessed in accordance with paragraph 2. The supplier of the characteristic performance is the insurer. This is quite obviously the case where the insurer provides assistance rather than monetary payments. This must, however, also be the case where the insurer makes a monetary payment. The monetary payment by the insurer is namely without a doubt based on a service, which the insurer provides by means of organising the risk-sharing community of insureds. The monetary payment by policyholders, the payment of the premium, is in contrast only the price for such a service. In this respect, the law of the country in which the insurer has his habitual residence also applies under paragraph 2.366 Where there is a “manifestly” closer connection between the insurance contract and another 219 country, the law of this other country must be applied pursuant to paragraph 3. The assessment of whether there is such a manifestly closer connection must take into account “all the circumstances of the case” and therefore be conducted on a case-by-case basis. The location of the risk does not suffice to constitute a manifestly closer connection, because this would transform the system in Art 4 to one analogous to the system in the third subparagraph of Art 7(3), which would oust the normal connection in Art 4(1).367 In relation to insurance of multiple risks or the conclusion of insurance contracts with 220 multiple insurers (“international insurance programmes”), the same problems arise as previously discussed in respect of a possible deviation where large risk insurance is concerned.368 b) Objective connection pursuant to Art. 6 For consumer insurance contracts within the meaning of Art 6 to which the exception in 221

362 363 364 365 366 367 368

Cf. Falconi, 126 et seq. See the discussion at supra note 211. Cf. Gruber, in: Calliess, Art 7 Rom I-VO, note 78. This is proposed, e.g., by Roth, in: Beckmann/Matusche-Beckmann, § 4 note 28. See also Falconi, 127; Gruber, in: Calliess, Art 7 Rom I-VO, note 80. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 180; Gruber, in: Calliess, Art 7 Rom I-VO, note 84. See supra notes 98 and 106 et seq.

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paragraph 4(a)369 does not apply, the law of the country in which the policyholder has his habitual residence will apply under paragraph 1. XI. Reinsurance contracts 1. Definition and features 222 Reinsurance370 is a contract through which a reinsurer grants an insurer (“assignor”) cover

for situations in which the assignor is liable on the basis of his insurance contract for insured events.371 The assignor may be a direct insurer (including also social insurers) or a reinsurer. The term used to describe the latter case is “retrocession”.372 In exchange for the reinsurance, the assignor pays a premium.373 The legal relationship between assignors and reinsurers is clearly not restricted to the fulfilment of the two main performances. It also establishes a whole range of ancillary duties.374 223 Reinsurance may cover an individual insured risk or a whole portfolio of insured risks. The

former case concerns facultative reinsurance. In this context, an assignor may choose freely whether or not to take out reinsurance for a part of the risk insured by him. A reinsurer is also free to determine whether to reinsure the risk offered.375 In relation to obligatory reinsurance or treaty reinsurance, however, a portfolio of insured risks is reinsured in its entirety to the extent agreed upon. Reinsurance is provided to any risk directly insured by the assignor which meets the requirements of the reinsurance treaty and therefore belongs to the portfolio. With regard to the individual risk, it is not possible for the assignor or the reinsurer to freely avoid coverage of a risk belonging to the portfolio.376 Mixed forms of both of these arrangements are also conceivable. There is, for example, semi-obligatory reinsurance which refers to situations where, in respect of a particular insured risk, either solely the assignor is obliged to offer the transfer of a part of his risk to the reinsurer (obligatory facultative reinsurance) or solely the reinsurer is obliged to offer underwriting (facultative obligatory reinsurance) a part of the risk, while the other party is free to choose.377 224 In addition to the different conceptions with regard to the parties’ right to choose to under-

write a certain proportion of the risk, reinsurance contracts may also vary due their cover structures. Contracts of reinsurance are commonly divided into proportional reinsurance 369 370 371

372 373 374

375

376

377

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See supra note 210. Cf. also the definition in Art 13(7) Directive 2009/138/EC (Solvency II). Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 notes 125 et seq.; Art 77(1) Spanish Insurance Contract Act (LCS) of 8 October 1980. Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 202. Edelman/Burns, note 5.01; Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 134. Cf. Judgment of the Swiss Federal Supreme Court, BGE 140 III 115, consideration 6.4; Cannawurf/ Schwepcke, in: Lüer/Schwepcke, § 9 note 105; Edelman/Burns, notes 4.08 et seq. and notes 5.07 et seq. Cf. Forsikringsaktieselskapet Vesta v. JNE Butcher [1989] 1 AC 852, 893; Edelman/Burns, note 1.41; Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 notes 265 et seq.; Sánchez Calero, 1590 et seq. Edelman/Burns, notes 1.50 et seq.; Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 notes 267 et seq.; Sánchez Calero, 1591. Aneco Reinsurance Underwriting Ltd v. Johnson & Higgins Ltd [2002] C.L.C. 181, 187; Edelman/Burns, notes 1.71 et seq.; Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 269; Barroso de Mello, 162.

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(also known as insurance of fixed sums) and non-proportional reinsurance (also known as indemnity insurance). Where proportional reinsurance is concerned, the reinsurer carries a certain share of the insured risk. In return, he receives a corresponding proportion of the insurance premium as the reinsurance premium.378 Non-proportional reinsurance is characterised by the fact that the reinsurer does not undertake a share of the actuarial risk, but rather the part of the damage exceeding a deductible amount. The maximum liability of the reinsurer may naturally also be agreed upon.379 Finite reinsurance (also referred to as “financial reinsurance”) represents a special case.380 225 This is available in a number of different variations (loss portfolio transfer, LPT; adverse development cover, ADC; prospective finite reinsurance). All of these are characterised by the fact that the reinsurer only covers the risk of the assignor to a limited degree381 and these are in fact actually used to pursue financial and business goals.382 Loss portfolio transfers involve a transfer to the reinsurer of existing liability arising from insured events which have occurred already in exchange for a one-off payment.383 Adverse development cover provides cover for the assignor’s insufficient loss reserves.384 In addition, there are numerous other variations, in particular also prospective variations.385 With regard to the question of the proper law the special features of finite reinsurance are, however, unlikely to make any difference to the result. The question of whether and the conditions under which an insurance transaction is concerned simply does not arise in regard to conflicts of law, because Art 7 definitely does not apply to reinsurance.386 The governing provisions in Arts. 3, 4 and possibly 9 do not distinguish whether a contract of finite reinsurance is classified as a reinsurance contract in the strict meaning of the word or as a different type of transaction. The situation becomes more complex in other cases of an alternative risk transfer (ART), 226 especially in relation to the so-called securitisation of risks (“risk securitisation”; “insurance linked securities”). By means of a company established for the purpose of insurance, a “special purpose vehicle (SPV)”,387 a risk can be passed on to the capital markets by issuing bonds which are linked to the non-occurrence of a particular event (e.g. an earthquake) to investors.388 The capital provided is invested by the insurance special purpose vehicle in order to increase the risk capital. In this construction, the investor functions as an insurer. For the purposes of conflicts of law, these constructions must be separated into their individual parts (assumption of risk by the insurance special purpose vehicle; investment transactions by the insurance special purpose vehicle; the issuing of bonds by the insurance special purpose vehicle) and be assessed independently. 378

379 380 381 382 383 384 385 386 387 388

Edelman/Burns, notes 1.43 et seq. and notes 1.52 et seq.; Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 271. Edelman/Burns, note 1.49 and notes 1.62 et seq.; Cannwurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 273. Schwer, in: Lüer/Schwepcke, § 14 notes 1 et seq.; Barlow/Lyde/Gilbert, notes 24.6 et seq. Barlow/Lyde/Gilbert, note 24.6. See Art 201(3) Directive 2009/138/EC (Solvency II). Schwer, in: Lüer/Schwepcke, § 14 notes 10 et seq. Schwer, in: Lüer/Schwepcke, § 14 notes 14 et seq. Schwer, in: Lüer/Schwepcke, § 14 notes 17 et seq.; Barlow/Lyde/Gilbert, note 24.13. Second sentence of Art 7(1) of the Rome I Regulation. With regard to the meaning of this term, cf. Art 13(26) of Directive 2009/138/EC (Solvency II). Barlow/Lyde/Gilbert, notes 1.226 et seq.

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227 So-called reinsurance pools are a particularity. In this context, the direct insurers and

reinsurers join to share cover of risks as well as profits amongst themselves. Members of a reinsurance pool (direct insurers and reinsurers) underwrite the actuarial risks on their own behalf and for their own account. Subsequently, they cede the risk either entirely or partially to the pool company in accordance with previously agreed terms, so that the latter becomes a reinsurer or a retrocessionaire. By means of this process, the risk is divided amongst the members of the pool.389 In this context, it is only the relationship between the pool member underwriting the risk concerned on his own behalf and for his own account and the pool company in its capacity as reinsurer or retrocessionaire which is classified as reinsurance. The relationship between the individual pool members amongst themselves is, in contrast, an issue of company law390 and therefore does not fall within the scope of Rome I.391 228 In reinsurance business especially, so-called “company reinsurers” or “captive reinsurers”

emerge. These are characterised by the fact that they have been established as an insurance undertaking by another business, in order to provide reinsurance cover for their risks, the initial cover for which is provided by a direct insurer.392 By this means, the policyholder indirectly benefits from the insurance premium paid by him. This situation does not, however, give rise to special considerations under conflicts of law. 2. Conflict rules applicable 229 Under Art 7(1), reinsurance contracts are excluded from the scope of Art 7. Consequently,

the general conflict rules, in particular, Arts. 3, 4 and also 9 apply to reinsurance.393 3. Choice of law 230 Under Art 3, a free choice of law may be made in respect of reinsurance contracts.394 This

389

390 391 392

393

394

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Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 215; Gerathewohl, 430 et seq.; see also Barlow/Lyde/ Gilbert, notes 2.29 et seq.; Ernst & Young, in: The European Commission’s Study on co(re)insurance pools on ad-hoc co(re)insurance agreements on the subscription market, July 2014, note 1. 1. 1.2.; Sánchez Calero, 1593 et seq. Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 214; Gerathewohl, 430. Art 1(2)(f) of the Rome I Regulation. See Barlow/Lyde/Gilbert, notes 24.125 and 24.32, where a model is described in which the primary insurer acts as fronting entity that transfers the entirety of the risk to the captive; Cannawurf/Schwepcke, in: Lüer/ Schwepcke, § 8 notes 206 et seq. Bonnamour, Rev. Lamy dr. aff. No. 29 (2008), 76, 78; Pinheiro, CDT Vol. 4 No. 2 (2012), 202, 214; Miquel Sala, AEDIPr 2016, 793, 796; Caamiña Domínguez, CDT Vol. 1 No. 2 (2009), 30, 31; Kramer, Icfai University Journal of Insurance Law Vol. VI No. 4 (2008), 23, 36; Plender/Wilderspin, note 10-102; Piroddi, in: Boschiero, 292; Gruber, in: Calliess, Art 7 Rom I-VO, note 87; Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, notes 38 and 156; Merkin, Colinvaux’s Law of Insurance, note 2-059; Bělohlávek, note 07.77; Merrett, JPIL Vol. 5 (2009), 49, 53; Martiny, in: MüKo BGB, Art 7 Rom I-VO, notes 8a and 18; Perner, IPRax No. 3 (2009), 218, 220; as to the legal situation before the entry into force of the Rome I regulation Mankowski, VersR 2002, 1177, 1178. Gruber, in: Callies, Art 7 Rom I-VO, note 86; Merkin, Colinvaux’s Law of Insurance, note 2-059; Loo-

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rule appears suitable for reinsurance contracts, as these are usually concluded in an international environment and between parties of equal strength.395 Art 3(3) provides that the parties’ choice of law cannot prejudice the application of man- 231 datory provisions of the country on whose territory all of the elements relevant to the situation are located at the time at which the choice of law was made. A choice of jurisdiction in favour of a country other than the one in which the other relevant elements are located does not represent a sufficient “element” to exclude the application of Art 3(3).396 Accordingly, it is made clear in Art 3(3) that only a substantive reference is considered where, with the exception of the choice of law, all of the elements are located in one country.397 Clearly, Art 3(3) has very little relevance in the context of reinsurance, because there are hardly any mandatory provisions. Moreover, many of the cases have a foreign element, so that not all of the elements are located in one single country.398 Art 3(4) provides that mandatory provisions of Community law cannot be prejudiced by a 232 choice in favour of the law of a third country, where all of the elements relevant to the situation are located in one or more of the Member States at the time at which the choice of law is made. This “internal market term” is hardly relevant to reinsurance due to the lack of mandatory contract law.399 Directive 2009/138/EC (Solvency II), in particular, does not contain any mandatory private law provisions applicable to reinsurance contracts. The consumer protection directives do not apply to reinsurance relationships, as neither party involved can be classified as a consumer.400 Special supervisory provisions may, however, impose a duty on the parties to choose a 233 particular law. Art 38 of Resolution 168/07 of the Brazilian National Council of Private Insurance (Conselho Nacional de Seguros Privados (CNSP)), for example, requires reinsurance contracts covering risks situated in Brazil to include a choice of law clause in favour of Brazilian law.401 Similarly in Australia,402 in the non-life insurance sector, reinsurance contracts must make Australian law applicable under the General Insurance Prudential Standard GPS 230, paragraph 34 of the Australian Prudential Regulation Authority (APRA). This compulsory requirement does not directly apply to life insurers; by virtue of the solvency rules, it does however indirectly force reinsurance to be taken

395

396

397 398 399 400 401

402

schelders, in: Lüer/Schwepcke, § 9 note 67; see also Recital 11 of the Rome I Regulation; as to the legal situation before the entry into force of the Rome I Regulation Cox/Merrett/Smith, note 10.2. Looschelders, in: Lüer/Schwepcke, § 9 note 68, see also Barlow/Lyde/Gilbert, note 11.39; as to the situation before the entry into force of the Rome I Regulation Mankowski, VersR 2002, 1177, 1178. Cf. Recital 15 of the Rome I Regulation; as to the legal situation before the entry into force of the Rome I Regulation Mankowski, VersR 2002, 1177, 1180. Looschelders, in: Lüer/Schwepcke, § 9 note 75. Looschelders, in: Lüer/Schwepcke, § 9 note 76; Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 20. Looschelders, in: Lüer/Schwepcke, § 9 note 77. Looschelders, in: Lüer/Schwepcke, § 9 note 77. I am very grateful to Valeria Schmitke (Zurich Minas Brasil Seguros S/A) for providing me with details on Brazilian law. I am very grateful to Nick Woodforde (Zurich Financial Services Australia) for providing me with details on Australian law.

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out with reinsurers licensed in Australia. This also leads, as a general rule, to the application of Australian law.403 234 As with other types of contracts, the parties may incorporate a non-State body of law into

their reinsurance contract.404 This is, however, not the same thing as choosing the law applicable to the reinsurance contract as in the former case the contract is still governed by the applicable state law so that mandatory state law provisions oust incompatible provisions of the non-State body of law.405 As non-State body of law the UNIDROIT Principles of International Commercial Contracts (PICC) may be considered, although they clearly do not contain any specific rules for reinsurance contract law. Based on these, the Principles of Reinsurance Contract Law (PRICL)406 are currently being drafted, which together with the UNIDROIT Principles will form a non-State reinsurance contract law which may be chosen upon completion of drafting. The fact that a reinsurance contract into which the parties incorporated a non-State body of law is governed by the applicable state law is hardly troubling in relation to issues specific to reinsurance. This is because there are practically no mandatory provisions on this matter in any jurisdiction, which would otherwise prevent the unconditional application of the rules chosen.407 This also applies in relation to Australian and Brazilian408 law. 235 A choice of law may also be made implicitly.409 As always, the question of whether an

implicit choice of law has been made can only be determined on a case-by-case basis and after an appraisal of all the circumstances of the case.410 For example, an implicit choice in favour of a law may be seen in the choice of a certain jurisdiction or in an agreement 403 404 405

406 407

408 409

410

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Life Insurance Prudential Standard LPS 117. Recital 13 of the Rome I Regulation. Merkin, JPIL Vol. 5 (2009), 69, 74 and 76; Looschelders, in: Lüer/Schwepcke, § 9 note 70; as to the legal situation before the entry into force of the Rome I Regulation Cox/Merrett/Smith, note 10.59; on this subject in general Halpern v. Halpern [2007] APP.L.R. 04/03; Judgment of the Swiss Federal Supreme Court of 20 December 2005, 4C.1/2005, consideration 1.4; Beximco Pharmaceuticals Ltd v. Shamil Bank of Bahrain EC [2004] APP.L.R. 01/28; Calliess, in: Calliess, Art 3 Rom I-VO, note 33; Stone, 294. See http://www.rwi.uzh.ch/oe/PRICL.html (last accessed on 7 June 2016). Looschelders, in: Lüer/Schwepcke, § 9 note 70; in respect of the legal situation before the entry into force of the Rome I Regulation Sánchez Calero, 1638 and 1641; on this subject in general Halpern v. Halpern [2007] APP.L.R. 04/03; Beximco Pharmaceuticals Ltd v. Shamil Bank of Bahrain EC [2004] APP.L.R. 01/28. Barroso de Mello, 81. Lawlor v. Sandvik Mining [2013] EWCA Civ 365, 876 et seq.; van Calster, 203; Ragno, in: Ferrari, Art 3 Rom I-VO, note 32; Stone, 298. In respect of the legal situation before the entry into force of the Rome I Regulation, see Gard Marine and Energy Ltd v. Tunnicliffe [2011] Bus L.R. 839, 849 et seq.; in respect of direct insurance, see Travelers Casualty & Surety v. Sun Life Assurance [2007] Lloyd’s Law Reports IR 619; American Motorists Insurance Co v. Cellstar Corporation and another [2003] I.L.Pr.22, 391 et seq.; CGU International v. Szabo [2002] Lloyd’s Rep 196; see also AIG Europe SA v. QBE International Insurance [2001] C.L.C. 1259, 1265; Assicurazioni Generali Spa v. Ege Sigorta AS [2002] Lloyd’s 480; Tiernan v. Magen Insurance Co. Ltd [2000] IL Pr. 517, 522 et seq.; Gan Insurance Co. Ltd & Another v. Tai Ping Insurance Co. Ltd (No. 1) [1998] C.L.C. 1072 (Commercial Court), 1081; [1999] C.L.C. 1270 (C. A.), 1279. Cf. Recital 12 of the Rome I Regulation.

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regarding a particular place of arbitration.411 English courts have found implicit choices of law where the contracts were concluded on the London Market using the standard terms common to that market.412 In most cases, London-based brokers are involved in the conclusion of the contract.413 In such cases where the contract is based entirely on English law and there are no indications to the contrary, such as, e.g., a jurisdiction clause in favour of a court outside of the United Kingdom or references to other jurisdictions etc., an implicit choice in favour of English law may be assumed.414 It is therefore normal for English courts to presume an implicit choice of law unless the parties have expressly agreed the application of another law.415 An objective connection pursuant to Art 4 is considered merely an alternative reason.416 In contrast, for an implicit choice of law it does not suffice in itself that the terms substan- 236 tively bind the reinsurance contract to the direct insurance contract or that there is a presumption417 that the proportional reinsurance contract covers the same risks as the direct insurance contract.418 This regards “as original” terms and the “back-to-back cover” prin411

412

413

414 415

416

417 418

Recital 12 of the Rome I Regulation; Dicey/Morris/Collins, note 33-238; in respect of the legal situation before the entry into force of the Rome I Regulation, see Norske Atlas Ins. Co. v. London Gen. Ins. Co. [1927] 28 Lloyd’s Rep 104, 107; Bankers’ & Schippers’ Ins. Co. v. Liverpool Marine & Gen. Ins. Co. [1926] 24 Lloyd’s Rep 85, 86; Spurrier v. LaCloche [1902] A.C. 446, 450; see also Giuliano/Lagarde, 17. In respect of the legal situation before the entry into force of the Rome I Regulation, see Gard Marine and Energy Ltd v. Tunnicliffe [2011] Bus L.R. 839, 849 et seq.; Stonebridge Underwriting Ltd v. Ontario Municipal Insurance Exchange [2010] EWHC 2279, 362 et seq.; Tiernan v. Magen Insurance Co. Ltd [2000] IL Pr. 517; Assicurazioni Generali Spa v. Ege Sigorta AS [2002] Lloyd’s 480; Gan Insurance Co. Ltd & Another v. Tai Ping Insurance Co. Ltd (No. 1) [1998] C.L.C. 1072 (Commercial Court), 1081; [1999] C. L.C. 1270 (C. A.), 1279; on this subject also see Giuliano/Lagarde, 17. It should be assumed that courts will continue to apply this rule even under the stricter Art 3(1) of the Rome I Regulation. Fricke opines in: Rauscher, note 6, that in the fact that a reinsurance agreement has been concluded in a certain market cannot be seen an implicit choice of law as the parties do not ordinarily chose to operate on a market because they want to submit themselves to the laws of a certain country. In respect of the legal situation before the entry into force of the Rome I Regulation, see Tiernan v. Magen Insurance Co. Ltd [2000] IL Pr. 517; Assicurazioni Generali Spa v. Ege Sigorta AS [2002] Lloyd’s 480. Looschelders, in: Lüer/Schwepcke, § 9 note 87. Merkin, Colinvaux’s Law of Insurance, note 2-085; Cox, in: Burling/Lazarus, 210; in respect of the legal situation before the entry into force of the Rome I Regulation, see Travelers Casualty & Surety v. Sun Life Assurance [2007] Lloyd’s Law Reports IR 619; American Motorists Insurance Co v. Cellstar Corporation and another [2003] I.L.Pr.22, 391 et seq.; CGU International v. Szabo [2002] Lloyd’s Rep 196; see also AIG Europe SA v. QBE International Insurance [2001] C.L.C. 1259, 1265; Tiernan v. Magen Insurance Co. Ltd [2000] IL Pr. 517, 522 et seq. In Travelers Casualty & Surety v. Sun Life Assurance [2007] Lloyd’s Law Reports IR 619, Tiernan v. Magen Insurance Co. Ltd [2000] IL Pr. 517 and American Motorists Insurance Co v. Cellstar Corporation and another [2003] I.L.Pr.22, 391, the courts based their decisions solely on the alternative on the “closest connection” test of Art 4(1) of the Rome Convention. In Dornoch Limited v. Mauritius Union Assurance Co. Limited [2006] 1 C.L.C. 714, 725 et seq., the court held that the law applicable was that of the country in which the party having to effect the characteristic performance of the contract had its habitual residence. Edelman/Burns, note 3.12. Dicey/Morris/Collins, note 33-237.

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ciple.419 Such terms or the presumption may, however, lead to an appreciation of the insurance contract in terms of the direct insurance contract, which in turn is interpreted in accordance with the law applicable to it. In 1989, the House of Lords in Forsikringsaktieselskapet Vesta v. JNE Butcher held that “[…] as a matter of construction of the reinsurance contract and by seeking to ascertain the presumed intention of the parties the […] clause has to be given the same effect as it is given in the underlying insurance contract”.420 For substantive reasons, the reinsurance contract may therefore in effect follow the rules set out in the direct insurance contract in such cases.421 This principle was qualified in Wasa International Insurance Company Ltd. v. Lexington Insurance Company in 2009. In this case, the House of Lords held that “given the fundamental importance under English law of the temporal scope of a time policy, I find it impossible to construe the reinsurance contract […] in [the same way as the underlying insurance contract]”.422 The extent to which a certain term in the reinsurance contract will be construed in light of the corresponding term in the direct insurance contract obviously depends on the individual case. However, it is not possible to identify an implicit choice of law in this situation.423 4. Objective connection 237 In the absence of a choice of law, the reinsurance contract must be objectively connected in

accordance with Art 4.424 Under Art 4(1)(b), the law of the country in which the service provider has his habitual residence applies. The first question to arise is whether the reinsurance contract is a contract for the provision of services within the meaning of Art 4(1) (b).425 In my opinion, this is the case for the same reasons outlined in relation to direct insurance.426 Subsequently, the question arises as to whether it is the reinsurer or the direct insurer who counts as the service provider for the purposes of the provision. According to the Swiss Federal Supreme Court, the reinsurer is the service provider within the meaning of Art 4(1)(b).427 Consequently, it is the law at the place of the reinsurer’s habitual residence which applies to the reinsurance contract.428

419

420 421 422

423 424 425

426

427 428

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Wasa International Insurance Company Ltd v. Lexington Insurance Company, AGF Insurance Ltd v. Lexington Insurance Company [2009] 2 C.L.C. 320, 327; see also Merkin, JPIL Vol. 5 (2009), 69, 74 and 78 et seq. Forsikringsaktieselskapet Vesta v. JNE Butcher [1989] 1 AC 852, 875. Barlow/Lyde/Gilbert, notes 20.50 et seq. Wasa International Insurance Company Ltd v. Lexington Insurance Company, AGF Insurance Ltd v. Lexington Insurance Company, [2009] 2 C.L.C. 320, 327. Apparently disagreeing with this Plender/Wilderspin, note 10-103. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 156; Merkin, JPIL Vol. 5 (2009), 69, 74. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 157; apparently not of this opinion Edelman/Burns, note 7.17; Cox, in: Burling/Lazarus, 204 et seq. and 210 et seq.; Gruber, in: Calliess, Art 7 Rom I-VO, note 87; Stone, 359. Cf. supra note 211; Gruber, in: Ferrari/Leible, 114; Leible/Lehmann, RIW No. 8 (2008), 528, 539; Fricke, in: Rauscher, note 7; as to the legal situation before the entry into force of the Rome I Regulation Mankowski, VersR 2002, 1177, 1182 et seq. Judgment of the Swiss Federal Supreme Court, BGE 140 III 115, consideration 6.5. Looschelders, in: Lüer/Schwepcke, § 9 note 99; Dicey/Morris/Collins, note 33-233; BeckOGK, Art 7 Rom I-VO, note 158.

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The result is, however, no different where the reinsurance contract is not classified as a 238 contract for the provision of a service. This is because Art 4(2) applies to those cases where Art 4(1) does not apply.429 Under Art 4(2), it is the law of the country in which the party required to effect the characteristic performance of the contract has his habitual residence which applies. Both the English courts430 and the Swiss Federal Supreme Court431 identify the reinsurer as the party effecting the characteristic performance.432 The effect of this stance is to reject the view assuming that there is a lack of a characteristic performance in reinsurance433 and the view claiming that both the insurer and the reinsurer effect the characteristic performance.434 Depending on whether the reinsurance contract is regarded as a service for the purposes of Art 4(1)(b), the law of the country in which the reinsurer has his habitual residence is determined as the law applicable either by virtue of Art 4(1)(b) or by virtue of Art 4(2).435 Under Art 19(1), the place of the habitual residence of companies and other bodies, cor- 239 porate or unincorporated, is the place of central administration. In cases where a reinsurance contract is concluded by a branch, agency or any other establishment or if such a branch, agency or establishment is responsible for contract performance, the location of the branch, agency or other establishment is deemed the habitual residence.436 The branch, agency or other establishment for the purposes of Art 19(2) must be distinguished from the reinsurance broker, who normally represents the interests of the assignor. Therefore, his conduct or his habitual residence is not attributable to the reinsurer as the provider of the characteristic performance. Art 19(2) applies to cases where a reinsurer maintains offices tasked with the conclusion and performance of reinsurance contracts in a country other than in the country of his central administration. For reinsurance contracts falling within the scope of the normal connection established in 240 Art 4(1)(b) or the connection set out in Art 4(2), a deviation to another law will only be allowed in particular cases as set out in Art 4(3).437 Consequently, the view previously held, especially in the German-speaking world, that the reinsurance contract is generally gov429

430

431 432

433

434

435 436 437

Dicey/Morris/Collins, note 33-240; Fricke, in: Rauscher, note 7; Reithmann/Martiny, argue in note 6.2761 that the characteristic performance could possibly be effected by the direct insurer rather than the reinsurer. In respect of the legal situation before the entry into force of the Rome I Regulation, see Dornoch Limited v. Mauritius Union Assurance Co. Limited [2006] 1 C.L.C. 714, 716; Lincoln National Life Insurance Co v. Employers Reinsurance Corp, [2002] Lloyd’s Rep IR 853; Tiernan v. Magen Insurance Co. Ltd [2000] IL Pr. 517, 523. Judgment of the Swiss Federal Supreme Court, BGE 140 III 115, consideration 6.5. Looschelders, in: Lüer/Schwepcke, § 9 note 105; Gruber, in: Callies, Art 7 Rom I-VO, note 87; Stone, 359; Plender/Wilderspin, note 10-107; in respect of the legal situation before the entry into force of the Rome I Regulation, see Sánchez Calero, 1640; Merkin, 385; Giuliano/Lagarde, 21. See Armbrüster, in: Prölss/Martin, preliminary remarks Art 1 Rom I-VO, note 20 with further information. Keller/Kren Kostkiewicz, Zürcher Kommentar zum IPRG, Art 117 IPRG, note 156; Ondo, SVZ 63 (1995), 39, 45; Nebel, SVZ 66 (1998), 54, 63. Dicey/Morris/Collins, note 33-233. Art 19(2) of the Rome I Regulation; Dicey/Morris/Collins, note 33-240. Lüttringhaus, in: BeckOGK, Art 7 Rom I-VO, note 161; Leible/Lehmann, RWI No. 8 (2008), 528, 539; in

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erned by the law at the place of the direct insurer’s head office or by the law governing the direct insurance contract should, in my opinion, not be followed (any longer).438 In this context, it should however also be mentioned that this former standpoint remains enshrined in the Principality of Liechtenstein, because the Principality has a regular connection for reinsurance in favour of the law of the assignor in Art 9(3) of the International Insurance Contract Act of 12 June 2015 (IVersVG).439 In English academic commentary, it is opined that the exception clause contained in Art 4(3) must normally always be applied in cases where the reinsurer’s habitual residence is not located in the country in whose market the reinsurance contract was concluded.440 This view should not be followed. Insofar as an implicit choice of law pursuant to Art 3(1) cannot be ascertained from the fact that the reinsurance contract was concluded in a particular market, it can oust the conflict of law rules prescribed in the Regulation in favour of a connection to the law at the place of the market, i.e. of the London market in exceptional cases only.441 An opinion to the contrary would mean that Art 4(1)(b) and Art 4(2) never apply to reinsurance contracts, because reinsurance contracts are always concluded in a particular market. It is also not generally possible to make a connection to the assignor’s habitual residence by reference to the nature of reinsurance contracts or on the basis of a balancing of interest.442 The exception clause in Art 4(3) can therefore only attract attention in individual cases.443 5. In focus: Reinsurance customs 241 Reinsurance contract law is for the most part not codified.444 National insurance contract

acts frequently exclude reinsurance from their scope of application.445 In principle, this means that only the general contract law rules of the governing law apply.446 However, this

438

439

440 441

442 443

444 445

446

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respect of the legal situation before the entry into force of the Rome I Regulation ICF v. Balkenende Oosthuisen BV, C-133/08, notes 61 et seq. For a detailed discussion of the doctrine, see Looschelders, in: Lüer/Schwepcke, § 9 notes 100 and 108 et seq. As an EEA Signatory State, the Principality of Liechtenstein is bound to the Rome I Regulation by virtue of Art 178 of Directive 2009/138/EC (Solvency II), but only in relation to the types of contract falling within the scope of Art 7 and therefore not to reinsurance. Merkin, Colinvaux’s Law of Insurance, note 2-085; Dicey/Morris/Collins, note 33-242. Cf. Cox, 205; Looschelders, in: Lüer/Schwepcke, § 9 notes 123 et seq.; Dicey/Morris/Collins, note 33-243; as to the legal situation before the entry into force of the Rome I Regulation Mankowski, VersR 2002, 1177, 1183 et seq. As to such approaches see, e.g., Roth, 580 et seq. See also Recital 20 of the Rome I Regulation for the relevant circumstances of the individual case; as to the legal situation before the entry into force of the Rome I Regulation cf. Mankowski, VersR 2002, 1177, 1183 et seq. Barroso de Mello, 73; Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 37. For example, Switzerland: Art 101(1)(1) of the Insurance Contract Act (VVG); Germany: § 209 of the Insurance Contract Act (VVG); Austria: § 186 of the Insurance Contract Act (VersVG); direct applicability in the United Kingdom: Marine Insurance Act 1906 and, as of 12 August 2016, Insurance Act 2015; and in Spain: Insurance Contract Act 1980 (LCS). Judgment of the Swiss Federal Supreme Court, BGE 140 III 115, consideration 6.3; Cannawurf/ Schwepcke, in: Lüer/Schwepcke, § 8 notes 43 et seq.; Gerathewohl, 457 et seq.; Nebel, SVZ 66 (1998), 54, 57.

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does not offer an adequate solution to issues specific to reinsurance. The question of the extent to which the rules applying to direct insurance may be extended to reinsurance contracts by analogy has therefore been contemplated.447 This can clearly only be determined by the law applicable.448 In England, the insurance law provisions contained in the Marine Insurance Act 1906449 and, since 12 August 2016, the Insurance Act 2015450 apply directly to reinsurance. Both general contract law and insurance contract law, which at most should be applied 242 analogously, may be prejudiced by trade practices, the so-called reinsurance customs or usage.451 The conditions required for a business practice to be recognised as a trade custom or trade usage applying to the reinsurance contract are determined by the substantive law applicable in proceedings before national courts.452 It is evident that trade practices are only recognised under restrictive conditions even under pioneering English law.453 Even where various jurisdictions recognise a trade custom or trade usage in a particular field, the problem still remains that reinsurance customs or usages are not completely uniform around the world, which consequently leads to a conflict in their application.454 The conflict described in relation to the application of reinsurance customs or usages can- 243 not, however, be resolved using Art 3 or 4. Instead, the question which of the conflicting reinsurance customs or usages takes precedence over the other or others is to be determined by the substantive law applicable to the reinsurance contract.455 Consequently, it is not possible to infer that the application of a particular national law will lead to the application of the reinsurance customs or usages in that same country. 6. Overriding mandatory provisions (Art 9) Overriding mandatory provisions are governed by the special connection set out in Art 9.456 244 447

448

449

450 451

452 453

454

455 456

Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 notes 38 et seq.; Gerathewohl, 441 et seq.; Graber/Lang/ Kunszt, 281; Barroso de Mello, 83 et seq. For a detailed analysis of the situation under German law, see Cannawurf/Schwepcke, in: Lüer/ Schwepcke, § 8 notes 38 et seq.; Gerathewohl, 441 et seq.; under English law, the Marine Insurance Act 1906 and, as of 12 August 2016, the Insurance Act 2015 are directly applicable to reinsurance contracts. Section 9(1) Marine Insurance Act 1906; see also WISE (Underwriting Agency) Ltd v. Grupo Nacional Provincial [2004] Lloyd’s Rep IR 764; Rendall v. Combined Insurance Company Of America [2006] Lloyd’s Rep IR 732; Edelman/Burns, Table of Legislation; Hagopian, 169. Explanatory Notes to the Insurance Act 2015, note 36; see Barlow/Lyde/Gilbert, note 53.7. Staring/Hansell, § 4:5; Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 notes 65 et seq.; Barlow/Lyde/ Gilbert, notes 15.25 et seq.; Hoffman, Tort & Ins. L.J. Vol. 33 No. 1 (1997), 33, 33 et seq.; Gerathewohl, 210 et seq. Cf. Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 66. Edelman/Burns, notes 3.58 et seq.; Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 66; Barlow/Lyde/ Gilbert, notes 15.25 et seq. Cf. Insurance Co. of North America v. Hibernia Ins. Co. of New Orleans, 35 L.Ed. 517, 573, in which the court held that local usages cannot affect insurance contracts made elsewhere. This case was about insurance, not reinsurance; Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 66. Cf. Cannawurf/Schwepcke, in: Lüer/Schwepcke, § 8 note 22. In more detail supra notes 86 et seq.

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In the field of reinsurance, there may be embargoes, foreign exchange rules, supervisory provisions and the like. 7. Special features in arbitration 245 Arbitration plays a leading role in relation to reinsurance contracts. Where the view is taken

that Rome I does not bind arbitral tribunals in matters of European law,457 the result is that the law governing the reinsurance contract is determined in accordance with the national arbitration law.458 Some national arbitration acts contain special conflict rules;459 others refer arbitral tribunals to the conflict of law rules which they deem appropriate.460 A third category of arbitration acts empower the tribunal to use its discretion to determine the substantive law applicable (voie directe).461 In respect of national arbitration laws based on the UNCITRAL Model Law, Art 28 applies. 246 Art 28 of the UNCITRAL Model Law permits the parties to also choose non-state law (“rules

of law”)462 as the law applicable.463 In addition, the parties may also release the arbitral tribunal from coming to a legal decision and authorise it to decide in accordance with principles of justice and fairness.464 247 In the absence of a choice of law, the arbitral tribunal will determine the governing law in

accordance with the conflict rules it deems appropriate and therefore possibly also pursuant to Art 4 of Rome I.465 248 Art 28(4) of the UNCITRAL Model Law sets out inter alia that an arbitral tribunal must take

into account the usages of the trade in all cases when coming to its decision. Consequently, the question of whether and, if so, which trade practices to apply in arbitration proceedings will not be determined solely by the substantive law applicable. Where the national arbitration law follows the model provided in Art 28(4) of the UNCITRAL Model Law, reinsurance customs or usages have to be taken into consideration by virtue of the arbitration law itself.466 457 458 459

460

461

462

463

464 465

466

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Blackaby/Partasides et al., notes 3.211 et seq.; see also Born, International Commercial Arbitration, 2626. This may, of course, refer to the Rome I Regulation for the determination of the law applicable. Cf. § 1051(2) of the German Civil Procedure Code (ZPO); Art 187(1) of the Swiss Private International Law Act (IPRG). Cf. section 46(3) of the English Arbitration Act 1996; Art 28(2) of the UNCITRAL Model Law on International Commercial Arbitration. Art 1511(1) of the French Civil Procedure Code (CPC); Art 1054(2) of the Dutch Civil Procedure Code (WBRv). Cf. German lex arbitri, which on this point corresponds to the UNCITRAL Model Law; Schmalz, in: Böckstiegel/Kröll, § 1051 of the German Civil Procedure Code (ZPO), note 20; Born, International Commercial Arbitration, 2660 et seq. In this case the non-State body of law is not merely incorporated into the reinsurance contract but governs the latter. Hence, there will generally not be any mandatory state law prevailing over the provisions of the non-State body of law, cf. supra note 234. Art 28(3) of the UNCITRAL Model Law on International Commercial Arbitration. Art 28(2) of the UNCITRAL Model Law on International Commercial Arbitration; Merkin, JPIL Vol. 5 (2009), 69, 74 and 77. See Heiss, in: FS Bernd von Hoffmann (2011), 803, 812 et seq.

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In relation to institutional arbitration, the arbitration rules applicable must be discussed.467 249 Pursuant to a majority of the arbitration rules, the arbitral tribunal is required to take into consideration trade practices in the process of its decision-making.468 Since the parties will have agreed upon the application of such arbitration rules, the duty laid down in them to take account of trade practices appears to be an indirect choice of law by the parties.469 In line with the principle of party autonomy, which is paramount in arbitration law, national arbitration laws may generally be construed as recognising an indirect choice of the law applicable made by virtue of an agreement in favour of the application of institutional arbitration rules.470 In cases where the parties have additionally agreed upon the proper law the relationship between the conditions under which trade practices need to be taken into consideration by virtue of institutional arbitration rules and the conditions under which they need to be taken into account by virtue of the proper law remains problematic.471 Article 8: Individual employment contracts 1. An individual employment contract shall be governed by the law chosen by the parties in accordance with Article 3. Such a choice of law may not, however, have the result of depriving the employee of the protection afforded to him by provisions that cannot be derogated from by agreement under the law that, in the absence of choice, would have been applicable pursuant to paragraphs 2, 3 and 4 of this Article. 2. To the extent that the law applicable to the individual employment contract has not been chosen by the parties, the contract shall be governed by the law of the country in which or, failing that, from which the employee habitually carries out his work in performance of the contract. The country where the work is habitually carried out shall not be deemed to have changed if he is temporarily employed in another country. 3. Where the law applicable cannot be determined pursuant to paragraph 2, the contract shall be governed by the law of the country where the place of business through which the employee was engaged is situated. 4. Where it appears from the circumstances as a whole that the contract is more closely connected with a country other than that indicated in paragraphs 2 or 3, the law of that other country shall apply.

467 468

469 470 471

Noussia, 62. Cf. Art 33(3) of the Swiss Rules of International Arbitration (Swiss Rules); Art 31(2) of the International Dispute Resolution Procedures (IDRP) drafted by the American Arbitration Association; Art 21(2) of the ICC Rules of Arbitration; the alternative version of Art 14.3 of the ARIAS U.S. Rules for the Resolution of U.S. Insurance and Reinsurance Disputes; there is no duty to take into account trade usages in Art 22.3 LCIA Arbitration Rules (2014) nor in Art 17.1 ARIAS Arbitration Rules (2014) UK Version. Cf. Karrer, in: Basler Kommentar zum IPRG, Art 187 IPRG, note 103. Born, International Arbitration: Law and Practice, § 13.02 note 471. Ayoglu, 30 ASA Bulletin (2012), 545 et seq., opining that the agreement on arbitration rules and thereby also on the tribunal’s duty to take into account trade usages does not consist in an indirect choice of law which could possibly prevail over the express choice made in favour of the proper law.

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Bibliography Balandi, La direttiva comunitaria sul distacco dei lavoratori: un passo in avanti verso il diritto comunitario del lavoro, in: I contratti di lavoro internazionali (1998), p. 115 Baratta, Il collegamento più stretto nel diritto internazionale privato dei contratti (1991) Bonomi, Le norme imperative nel diritto internazionale privato (Zürich 1998) Brière, Note to Heiko Koelzsch v. État du GrandDuché du Luxembourg (Case C-29/10), Clunet 139 (2012), 187 Brière, Note to Anton Schlecker v. Melitta Josefa Boedeker (Case C-64/12), Clunet 140 (2014), 169 Brito, Directo aplicable ao contrato internacional de trabalho. Algunas consideraçoes a propósito do Código do Trabalho, in: Estudos em memória do conselheiro Luís Nunes de Almeida (2007), p. 105 Calligaro, Le contrat international de travail, compétence législative’, in: Droit social et situations transfrontalières (Baden-Baden, 1998), 141 Carrascosa González/Rodríguez-Piñero Royo, Desplazamientos temporales en la Comunidad Europea y ley aplicable al contrato de trabajo, Rel. Lab. (1991), 25 Carrascosa González/Rodríguez-Piñero Royo, Contrato internacional de trabajo y Convenio de Roma sobre la ley aplicable a las obligaciones contractuales: impacto en el sistema jurídico español, Rel.Lab. (1996), 1335 Casado Abarquero, La autonomía de la voluntad en el contrato de trabajo internacional (2008) Coursier, Le conflit de lois en matière de contrat de travail (1993) Deinert, Internationales Arbeitsrecht (2013) Déprez, Rattachaments rigides et pouvoir d’appréciation du juge dans lá determination de la loi applicable au contrat de travail international, Dr. soc. 1995, 323 Di Filippo, La legge applicabile al contrato di lavoro subordinato tra la convenzione di Roma e la proposta di regolamento c.d. Roma I, in: Hacia un Derecho conflictual europeo: realizaciones y perspectivas (2008), p. 81 Esteban de la Rosa/Molina-Navarrete, La movilidad transnacional de trabajadores: reglas y prácticas (Granada 2002)

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European Group for Private International Law, Troisième commentaire consolide des propositions de modifications des articles 1er, 4, 4, 5, 6, 7, 9, 10bis, 12 et 13 de la convention de Rome du 19 juin 1980 sur la loi applicable aux obligations contractuelles, et l’article 15 du règlement 44/2001/CE (règlement “Bruxelles I”), accessible at: http://www.gedip-egpil. eu/ Fallon, Le détachement européen des travailleurs, à la croisée de deux logiques conflictualistes, RCDIP 97 (2008), 781 Fotinopoulou Basurko, La determinación de la ley aplicable al contrato de trabajo internacional (2006) Franzen, Arbeitskollisionsrecht und sekundäres Gemeinschaftsrecht: Die EG-Entsende-Richtlinie, ZEuP 1997, 1055 Gamillscheg, Internationales Arbeitsrecht (1959) Gamillscheg, Les principes du droit du travail international, RCDIP 50 (1961), 265 Gamillscheg, Labour contracts, IECL Vol. III, C. 28 Garcimartín Alférez, El Reglamento “Roma I” sobre la ley aplicable a las obligaciones contractuales: ¿Cuánto ha cambiado el Convenio de Roma de 1980?, La Ley No. 6957 (2008, 1) Gardeñes Santiago, La regulación conflictual del contrato de trabajo en el Reglamento Roma I: una oportunidad perdida, AEDIPr (2008), 387 González Campos, Diversification, spécialisation, flexibilisation et matérialisation des règles de droit international privé, RdC 287 (2000), 9 Guardans Cambó, Contrato internacional y derecho imperativo extranjero (1993) Gulotta, The first two decisions of the European Court of Justice on the law applicable to employment contracts, Cuad. der. trans. 5 (2013), 584 Grusic, The territorial scope of employment legislation and choice of law, MLR 75 (2012), 722 Iriarte Ángel, El contrato de embarque internacional, (Madrid, 1993) Juárez-Pérez, Las relaciones laborales en los grupos internacionales de sociedades (Granada, 2000) Jault-Seseke, La détermination des accords colletifs applicables aux relations de travail internationales, in: Mélanges en L’honneur de paul Lagarde (Paris, 2005). 455 Jault-Seseke, Note to Heiko Koelzsch v. État du

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Chapter II: Uniform Rules Grand-Duché du Luxembourg (Case C-29/10), RCDIP 100 (2011), 455 Junker, Die “zwingenden Bestimmungen” im neuen internationalen Arbeitsrecht, IPRax (1989), 69 Junker, Internationales Arbeitsrecht im Konzern (1992) Junker, Die freie Rechtswahl und ihre Grenze, IPRax 1993, 1 Junker, Arbeitsrecht im Grenzüberschreitenden Konzern – Die kollisionsrechtliche Problematik, ZIAS 1995, 564 Junker, Internationales Arbeitsrecht in der Praxis im Blickpunkt: Zwanzig Entscheidungen der Jahre 1994–2000, RIW 2001, 94 Junker, Empfiehlt es sich, Art. 7 EVÜ zu revidieren oder aufgrund der bisherigen Erfahrungen zu präzisieren?, IPRax 2000, 65 Junker, Internationales Arbeitsrecht in der geplanten Rom I-Verordnung, RIW (2006), 401 Kaye, The new Private International Law of contract of the European Community, (Aldershot, 1993) Knap, La protection des travailleurs des sociétés membres du groupe, in: Colloque international sur le droit international privé des groupes de sociétés, (Genève, 1973), 147 Knöfel, Kommendes Internationales Arbeitsrecht – Der Vorschlag der Kommission der Europäischen Gemenschaften vom 15.12.2005 für eine “Rom I”Verordnung, RdA 5 (2006), 269 Knöfel, Navigare necesse est – Zur Anknüpfung an die einstellende Niederlassung im Europäischen Internationalen Arbeitsrecht der See, IPRax 2014, 130 Knöfel, The Sweet Escape – Zur Ausweichklausel im Europäischen Internationalen Arbeitsvertragsrecht, EuZA2014, 375 Lyon-Caen/Lyon-Caen, Droit social international et européen (1993) Liukkunen, The Role of Mandatory Rules in International Labour Law (2004) Maestre Casas, El contrato de trabajo de marinos a bordo de buques mercantes, Cuad. der. trans. 4 (2012), 322 Mankowski, Der gewöhnliche Arbeitsort im Internationalen Prozess- und Privatrecht, IPRax 1999, 332 Mankowski, Der Vorschlag für die Rom I-Verordnung, IPRax 2006, 101 Mankowski, Employment Contracts under Article 8

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Article 8 of the Rome I Regulation, in: Ferrari/Leible: Rome I Regulation. The Law Applicable to Contractual Obligations in Europe (Munich, 2009), 171 Mankowski/Knöfel, On the Road Again oder: Wo arbeitet ein Fernfahrer? Neues vom Europäischen Internationalen Arbeitsvertragsrecht, EuZA 2011, 521 Maseda Rodríguez, Prestación laboral ejecutada en varios Estados y ley aplicable al contrato individual de trabajo, La Ley 7662 (2011), 1 Martiny, Europäisches Internationales Vertragsrecht – Erosion der Römischen Konvention?, ZEuP 1997, 107 Martiny, Europäisches Internationales Vertragsrecht- Ausbau und Konsolidierung, ZEuP 1999, 246 Martiny, Europäisches Internationales Vertragsrecht in Erwartung der Rom I-Verordnung, ZEuP 2008, 79 Merrett, Employment contracts in Private International Law (Oxford, 2011) Morgenstern, International Conflicts of Labour Law, (Ginebra, 1986) Morse, Contracts of employment and the E.E.C. contractual obligations Convention, in: Contract Conflicts, (Amsterdam, 1982), 143 Morse, Consumer contracts, employment contracts and the Roma Convention, ICLQ (1992), 1 Moura Ramos, Da lei aplicável ao contrato de trabalho internacional (Coimbra, 1991) Moureau-Borlès, Le détachement des travailleurs effectuant une prestation des services dans l’Union européenne, Clunet (1996), 889 Moreau/Trudeau, Les normes de droit du travail confrontées à l’évolution de l’économie: de noveaux enjeux pour l’espace regional, Clunet (2000), 915 Palao Moreno, Los Grupos de Empresas Multinacionales y el contrato individual de trabajo (Valencia, 2000) Palao Moreno, Luces y sombras en la aplicación práctica de los Convenios de Bruselas de 1968 y de Roma de 1980 al contrato individual de trabajo (A propósito del personal laboral de organismos públicos españoles que presta sus servicios en el extranjero), Rel. Lab. (2000), 13 Palao Moreno, Multinational Groups of Companies and Individual Employment Contracts in Spanish and European Private International Law, Yb. PIL 4 (2002), 303 Palao Moreno, La ley aplicable al contrato de trabajo

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internacional por los tribunales españoles y su problemática procesal, in: Derecho internacional privado. Trabajadores extranjeros. Aspectos sindicales, laborales y de seguridad social, (Madrid, 2001), 521 Palao Moreno, Las normas del Derecho internacional privado de origen comunitario en materia de contrato individual de trabajo, ante los retos de la integración europea y de la globalización, AEDIPr (2005), 309 Parisot, Vers une cohérence des textes communautaires en droit du travail?: Réflexion autour des arrêts Heiko Koelzsch et Jan Voogsgeerd de la Cour de justice, Clunet 2 (2012), 597 Pataut, Note to Jan Voogsgeerd v. Navimer SA, (Case C-384/10), RCDIP 101 (2012), 657 Polak, “Laborum dulce lenimen”? Jurisdiction and choice of law aspects of employment contracts, in: Enforcement of International Contracts in the European Union (Antwerp, 2004) Rodière, Conflits de lois en droit du travail: étude comparative, Dr.Soc. (1986), 118 Rudisch, Art. 6, in: Czernich/Heiss (eds.), EVÜ Das Europäische Schuldsvertragsübereinkommen (Vienna, 1999), 152 Sabido Rodriguez, La protección del trabajador en sucesiones internacionales de empresas, (Cizur Menor [Navarra] 2009) Salerno, La regolamentazione internazionale dei rapporti di lavoro con imprese multinazionali (Milan, 1986). Salvadori, La protezione del contraente debole (consumatori e lavoratori) nella Convenzione di Roma, in: Sacerdoti/Frigo, La Convenzione di Roma sul diritto applicabile ai contratti internazionali, (Milan, 1994), 121 Schlachter, Fortentwicklung des Kollisionsrechts der Arbeitsverträge, in: Das Grünbuch zum Internationalen Vertragsrecht (Munich, 2004), 155 I. II. III. IV.

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Preliminary remarks . . . . . . . . . . . . . . . . . . . . . . . . . . Material scope of Article 8 . . . . . . . . . . . . . . . . . . . Choice of the law applicable to an individual employment contract . . . . . . . . . . . . Applicable law to an individual employment contract in the absence of choice . . . . 1. The rule of the place where the employee habitually carries out his work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 4 7

Siblini-Vallat, Les normes matérielles internationales d’entreprise, RCDIP (1988), 653 Staudinger, Art. 8 Individualarbeitsverträge, in: Internationales Vertragsrecht. Rom I-VO, CISG, CNMR, FactÜ (Munich, 2012), 219 Straube, Sozialrechtliche Eingriffsnormen im Internationalen Privatrecht (Frankfurt a.M., 2001) Szaszy, The Proper Law of Labour Contracts, ICLQ 17 (1) (1968), 11 Taschner, Arbeitsvertragsstatut und zwingende Bestimmungen nach dem Europäischen Schuldvertragsübereinkommen (Frankfurt a.M., 2003). Tuo, La tutela del lavoratore subordinato tra diritto internazionale private e libertà economiche dell’UE, Diritto del commercio internazionale 4 (2011), 1172 Ubertazzi, Il regolamento Roma I sulla legge applicabile alle obbligazioni contrattuali, (Milan, 2008) Van Den Eeckhout, The Escape-Clause of Article 6 Rome Convention (Article 8 Rome I Regulation): How Special Is the Case Schlecker?, Tijdschrift Recht en Arbeid 4 (2014), available at: http://papers.ssrn. com/sol3/papers.cfm?abstract_id=2364358 Villani, I contrati di lavoro, in: Verso una disciplina comunitaria della legge applicabile ai contratti, (Padua, 1983), 265 Zabalo-Escudero, El contrato de trabajo en el Derecho internacional privado español (Barcelona, 1983) Zabalo-Escudero, La Convención CEE sobre la ley aplicable a las obligaciones contractuales y el contrato de trabajo, RIE (1983), 529 Zabalo-Escudero, Mecanismos de flexibilización y materialización en la regulación del contrato individual de trabajo, in: Pacis Artes. Obra homenaje al Profesor Julio D. González Campos (Madrid, 2005), 1815.

2. Situations where the worker is temporarily employed in another country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 a) In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 b) Situations covered by directive 96/71/EC of the European Parliament and of the Council of 16 December 1996, concerning the posting of workers

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Chapter II: Uniform Rules in the framework of the provision of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3. Cases where the employee does not habitually carry out his work in one specific place: the law of the place of

V.

business through which the employee was engaged is situated . . . . . . . . . . . . . . . . . 16 4. The escape clause . . . . . . . . . . . . . . . . . . . . . . . . 18 Scope of the law applicable to the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

I. Preliminary remarks Art. 8 Regulation (EC) No 593/2008 takes Art. 6 Rome Convention of 1980 as its direct 1 precedent. Both provisions share the same aims: the protection of the worker as the weaker party in an individual employment contract,1 as well as the determination of the most closely connected law to this particular legal relationship. From a general perspective, those provisions also share most of their general features. In this respect, the new provision may be criticized, because it does not provide a real change in the conflict-of-law approach to the question. This continuity can also be highlighted after a comparison between both the Green Paper,2 the Proposal,3 and the final version of this provision.4 However, Art. 8 Regulation (EC) No 593/2008 offers several improvements – in relation to Art. 6 Rome Convention of 1980 –, which can be highlighted after a deeper analysis of its final wording. II. Material scope of Article 8 As mentioned above, Art. 8 determines the Law applicable to “individual employment 2 contracts”; therefore, it does not offer any major changes in respect to Art. 6 Rome Convention of 1980, from the perspective of its substantive scope. This provision can be characterized as a specialized and a materially-oriented conflict-of-law rule and configures an exception to the general solutions provided for commercial contracts in the Regulation (EC) No 593/2008 itself.5 In this respect, it is of a principal importance to draw a clear line between these specific relationships and other international contracts (e.g. agency contracts covered by Art. 4 Regulation (EC) No 593/2008). However, neither this provision nor the Recitals of the Regulation, include a definition or description of what an “individual employment contract” means. It is true that this type of contract enjoys a similar characterization in the different Member States.6 However, as long as some significant differences do exist, we must take into account the need for an autonomous and independent interpretation of this concept by the Court of 1

2

3

4 5 6

Report on the Convention on the law applicable to contractual obligations, by Mario Giuliano Professor, University of Milan and Paul Lagarde Professor, University of Paris I (OJ C 282, 31.10.1980), (hereinafter, Giulano/Lagarde, Report). Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation, COM (2002) 654 final, 35–38 (hereinafter, Green Paper). Proposal for a Regulation of the European Parliament and the council on the law applicable to contractual obligations (Rome I), COM (2005) 650 final, 7 (hereinafter, Proposal). Mankowski, in: Ferrari/Leible, 176. Also, Knöfel RdA 5 (2006), 269, 270. Fotinopoulou Basurko, 64; Gardeñes Santiago, AEDIPr (2008), 387, 392; Junker, 172.

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Justice of the European Communities.7 If the wording of paragraph (1) is taken into account, it could be pointed out that two are the main elements to be taken into consideration in that respect: the “individual” character of the relationship as well as its characterization as “employment” (i.e. dependent). In relation to the first element, we must be aware that the Giulano/Lagarde Report to the Rome Convention of 1980 offered two decisive criteria to characterize these contracts, which could also be helpful nowadays. In accordance with their opinion, this provision would neither cover collective agreements nor social security relationships;8 nevertheless, this could also determine the effect of a collective agreement towards the lex contractus, if there was a reference to it in the contract.9 According to the second element, this provision would not apply in relation with other contracts dependent upon individual employment contracts. Moreover, Art. 8 would not be considered applicable inter alia to free-based employment relationships or to those contracts concluded within family relationships.10 Besides, an analogy between individual employment contracts, on the one hand, and void contracts and also de facto employment relationships, on the other hand, can be established.11 3 Regarding the delimitation of the material scope of Art. 8, it must also be retained that, as

long as the “substantive scope of the provisions of this Regulation should be consistent with Council Regulation (EC) No 44/2001”,12 we can also make use of the jurisprudence of the Court of Justice of the European Communities, when the Court has interpreted Art. 18 Regulation (EC) No 44/2001 (and beforehand, Art. 5 (1) Brussels Convention of 1968) and will interpret Art. 20 Regulation (EU) No 1215/2012; an interpretation which does provide certain keys that facilitate the understanding of this expression.13 It has to be stressed, as stated in the Koelzsch case, in respect to this question but also applicable to other aspects of this provision, that the interpretation of its concepts must be consistent with the criteria used in the Brussels Convention (and its predecessors).14 This is an approach which ensures legal certainty, favours the protection of the weak party of the contract,15 and favours a coincidence between forum and ius.16 7

8

9

10 11 12 13

14 15

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See Casado Abarquero, 58 et seq. Underlying the limits of such autonomous approach, Gardeñes Santiago, AEDIPr (2008), 387, 395. Besides, highligting a necessary cooperation between the European Court of Justice and national judges, Knöfel, RdA 5 (2006), 269, 273. In this respect, Hassan Shenavai v. Klaus Kreischer, (Case 266/85) [1987] ECR 239. See Fotinopoulou Basurko, 71–75 and 84–86. More particularly, in relation to collective agreements, Jault-Seseke, in: Mélanges Lagarde, 455. Giulano/Lagarde, Report, 23. Cass. Clunet 1992, 357; Trib. Sup. Aranzadi 1997, 5565; Cass. RCDIP 100 (2012), 72. Rudisch, in: Czernich/Heiss (eds.), Art. 6, 152, 160–162; Ubertazzi, 93. Giulano/Lagarde, Report, 23. Recital (7). Junker RIW (2006), 401, 402. See Esplugues Mota/Palao Moreno, in: Magnus/Mankowski, Art. 20; Bosse, 66 et seq. Heiko Koelzsch v. État du Grand-Duché du Luxembourg, (Case C-29/10) [2011] I-01595, at 33. Jault-Seseke RCDIP 100 (2011), 455, 459.

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In this sense, the Court has chosen to favor an independent interpretation of the concept, considering that this is the only one option capable of ensuring uniform application of Convention of 1968 and Regulations (EC) No 44/2001 and (EU) No 1215/201217 On the basis of this premise, it considers that “contracts of employment, like other contracts for work other than on a self-employed basis, differ from other contracts – even those for the provision of services – by virtue of certain peculiarities: they create a lasting bond which brings the worker to some extent within the organisational framework of the business of the undertaking or employer”.18 III. Choice of the law applicable to an individual employment contract Party autonomy constitutes the first connecting factor which can be found in Art. 8 (1). In 4 this regard, instead of a total exclusion of such possibility, this provision opts for its limitation when it impairs the interests of the employee (in accordance with its substantive orientation).19 This traditional and widely accepted connecting factor must be welcome for international individual employment contracts, since it improves predictability of the outcome of litigation and legal certainty as to the law applicable.20 Moreover, this solution enables not only the protection of the employee by the law of the country of origin, in situations of international mobility21 (especially when enclosed in a “mobility agreement” in cases of services rendered within a multinational group of companies)22, but also is in the interest of the employer, since it allows the standardization of the legal relationships with its staff.23 This national law coincides, in most of the cases, with the lex fori,24 the lex loci laboris as well as the law of the place of engagement (thus, with the most common objective law applicable to these particular contracts).25 According to the more clear wording of paragraph (1) – if it is compared to its precedent in Art. 6 Rome Convention of 1980 –, the parties to the contract can choose the law in accordance with Art. 3 Regulation (EC) No 593/2008. This connecting factor brings two main important consequences in relation to the moment and to the formal conditions of the 16 17 18

19 20

21

22

23 24 25

Maseda Rodríguez, 31; Parisot Clunet 2 (2012), 597, 615–623. See Hess, Pfeiffer, Schlosser, 88. Hassan Shenavai v. Klaus Kreischer, (Case 266/85) [1987] ECR 239, 255–256; Mulox IBC Ltd. v. Hendrick Geels, (Case C-125/92) [1993] ECR I-4075, I-4103 et seq. For instance, relations between an independent commercial agent and the principal should be excluded, as stated by the OBG, Juristische Blätter 1999, 745. Also, Brito, 114. Coursier, 37 et seq.; Gamillscheg, 7 et seq.; Junker, IPRax (1993), 1; Morgenstern, 19–21; Morse, in: Contract Conflicts, 149; Moura Ramos, 428 et seq. and. 878 et seq.; Palao Moreno, in: Derecho internacional privado. Trabajadores extranjeros. Aspectos sindicales, laborales y de seguridad social, (Madrid, 2001), 521, 539–540. Junker, Z.I.A.S. (1995), 564, 586. However, Carrascosa González/Rodríguez-Piñero Royo, Rel. Lab. 21 (1991), 25, 33. Palao Moreno Yb. PIL 4 (2002), 303, 331. See, Cass. RCDIP 1992, 468; BAG IPRspr. 1995, 110. However, Cass. RCDIP 1994, 323. Martiny, in: Reithmann/Martiny, 1332, 1356. Junker RIW 2 (2001), 94, 97. Also, Coursier, 77.

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agreement.26 Firstly and contrary to what it has been established in Art. 21 Regulation (EC) No 44/2001 (currently Art. 23 Regulation (EU) No 1215/2012),27 “the parties may at any time agree to subject the contract to a law other than that which previously governed it”. Therefore, Art. 8 contains no time condition when it comes to the question of the choice of law. The only limit for such a change would be to ascertain the violation of the rights of third parties. 5 Secondly, it has to be taken into account that “the choice shall be made expressly or clearly

demonstrated by terms of the contract or circumstances of the case”. Thus, from a formal perspective, the parties can both expressly or tacitly agree on the legal regime applicable to their contract of employment. On the one hand, the parties do not usually make use of an express pactum de lege utenda (either written or orally) in relation to individual employment contracts in practice.28 Nevertheless, and more and more often, the parties may agree on the law applicable to the individual employment contract in some international situations;29 especially when an international circulation of workers within a Group of companies is at stake.30 This agreement can usually be found among other standard conditions, which cannot be considered to create a distinctive lex laboris,31 as its effectiveness depends on what is provided by the (national) law applicable to the contract.32 Nevertheless, this would not preclude parties from incorporating by reference into their contract a non-Sate body of law (or, in the future, a facultative body of rules designed by the EU).33 On the other hand, regarding a tacit or implied agreement of the applicable law to the contract (a possibility not accepted under Art. 21 Regulation (EC) No 44/2001 – nor under Art. 23 Regulation (EU) No 1215/2012)34, it must firstly be remembered that the new Art. 3 clarifies this possibility in order to provide a higher degree of predictability. Despite the problems which could arise from the practical application of this connecting factor to labour relationships,35 among the different circumstances which a cautious interpreter could take 26

27 28

29 30

31 32 33

34 35

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Another important effect derives from paragraphs (3) and (4), depending on the location of the different main elements of the labour relationship (inside or outside the EU). Gardeñes Santiago, AEDIPr (2008), 387, 401. Esplugues Mota/Palao Moreno, in: Magnus/Mankowski, Art. 23. An express choice of law could even include an oral agreement before the Judge hearing the case. Calligaro, in: Droit social et situations transfrontalières, 143. Underlying the flexibility of the formal requirements present in this provision, Casado Abarquero, 236; Rudisch, in: Czernich/Heiss (eds.), Art. 6, 152, 167. Trib.Sup.Just. Islas Canarias Aranzadi 2005, 1016. Knap, in: Colloque international sur le droit international privé des groupes de sociétés, 168; Palao Moreno, 249–257. See, Siblini-Vallat RCDIP (1988), 653; Liukkunen p. 259. Junker RIW (2006), 401, 404; Lyon-Caen/Lyon-Caen, 67; Palao Moreno, 255–257. Recital 13. See, Knöfel RdA 5 (2006), 269, 277; Moreau/Trudeau Clunet (2000), 915, 923; Palao Moreno AEDIPr (2005), 309, 327. Esplugues Mota/Palao Moreno, in: Magnus/Mankowski, Art. 23. Green paper, 35; Ubertazzi, 93–94. See, Morse, in: Contract Conflicts, 151; Calligaro, in: Droit social et situations transfrontalières, 145–146. Also, Cass. RCDIP 101 (2012), 587.

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into consideration, the following could be mentioned: the existence of a jurisdiction agreement in the contract (as expressly mentioned in Recital 12) or a choice of law agreement in a previous relationship between the parties, the reference to certain provisions of a national legal order, the use of standard from contract, the place where the labour activity starts or takes place, the place where the salary is paid, as well as the connection of the individual contract of employment to a collective agreement.36 In spite of the paramount importance attributed to party autonomy and its increasing 6 practice, this principle meets decisive limits in relation to individual employment contracts, in order to accomplish with the protective character of Art. 8.37 This materially oriented choice-of-law rule which provides for a limitation of the choice of law of the parties, although it does not completely exclude such possibility. We must be aware of the fact that a completely liberal approach to this issue would impair the rights of the employee, as the weak party of the contract.38 In this respect, Art. 8 (1) states that: “Such a choice of law may not, however, have the result of depriving the employee of the protection afforded to him by provisions that cannot be derogated from by agreement under the law that, in the absence of choice, would have been applicable pursuant to paragraphs 2, 3 and 4 of this Article.” According to this provision, the national law which objectively regulates the contract (a law which must be determined, in case no choice of law has been made by the parties, pursuant the application of paragraphs (2) to (4) of Art. 8), would be considered as the minimum standard of protection for the worker in international situations, which can never been derogated by the parties under that law; unless they are derogated from to their benefit (as stated in Recital 35). Therefore, an agreement on the law applicable to the individual employment contract will only be accepted if and in so far as the law chosen by the parties respects this minimum protection (easily predictable by the parties), guaranteed by the law applicable to the contact in absence of such an agreement.39 In the words of the Giuliano/ Lagarde Report, in so far as the provisions of the law applicable pursuant to paragraphs (2) and (3) give employees better protection than the chosen law, these provisions set the provisions of the chosen national law aside and are applicable in their place.40 This system may be criticized for two main different reasons: it implies a complex two-step process and it increases information costs (as a foreign law should always be determined).41 Firstly, the law applicable to the contract, in case it has not been chosen by the parties must always be ascertained, even though the parties made an effective choice of law. Secondly, the 36

37 38

39

40 41

Casado Abarquero, 237–238; Fotinopoulou Basurko, 98; Junker, 201; Junker RIW (2006), 401, 404; Coursier, 63 et seq.; Merrett, 193–198. See, Pretura di Milano RIDL 1996, 503; STSJ Madrid Aranzadi 1996, 3300; Cass. Rec. Dalloz 1998, 57; Cass., Clunet 1999, 144; Cassaz, RDIPP 4 (2011), 1045. However, Cassaz, RDIPP 1998, 180. Critic, Di Filippo, 89–90. Zabalo Escudero, RIE (1983), 535; Villani, in: Verso una disciplina comunitaria della legge applicabile ai contratti, 265, 278; Rodière, Dr.Soc. (1986), 118, 119 et seq. Giuliano/Lagarde, Report, 23. Bonomi, 25; F Leclerc, La protection de la partie faible dans les contrats internationaux, Bruselas, Bruylant, 1995, pp. 484 y ss. Giuliano/Lagarde, Report, 23. In this respect, Gardeñes Santiago, AEDIPr (2008), 387, 403–404; Polak, in: Meeusen/Pertegás/Straetmans, 334–335.

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result of both the law agreed by the parties and the objectively applicable must be compared, in order to determine if the minimum protection standard of the second is respected by the former.42 In practice, it has been discussed whether the comparison between the two national legal systems involved should be either global or partial (i.e. affecting only analogous institutions). Some authors are inclined to the former43 and others to the second option (as long as a global comparison may prove to be impossible in practice)44; thus favoring a comparison of the national laws only in respect of the particular and analogous institutions involved.45 However, this option would lead to a dépèçage of the law applicable to an individual employment contract, after the application of this provision.46 Anyway, the Regulation remains silent to this question, which will be ascertained by the legal system of each Member State.47 This position has raised some criticism.48 IV. Applicable law to an individual employment contract in the absence of choice 7 Paragraphs (2) to (4) of Art. 8 determine the law applicable to individual employment

contracts in the absence of choice – resembling the solutions also contained in Art. 6 Rome Convention of 1980, although improving its wording. As mentioned before, the solutions offered by these paragraphs enjoy a paramount significance; not only because of the limited weight of party autonomy for individual employment contracts, but also because if a choice of law is made, they can limit its scope.49 On the other hand, these paragraphs offer a cascade system of connecting factors, aiming at protecting the employee as the weak party of the contract and, more important, determining the most closely connected national law to this labour relationship. In this respect and in brief, while paragraphs (2) and (3) offer different connecting factors, depending on the possible (or impossible) determination of the locus laboris in a given case, paragraph (4) provides an “escape clause” common to those previous paragraphs. 1. The rule of the place where the employee habitually carries out his work

8 Art. 8 (2) takes the lex loci laboris as the principal connecting factor, in the absence of choice

of law. This traditional (in the different Member States) and territorial solution must be welcome, because it offers the possibility to apply the law most closely connected to the contract (thus, it can be considered as a connecting factor based on the “proximity principle”), as well as a legal system easily predictable by the parties, also enabling an efficient organization of the different national labour markets; a law which favors not only the 42

43 44 45 46 47 48 49

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Bonomi, 35; Lyon-Caen/Lyon-Caen, 27; Martiny, in: Reithmann/Martiny, 1332, 1361–1362; Salvadori, in: Sacerdoti/Frigo, 140–141. Casado Abarquero, 337; Staudinger, 229. Also, Cass. Clunet 2004, 135. Gardeñes Santiago, AEDIPr (2008), 387, 405. Carrascosa González/Rodríguez-Piñero Royo, Rel.Lab. (1996), 1335, 1353. See Cass. RCDIP 101 (2013), 518. Garcimartín, p. 21. Ubertazzi, 93. Palao Moreno, in: Derecho internacional privado. Trabajadores extranjeros. Aspectos sindicales, laborales y de seguridad social, (Madrid, 2001), 521, 548–549.

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protection of the worker (as this will coincide with the law of his habitual residence in most of the cases), but also may be in the interest of the employer (as it enables an equal organization of its local staff under the law of its establishment, independently of the nationality of the employees).50 This approach also favors a parallelism (coincidence) between the competent court (forum) and the law applicable to the individual contract of employment (ius) in international situations.51 Besides, from the perspective of the internal market, this connecting factor treats all employees working in the same country equally (melius Member State), regardless of their nationality.52 As a consequence, scholars53 and case law54 have traditionally supported this connecting factor for international individual employment contracts. The mentioned paragraph states this solution for employees who “habitually” carry out their 9 work “in” or “from which” a country, “in performance of the contract”. Thus, all those different elements should be previously clarified, so that the connecting factor can meet a correct application. However Art. 8 does not offer an autonomous definition of those terms.55 In this respect, it must the highlighted that the case-law of the European Court of Justice (interpreting Arts 5 (1) Brussels Convention of 1968 and 19 (2) (a) Regulation (EC) No 44/2001) was taken into consideration when this provision was elaborated.56 According to the last element (“in performance of the contract”), the only activities pursued by the worker to be considered must be the ones directly linked to the employment contract and the obligations derived from this specific relationship. The reference made in Art. 8 (2) to the country “in” or “from which” the labour activity has been conducted, can be considered as the major change of Art. 8 – if compared with Art. 6 Rome Convention of 198057 – and finds its precedent in the case-law of the European Court of Justice when interpreting Art. 5 (1) Brussels Convention of 1968, when it considered that the place where the work is carried out is that place “where or from which the employee principally discharges his obligations towards his employer”,58 or where he “has established

50

51

52 53

54 55 56

57 58

Coursier, 94 et seq.; Esteban de la Rosa/Molina-Navarrete, 84; Gamillscheg, 11 et seq.; Morgenstern, 24; Moura Ramos, 908 et seq.; Villani, in: Verso una disciplina comunitaria della legge applicabile ai contratti, 265, 282–284; Zabalo-Escudero, in: Pacis Artes. Obra homenaje al Profesor Julio D. González Campos, 1825–1827. Kaye, 232; Salvadori, in: Sacerdoti/Frigo, 144; Villani, in: Verso una disciplina comunitaria della legge applicabile ai contratti, 265. See, ECJ 30 April 1996, Case C-214/94, Ingrid Boukhalfa [1996] ECR I-2253. In favor, Carrascosa González/Rodríguez-Piñero Royo, Rel.Lab. (1996), 1335, 1347; Coursier, 79 et seq.; Junker, 59; Morgenstern, 24; Moura Ramos, 538 et seq.; Szaszy ICLQ (1968), 11, 12. Trib.Sup. Aranzadi 1995, 2669; Trib.Sup. Aranzadi 1996, 7785; Cass. RCDIP 101 (2012), 576. Ubertazzi, 93. Although with some differences, Mankowski, in: Ferrari/Leible, 180. See Esplugues Mota/Palao Moreno, in: Magnus/Mankowski, Art. 21. Mankowski, in: Ferrari/Leible, 177. Mulox IBC Ltd. v. Hendrick Geels, (Case C-125/92) [1993] ECR I-4075, I-4105. The differences between “the habitual workplace” and “the principal workplace” have been approached by Mankowski IPRax (1999), 332 et seq.

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the effective centre of his working activities and where, or from which, he in fact performs the essential part of his duties vis-à-vis his employer”.59 This distinction between these two alternative places (not present in the former Art. 6 Rome Convention of 1980, thus clarifying since it enables a more broad interpretation of this connecting factor) has as its main objective to cover not only the more normal situations of workers pursuant their activities habitually in a single country (even when the worker lives nearby but across the border, in the case of cross-border working), but also those relationships related to “mobile” labour relationships when they enjoy an international character (i.e. seamen, aircraft personnel or professional drivers) in case there is a fixed base from which the personnel work and also perform certain obligations towards the employer.60 As a result, after this clarification there would be fewer possibilities for the application of paragraph (3), because paragraph (2) will cover more factual situations than those already envisaged by Art. 6 Rome Convention of 1980.61 In this respect, the the Court of Justice has offered in the Koelzsch case a broad, protective and flexible interpretation of Art. 6 (2) (a) Rome Convention 1980 of this connection factor – confirming its application in priority –, in a case of a “mobile” worker (a heavy goods vehicle driver) in which he carried out his activities in more than one Contracting State, by determining –in accordance to the qualitative elements of the relationship – that the locus laboris was situated in the place “from which, in the light of all the factors which characterise the activity, the employee performs the greater part of his obligations towards his employer”.62 10 In relation to the adverb “habitually”, the functioning of the rule contained in Art. 8 (2) does

not give rise to any particular problems on occasions where the work is carried out by the employee in a single place (i.e. local employees or personnel transferred to another country) or where there are several places but one of them is the habitual place for the parties. However, the determination of the place where the worker “habitually” carries out his activity can meet some difficulties under some circumstances; especially in cases where the work is carried out by the employee in more than one place. In these cases, the application involves defining the place where the work is “habitually” carried out. This has been already determined in the jurisprudence of the Court of Justice of the Communities, interpreting mainly Art. 5 (1) Brussels Convention of 1968 (Art. 19 (2) Regulation (EC) No 44/2001), by means of different hypotheses concerning the location of the locus laboris.63 Besides, the Court of Justice has also faced the interpretation of this term, in relation to Art. 6 (2) (a) Rome Convention 1980. This case-law can also be taken into consideration, to interpret Art. 8 (2) Regulation (EC) No 593/2008, in order to accomplish with a consistent application of the provisions of both Regulations.64

59 60

61 62 63 64

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Petrus Wilhelmus Rutten v. Cross Medical Ltd., (Case C-383/95) [1997] ECR I-57, I-77. Proposal, 7. Critic, Max Planck Institut for Comparative and International Private Law RabelsZ 71 (2007), 225, 285–287. See, Cass. RCDIP 2004, 644. Gardeñes Santiago, AEDIPr (2008), 387, 409–410. In this respect, Proposal, 7. Heiko Koelzsch v. État du Grand-Duché du Luxembourg, (Case C-29/10) [2011] I-01595, at 44. See Esplugues Mota/Palao Moreno, in: Magnus/Mankowski, Art. 21. Recital (7). Mankowski IPRax 2 (2006), 101, 107; Martiny ZEuP (2008), 79, 97.

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The question arose for the first time in the Mulox case,65 about a former employee who had carried out his work in different countries and brought an action against his former employer. The Court, when determining the habitual workplace in a case where the work was carried out in different places, underlined the need to interpret the old Art. 5 (1) Brussels Convention of 1968 in such a way “as to avoid any multiplication of courts having jurisdiction, thereby precluding the risk of irreconcilable decisions and facilitating the recognition and enforcement of judgments in States other than those in which they were delivered”.66 Thus it is impossible to grant jurisdiction to the courts of all the countries where the employee has carried out his work and the subsequent need to specify one place where he is presumed to have carried out his/her work habitually. More particularly, the employee is understood to carry out his work habitually in the place where he “has established the effective centre of his working activities and where, or from which, the worker in fact performs the essential part of his duties vis-à-vis his/her employer”.67 It is a presumption iuris tantum, for whose concretion the national court responsible of applying the Regulation must take into account the factual background of the case:68 circumstances such as whether or not the worker carried out his work from one particular office, whether the employee organized his professional activities from that office, whether he had his residence in that place, how long he stayed there, or whether he went back there after every business trip, make it possible to verify the location of the effective centre of the employee’s working activities.69 Thus, the position sustained by the Court of Justice assumes that the employee has an office or “effective centre” from which he carries out his working activities.70 In practice, nevertheless, it is clear that there is a possibility that this office may not exist. This is the underlying situation in the Weber case,71 referring to the work as a cook carried out by an employee on several platforms located in the sea. In this case, the Luxembourg Court understood that, on those occasions where a person performs the same work in several places, any qualitative criteria relating to the nature and importance of the work done in various places within the Contracting States are irrelevant. Therefore, “the relevant criterion for establishing an employee’s habitual place of work, for the purposes of Article 5 (1) Brussels Convention of 1968 is, in principle, the place where he spends most of his working time engaged on his employer’s business”,72 independently of what was established in the individual contract of employment,73 or where the employer carried out the first part of the activity.74 To sum up, when the Court of Justice has interpreted the Judgements Convention and 65 66 67 68

69 70 71 72 73 74

Mulox IBC Ltd. v. Hendrick Geels, (Case C-125/92) [1993] ECR I-4075. Mulox IBC Ltd. v. Hendrick Geels, (Case C-125/92) [1993] ECR I-4075, I-4105. Petrus Wilhelmus Rutten v. Cross Medical Ltd., (Case C-383/95) [1997] ECR I-57, I-77. Mulox IBC Ltd. v. Hendrick Geels, (Case C-125/92), [1993] ECR I-4075, I-4105–4106; Petrus Wilhelmus Rutten v. Cross Medical Ltd., (Case C-383/95) [1997] ECR I-57, I-78. Mankowski IPRax (1999), 332, 336. Petrus Wilhelmus Rutten v. Cross Medical Ltd., (Case C-383/95) [1997] ECR I-57. Herbert Weber v. Universal Ogden Services Ltd., (Case C-37/00) [2002] ECR I-2013. Herbert Weber v. Universal Ogden Services Ltd., (Case C-37/00) [2002] ECR I-2013, I-2048. Salerno, 226–227. Cassaz. RDIPP 2004, 664. Cassaz. RDIPP 2004, 661.

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Regulation, taking into account the working relationship as a whole, the duration of the different work periods carried out in the different Member States of the Union must be considered, presuming that the place where most time is spent will be considered the habitual workplace.75 This time rule is based on a presumption that may be rebutted; however, only on occasions where the factual background of a case shows that there is a greater relationship with one particular Member State. Circumstances such as the fact that an employee, having carried out his work in one particular Member State goes to work permanently in another country, reflecting the desire that this latter place should become a new habitual place of work. Moreover, the Court of Justice has interpreted this term in a “mobile case”, giving priority to the qualitative elements of the employment relationship, by favouring its location in the country where “the employee performs the greater part of his obligations towards his employer”.76 2. Situations where the worker is temporarily employed in another country 11 Art. 8 (2) equally treats those situations where there is a habitual work place, to those where

the worker is temporarily employed in another country. Therefore, this paragraph raises two different questions to be ascertained. Firstly, it is important to draw a distinction between individual employment contracts in which the employee has been transferred to another country (i.e. with a change of the locus laboris) and those in which the worker has been temporarily posted (i.e. with no change of the work place). Secondly, it must be underlined that the EC has developed a specific regime for temporarily posted workers under particular circumstances (i.e. the Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996, concerning the posting of workers in the framework of the provision of services). Both questions will be analyzed below separately. a) In general 12 The main objectives underlying this conflict of law rule, in respect to those workers who

were temporary posted abroad (independently if they were posted to another Member State or to a third country), are: to avoid the negative consequences of a dépèçage of the law applicable to the contract under those circumstances, to promote the application of a more connected and predictable national legal systems to those relationships, as well as to allow a “legal continuity” of the labour relationship with the country of origin in cases in which the worker intents to return.77 As a result, those contracts of employment will be governed by the law of the country of origin (still considered as the habitual work place), instead of the law of the country of temporary destination.78 Therefore, it could be affirmed that, strictly speaking, this conflict-of-law rule diverges from the traditional principle of territoriality, in the field of Labour Law.79 75 76 77

78 79

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Mankowski IPRax (2003), 21, 23–24. Heiko Koelzsch v. État du Grand-Duché du Luxembourg, (Case C-29/10) [2011] I-01595, at 44. Villani, in: Verso una disciplina comunitaria della legge applicabile ai contratti, 265, 285. Something which will be assessed, when the dispute arises. In this respect, Kaye, 234. Cour d’Appel Paris RCDIP 1997, 55. Palao Moreno, in: Derecho internacional privado. Trabajadores extranjeros. Aspectos sindicales, laborales y de seguridad social, (Madrid, 2001), 521, 552–553.

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Thus, this conflict-of-law approach firstly raises the question of the distinction between situations in which the employee has been temporary posted abroad; from those in which the worker will remain legally connected to the law of the country of destination (i.e. he is transferred).80 This problem relates to the determination of the duration of the employment, in order to be considered temporary or not.81 However, this difficulty has not been completely solved by the new wording of Art. 8 (2), insofar as this provision does not clearly determine how long this period could last.82 In this respect, it is expected that the Court of Justice of the European Communities will provide for an autonomous definition of those concepts, in order to guide national Courts and promote a uniform application of this provision. Anyway, there are two elements which can be found in the Regulation which enable the 13 interpreter to distinguish between the two mentioned situations. On the one hand, Recital (36), establishes that: “As regards individual employment contracts, work carried out in another country should be regarded as temporary if the employee is expected to resume working in the country of origin after carrying out his tasks abroad.” The Regulation opts for an open and flexible approach as to this issue, based on the expectations and the intentions of the parties (animus revertendi of the worker and animus retrahendi form the perspective of the employer), to return to the country where the employee was working prior to the posting; a solution which favors an ex ante assessment of the duration of the assignment.83 This approach favors the subjective elements of the relationship which, if not defined by the European Court of Justice, should be interpreted by national courts, taking into account both the wording of the contract and the factual elements of the case. Therefore, it may cause some uncertainties and favour its manipulation by the employer.84 On the other hand, the same Recital also states that: “The conclusion of a new contract of employment with the original employer or an employer belonging to the same group of companies as the original employer should not preclude the employee from being regarded as carrying out his work in another country temporarily.” This refers to more common everyday situations of double employment, related to the activity developed by multinational groups of companies from a Labour Law perspective.85 More particularly, a factual precedent of the problem which pursues to solve can be found in the Judgment of the European Court of Justice of April 10, 2003 in the Pugliese case.86 In this respect, it could be affirmed that, although with this further clarification many of the problems which raise 80 81

82

83

84 85 86

BAG IPRax 1994, 123; Cass. Clunet 1995, 134. This problem was mentioned – as well as deeply analyzed – by the Green Paper, 35–37 (because of the practical difficulties raised by Art. 6 Rome Convention of 1980 in that respect). Trib.Sup.Just. Cataluña Aranzadi 1998, 2056; Trib.Sup.Just. Madrid Aranzadi 1999, 1956. Proposal, 7. In favour of an open and flexible approach to this issue, Max Planck Institut for Comparative and International Private Law RabelsZ 71 (2007), 225, 288–289. Against, Schlachter, 159. Mankowski, in: Ferrari/Leible, 185–186; Ubertazzi, 94. As proposed by the European Group for Private International Law, parr. 23 Accessible at: http://www.gedip-egpil.eu/. Cass. Rec. Dalloz 1998, 57. Mankowski IPRax 2 (2006), 101, 107. Palao Moreno Yb.PIL 4 (2002), 303. Giulia Pugliese v. Finmeccanica SpA, Betriebsteil Alenia Aerospazio, (Case C-437/00) [2003] ECR I-3573.

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the international circulation of workers within a group of companies may find a positive solution,87 the wording of this Recital also raises several difficulties.88 b) Situations covered by Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996, concerning the posting of workers in the framework of the provision of services 14 Notwithstanding the general regime for employees temporary posted abroad, it must be taken into account that also a special legal regimen for this type of workers can be found in Directive 96/71/EC of the European Parliament and of the Council of 16 December, concerning the posting of workers in the framework of the provision of services.89 That is, for those situations determined in Arts. 1 and 2 of the Directive, in which a worker carries out his work in the territory of a Member State other than the one in which he normally works for a limited period of time. In this respect, the temporary posting of a worker from the country where he habitually carries out his working activities to another State is somewhat exceptional according to Art. 2 of the Directive. From a Private International Law perspective, Directive 98/71/EC must be considered as an instrument whose conflict-of-law rules will precede the solutions envisage in Regulation (EC) No 593/2008, in accordance with Art. 23 (also remembered in its Recital (34)). Notwithstanding this, Art. 8 (2) still has some room for application. In this sense, on the one hand, it still considered that the employee carries out habitually his working activity in the country from which he was moved. However, on the other hand and according to Art. 3 of Directive 96/71/EC, when a labour relationship is under the scope of this Directive (rectius by the national law which has implemented it), Member States shall ensure that, whatever the law applicable to the employment relationship could be (ascertained by Art. 8 Regulation (EC) No 593/2008), the undertakings have to guarantee workers posted to their territory the terms and conditions of employment, in the Member State where the work is carried out (i.e. the lex loci laboris).90 Therefore, even though those contracts will be regulated by the law of the Member State of origin (as established by Art. 8 (2) Regulation (EC) No 593/2008), some mandatory conditions of the law of the Member State of destination must be observed. This mandatory provisions refer, particularly, to some decisive issues (the so-called “hard core”) like, “(a) maximum work periods and minimum rest periods; (b) minimum paid annual holidays; (c) the minimum rates of pay, including overtime rates; this point does not apply to supplementary occupational retirement pension schemes; (d) the conditions of hiring-out of workers, in particular the supply of workers by temporary employment undertakings; (e) health, safety and hygiene at work; (f) protective measures with regard to the 87

88 89

90

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Lagarde/Tenenbaum RCDIP 4 (2008), 727, 747. Cassaz. 7.12.2005, RDIPP (2006), 1053; Cassaz. 23.2.2006, RDIPP (2007), 157. Mankowski, in: Ferrari/Leible, 191–192. OJ 1997 L 18/1. Note the Proposal for a Directive of the European Parliament and of the Council on the enforcement of directive 96/71/EC concerning the posting of workers in the framework of the provision of services of 2012 (COM (2012) 131 final). In this respect, Recital (34) states: “The rule on individual employment contracts should not prejudice the application of the overriding mandatory provisions of the country to which a worker is posted in accordance with Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services.”

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terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people; (g) equality of treatment between men and women and other provisions on non-discrimination”. Art. 3 Directive 96/71/EC pursues an efficient competition, avoids social dumping within 15 the internal market (derived from the different social standards existing in the different Member States), and ensures a minimum protection to the employee in those situations (the “hard core”).91 Besides, with this solution the territoriality principle recovers some of its importance, as Art. 3 Directive 96/71/EC ensures an equivalent treatment (at least in relation to certain fundamental conditions) of local and temporarily posted workers coming from another Member State.92 Therefore, this provision must be welcome, because of its positive effects both in relation to the working conditions of posted employees and the internal market itself. However, the application of the before mentioned Directive also creates some uncertainties, as long as Art. 2 (2) just mentions that a “posted worker means a worker who, for a limited period, carries out his work in the territory of a Member State other than the State in which he normally works”. This provision does not clarify how long this period should last and this is something which should require a uniform definition, in order to avoid divergent national applications of this community instrument. In this respect, and as long as neither the Directive nor the European Court of Justice offer further clarification, the expectations and the intentions of the parties should be taken into account, to determine whether the worker has been posted “for a limited period” or not; once again, making use of a subjective approach to the question, as mentioned before in relation to Art. 8 (2). However, it must be reminded that, as long as Regulation (EC) No 593/2008 and Directive 96/71/EC pursue different objectives, their provisions could not be interpreted the same way.93 3. Cases where the employee does not habitually carry out his work in one specific place: the law of the place of business through which the employee was engaged is situated Art. 8 (3) Regulation (EC) No 593/2008 (with a similar wording of Art. 6 (2) (b) Rome 16 Convention of 1980) establishes a conflict-of-law rule for those cases not covered by its paragraph (2). In this respect, we must be aware that many international labour relationships which currently take place do not find a positive solution in the classic lex loci laboris.94 Traditionally, the most common cases which could be covered by these provisions were those where a mobile employee had not a single work place but several (i.e. labour agents), and those where the worker pursued his activities in a place not subject to national sovereignty (i.e. sailors working at oil rigs situated in High Seas).95 Hence, in accordance with paragraph (3), on those occasions where the employee does not carry out his habitual work in one specific country, the contract of employment would be governed by the national law

91

92 93 94 95

Fallon RCDIP 97 (2008), 781, 817–818; Franzen ZEuP (1997), 1055, 1069 et seq.; Martiny ZEuP (1997), 107, 124; Moreau-Borlés Clunet (1996), 889, 901 et seq. Similarly, Balandi, in: I contrati di lavoro internazionali, 115, 121 et seq. Green Paper, p. 37. In this respect, Gamillscheg RCDIP 50 (1961), 265, 284–285; Moura Ramos, 531 et seq. Mankowski, in: Ferrari/Leible, 181–182; Staudinger, 237–238. See Giuliano/Lagarde, Report, 24.

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of the place of business through which the worker was engaged is situated. Hence, this connecting factor is based on the theory of “irradiation”.96 Therefore, this connecting factor can prove to be useful in relation to different highly international labour cases,97 like those contracts where the “mobile” worker was engaged by a subsidiary to work for a multinational group of companies in a multiplicity of countries,98 as well as those in relation to seamen in order not to apply the law of the Flag of the vessel.99 However, we must be aware that the actual application of Art. 8 (3) has been severely limited in practice – as a result of the wording of paragraph (2) and the case-law of the European Court of Justice interpreting Art. 5 (1) Brussels Convention of 1968 (Art. 19 (2) Regulation (EC) No 44/2001 and Art. 21 (1) Regulation (EU) No 1215/2012) – and enjoys only a marginal importance in practice.100 In this respect, not only the locus laboris has been interpreted in a very expanded and flexible way by the European Court of Justice (as it has been examined before), but also that some of the situations of international mobility of workers are currently covered by the expression “in” or “from which” present in paragraph (2).101 The objective underlying this limitation can only be considered as a political one.102 17 In order to determine this place, the following elements must be taken into consideration.

Firstly, the term “engage” should be related to the integration of the employee in the organization of the employing company.103 Secondly, this provision refers to the present location of the place of business that engaged the employee, without taking into consideration the place where it was previously situated.104 This could create some problems in cases where that placed had changed its location or, even more, when it had completely disappeared. Thirdly, this provision only refers to the place of business which engaged the worker, without mentioning the importance of the legal person which engaged the worker. Thus, in principle, it would be sufficient if a secondary establishment was involved in the operation. However, it also brings the risk to leave in the hands of the employer the determination of the law applicable to the individual contract of employment under some circumstances and, as a result, that this relationship could be governed by an unconnected legal system.

96 97 98

99 100

101 102 103 104

594

Palao Moreno YBPIL 4 (2002), 303, 322. Palao Moreno AEDIPr 2005, 309, 331. See, Coursier, p. 103; Gamillscheg RCDIP (1961) 265, 285 and 349 et seq.; Lyon-Caen/Lyon-Caen, 28; Morgenstern, 27; Szaszy (1968) 17 (1) ICLQ 11, 12; Zabalo Escudero, pp. 138 et seq.; Kaye, pp. 235–236; Lagarde RCDIP (1991), 287, 318–319. Mankowski IPRax 2 (2006), 101, 108; Iriarte Ángel, 122 et seq.; Moura Ramos, 930 et seq. Briere Clunet 2012, 187, 191; Mankowski/Knöfel EuZA 2011, 521, 526; Parisot Clunet 139 (2012), 597, 623–633. Gardeñes Santiago AEDIPr 2008, 387, 414–415. Mankowski, in: Ferrari/Leible, 178. Mankowski, in: Ferrari/Leible, 195. However, neither Art. 19 (2) (b) of the Regulation (EC) No. 44/2001, nor Art. 21 (1) Regulation (EU) No 1215/2012, take into account both moments.

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Therefore, some minimum conditions relating to its stability or close connection to the contract and the labour activity developed by the worker should be imposed to give validity to this connecting factor.105 In relation to this, the Court of Justice has provided some guiding elements – for some authors with a broad, substantive oriented and protective objective106 –, to interpret this subsidiary connecting factor for a “mobile” employment relationship in the Navimer case –a chief engineer working on different ships-, by establishing that “‘the place of business through which the employee was engaged’ must be understood as referring exclusively to the place of business which engaged the employee and not to that with which the employee is connected by his actual employment”. In this respect and again with a substantive goal “the possession of legal personality does not constitute a requirement that must be met by the place of business of the employer within the meaning of that provision”.107 Besides, the Court stated that “the place of business of an undertaking other than that which is formally referred to as the employer, with which that undertaking has connections, may be classified as a ‘place of business’ within the meaning of Article 6(2)(b) of that convention if objective factors make it possible to establish that there exists a real situation different from that which appears from the terms of the contract, even though the authority of the employer has not been formally transferred to that other undertaking.”108 4. The escape clause In any case, Art. 8 (4) provides that – no matter which the objective law applicable to the 18 individual contract of employment could be – if “from the circumstances as a whole” there is a more closely connected national law to the contract, this domestic law would be made applicable. The “escape clause” affects paragraphs (2) and (3) – thus, if we compare paragraph (4) with the wording of Art. 6 (2) Rome Convention of 1980, it clarifies that it affects also those contracts governed by the lex loci laboris109 – and its application will depend upon the circumstances of the given case. Under those circumstances, the following could be taken into account: the habitual residence of the employee, the place where the employer is established, the common habitual residence or nationality of the parties, the language used in the contract, the previously existing relationship between the parties or the existence of other contracts with different companies belonging to the same multinational group of companies.110

105

106

107

108

109 110

Gardeñes Santiago AEDIPr (2008), 387, 413; Zabalo-Escudero, in: Pacis Artes. Obra homenaje al Profesor Julio D. González Campos, 1827. Gulotta, Cuad. der. trans. 5 (2013), 584, 587–588. However, critic with this interpretation, Knöfel IPRax 2 (2014), 130, 136; Tuo, Diritto del commercio internazionale 4 (2011), 1172, 1187–1188. Gulotta, Cuad. der. trans. 5 (2013), 584, 591. With this approach, the question related to the law applicable to the determination of the employer is not solved, as stated by Pataut RCDIP 101 (2012), 666. Jan Voogsgeerd v. Navimer SA, (Case C-384/10) [2011] ECR I-13275, at 47. See Maestre Casas, Cuad. der. trans. 4 (2012), 322. Mankowski, in: Ferrari/Leible, 175. Kaye, 237. Some authors also mention the content of the applicable law as an important factor, Merrett, 211–214.

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The aim of this flexible connecting factor (based mainly on the “principle of proximity” and thus lacking a substantive orientation) is to correct the solutions reached by the application of the previous paragraphs,111 in order to determine the most closely connected law to the contract, a legal regime which cannot coincide with the most favorable legal regime to the worker.112 In this respect, a cautious application of the “escape clause” could be useful in relation to certain complex international labour relationships, in order to adapt this conflictof-law rule to the circumstances of the global economy.113 Some examples would include inter alia and firstly, the possibility to maintain the legal regime of the individual contract of employment when there is a modification of the structure of the employing company (i.e. after the transfer of its headquarters abroad, or due to its participation in an international merger).114 Secondly, the possibility to disregard the law of the place of business through which the employee was engaged is situated, when this had no real connection to the contract (i.e. the worker was engaged through a recruitment office with no real connection to the contract, to work within a multinational group of companies).115 Thirdly, to apply the law of the place of business through which the employee was engaged is situated, when an employee was transferred abroad (for example, to a subsidiary of the group), but the relationship was still more closely connected to the law of the country of origin where he was first engaged.116 Fourthly, the possibility to apply the law of the common national law of the parties, instead of the lex loci laboris,117 for example when a public entity engages citizens of that country abroad (i.e. labour personnel rendering their services at an embassy or a consulate).118 Fifthly, the possibility to disregard the law of the workplace, in favor of the law where the employing company is situated, when this proved to be a predictable legal regime to a IT worker under some circumstances.119 Therefore, this provision must be welcome in order to adapt the conflict-of-law solution, derived from the application of paragraphs (2) and (3), to the circumstances of the case. However, as this open approach may cause some uncertainties to the parties as to the law applicable to the contract,120 this paragraph should receive an exceptional and strict application.121 This restrictive application of the “escape clause” should have been stressed in 111 112

113

114 115 116 117 118 119

120 121

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Martiny, in: Reithmann/Martiny, 1332, 1370; Merrett, 210. Bonomi, 189; Calligaro, in: Droit social et situations transfrontalières, 165–166; Palao Moreno, in: Derecho internacional privado. Trabajadores extranjeros. Aspectos sindicales, laborales y de seguridad social, (Madrid, 2001), 521, 561–562; Salvadori, in: Sacerdoti/Frigo, 145–146. However, Liukkunen, 248–250. An example of this reasoning, but in relation to Art. 39 ECT, can be found at ECJ 30 April 1996, Case C-214/94, Ingrid Boukhalfa [1996] ECR I-2253. See, Casado Abarquero, 264–266. Moreau/Trudeau Clunet (2000), 915, 922; Palao Moreno AEDIPr (2005), 309, 331–332; Zabalo Escudero, in: Pacis Artes. Obra homenaje al Profesor Julio D. González Campos, 1829. Sabido Rodríguez, 221; Salvadori, in: Sacerdoti/Frigo, 145. Morgenstern, 32–33; Morse ICLQ (1992), 1, 20; Kaye, 237; Moreau/Trudeau Clunet (2000), 915, 925–926. Green Paper, 38, footnote 78. See, Trib. Sup. Aranzadi 2005, 776; Cass. Clunet 4 (2012), 1354. LAG Frankfurt a.M. IPRspr. 1992, 161. See, Palao Moreno, Rel. Lab. (2000), 13, 33–36. Zabalo Escudero, in: Pacis Artes. Obra homenaje al Profesor Julio D. González Campos, 1827. Also, Green Paper, 40–41. Fotinopoulou Basurko, 129; Ubertazzi, 96. Baratta, 235 et seq.; Déprez, 323; Calligaro, in: Droit social et situations transfrontalières, 156–158.

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relation to individual contracts of employment (as it happens in Art. 4 (3)), so that its application could have been limited to those situations where the other legal system was “manifestly” more closely connected to the contract.122 However, this condition does not exist in Art. 8 (4), enabling thus a more flexible interpretation of the “escape clause” if compared to Art. 4 (3).123 This was the case of, for example, the situation analysed by the Judgement of the Court of Justice in the Schlecker case.124 A situation in which an employer was first transferred from Germany to a branch in the Netherlands (by entering into a new employment contract with the company) and, after a long working period in that Member State, the position in the Netherlands was abolished and the employer was invited to work again in Germany. When the employee asked for the application of Dutch Law, as the legal system of the place in which the worker claimed to perform habitually his work, the Court of Justice answered that “even where an employee carries out the work in performance of the contract habitually, for a lengthy period and without interruption in the same country, the national court may, under the concluding part of that provision, disregard the law of the country where the work is habitually carried out, if it appears from the circumstances as a whole that the contract is more closely connected with another country.” Thus, with its judgment the Court of Justice not only stressed the lack of a materially oriented rule in this provision, but also its possible ex-officio application.125 V. Scope of the law applicable to the contract In accordance to Arts. 10 (consent and material validity) and 12 (scope of the law applicable) 19 of Regulation (EC) No 593/2008, the law governing the individual contract of employment enjoys a wide application.126 Nevertheless, two significant issues will escape from its scope of application: the law applicable to the legal capacity to the parties of the contract (a question to be ascertained by the Private International Law system of the national judge,127 besides what is established in Art. 13, and taking into account the obligations imposed by the Immigration Law of the country where a foreign employee provides his services),128 as well as the law applicable to determine the formal validity of the contract, as established by Art. 11.129

122

123 124 125 126

127 128 129

Ubertazzi, 96; Max Planck Institut for Comparative and International Private Law RabelsZ 71 (2007), 225, 297. An example of a strict application of the escape clause, not avoiding the application of the lex loci laboris, can be found in Cass. RCDIP 101 (2012), 587. Gardeñes Santiago AEDIPr (2008), 387, 416. Anton Schlecker v. Melitta Josefa Boedeker (Case C-64/12) [2013] ERC I-2013, at 41. Briere Clunet 1 (2014) 169, 171, 178. However, Van Den Eeckhout, 8. Coursier, 113 et seq.; Fotinopoulou Basurko, 146 et seq.; Martiny, in: Reithmann/Martiny, 1332, 1387 et seq.; Staudinger, 239–240. Gardeñes Santiago AEDIPr (2008), 387, 418. Juárez Pérez, 160–161; Zabalo Escudero, 171–1782. See, Coursier, 116–119; Morgenstern, 65–66. Giulano/Lagarde, Report, 29. Critic, Gardeñes Santiago AEDIPr (2008), 387, 421–422. See, Zabalo Escudero, 177–179; Morgenstern, 66–67.

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20 Mandatory provisions130 enjoy a paramount importance in relation to individual employ-

ment contracts.131 This significance is (unnecessarily)132 underlined by Recital (35) of Regulation (EC) No 593/2008, when it states that “Employees should not be deprived of the protection afforded to them by provisions which cannot be derogated from by agreement or which can only be derogated from to their benefit”. In this regard it must be remembered that, according to Art. 8 (1) the mandatory provisions of the law applicable to the contract in the absence of choice of law, will limit the possible agreement made by the parties as to the legal regimen of the individual contract of employment. Nevertheless, when dealing with the importance of mandatory provisions in relation to individual contracts of employment, both Art. 9 Regulation (EC) No 593/2008 and 3 Directive 96/71/EC must also be considered. The relationship existing between Art. 8 and the other two provisions (particularly Art. 9) may cause serious difficulties, which have not completely been solved by the new Regulation.133 In relation to Art. 9, on the one hand, the interaction between Arts. 8 and 9 Regulation (EC) No. 593/2008 may cause difficulties. However, it can also be stated that, while Art. 8 (1) is interested in the “private” dimension of this notion (thus aiming at protecting the employee), Art. 9 focuses more on the “public” side of the issue (i.e. the economic and social model of a country).134 Therefore, the former does not preclude the application of the other.135 Nevertheless, we should be aware that Art. 9 may risk justifying the application of the lex fori.136 Lex fori will also be of application in the (currently exceptional) cases in which the judge consider suitable to make use of the classic exception of ordre public.137 Art. 3 Directive 96/71/EC and Art. 8 (1), on the other hand, maintain a clear relationship currently; as Recital (34) states: “The rule on individual employment contracts should not prejudice the application of the overriding mandatory provisions of the country to which a worker is posted in accordance with Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services.”138 However, the wording of this Recital may meet serious problems as, for example, it does not clarify the reference made to the “overriding mandatory provisions” of the country.139 On the other hand, the reference should not only be made to national rules

130

131 132 133 134

135 136 137

138 139

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An approach to the delimitation of this concept can be found in ECJ 23 November 1999, Joined cases C-369/96 and C-374/96, Criminal proceedings against jean-Claude Arblade, Arblade & fils SARL, Bernard and Serge Leloup and Sofrage SARL, [1999] ECR I-8453. However, Liukkunen p. 262. See the studies by Liukkunen, Straube and Taschner. Mankowski, in: Ferrari/Leible, 185. Mankowski, in: Ferrari/Leible, 206. González Campos RdC 287 (2000), 9, 374–375; Zabalo Escudero, in: Obra homenaje al Profesor Julio D. González Campos, 1832. Junker IPRax (2000), 65, 73. Lagarde/Tenenbaum RCDIP 4 (2008), 727, 748. Casado Abarquero, 315. Cass. Dr.Soc. 1993, 78. Cassaz. RDIPP 2003, 978. See Cass. Clunet 2007, 531, in relation to a case of modern slavery. Limiting the recourse to this exception, only when international ordre public was at stake, Cassaz. RDIPP 2005, 771; Cassaz. RDIPP 2008, 214. Gardeñes Santiago AEDIPr 2008, 387, 412. Lagarde/Tenenbaum Rev.crit. DIP 4 (2008), 727, 747–748.

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implementing the Directive, but this objective would also be accomplished after the application of Art. 23 Regulation (EC) No 593/2008.140 Besides, the Court of Justice of the European Communities has not only approached a definition of this complex category, but has also tried to restrict its application in order to make mandatory provisions – in the field of Labour Law – compatible with community freedoms (i.e. cases Arblade141 and Mazzoleni)142, thus favouring the integrative objective of the EU.143 In accordance with that has been mentioned, only a limited number of Labour Law provisions (those establishing minimum working conditions) can be characterized as mandatory in relation to Art. 8.144 In this respect, the following conditions could be mentioned as mandatory: health, safety and hygiene at work, right to strike, redundancy protection, or minimum rest periods.145 In relation to this, Art. 3 Directive 96/71/EC offers a good illustration of the kind of terms of conditions covered by this category, when listing the “hard core”.146 Finally, mandatory provisions could be contained not only in the collective agreements and arbitration awards affecting the contract of employment, but also in the following national laws (in accordance to Arts. 8 and 9 Regulation (EC) No 593/2008): the law applicable to the individual contract of employment, the law of the place where the work has to be performed and the law of the competent forum.147 Article 9: Overriding mandatory provisions 1. Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation.

140 141

142

143

144

145

146

147

Mankowski, in: Ferrari/Leible, 184–185. ECJ 23 November 1999, joined cases C-369/96 and C-374/96, Criminal proceedings against jean-Claude Arblade, Arblade & fils SARL, Bernard and Serge Leloup and Sofrage SARL, [1999] ECR I-8453, I-8513. ECJ 15 March 2001, Case C-165/98, Criminal proceedings against André Mazzoleni and Inter Surveillance Assistance SARL, [2001] ECR I-2189. Liukkunen, 165; Palao Moreno AEDIPr (2005), 309, 333; Zabalo Escudero, in: Pacis Artes. Obra homenaje al Profesor Julio D. González Campos, 1833–1834. Guardans Cambó, 402 et seq.; Zabalo Escudero, 184. However, not all mandatory provisions are equally imperative, Junker IPRax (1989), 69. Giuliano/Lagarde, Report, 23; Martiny ZEuP (1999), 252–260; Kaye, 224 et seq.; Lyon-Caen/Lyon-Caen, 31; Salvadori, in: Sacerdoti/Frigo, 139 et seq.; Villani, in: Verso una disciplina comunitaria della legge applicabile ai contratti, 265, 282. The delimitation of this category may vary from one national judge to the other. Calligaro, in: Droit social et situations transfrontalières, 148. See Cass, 27.4.2000, Clunet (2001), 523. A list which could also be used to illustrate the scope of this category in relation to Art. 8 (1) Regulation, (EC) No. 593/2008, Polak, in: Meeusen/Pertegás/Straetmans, 338. Guardans Cambó, 444 et seq. The accumulation of these provisions may cause a protection “at any cost”, according to Bonomi, 179. See Grusic, 751.

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2. Nothing in this Regulation shall restrict the application of the overriding mandatory provisions of the law of the forum. 3. Effect may be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as those overriding mandatory provisions render the performance of the contract unlawful. In considering whether to give effect to those provisions, regard shall be had to their nature and purpose and to the consequences of their application or non-application.

Bibliography Anderegg, Ausländische Eingriffsnormen im internationalen Wirtschaftsrecht (Tübingen 1989) Archer, Lois de police et dispositions impératives du droit communautaire dérivé: pour une approche conciliatrice des logiques internationaliste et communautaire, REDC 2009, 678 Arif, Eingriffsnormen und öffentlich-rechtliche Genehmigungen unter der Rom II-VO, ZfRV 2011, 258 Audit, Extra-territorialité et commerce international. L’affaire du gazoduc sibérien, RCDIP, 1989, 401 Bälz, Zinsverbote und Zinsbeschränkungen im internationalen Privatrecht, IPRax 2012, 306 Basedow, Das amerikanische Pipeline-Embargo vor Gericht, RabelsZ 47 (1983), 141 Benzenberg, Die Behandlung ausländischer Eingriffsnormen im Internationalen Privatrecht: eine Studie unter besonderer Berücksichtigung des Internationalen Schuldrechts (2008) Biagioni, L’ordine pubblico e le norme di applicazione necessaria nella proposta di regolamento “Roma I”, in: Franzina, La legge applicabile ai contratti nella proposta di regolamento “ Roma I” (2006), p. 96 Bonomi, Le norme imperative nel diritto internazionale privato – Considerazioni sulla Convenzione europea sulla legge applicabile ai contratti nonché sulle leggi italiana e svizzera di diritto internazionale privato (Zürich 1998) Bonomi, Mandatory Rules in Private International Law – The Quest for Uniformity of Decision in a Global Environment, YBPIL 1 (1999), 215 Bonomi, Overriding Mandatory Provisions in the “Rome I” Regulation on the Law Applicable to Contracts, YBPIL 10 (2008), 285 Boschiero, Norme inderogabili, “disposizioni imperative del diritto comunitario” e “leggi di polizia” nella proposta di regolamento “Roma I”, in: Il nuovo

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diritto europeo dei contratti della convenzione di Roma al regolamento “Roma I”, Atti del Convegno, Quaderni della Fondazione italiana per il Notariato (Milano 2007), p. 101 Boskovic, La protection de la partie faible dans le règlement Rome I, D. 2008, 2175 Andreas Bucher, L’ordre public et le but social des lois en droit international privé, in Recueil des cours (1993), 9 Bureau/Muir Watt, L’impérativité désactivée? (à propos de Cass. civ. 1ère, 22 octobre 2008), RCDIP 108 (2009), 1 Chong, The Public Policy and Mandatory Rules of Third Countries in International Contracts, (2006) 2 JPrIL 27 Coester, Die Berücksichtigung fremden zwingenden Rechts neben dem Vertragsstatut, ZVglRWiss 82 (1983), 1 Cuniberti, Le nouvel art. 3. 3. 1 des Principes UNIDROIT 2010 sur le contrat violant une règle impérative: un regard critique du point de vue du droit international privé, Unif. L. Rev. 2013, 490 d’Avout, Le sort des règles impératives dans le règlement Rome I, D. 2008, 2165 d’Avout, Les directives européennes, les lois de police de transposition et leur application aux contrats internationaux, D. 2014, 60 d’Avout/Bollee, Droit du commerce international: août 2008-août 2009, D. 2009, 2384 de Cesari, Disposizioni alle quali non è permesso derogare convenzionalmente e norme di applicazione necessaria nel Regolamento Roma I, in: Liber Fausto Pocar (2009), p. 257 de Nova, Conflits des lois et normes fixant leur propre domaine d’application, in: Mélanges offerts à Jacques Maury (1960), p. 377

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Chapter II: Uniform Rules de Nova, I conflitti di leggi e le norme sostanziali funzionalmente limitate, RDIPP 1967, 699 de Vareilles-Sommieres, Lois de police et politiques législatives, RCDIP 100 (2011), 207 Dechamps/Fallon, Analyse d’impact de la proposition de règlement relative au droit commun européen de la vente sur le droit applicable au contrat de consommation, REDC 2012, 393 Dickinson, Third-Country Mandatory Rules in the Law Applicable to Contractual Obligations: so Long, Farewell, auf Wiedersehen, Adieu?, (2007) 3 JPrIL 53 Drobnig, Die Beachtung von ausländischen Eingriffsgesetzen – eine Interessenanalyse, in: FS Gerhard Kegel zum 75. Geb. (1987), p. 95 Fallon, Les règles d’applicabilité en droit international privé, in: Mélanges offerts à Raymond Vander Elst (Bruxelles 1986), p. 285 Fallon/Meeusen, Le commerce électronique, la directive 2001/31/CE et le droit international privé, RCDIP 91 (2002), 435 Fetsch, Eingriffsnormen und EG-Vertrag (2002) Francescakis, Quelques précisions sur les “lois d’application immédiate” et leurs rapports avec les règles de conflits de lois, RCDIP 55 (1966), 1 Francescakis, Lois d’application immédiate et règles de conflit, RDIPP 1967, 691 Francq, Le règlement Rome I sur la loi applicable aux obligations contractuelles – De quelques changements …, Clunet 136 (2009), 41 Francq/Jault-Seseke, Les lois de police, une approche de droit comparé, in: Corneloup/Joubert (éds.), Le Règlement Communautaire “Rome I” et le choix de loi dans les contrats internationaux (2011), p. 357 Freitag, Einfach und international zwingende Normen, in: Leible (ed.), Das Grünbuch zum Internationalen Vertragsrecht (2004), p. 167 Freitag, Die kollisionsrechtliche Behandlung ausländischer Eingriffsnormen nach Art. 9 Abs. 3 Rom I-Verordnung, IPRax 2009, 109 Freitag, Art. 9 Rom IVO, Art. 16 Rom II-VO als Superkollisionsnormen des Internationalen Schuldrechts? – Gedanken zum Verhältnis zwischen internen und externen Lücken des EuIPr, IPRax 2016, 418 Gaudemet-Tallon, Le règlement “Rome I” sur la loi applicable aux obligations contractuelles, J. dr. eur. 2010, 237 Guedj, The Theory of the Lois de Police – A

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Article 9 Functional Trend in Continental Private International Law, 39 Am. J. Comp. L. 661 (1991) Harris, Mandatory Rules and Public Policy Under the Rome I Regulation, in: Ferrari/Leible (eds.), Rome I Regulation – The Law Applicable to Contractual Obligations in Europe (München 2009), p. 269 Hartley, Mandatory Rules in International Contracts: the Common Law Approach, RdC 266 (1997), 365 Hauser, Eingriffsnormen in der Rom I-Verordnung (2012) Hellner, Third Country Overriding Mandatory Rules in the Rome I Regulation, Old Wine in New Bottles?, (2009) 5 JPrIL 447 Jacquet, La norme juridique extraterritoriale dans le commerce international, Clunet 112 (1985), 327 Jault-Seseke, L’applicabilité d’une loi de police n’entrave pas le jeu de la clause attributive de juridiction, D. 2009, 200 Jobard-Bachelier/Train, Note, Clunet 126 (2009), 599 Karaquillo, Etudes de quelques manifestations des lois d’application immédiate dans la jurisprudence française de droit international privé (1977) Kinsch, Le fait du prince étranger (1994) Kleiner, La prohibition de payer en espèces: une loi de police applicable aux seuls paiements faits en France, D. 2012, 2289 Andreas Köhler, Eingriffsnormen – Der “unfertige Teil” des europäischen IPR (2013) Kuckein, Die Berücksichtigung von Eingriffsnormen im deutschen und englischen internationalen Vertragsrecht (2008) Kuipers/Migliorini, Qu’est-ce que sont les “lois de police”? – Une querelle franco-allemande après la communautarisation de la Convention de Rome, ERPL 2011, 18 Lüttringhaus, Eingriffsnormen im internationalen Unionsprivat- und Prozessrecht: Von Ingmar zu Unamar, IPRax 2014, 146 Mankowski, Zur Frage der Anwendung oder Auswirkung drittstaatlicher Eingriffsnormen im internationalen Vertragsrecht, RIW, 1994 688 Mankowski, Art. 34 EGBGB erfaßt § 138 BGB nicht!, RIW 1996, 8 Mankowski, Verbraucherkreditverträge und europäisches IPR: internationale Zuständigkeit und Eingriffsrecht, ZEuP 2008, 845

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Article 9 Mankowski, Drittstaatliche Embargonormen, Außenpolitik im IPR, Berücksichtigung von Fakten statt Normen: Art. 9 Abs. 3 im praktischen Fall (zu Cour d’appel de Paris, 25.2.2015 – 12/23757), IPRax 2016, 485 Martiny, Der deutsche Vorbehalt gegen Art. 7 Abs. 1 der EG-Schuldvertragsübereinkommens vom 19.6. 1980 – seine Folgen für die Anwendung ausländischen zwingenden Rechts, IPRax 1987, 227 Pierre Mayer, Les lois de police étrangère, Clunet 108 (1981), 277 Nuyts, L’application des lois de police dans l’espace (Réflexions à partir du droit belge de la distribution commercial et du droit communautaire) RCDIP 88 (1999), 31 Nuyts, Les lois de police et dispositions impératives dans le Règlement Rome 1, Rev. dr. comm. belge 2009, 553 Neumayer, Autonomie de la volonté et dispositions impératives en droit international privé des obligations, RCDIP 46 (1957) 579 and RCDIP 47 (1958), 53 Pauknerová, Mandatory Rules and Public Policy in International Contract Law, ERA Forum 2010, 29 Pocar, La legge applicabile ai contratti con i consumatori, in: Treves (ed.), Verso una disciplina comunitaria della legge applicabile ai contratti (Padova 1983), p. 303 Radicati di Brozolo, Mondialisation, juridiction, arbitrage: vers des règles d’application semi-immédiate?, RCDIP 92 (2003), 1 Remien, Variationen zum Thema Eingriffsnormen nach Art. 9 Rom I-VO und Art. 16 Rom II-VO unter Berücksichtigung neuerer Rechtsprechung zu Art. 7 Römer Übereinkommen, in: FS Bernd von Hoffmann (2012), p. 334 Rémy, Exception d’ordre public et mécanisme des lois de police en droit international privé (2008) Wulf-Henning Roth, Savigny, Eingriffsnormen und die Rom I-Verordnung, in: FS Gunther Kühne (2009), p. 859 Schnyder, Wirtschaftskollisionsrecht, Sonderanknüpfung und extraterritoriale Anwendung wirtI.

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General Remarks 1. Purpose of the rule . . . . . . . . . . . . . . . . . . . . . . . 1 2. Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3. Remarks as to Methodology . . . . . . . . . . . . . 8

Rome I Regulation schaftsrechtlicher Normen unter besonderer Berücksichtigung von Marktrecht (Zürich 1990) Schubert, Internationale Verträge und Eingriffsrecht – Ein Beitrag zur Methode des Wirtschaftskollisionsrechts, RIW 1987, 729 Schulte, Die Anknüpfung von Eingriffsnormen, insbesondere wirtschaftsrechtlicher Art. im internationalen Vertragsrecht (1975) Siehr, Ausländische Eingriffsgesetze im inländischen Wirtschaftskollisionsrecht, RabelsZ 52 (1988), 41 Sperduti, Norme di applicazione necessaria e ordine pubblico, Riv. dir. int. 1976, 469 Tang, The Interrelationship of European Jurisdiction and Choice of Law in Contract, (2008) 4 JPrIL 35 Thorn, Eingriffsnormen, in: Ferrari/Leible (eds.), Ein neues Internationales Vertragsrecht für Europa – Der Vorschlag für eine Rom I-Verordnung (2007), p. 129 Treves, Norme imperative e di applicazione necessaria nella Convenzione di Roma del 19 giugno 1980, in Verso una disciplina comunitaria della legge applicabile ai contratti (Padova 1983), p. 25 von Hoffmann, Inländische Sachnormen mit zwingendem internationalem Anwendungsbereich, IPRax 1989, 261 Voser, Die Theorie der lois d’application immédiate, Untersuchung zur zwingenden Anwendung von Bestimmungen des schweizerischen Rechts gemäss Art. 18 IPRG (1993) Wengler, Die Anknüpfung des zwingenden Schuldrechts im internationalen Privatrecht. Eine rechtsvergleichende Studie, ZVglRWiss 54 (1941), 168 Wengler, Sonderanknüpfung, positiver und negativer ordre public, JZ 1979, 175 Wilderspin/Lewis, “Les relations entre le droit communautaire et les règles de conflit de lois”, RCDIP 2002, 1 et 289 Wojewoda, Mandatory Rules in Private International Law, Maastricht J. Eur. & Comp. L. 2012, 9 Zweigert, Nichterfüllung auf Grund ausländischer Leistungsverbote, RabelsZ 14 (1942), 283.

4. 5. a) b)

Legislative history of the provision . . . . 11 Comparison with other texts Rome II Regulation . . . . . . . . . . . . . . . . . . . . . . 14 Succession Regulation . . . . . . . . . . . . . . . . . . . 15

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II.

III.

c) Matrimonial Property and Registered Partnership Regulations . . . . . . . . . . . . . . . . . 16 d) Other regulations . . . . . . . . . . . . . . . . . . . . . . . . 17 e) National codifications . . . . . . . . . . . . . . . . . . . 18 f) International instruments . . . . . . . . . . . . . . . 19 The Scope of Application of Art. 9 and its Relationship to Other Provisions of the Regulation 1. Scope of application a) Material scope . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 b) Universal application . . . . . . . . . . . . . . . . . . . . 23 2. Art. 9 and other provisions of the Regulation a) Art. 9 and the “ordinary” choice-of-law rules of the Regulation . . . . . . . . . . . . . . . . . . 24 b) Art. 9 and the protective choice-of-law rules of Arts. 6 and 8 . . . . . . . . . . . . . . . . . . . . 26 c) Art. 9 and other mechanisms for the application of mandatory provisions . . 33 d) Special choice-of-law rules in EU law instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 e) Art. 9 and public policy . . . . . . . . . . . . . . . . . 42 The Notion of Overriding Mandatory Provisions 1. The sources of overriding mandatory provision a) National law rules . . . . . . . . . . . . . . . . . . . . . . . 45 b) European law rules . . . . . . . . . . . . . . . . . . . . . . 47 c) International law . . . . . . . . . . . . . . . . . . . . . . . . . 52 2. The definition of overriding mandatory provisions and its impact . . 53 3. The elements of the definition . . . . . . . . . 60 a) A mandatory provision . . . . . . . . . . . . . . . . . 62 b) A provision, the respect for which is crucial for safeguarding public interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 c) A provision with an overriding reach . 86 4. Other unwritten conditions a) Compatibility with EU law and public international law . . . . . . . . . . . . . . . . . 91 b) A connection with the enacting State (“Inlandsbeziehung”) . . . . . . . . . . . . . . . . . . . . 95 5. The competence to examine the

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Article 9 compliance with the conditions under Art. 9 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 IV. Overriding Mandatory Provisions of the lex fori . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 V. Overriding Mandatory Provisions of a Foreign lex contractus 1. Applicability of the provisions of the lex contractus . . . . . . . . . . . . . . . . . . . . . . 108 2. The impact of the will of the parties . 117 VI. Overriding Mandatory Provisions of the Law of a “Third” State 1. General remarks a) Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 b) Purpose of Art. 9 (3) . . . . . . . . . . . . . . . . . . 123 c) The new conditions set by Art. 9 (3) 125 d) Overall appraisal . . . . . . . . . . . . . . . . . . . . . . . 131 2. The conditions for giving effect to a foreign mandatory provision a) A foreign provision . . . . . . . . . . . . . . . . . . . . 141 b) An overriding mandatory provision . 142 c) A provision that renders the performance unlawful . . . . . . . . . . . . . . . . . . . . . 149 d) A provision of the law of the place of performance . . . . . . . . . . . . . . . . . . . . . . . . . 154 3. The court’s discretion . . . . . . . . . . . . . . . . . 168 a) Reasons for giving effect to a foreign overriding provision . . . . . . . . . . . . . . . . . . . 170 b) Factors to be taken into account . . . . . 172 c) Limits to the court’s discretion . . . . . . . 179 4. Giving effect to a foreign overriding provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 5. The impact of Art. 9 (3) on alternative ways for indirectly applying foreign overriding provisions . . . . . . . . . . . . . . . . . . 185 VII. The Impact of Overriding Mandatory Provisions on Conflicts of Jurisdiction . 192 1. Overriding mandatory rules and jurisdiction a) General remarks . . . . . . . . . . . . . . . . . . . . . . . 193 b) Overriding mandatory provisions and choice-of-court agreements . . . . . . 195 2. Overriding mandatory provisions and the recognition and enforcement of foreign decisions . . . . . . . . . . . . . . . . . . . . 207

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I. General Remarks 1. Purpose of the rule 1 In the system for the determination of the applicable law instituted by the Rome I Regula-

tion, an important role is attributed to the “overriding mandatory provisions”, dealt with by Art. 9 of the Regulation. This provision aims at ensuring a balance between the main objectives of the Regulation, in particular the uniformity of the choice-of-law rules among the Member States and the admission of party autonomy, on the one hand, and the safeguard of fundamental States’ interests, on the other.1

2 The choice-of-law rules included in the Regulation are mainly based on the protection of

party interests. This is obviously the case for Art. 3, which recognizes party autonomy in a quite broad way. Failing a party choice, most of the connecting factors of Arts. 4, 5 and 7 are also conceived with the purpose of striking a balance between the parties’ interests, in particular by giving priority to the party who is to effect the characteristic performance under the contract. Finally, the declared goal of Arts. 6 and 8 is to protect the weaker party, i.e. the consumer or the employee. 3 States’ regulatory interests do not play a central role in the economy of the Regulation,

contrary to the prevailing approach in the United States, where, since the so-called “American revolution”, conflicts of laws are commonly addressed through the prism of “governmental interests’ analysis”.2 This is partially corrected by Art. 9.3 This provision deals with those mandatory rules whose observance is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation. Because of their importance for the State that has enacted them, such provisions must be observed even in international situations, irrespective of the law governing the contract under the normally applicable choice-of-law rules of the Regulation.

4 The practical importance of Art. 9 should not been overestimated.4 As stressed by Recital 37

of the preamble, the application of overriding mandatory provisions is only allowed “in exceptional circumstances”, as it is also the case for public policy under Art. 21. According to the ECJ, Art. 9 – “as a derogating measure” – must be interpreted strictly.5 Particularly rare are the courts’ decisions giving effect to foreign overriding mandatory provision, as allowed by Art. 9 (3).6 1

2

3 4 5 6

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The need for a balance between overriding mandatory provisions and the principle of the freedom of contract was underlined by the ECJ, United Antwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare, (Case C-184/12) (2013), para. 49. As is well-known, interest analysis was first proposed by Brainerd Currie: see his Selected Essays on the Conflict of Laws (1963). On the distinction between the American interest analysis and the European notion of overriding mandatory provisions, see Guedj, The Theory of the Lois de Police, A Functional Trend in Continental Private International Law, AJCL (1991), p. 681 et seq. See Republik Griechenland v. Grigorios Nikiforidis (C-135/15) (2016), para. 43. Magnus, para. 2. Republik Griechenland v. Grigorios Nikiforidis (C-135/15) (2016), para. 44. See, however, the recent ECJ decision in the case Republik Griechenland v. Grigorios Nikiforidis (C-135/ 15) (2016). See also Cour d’Appel de Paris, 25.2.2015 – 12/23757.

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Article 9

2. Terminology The term “overriding mandatory provisions”, which now appears in the title and in the 5 wording of Art. 9, has been preferred to “mandatory provisions” used in Art. 7 Rome Convention. This expression refers to the capacity of these provisions to “override” (i.e. to “be more important than”, to “prevail over”) the otherwise applicable law. Other terms used in legal English to define such provisions are “overriding statutes” or “internationally mandatory rules”.7 This language was chosen in order to clearly distinguish such rules from simply “internally” 6 (or “domestically”) mandatory provisions, which cannot be derogated from by contract. Internally mandatory provisions must be observed in purely domestic situations; they must also be complied with in international situations, but only when they belong to the law applicable to the contract. By contrast, overriding mandatory provisions are applicable, in international situations, even when they are not part of the law governing the contract. In order to avoid confusion between these notions, all references to “mandatory provisions”, which were included in the Rome Convention were replaced with the language “provision […] which cannot be derogated from by contract” (see Arts. 3 (3), 3(4), 6 (1) and 8 (2) of the Regulation). The term “mandatory provisions” is now only used in Art. 9 of the Regulation.8 In the French version of the Regulation, the expression “lois de police”, echoing Art. 3 of the 7 French Civil Code and widely-used in French legal doctrine and case law, corresponds to that used in Art. 7 Rome Convention. It has been preferred to other common expressions, such as “lois d’application immédiate” or “règles d’ordre public”. The same term (“leyes de policía”) has been used in the Spanish text, although it is not very common in the Spanish legal language (where these provisions are normally qualified as “normas de aplicación necesaria”). In the German version, “Eingriffsnormen”, which refers to the ability of these norms to “interfere” (“eingreifen”) in the contractual relationship in order to safeguard public interests,9 has been preferred to “zwingende Vorschriften” (or “international zwingende Vorschriften”). In Italian and Portuguese, the terms “norme di applicazione necessaria” and “normas de aplicação imediata” reflect the general use. 3. Remarks as to Methodology In conformity with the doctrinal understanding, overriding mandatory provisions require a 8 different approach to conflict of law issues. To rule on their applicability, the court does not have to determine “which law is applicable” to a certain relationship, but rather whether the object and the purpose, or, in other words, the policy of a mandatory rule, commands its application in the particular case. Using German terminology, one can say that, in the 7

8 9

See Hartley, Mandatory Rules in International Contracts: the Common Law Approach, 266 Collected Courses (1997), p. 365. Nuyts, RDC (2009), p. 556. Refer for instance to: Neuhaus, Die Grundbegriffe des internationalen Privatrechts, 2nd ed. (1976), p. 33 et seq.; Schulte, Die Anknüpfung von Eingriffsnormen, insbesondere wirtschaftrechtlicher Art, im internationalen Vertragsrecht (1975); Drobnig, Die Beachtung von ausländischen Eingriffsgesetzen – eine Interessenanalyse, in: Festschrift für Gerhard Kegel (1987), p. 95 et seq.; Siehr, Ausländische Eingriffsgesetze im inländischen Wirtschaftskollisionsrecht, RabelsZ (1988), p. 41 et seq.

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presence of such norms, the solution of a conflict-of-law issue requires reasoning based on the content and purpose of a rule (“vom Gesetze aus”) and not, as with “classical” conflictof-laws methodology inspired by von Savigny’s theory, on the legal issue (“vom Sachverhalt her”). 9 Contrary to classical, “bilateral” choice-of-law rules, which can indistinctly lead to the

application of the lex fori or of a foreign law, overriding mandatory provisions are the expression of a “unilateral” approach to conflict of laws. Based on their content and their policy, these rules unilaterally determine their own scope of application, irrespective of the choice-of-law rules of the forum. Such unilateral determination of the rule’s scope cannot be directly “extrapolated” in order to determine the applicability of similar provisions belonging to a different legal system; the applicability of these foreign rules depends, in turn, on their own content and policy. 10 Notwithstanding a certain similarity with the policy-oriented methodology proposed in the

United States by the tenants of the “interest analysis”,10 the European approach is less radical than the American approach.11 While interest analysis applies to all kinds of legal rules and is meant to entirely replace “bilateral”, “jurisdiction-selecting” choice-of-law rules, overriding mandatory provisions coexist in the Regulation with “classical” choice-of-law rules and only exceptionally prevail over them. This is one expression of what has been called “a pluralist approach” to conflict of laws, meaning that different methodologies are used in parallel in order to attain a balanced solution to conflict-of-laws issues. 4. Legislative history of the provision

11 The predecessor of Art. 9 was Art. 7 Rome Convention, a widely discussed provision. Art. 7

(2) of the Convention dealt with the overriding mandatory provisions of the lex fori. Although the effects of that rule were not disputed, it raised the very difficult and controversial question of the characterisation of a national rule as an overriding mandatory provision. Art. 7 (1) of the Convention was even more controversial, since it opened up the possibility for the national courts to “give effect” to foreign mandatory provision not belonging to the law of the contract. Fearing the lack of legal certainty allegedly caused by this provision and its potentially disruptive effects on the uniformity of the applicable law, five Contracting States (Germany, Ireland, Luxembourg, Portugal and the United Kingdom) made a reservation against Art. 7 (1), as allowed by Art. 22 Rome Convention. 12 In its Proposal,12 the Commission suggested including the definition of overriding manda-

tory provision, which we find now in Art. 9 (1). Besides some drafting changes, no other significant novel additions were included in the Proposal. During the subsequent legislative stages, the negotiation focused on the future of Art. 7 (1). 13 The new provision of Art. 9 introduces various novel changes, one of which is purely formal

whereas the other two relate to very substantial issues. At the formal level, the order of the 10 11

12

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See also Stone, EU Private International Law, 2nd ed. (2010), p. 342. See Guedj, The Theory of the Lois de Police, A Functional Trend in Continental Private International Law, AJCL (1991), p. 681 et seq. COM (2005) final, of 15.12.2005.

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two paragraphs of Art. 7 of the Convention has been judiciously reversed. The provision of Art. 7 (2) of the Convention relating to overriding mandatory provisions of the lex fori, which has become Art. 9 (2) of the Regulation, now precedes the rule relating to foreign overriding mandatory provisions that has been included, with certain important modifications, in the third paragraph of Art. 9. This amendment, which is purely cosmetic and without practical effect, deserves approval, since it simplifies the comprehension of this complex provision. Much more significant are the modifications relating to the substance, in particular the introduction of a definition of overriding mandatory provisions in Art. 9 (1)13 and the reformulation in a more restrictive manner of the conditions for the application (or the consideration) of the foreign overriding mandatory provisions under Art. 9 (3).14 5. Comparison with other texts a) Rome II Regulation Some other European regulations on private international law also include a specific section 14 dealing with overriding mandatory provisions. Thus, Art. 16 Rome II Regulation on the law applicable to non-contractual obligations refers to the overriding mandatory provision of the lex fori. The language of this provision is identical to that of Art. 7 (2) Rome Convention. In substance, the rule also corresponds to Art. 9 (2) Rome I Regulation. However, Art. 16 does not, unlike Art. 9 (1), include a definition of overriding mandatory provisions, nor does it include a provision dealing with foreign mandatory provisions such as that seen in Art. 9 (3).15 However, without referring to overriding provisions, Art. 17 Rome II Regulation resembles Art. 9 (3), in that it provides that “account shall be taken” of the rules of safety and conduct which are in force at the place of the event giving rise to the liability.16 b) Succession Regulation The Succession Regulation includes in Art. 30 a provision referring to the “special rules” 15 which are “applicable irrespective of the law applicable to the succession”. These overriding mandatory provisions must apply to the succession when, “for economic, family or social considerations”, they “impose restrictions concerning or affecting the succession” in respect of specific assets (such as immovable property, certain enterprises or other special categories of assets) located in the country where the provisions are in force. This rule is not limited to mandatory rules of the lex fori but also covers foreign mandatory rules provided that they belong to the law of the place of the asset’s location. c) Matrimonial Property and Registered Partnership Regulations The regulations on Matrimonial Property and on the Property Consequences of Registered 16 Partnership both contain a provision (Art. 22 resp. Art. 17) referring to the overriding mandatory provision of the lex fori. The language of these sections includes a definition

13 14 15

16

See infra, Art. 9 para. 53 et seq. See infra, Art. 9 para. 128 et seq. According to Hellner JPIL (2009), p. 452, “no strong case was really made for the need of such a provision” in the area of non-contractual obligations. See also Hellner JPIL (2009), p. 452.

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on the line of Art. 9 (1) Rome I Regulation. However, no reference is provided to foreign mandatory provisions. d) Other regulations 17 Other PIL regulations do not even refer to overriding mandatory provisions. This is the case

for the Rome III Regulation on the law applicable to divorce and of the Maintenance Regulation; for the purpose of determining the applicable law, the latter refers to the Hague Protocol of 23 November 2007, which does not include a section on overriding mandatory provisions. e) National codifications 18 Several national codifications of private international law include a section referring to

overriding mandatory provisions.17 However, only a few of them contain a definition of such provisions. Even rarer are provisions on foreign overriding mandatory rules.18 f) International instruments 19 Besides the Rome Convention, other international instruments also include specific norms

on overriding mandatory provisions. This is the case for some Hague Conventions, such as the Hague Convention on the Law Applicable to Agency of 14 March 1978 (Art. 16), the Hague Convention on the Law Applicable to Trusts and their Recognition of 1 July 1985 (Art. 16) and the Hague Principles on Choice of law in International Commercial Contracts (Art. 11).19 The Mexico Convention on the Law Applicable to Contracts (CIDIP V) of 17 March 1994 also includes a specific provision (Art. 11). II. The Scope of Application of Art. 9 and its Relationship to Other Provisions of the Regulation 1. Scope of application a) Material scope 20 As a part of the Rome I Regulation, Art. 9 directly governs overriding mandatory provisions

in the area of contracts, i.e. such provisions, which, irrespective of their private or public law nature, have an effect on the formation, the validity, or the interpretation of a contract, or on the rights and duties of the parties thereof. 21 In the absence of a “Rome 0 Regulation”, covering the general questions of private inter-

national law, the definition of overriding mandatory provisions in Art. 9 (1) is probably also relevant for other European regulations, which refer to this category of norms without defining them, such as the Rome II Regulation (Art. 16) and the regulations on matrimonial 17

18

19

608

See for instance: Art. 17 of the Italian PIL Statute of 1995, Art. 20 of the Belgian PIL Code of 2004; Art. 7 of Book 10 of the Dutch Civil Code; Art. 8 of the Polish PIL Act of 2011. Well-known examples are Art. 19 of the Swiss Private International Law Act of 1987 and Art. 3079 of the Quebec Civil Code of 1994. Among the most recent national codifications see for instance: Art. 20 (3) of the Belgian PIL Code of 2004; Art. 7 (3) of Book 10 of the Dutch Civil Code; Art. 8 (2) of the Polish PIL Act of 2011. The text of the Principles is available on the website of the Hague Conference of Private International Law, www.hcch.net.

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property and the property consequences of registered partnership.20 However, paragraphs 2 and 3 of Art. 9 do not have this indirect function. Therefore, it is not possible, in the absence of a specific provision in the relevant regulation, to resort to Art. 9 Rome I Regulation in order to apply or to give effect to overriding mandatory provisions in areas of law other than contractual obligations. It has been suggested that the reference in some provisions of the Rome II Regulation (such 22 as Arts. 4 (3), 10 (1), 11 (1) and 12 (1)) to the law applicable to the contract also encompasses Art. 9.21 However, such an extension of Art. 9’s scope is not a matter of course. It seems that either the overriding mandatory provision has an effect on the contract as such (and is therefore not relevant for the non-contractual obligations falling under the Rome II Regulation), or it specifically applies to the non-contractual obligation at hand; in the latter case, it is not covered by Art. 9 but by its counterpart, Art. 16 Rome II Regulation, which does not provide for third countries’ provisions. b) Universal application As all other rules of the Rome I Regulation, Art. 9 enjoys a universal scope (Art. 2). In other 23 words, the overriding mandatory provisions referred to by this rule are applicable whether or not they are part of the law of a Member State. This is not relevant for Art. 9 (2), which only refers to the overriding mandatory provision of the lex fori (which necessarily is the law of a Member State), but for Art. 9 (3): this rule allows the court, under certain conditions, to give effect to foreign overriding provisions, irrespective of whether they are part of the law of a Member State or not. 2. Art. 9 and other provisions of the Regulation a) Art. 9 and the “ordinary” choice-of-law rules of the Regulation Art. 9 belongs to the provisions of the Regulation with a general scope of application. As with 24 Arts. 3 and 4, but contrary to Arts. 5 to 8 of the Regulation, Art. 9 is applicable to contracts in general and not to some specific categories of contracts only. Art. 9 applies in parallel with Arts. 3, 4, 5 and 7 of the Regulation. These choice-of-law rules 25 determine the law applicable to the contract. Irrespective of this, Art. 9 allows, under certain conditions, the application of overriding mandatory rules belonging to the lex fori or to the law of a third State. When such rules are applicable under Art. 9, they prevail over any irreconcilable provision belonging to the law of the contract. In this sense, one can say that Art. 9 partially derogates from the choice-of-law rules included in the Regulation. b) Art. 9 and the protective choice-of-law rules of Arts. 6 and 8 The relationship of Art. 9 with Arts. 6 and 8 of the Regulation is much more controversial. 26 Latter provisions contain special choice-of-law rules, the objective of which is to protect the weaker party to the contract, i.e. the consumer and the employee respectively. This goal is pursued, on one hand, by submitting the contract to a law, with which the weaker party is particularly familiar, i.e. respectively the law of the country of the consumer’s habitual residence and the law of the place where (or from where) the employee habitually carries 20 21

Magnus, para. 48. Magnus, para. 15.

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out his work (Arts. 6 (1) and 8 (2)). On the other hand, if the parties have chosen the law applicable to the contract, such a choice cannot have the result of depriving the weaker party of the protection afforded to him by the mandatory provisions of the law, which would be applicable in the absence of a choice (Arts. 6 (2) and 8 (1)). In this framework, it is disputed whether Art. 9 can also be relied upon by the weaker party in order to invoke a protective provision, which would not be applicable under Arts. 6 or 8.22 27 Before taking a position, it should be noted that the problem mainly arises in two scenarios.23

The first one is when, although the contract is a consumer contract covered by Art. 6, the specific conditions set up by this provision are not satisfied: this is the case, in particular, when the trader did not pursue his activities in the country of the consumer’s habitual residence, nor did he direct such activities to that country, as required by Art. 6 (1). Can a protective provision in force in the country of the consumer’s habitual residence be nonetheless applied based on Art. 9?24 The second situation arises when, although all conditions set up by Arts. 6 and 8 are satisfied, the weaker party relies on a protective rule belonging to a law other than that designated by those choice-of-law rules: for instance, failing a party choice, can the consumer invoke, based on Art. 9, a rule in force in the country of the trader’s place of business? Can the employee rely on a rule in force in the country of its own habitual residence? 28 To answer this question, it is first necessary to determine whether a provision aimed at the

protection of the weaker party can qualify as an overriding mandatory provision within the meaning of Art. 9. As will be shown when discussing the definition of overriding mandatory provisions under Art. 9 (1), the answer is probably yes.25 However, this does not yet mean that Art. 9 can be applied concurrently with Arts. 6 and 8. In fact, according to a widely held view,26 which was endorsed by German courts under the Rome Convention,27 the concurrent application of these provisions should be rejected, because recourse to Art. 9 when the

22

23

24 25 26

27

610

This was accepted in France by the Cour de cassation, 23.5.2006, Dalloz (2006), p. 2798, note by Audit; RCDIP (2007), p. 85, note Cocteau-Senn; see also Mankowski ZEuP (2008), p. 845 et seq. Quite surprisingly, this decision classified as a loi de police within the meaning of Art. 7 (2) Rome Convention a jurisdictional rule of the French Code de la consommation. See also the decisions of the Luxembourg courts Hames v. Spaarkrediet and Branczyk v. Gramegna and Grand-Duché de Luxembourg, cited by Plender/Wilderspin, para. 12–0138 et seq. A different situation arises when Art. 6 points towards the law of the consumer’s habitual residence, but the law of the forum includes an overriding mandatory provision, which is less favourable to the consumer. In such a case, there is a real conflict between Arts. 6 and 9. However, this can only be the case if (a) the rule of the lex fori is a rigid rule as opposed to a “minimum standard” rule (something which is not very common in the field of consumer protection: see Plender/Wilderspin, para. 12–034 and 12–043) and (b) if it is also aimed at protecting consumers who have their residence abroad (which is also rather uncommon). Plender/Wilderspin, para. 12–033. See infra, Art. 9 para. 76 et seq. See for instance Roth, in: Festschrift für Gunther Kühne (2009), p. 868; Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 26. Bundesgerichtshof, 19.3.1997, published in French in RCDIP (1998), p. 610, with note by Lagarde. See also Bundesgerichtshof, 26.10.1993, IPRax (1994), p. 449.

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conditions set up by Arts. 6 and 8 are not satisfied would be inconsistent with the rationale of these rules. In our opinion, the concurrent application of Art. 9 is in itself not inconsistent with Arts. 6 29 and 8, in particular because these provisions do not share the same purpose.28 Arts. 6 and 8 specifically aim at the protection of the weaker parties as individuals. They only focus on such individual interests, and determine how and under which conditions those interests should be protected. Thus, by setting the specific conditions of Art. 6 (1), the drafter of the Regulation considered that a consumer should only be entitled to rely on the protective rules of his country’s law when the trader, in some way, “targeted” that country; failing this, the consumer does not deserve a specific protection. However, Art. 9 has a different purpose, its goal being the safeguarding of a country’s public interests. As made clear by its wording, recourse to this article is only possible when the application of a specific provision (even if it is a rule protecting consumers or employees) is regarded by a country as crucial for safeguarding its political, social or economic organisation. The individual consumer’s interests are not decisive in this regard. That being so, it is perfectly conceivable, at least in theory, that a country has a crucial interest in compliance with a specific overriding mandatory provision in the area of consumer or employment law, even though the specific conditions of Arts. 6 or 8 are not satisfied. In practice, however, this will only very rarely be the case, in particular in the area of 30 consumer law, where the protection net of Art. 6 is now very wide.29 Thus, it is extremely unlikely that the country of the consumers’ habitual residence will assert a crucial public interest in protecting its consumers when they were not specifically “targeted” by foreign traders, such as when they buy goods or services during their holidays abroad.30 It is also unlikely that a country other than the country of the consumer’s habitual residence will have a crucial interest in imposing the application of its mandatory rules for the protection of “foreign” consumers. The conditions for a concurrent application of Art. 9 can probably more easily be satisfied in the area of employment law: thus, it cannot be a priori excluded that a country might have a crucial interest in protecting its citizens through mandatory regulations when involved in working activities abroad. In any case, these instances are probably quite rare: thus, the concurrent application of Arts. 6, 8 and 9, albeit theoretically possible, should be allowed only in very exceptional cases.31 However, preceding remarks only refer to mandatory rules protecting the consumers or the 31 employees. The analysis is completely different with regard to overriding mandatory provisions having a different goal, notably the safeguarding of a State’s political or economic interests. With respect to such norms, there is no doubt that Art. 9 can be applied in parallel with Arts. 6 and 8. Thus, embargo measures prohibiting the import of specific goods from a foreign country are obviously applicable under Art. 9, even when they impact on a consumer

28

29

30 31

Magnus, para. 25 et seq. See also Plender/Wilderspin, para. 12–040, and Renner, in: Calliess, Art. 9 Rome I, para. 5, who underline the opening words of Art. 9 (2) (“[n]othing in this Regulation shall restrict […]”). See also Archer, EJCL (2009), p. 699; Roth, in: Festschrift für Gunther Kühne (2009), p. 868; Remien, in: Festschrift für Bernd von Hoffmann (2011), p. 337; Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 26. This kind of scenarios has led to the decisions of the above-mentioned decisions of the German courts. In the result, we agree with Freitag IPRax (2009), p. 112, who invites the “greatest prudence”.

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contract. Also, provisions reducing the salary of employees in the public sector for reason of financial difficulties of the employer State can fall under Art. 9.32 32 It should also be pointed out that the applicability of Art. 9 should not be disputed when the

contract is not covered by Arts. 6 or 8, either because it is not a consumer or employment contract within the meaning of these provisions (for instance an insurance contract, a carriage contract or a commercial agency contract), or because it is specifically excluded from the scope of Art. 6 under paragraph 4. In such cases, in the absence of special choice-oflaw rules, the protection of the weaker party is only possible under Art. 9 provided that one country’s mandatory provision are regarded as crucial for the safeguard of its crucial public interests. c) Art. 9 and other mechanisms for the application of mandatory provisions 33 Art. 9 refers to “overriding mandatory provisions”. It thus covers only those mandatory

provisions that, because of their “crucial” role for the safeguarding of a country’s public interests, are applicable “irrespective of the law otherwise applicable to the contract”.

34 Although it doesn’t use the term “overriding mandatory provisions”, Art. 11(6) of the

Regulation also implicitly refers to this kind of provisions. In particular, this rule imposes compliance with the overriding mandatory provision of the lex rei sitae, which set formal requirements for contracts concerning immovable property (rights in rem in or tenancy of immovable property). Contrary to Art. 9, Art. 11(6) does not distinguish between provisions of the lex fori and foreign provisions: the provisions of the lex rei sitae are declared applicable, irrespective of the place of proceedings. 35 Arts. 3 (3), 3 (4), 6 (2) and 8 (1) of the Regulation refer to provisions “which cannot be

derogated from by agreement”. Contrary to Art. 9 and 16 (1), this reference encompasses all mandatory provisions of a certain legal system, even if they do not have an “overriding” reach and therefore do not fall under the definition of Art. 9 (1). As will be discussed later, mandatory provisions form a broader category of norms, among which only some qualify as overriding mandatory provisions. Therefore, if all mandatory provisions of a certain law are applicable by virtue of a rule of the Regulation, this also covers overriding mandatory provisions, so that recourse to Art. 9 is superfluous in that case. 36 The first of such rules, Art. 3 (3), corresponds to Art. 3 (3) Rome Convention. Pursuant to

this article, in contracts without cross-border elements, the parties’ choice of the applicable law shall not prejudice the mandatory provision of the law of the only country with which the contract is connected. The observance of overriding mandatory rules is also safeguarded by this provision. In such a case, the parties’ choice can only derogate from the dispositive rules of the otherwise applicable law, similar to that which occurs when the parties incorporate a foreign law into their contract. 37 Similarly, Art. 3(4), which is a “novelty” of the Regulation, ensures the application of the

mandatory provisions of European law notwithstanding the parties’ choice of the law of a non-Member State, provided that all other elements relevant to the situation are located in one or more Member States. In this case also, the reference to mandatory provisions of 32

612

See also the ECJ decision in the case Republik Griechenland v. Grigorios Nikiforidis (C-135/15) (2016).

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European law obviously includes overriding mandatory provisions of that legal system. However, contrary to an isolated opinion, this does not mean that Art. 9 cannot be applied, or is superfluous, with respect to European law provisions. It should be kept in mind that Art. 3(4) only covers pure “intra-European” situations, i.e. contracts without any relevant connection to a non-Member State. By contrast, if relevant elements of the situation are located outside the European Union, only Art. 9 (and in particular Art. 9 (2)) can be relied upon to ensure the application of overriding mandatory provisions of European law. This is, for instance, the case in situations like the one which led to the Ingmar decision of the European Court of Justice.33 As already mentioned, Arts. 6 (2) and 8 (1) of the Regulation also refer to provisions which 38 cannot be derogated from by contract. Under these articles, the parties’ choice of the applicable law cannot deprive the consumer, respectively the employee, of the protection afforded to him by the mandatory provision of the otherwise applicable law. Once again, this reference also includes overriding mandatory provisions. However, as mentioned before, the concurrent application of Art. 9 is possible (although this does not occur very frequently) for ensuring the application of those provisions which are not covered by Arts. 6 or 8, provided that these are regarded as crucial for safeguarding a country’s public interest. d) Special choice-of-law rules in EU law instruments Pursuant to Art. 23, the Regulation shall not prejudice the application of provisions of 39 Community law which, in relation to particular matters, lay down conflict-of-law rules relating to contractual obligations. By virtue of this provision, choice-of-law rules included in European law acts prevail over the rules of the Regulation. As shown by the legislative history of Art. 23, this provision also covers the specific clauses, 40 included in several European directives in the area of consumer protection.34 Pursuant to these clauses, the Member States have to take the necessary measures to ensure that the parties’ choice of the law of a non-Member State as the law applicable to the contract cannot deprive the consumer of the protection granted by the substantive rules of the relevant directive, provided that the contract has a close connection with the territory of a Member State. According to a widely held view, this “applicability rule” makes clear that the protective provisions in the EU directives are regarded, by the European legislator, as overriding mandatory provisions having priority over the law chosen by the parties.35 Therefore, in the 33

34

35

Ingmar GB Ltd. v. Eaton Leonard Technologies Inc., (C-381–98) (2000), ECR 2000-I, p. 9305; RCDIP (2001), p. 107, note Idot. On this case, see infra, para. 41. Art. 6 (2) of the Unfair Terms Directive No. 93/13/EC of 5.4.1993; Art. 12 (2) of the Distance Contract Directive No 97/7/EC of 20.5.1997 on the protection of consumers in respect of distance contracts; Art. 7 (2) of the Consumer Sales Directive No. 1999/44/EC of 25.5.1999; Art. 12 (2) of the Timeshare Directive 2008/122 of 1.1.2008; Art. 22(4) of the Consumer Credit Directive No 87/102/EEC of 23.4.2008. On these directives, see Wilderspin/Lewis, “Les relations entre le droit communautaire et les règles de conflit de lois”, RCDIP (2002), p. 1 et seq., 289 et seq. According to some scholars, even the ‘internal market clause’ included in Art. 3 of the Directive on electronic commerce is to be construed as a “règle d’applicabilité” imposing, under certain circumstances, the mandatory application of the law of the country of origin: Fallon/Meeusen, “Le commerce électronique, la directive 2000/31/CE et le droit international privé”, RCDIP (2002), p. 486 et seq. On this questions see also Plender/Wilderspin, para. 12–051 et seq. Contra: Martiny, in: Münchener Kommentar, para. 24.

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absence of Art. 23, the effect of such clauses would depend on Art. 9 of the Regulation. By virtue of Art. 23, however, these clauses immediately prevail over the Regulation as a matter of European law, so that recourse to Art. 9 is not needed.36 41 One might wonder whether Art. 23 also covers implied applicability rules of European law,

such as that announced by the European Court of Justice in its Ingmar decision. In that case, it was held that Arts. 17 and 18 of the Directive on Commercial Agents could be relied upon by a commercial agent domiciled in a Member State, irrespective of the parties’ choice of the law of a non-Member State.37 The result of such case law is very similar to that of the internal market clauses mentioned above. Notwithstanding this, it is submitted that Art. 23 only covers explicit rules included in European law acts. Implied applicability rules such as that in the Ingmar case require a thorough examination of the content and policy of the European law rule at hand; for the sake of consistency with mandatory provisions of State law, such an analysis should rest on the criteria set for overriding mandatory provisions by Art. 9 (1). e) Art. 9 and public policy 42 Since overriding mandatory provisions prevail over bilateral choice-of-law rules when a

fundamental interest of the forum is at stake, they are functionally very similar to the traditional ordre public exception, which is referred to in Art. 21 of the Regulation. 43 According to a widely held opinion, the difference between these two devices lays in the fact

that ordre public is only a defensive measure against the application of the foreign law designated by the choice-of-law rules, whereas overriding provisions are to be “immediately” applied irrespective of the lex causae. The first operates (“as a shield”) after the governing law has been selected, whereas the latter are applicable (“as a sword”) prior to selection of the applicable law. However, this traditional understanding is challenged by the fact that the application of overriding mandatory rules should not be blind, but should be based on a weighing of policies, by which courts cannot ignore the content of the otherwise applicable law.38 44 In practice, these two devices have similar effects, in particular because after the refusal of a

certain foreign law rule for public policy reasons, the resulting gap is frequently (although not always) filled through the application of the lex fori. Furthermore, public policy is the main tool by which non-compliance with an overriding mandatory provision can be sanctioned at the stage of recognition and enforcement of a foreign decision.39 III. The Notion of Overriding Mandatory Provisions 1. The sources of overriding mandatory provisions a) National law rules 45 Overriding mandatory provisions are often part of the national legal system of a country. 36 37

38 39

614

This is also suggested by Plender/Wilderspin, para. 12–047. Ingmar GB Ltd. v. Eaton Leonard Technologies Inc., (C-381–98) (2000), ECR 2000-I, p. 9305; RCDIP (2001), p. 107, note Idot. See infra, Art. 9 para. 85. See infra, Art. 9 para. 207 et seq.

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This includes both the law in force in the whole of the country and the law applicable in one or more territorial units, such as sister states in a federal system or regions. Of course, not only written law rules, but also non-codified rules, such as customary law or case law rules, can qualify as overriding provisions within the meaning of Art. 9 (1).40 Because of the universal reach of the Regulation (Art. 2), Art. 9, and in particular its para- 46 graph 3, also encompasses the overriding mandatory provisions in force in a non-Member State. b) European law rules European law rules can also be qualified as internationally mandatory within the meaning of 47 Art. 9. This is widely accepted for rules included in EU directives as well as for the national law rules implementing them. The case law of the European Court of Justice also confirms this. Thus, in the well-known 48 Ingmar case,41 the Court held that a commercial agent established in a Member State can rely on Arts. 17 and 18 of the Commercial Agents Directive (and on the national transposition rules) to claim an indemnity upon termination of the contract, even though the law chosen by the parties as applicable to the contract is that of a non-Member State. Although the Court did not use the expression “overriding mandatory provisions” nor any similar notions, and did not refer to the (then applicable) Art. 7 Rome Convention, that decision is generally interpreted as meaning that mandatory provisions included in EU directives (as well as national transposition rules) are applicable irrespective of the otherwise applicable law, provided that they can be regarded as crucial for safeguarding overriding European law interests. This reading is corroborated by the Unamar decision of the European Court of Justice. In 49 this case, a similar question arose with respect to national (Belgian) transposition rules, which had extended the scope of the Commercial Agents Directive, thus ensuring commercial agents protection going beyond that provided by the directive. Contrary to the Ingmar case, the law chosen by the parties was the law of a Member State that had implemented the directive, meeting its minimum standard requirements. This time, the Court examined the issue through the prism of Art. 7 (2) Rome Convention, and came to the conclusion that, in those specific circumstances, the national transposition rules could only have priority over the law chosen by the parties if the court seized found “on the basis of a detailed assessment, that […] the legislature of the State of the forum held it to be crucial, in the legal order concerned, to grant the commercial agent protection going beyond that provided for by that directive, taking account in that regard of the nature and of the objective of such mandatory provisions.” In other words, according to this decision, the seized court has to determine whether the national transposition rules can be qualified as overriding mandatory provisions in the case at hand.42

40 41

42

Magnus, para. 49. Ingmar GB Ltd. v. Eaton Leonard Technologies Inc., (C-381–98) (2000), ECR 2000-I, p. 9305; RCDIP (2001), p. 107, note Idot. See already Plender/Wilderspin, para. 12–048.

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50 According to a widely held (although not unanimous) opinion,43 the specific clause included

in several consumer law directives44 also have the effect of conferring on the relevant substantive rules the character of overriding mandatory provisions. However, reference to Art. 9 has become superfluous for such rules, since their application is now ensured by Art. 23 of the Regulation.45 51 It has been held that recourse to Art. 9 is superfluous in order to ensure the application of

mandatory provisions of EU law which enjoy direct applicability, such as those included in the EU treaties or in EU regulations. Following this opinion, the application of these rules does not depend on their classification as overriding mandatory provisions, because they have in any case priority over national law.46 This is certainly true when the law applicable to the contract is the law of Member States: in this event, EU law provisions are directly applicable to all situations falling within their scope and prevail over contrary national law rules. However, the question is different when the law of a non-Member State governs the contract by virtue of the EU Regulation. In this case, the priority of EU law rules cannot be simply based on their direct applicability, but needs a legal basis under the Rome I Regulation. As we have seen for directives, that legal basis will be Art. 23, when the EU act contains a special choice-of-law rule within the meaning of that provision. Failing this, the relevant EU rules can only prevail over the law applicable to the contract under the conditions of Art. 9. This also means that not all EC law rules, albeit mandatory, can be regarded as internationally mandatory. c) International law 52 Overriding mandatory provisions can also have their sources in public international law, in

particular in international treaties and in the acts of international organisations. Trade embargoes or other personal or economic sanctions adopted by the United Nations are a good example for that. The rules included in these acts are obviously applicable when they are in force (as self-executing provisions or by virtue of a transposition into national law) in the country, the law of which governs the contract under the Regulation. They can also prevail over the law otherwise applicable provided that they meet the conditions of Art. 9. 2. The definition of overriding mandatory provisions and its impact 53 A definition of overriding mandatory provisions was introduced in Art. 9 (1) of the Regu-

lation, following the European Commission’s proposal.47 Pursuant to the new text, overriding mandatory provisions are “provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract” under the Regulation. 54 The introduction of a normative definition of this category of legal provisions no doubt

constitutes an important innovation compared with Art. 7 Rome Convention. This defini43 44 45 46 47

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Roth IPRax (1994), p. 169. Contra: Magnus, para. 37; Martiny, in: Münchener Kommentar, para. 24. See supra, Art. 9 para. 40. Magnus, para. 37. Magnus, para. 37; Martiny, in: Münchener Kommentar, para. 28. See Art. 8 (1) of the Proposal.

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tion is also unique from a comparative law perspective; indeed, to the best of our knowledge, no other text – national or international – contains such a detailed definition of overriding mandatory provisions. As regards its content, the definition is not particularly innovative. Its direct source is to be 55 found in the well-known Arblade decision of the European Court of Justice.48 It should be recalled, however, that, in that decision, the European Court of Justice did not intend to create its own notion of overriding mandatory provisions (the question posed by the Belgian court did not require the Court to do so) and restricted itself to confirming the principle – clear, in and of itself – that Community law takes precedence over internal law, including those national norms which, in their own legal system, are regarded as overriding mandatory provisions.49 Thus, the definition of lois de police endorsed by the Court was no other that that used in Belgian law. In turn, this definition stems from French legal doctrine, in particular from the writings of Phocion Francescakis on “lois d’application immediate”.50 Although the doctrinal and jurisprudential origins of the definition appear unequivocal, the 56 consequences of its inclusion into the Regulation are more controversial. The definition certainly has the beneficial effect of clarifying the meaning of overriding 57 mandatory provisions. On this point, the Rome Convention maintained a certain ambiguity between the notion of lois de police and that of mandatory rules. Indeed, the expression “mandatory rules” was used with different meanings in various provisions of the Convention. Whereas pursuant to Arts. 3 (3) (contracts having no cross-border elements), 5 (2) (consumers contracts) and 6 (1) (employment contracts), this term referred to all the rules “which cannot be derogated from by contract”, the same term was used in the title of Art. 7 48

49

50

Jean-Claude Arblade, Arblade & Fils SARL and Bernard Leloup, Serge Leloup et Sofrage SARL (cases C-369/96 and C-376/96) (1999), ECR 1999-I, p. 8453, para. 30, where it was held that the terms “lois de police et de sûreté” as used in Belgian law should be understood “as applying to national provisions compliance with which has been deemed to be so crucial for the protection of the political, social or economic order in the Member State concerned as to require compliance therewith by all persons present on the national territory of that Member State and all legal relationships within that State.” See the note by Fallon in RCDIP (2000), p. 710. However, this definition was not mentioned in the Mazzoleni case, which also concerned the conformity with EU law of Belgian rules on the protection of workers: Procédure pénale contre André Mazzoleni et Inter Surveillance Assistance SARL (case C-165/98) (2001), ECR 2001, p. I-2189, para. 22 et seq.; RCDIP (2001), p. 495, with note by Pataut. Jean-Claude Arblade, Arblade & Fils SARL and Bernard Leloup, Serge Leloup et Sofrage SARL (cases C-369/96 and C-376/96) (1999), ECR 1999-I, p. 8453, para. 31: ‘the fact that national rules are categorised as public-order legislation [lois de police] does not mean that they are exempt from compliance with the provisions of the Treaty; if it did, the primacy and uniform application of Community law would be undermined. The considerations underlying such national legislation can be taken into account by Community law only in terms of the exceptions to Community freedoms expressly provided for by the Treaty and, where appropriate, on the ground that they constitute overriding reasons relating to the public interest’. This aspect of the Arblade case is rightly emphasised by P. Mankowski (note 1), p. 109. Francescakis, Quelques précisions sur les ‘lois d’application immédiate’ et leurs rapports avec les règles sur les conflits de lois, RCDIP (1966), p. 1 et seq.; Francescakis, Lois d’application immédiate et règles de conflit, RCDIP (1967), p. 691 et seq.; Francescakis, Conflits de lois (principes généraux), in: Rép. Dalloz, Droit international, t. 1 (1968), p. 480.

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with respect to those rules which are now called “overriding mandatory provisions”, i.e. a more restricted category of mandatory legal provisions that are to be applied “irrespective of the law otherwise applicable to the contract.” Such ambiguous language did not facilitate the understanding of the system, in particular for legal practitioners not specialised in private international law. The difficulty became much more serious in the Contracting States that did not recognise the notion of lois de police in their internal law.51 The definition introduced in the Regulation clarifies that overriding mandatory provisions form a sub-set of the more general category of mandatory rules. To prevent all ambiguity, the drafter of the new text also preferred to avoid the term “mandatory rules” in other provisions of the Regulation; this is the reason why Arts. 3 (3), 3(4), 6 (2) and 8 (1) of the Regulation now only refer to rules “which cannot be derogated from by contract”. The need to clearly distinguish between these two notions is also expressed in Recital 37, where it is stated that “[t]he concept of ‘overriding mandatory provisions’ should be distinguished from the expression ‘provisions which cannot be derogated from by agreement’ and should be construed more restrictively.” To this purpose, the new definition is certainly useful. 58 The definition, which is formulated in terms that are deliberately restrictive, should also

have a dissuasive effect for the Member States. The reference to norms deemed to be “crucial” for the safeguard of “public interests” as well as maintaining the “political, social and economic organisation” of the State, is clearly meant to prevent national legislators and courts from conferring too easily an overriding character to domestic mandatory rules. This should prevent a too frequent derogation from the uniform choice-of-law rules of the Regulation by means of excessive recourse to Art. 9.52 This concern is clearly demonstrated by Recital 37 which emphasises that recourse to overriding mandatory provisions, as well as to public policy, should only be possible in “exceptional circumstances” and that this notion should be “construed more restrictively” than that of internal mandatory rules. The normative definition will certainly result in the courts of Member States being required to provide appropriate reasoned justification of their decision to qualify a domestic provision as a loi de police.53

59 The definition in Art. 9 (1) should also promote a more uniform application of the Regu-

lation. Indeed, this definition reflects a new European law notion of overriding mandatory provisions, an autonomous notion which is distinct from those which may exist in the Member States (although it is certainly intended to influence them) and should be construed accordingly. Of course, States remain free to determine whether a provision should be regarded as crucial for safeguarding their own interests: this decision can be taken either by the national legislators or, failing an express indication, by the national courts. However, as is now widely accepted with respect to public policy,54 EU law fixes the limits within which 51

52 53

54

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The problem arose particularly in the common law countries, where the entry into force of the Rome Convention led the doctrine to forge a new concept, that of “overriding statutes”, as opposed to “simple” mandatory norms (“mandatory rules”). See Harris, p. 297 et seq. Republik Griechenland v. Grigorios Nikiforidis (C-135/15), para. 43 et seq. Such a justification should specify that the mandatory norm pursues an objective essential to the enacting State and that its application to the case at hand is necessary for the realisation of this result. See infra, Art. 9 para. 85. Dieter Krombach v. André Bamberski, (case C-7/98) (2000), ECR 2000-I, p. 1935, para. 23; Marco Gambazzi v. DaimlerChrysler Canada Inc. and CIBC Mellon Trust Company (case C-394/07) (2009),

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the Member States may legitimately have recourse to the concept of overriding mandatory provisions, and provides an indication of “the interests which a country can legitimately take into account in determining whether a rule is overriding.”55 Also, the existence of a European law notion necessarily implies that the Court of Justice is competent to interpret it.56 Therefore, the inclusion of this definition in the Regulation has an impact that goes well beyond the Arblade decision where the Court of Justice, as we have noted, did not intend to formulate a general definition of overriding mandatory provisions. 3. The elements of the definition According to Art. 9 (1), for a rule to qualify as an overriding mandatory rule, three condi- 60 tions must be satisfied: a) the provision should be mandatory; b) its observance should be regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organization; c) the provision should be applicable irrespective of the law that otherwise governs the contract under the Regulation. These conditions are cumulative, i.e. they all need to be fulfilled.57 All these elements can be expressly stated by the provision or can be inferred from it by way of construction. The classification of the provision as a part of private or public law is not relevant.58 How- 61 ever, for the application of Art. 9, it is necessary that the provision has an effect on a contract or on the rights or obligation arising thereof. a) A mandatory provision As it clearly results from the language of Art. 9 (1) as well as from the title of this article, only 62 “mandatory provisions”, i.e. rules that cannot be derogated from by party agreement, belong to this particular category of lois de police. This is now quite generally accepted. The reason is self-evident: if a rule of law can be excluded or derogated from by contract, it can hardly be regarded as the expression of a fundamental policy of the forum. Therefore, there is no reason why it should prevail over the law applicable to the contract, designated by the ordinary choice-of-law rules. It is not always easy to establish whether a rule of law is mandatory or not. In some cases, this 63 is clearly stated by an express provision. Failing such an indication, it is a matter of construction and interpretation, which has to be decided under domestic law (or EU law, or international law), by examining the content of the rule and its underlying policy.59 Since the mandatory nature is not sufficient to classify a rule as an overriding provision, the 64 examination of the other requirements set up by Art. 9 (1) will often absorb the specific question of the mandatory nature; in other words, if a rule is regarded as “crucial for safe-

55 56 57 58 59

ECR 2009-I, p. 2563, para. 34; Rüdolfs Meroni v. Recoletos Limited (et alia) (case C-559/14) (2016), para. 40. See Plender/Wilderspin, para. 12–013. See infra, Art. 9 para. 97 et seq. Magnus, para. 46. Martiny, Münchener Kommentar, para. 12. See United Antwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare, (Case C-184/12) (2013), para. 50.

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guarding the public interests” of a country, it is normally clear that it cannot be derogated from by contract. Conversely, if it is accepted under domestic law that a specific provision is not mandatory (because it can be derogated from by party agreement), this will be sufficient to reject its overriding character. 65 As already mentioned, not all mandatory provisions belong to the restricted category of

overriding mandatory provisions; in other words, not all mandatory rules command their application irrespective of the law designated by the choice-of-law rules. As a matter of principle, choice-of-law rules prevail over domestic rules, even if the latter are mandatory. Thus, when the contract is governed by the law of a foreign country, the rules of the lex fori will be discarded, even if they are mandatory. 66 Normally, the same is true even when the governing law was selected by the parties, as widely

permitted by Art. 3 of the Regulation. Thus, when the parties have chosen the law applicable to the contract, their choice excludes all rules of the otherwise applicable law (i.e. of the law which would have been applicable in the absence of a choice), including its mandatory rules. Under the Regulation, there are only few exceptions to this general principle. One of these is Art. 3 (3) of the Regulation, pursuant to which all mandatory rules of the otherwise applicable law prevail over the law designated by the parties, if the contract has no genuine crossborder element (i.e. if it is a purely “domestic” contract). Similarly, in intra-European relationships the mandatory rules of EU law prevail over the parties’ choice by virtue of Art. 3(4). Finally, under Arts. 6 (2) and 8 (1) of the Regulation, the parties’ choice in a consumer or employment contract cannot deprive the weaker party of the protection afforded to him by the mandatory rules of the law which would be applicable to the contract in the absence of choice. 67 Subject to these few exceptions (and to the “classical” public policy clause of Art. 21), only

overriding mandatory provisions take priority over the choice-of-law rules. Therefore, as stated in Recital 37, a clear distinction should be drawn between “domestically mandatory” (or “internally mandatory”) provisions, which cannot be derogated from by agreement, on one side, and “overriding mandatory” (or “internationally mandatory”) provisions, on the other. b) A provision, the respect for which is crucial for safeguarding public interests 68 According to the definition in Art. 9 (1), overriding mandatory provisions are, “provisions

the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation.” The purpose of this language is to clarify how overriding mandatory provisions should be distinguished from simply “domestically” mandatory provisions and why they have to be applied in cross-border situations irrespective of the otherwise applicable law.60 As the language of Art. 9 (1) makes clear, only an overriding mandatory provision involves the “crucial” interests of a country and must therefore be observed, even if in derogation from the law applicable pursuant to the ordinary choice-of-law rules. 69 The assessment of these conditions is a matter for the court, in conformity with the criteria

which might be formulated by the European Court of Justice. It is very unlikely that these 60

620

See infra, Art. 9 para. 86 et seq.

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elements directly result from the wording of the provision. Therefore, the court will have to make a “detailed assessment”, based on the “general structure” of the provision and on “all the circumstances in which that law was adopted”.61 The fact that a rule is provided with a specific definition of its territorial or personal scope is, of course, a strong indication that it could amount to an overriding mandatory provision. The sanctions provided for in case of non-observance are also important: thus, the fact that the rule is enforced by way of criminal or administrative sanctions can be an important element. However, civil law sanctions, such as the nullity or enforceability of the contract or liability for damages, may also be significant. According to the language of Art. 9 (1), only the safeguard of a country’s “public interests” 70 can justify a derogation from the ordinary choice-of-law rules. In particular, these interests could involve the political, social or economic organisation of that country. Based on this, there is no doubt that Art. 9 covers provisions, whether of public or private 71 law, directly aimed at the protection of collective interests of a country, provided that they are regarded as crucial to that purpose. This is typically the case of anti-trust legislation and rules against unreasonable restraint of trade, commercial embargoes and other political or economic sanctions against foreign countries, rules on the import and export of goods and services, provisions on the access and the exercise of specific trades or professions, regulations on stock exchanges and other public markets, regulations on prices and fees (e.g. rules against champerty), legislation on exchange control or restricting credit in the interest of currency stability, and so on. All of these rules are not concerned with the protection of the individual interests of a contractual party, but are directly aimed to safeguard the overriding public interests of a country (or, as the case may be, of a supranational organization or a group of countries). Typically, these rules do not have an exact equivalent in the law of foreign countries, because 72 their foreign counterpart – when they exist – usually target the protection of the foreign country’s interests and therefore have a different spatial or personal scope. Thus, only their mandatory application, irrespective of the otherwise governing law, ensures, in international situations, the safeguard of the protected interests. This is, for instance, the case for anti-trust legislation; the foreign country, the law of which can be chosen by the parties, may well have enacted its own anti-trust rules, but these normally have a different scope, because their aim is the protection of the foreign country’s market. Only the application of the anti-trust rules in force in the forum ensures the protection of the forum’s overriding interests. By contrast, it is highly debatable whether Art. 9 also covers mandatory rules that are 73 designed to protect certain categories of individuals, in particular weaker parties, such as consumers, employees, tenants, commercial agents, franchisees, etc. Norms of this kind are meant to directly protect the private interests of a party. Notwith- 74 standing this, there is a widely held opinion that considers that they may be assimilated to the category of overriding mandatory provisions, at least when they also protect, in an

61

United Antwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare, (Case C-184/12) (2013), para. 50.

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indirect manner, interests of a public nature.62 This idea is particularly strong in some Member States, such as France,63 Italy64 and Belgium.65 Under the Rome Convention, this opinion was corroborated by the plain language of the explanatory report66 mentioning the rules on consumer protection as well as those relating to carriage contracts as possible examples of lois de police within the scope of Art. 7. Apparently, the European Court of Justice also took the same position in the Ingmar case, holding that some protective provisions of the Commercial Agents Directive could prevail over the law of a non-Member State chosen by the parties.67 75 However, according to a different opinion, a clear distinction should be made between the

mandatory norms pursuing public goals and those protecting individual interests. Thus, most German scholars distinguish between Eingriffsnormen, on one hand, and Parteischutzvorschriften (or Sonderprivatrecht, i.e. “special private law”), on the other. The norms of the first category “interfere” (“eingreifen”) with the traditional contract law rules in order to further goals of public interest.68 This is, for instance, the case of the anti-trust legislation and of the rules governing imports and exports of goods. These rules clearly pursue collective interests and not only those of the parties to the contract. By contrast, with respect to the norms of the second category, their mandatory nature serves to preserve (or re-establish) a balance between the parties to the contract (the expression Ausgleich privater Interessen is used in Germany): typical examples are the rules protecting consumers and employees. Several German scholars argue that only Eingriffsnormen should be qualified as overriding mandatory provisions.69 This scholarly view has largely influenced German courts: as early 62

63

64

65

66 67

68

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An example is provided by the decisions rendered by the French Cour de cassation which attributed the nature of lois de police to the rules providing the sub-contractor with a the direct action against the owner (a particularity of French law provided for by a law of 31.12.1975): Cass, Ch. mixte, 30.11.2007, Agintis, Juris-Classeur Périodique G 2008, II, 10000, note D’Avout; Clunet 2008, note Perreau-Saussine; Cass. Ch. com., 27.4.2011, RCDIP (2011), p. 624, note M.-E. Ancel. Even though this rule certainly has an indirect effect on competition, it is intended to protect, at least in the first instance, the individual interests of a category of (often small) entrepreneurs. A different conclusion was arrived at by Cass. com. 13.7.2010, Clunet (2011), p. 91, note Jault-Seseke, with reference to the direct action of the carrier of goods (Art. L.132–8 of the Code de commerce). See the decisions of the French Cour de cassation of 23.5.2006, Dalloz (2006), p. 2798 (concerning consumer law) and those of 30.11.2007 and 27.4.2011 (quoted in the previous footnote) The French doctrine refers in such cases to lois de police ‘de protection’ as opposed to lois de police ‘de direction’. See also Boskovic, Dalloz (2008), p. 2178. Kuipers/Migliorini ERPL (2011), p. 195. See Pocar, La protection de la partie faible en droit international privé, in: Recueil des cours, t. 188, 1984, V, p. 392 et seq.; Pocar, La legge applicabile ai contratti con i consumatori, in: Treves (ed.), Verso una disciplina comunitaria della legge applicabile ai contratti, Padua 1983, p. 314 et seq.; Bonomi, Le norme imperative (1998), p. 190; Boschiero, p. 111. Thus, the Belgian provisions protecting commercial agents and exclusive distributors are traditionally regarded as lois de police: see Nuyts RCDIP (1999), p. 31–74. Overriding provisions also exist in the field of consumer and workers protection, as illustrated by the Arblade and Mazzoleni cases. Report by Giuliano/Lagarde, p. 28. Ingmar GB Ltd. v. Eaton Leonard Technologies Inc., (C-381–98) (2000), ECR 2000-I, p. 9305; RCDIP (2001), p. 107, note Idot. On the differences between the German and the French approaches, see also Kuipers/Migliorini ERPL (2011), p. 189 et seq.

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as the first half of the 1990’s, the Federal Labour Court (Bundesarbeitsgericht), relying on this restrictive reading of Art. 7 (2) Rome Convention (more precisely, of the German rule implementing that provision, Art. 34 (2) EGBGB), refused to apply a number of German rules protecting employees against abusive dismissal.70 In a more recent judgment, and after having left the question open in some previous decisions,71 the Federal Supreme Court (Bundesgerichtshof) held that the norms protecting certain categories of individuals, in particular the weaker party to a contract, do not fall under Art. 34 (2) EGBGB, even when they also tend to promote, indirectly, collective interests (“Belange der Allgemeinheit reflexartig mitgeschützt werden”).72 Although Art. 9 (1) refers to the safeguarding of public interests, several elements of its 76 wording indicate that this provision should not be construed as implying an a priori exclusion from its scope of all norms aimed at the protection of individual interests.73 First of all, it is important to note that such a restrictive reading does not necessarily follow 77 from the wording of Art. 9 (1). As it was frequently pointed out, norms protecting specific categories of individuals can also have a crucial importance for a country’s political, social and economic organisation, and thus indirectly further its public interests.74 It therefore follows from the Ingmar decision that, although the immediate purpose of Arts. 17 and 18 of the Commercial Agents Directive is the protection of commercial agents as weaker parties, the objective of these provisions is, at the same time, to promote some fundamental goals of EU law such as freedom of establishment and unrestricted competition.75 Some national

69

70

71

72

73

74

75

Mankowski RIW (1996), p. 8 et seq.; Martiny, in: Münchener Kommentar, para. 13. For additional references see Bonomi, Le norme imperative (1998), p. 172 et seq. Bundesarbeitsgericht, 29 October 1992, in: IPRax 1994, p. 123, pursuant to whose terms § 613a BGB, that protects the rights of employees in the event of a sale of a company, does not have an international mandatory character. See Bonomi, Le norme imperative (1998), p. 174, and the references therein. Cf. the judgments of 26.10.1993, in: IPRax 1994, p. 449, and of 19.3.1997, published in French in RCDIP (1998), p. 610, with note by Lagarde. Bundesgerichtshof, 13.12.2005, in: IPRax (2006), p. 272, with the commentary of Th. Pfeiffer, p. 238 et seq.; see also Bundesgerichtshof, 9.7.2009, EuZW (2009), p. 907, para. 32 (concerning the rules on standard terms included in §§ 307–309 BGB). Boschiero, p. 111 et seq.; Freitag IPRax (2009), p. 112; Hellner JPIL (2009), p. 458; Nuyts RDC (2009), p. 559; Pfeiffer EuZW (2008), p. 628, note 45; Remien, in: Festschrift für Bernd von Hoffmann (2011), p. 336; Stone, EU Private International Law, 2nd ed. (2010), p. 342; Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 11. See also the opinion of Advocate General Wahl in the case Unamar (Case C-184/12), paras. 53 et seq. For a narrow reading of Art. 9: Archer EJCL (2009), p. 701; D’Avout Rec. Dalloz (2008), p. 2167; Garcimartín Alférez, ELF (2008), p. I-16; Martiny, in: Münchener Kommentar, para. 15. Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 11. According to Nuyts RDC (2009), p. 558, the reference to “public interests” is larger than that to the organisation of the State. In order to justify the overriding reach of the rules of the Directive, the ECJ stressed that they were intended “to eliminate restrictions on the carrying-on of the activities of commercial agents, to make the conditions of competition within the Community uniform and to increase the security of commercial transactions”, and that their purpose was “to protect, for all commercial agents, freedom of establishment and the operation of undistorted competition in the internal market.”: Ingmar GB Ltd. v. Eaton Leonard Technologies Inc., (C-381–98) (2000), ECR 2000-I, p. 9305, para. 29.

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decisions on the issue also confirm this.76 That being so, a literal understanding of Art. 9 (1) cannot lead to the exclusion a priori of all of “protective” rules from the category of overriding mandatory provisions.77 78 The legislative history of Art. 9 also indicates that such a narrow understanding of overriding

mandatory provisions has not been sought by the drafters of the Regulation. The definition was already included, with more or less the same language, in the Commission Proposal.78 In this respect, the Explanatory Memorandum accompanying the Proposal simply stated that the definition originated from the Arblade decision, but did not mention the intention of changing the current understanding of lois de police. Admittedly, one of the objectives of the definition was to discourage a too frequent recourse to this notion by the Member States, but nothing indicated that the Commission intended to rule out from the scope of the provision the whole category of rules protecting individuals. There is also no indication that the distinction between Eingriffsnormen and Parteischutzvorschriften was discussed in the subsequent stages of the legislative procedure.79 Both in the Council and in the European Parliament, the debate focused on the very controversial issue of foreign overriding provisions and on the drafting of what became Art. 9 (3). Given that the notion of lois de police was interpreted quite widely under the Rome Convention – as it clearly appears from the Explanatory Report and from the case law in at least some Contracting States – it cannot be that a fundamental change of approach would have been brought about covertly, without any open debate on the issue. At the very least, more explicit language would have been needed for that purpose. 79 A significant argument in the same vein can also be inferred from the Arblade case itself,

which is the direct antecedent of the Art. 9 (1) definition.80 One must not lose sight of the fact that, in that case, as in the following Mazzoleni case, the Court of Justice used the notion of overriding mandatory provisions with regard to national norms of employees’ protection. It would be extremely surprising if the language taken from the Court’s ruling were to be read as excluding norms protecting employees and other weaker parties. 80 In more general terms, a narrow interpretation would be at odds with the already mentioned

tendency of the European legislator to confer an overriding reach on norms that protect the weaker party. This is the case for several directives on consumer protection which contain a specific clause, aimed at ensuring the priority of the substantive rules on the parties’ choice of the law of non-Member State.81 In the Posting of Workers Directive, an overriding effect is attributed also to certain national rules on workers’ protection which are in force in the 76 77

78 79 80

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So the decision of the French Cour de cassation of 30.11.2007, quoted above. This is implicitly recognised by one of the principal proponents of the interpretation of overriding mandatory provisions as Eingriffsnormen, Mankowski IPRax (2006), p. 109, who deplored the fact that, in the definition included in Art. 8 (1) of the Proposal “[d]ie Dichotomie Ausgleich zwischen Vertragsparteien/überindividuelle Interessen taucht als solche bedauerlicherweise nirgends auf.” See also Kuipers/ Migliorini ERPL (2011), 201. Art. 8 (1) of the Proposal. See also Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 11. Jean-Claude Arblade, Arblade &/Fils SARL and Bernard Leloup, Serge Leloup et Sofrage SARL (cases C-369/96 and C-376/96) (1999), ECR 1999-I, p. 8453. See supra note 30.

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Member State where the worker is posted.82 This legislative tendency is also corroborated by the case law of the European Court of Justice. In the previously cited Ingmar decision, the Court implicitly recognised the nature of overriding mandatory provisions of the norms protecting commercial agents.83 In the same vein, in the Mostaza Claro case,84 the Court regarded the consumer protection rules of the Unfair Terms Directive as belonging to the European public policy. Certainly, this trend mainly (but not only) concerns norms belonging to European law, the application of which is now often (but not always) ensured by the new Art. 23 of the Regulation. However, it would be strange if the Court adopted a radically different approach with respect to the protective provisions in force in the Member States. Finally, it should be noted that, if the German distinction between Eingriffsnormen and 81 Parteischutzvorschriften were adopted for the purpose of Art. 9 (1), its impact would be stronger than under current German law. In that Member State, the distinction serves as a limit for the courts when the overriding nature of a provision does not result clearly from its wording. By contrast, if such a distinction were adopted for the purpose of the Regulation, it would also limit the autonomy of the Member States’ legislators, because they could no longer confer an overriding reach on internal norms protecting individuals.85 It is unlikely that the European legislator intended to restrain the power of the Member States to determine their own crucial interests to such a large extent. For all of these reasons, it is submitted that rules aimed at the protection of individual 82 interests can also qualify as overriding mandatory provisions. Of course, this is only a possibility and does not mean that all rules of this kind have an overriding effect.86 It would certainly be wrong to assume that all protective rules are internationally mandatory; however, it cannot be excluded a priori that some of them belong to this category. As Art. 9 (1) makes clear, a mandatory rule can prevail over the ordinary choice-of-law rules only when it is regarded as crucial by a country for safeguarding its public interests. This means that a rule protecting individuals can only be regarded as lois de police when it also promotes public interests: in other words, the rule must have a dual or multiple purpose.87 The decisions cited above offer some examples of this. As a consequence of the suggested interpretation, Art. 9 can be invoked by the weaker party 83 to a contract in order to seek protection of mandatory rules of national law, provided that these rules are crucial for safeguarding a country’s public interests. As stated above, this 82

83 84

85 86 87

We refer here to certain protective norms of the State to which an employee is posted, to which the Directive 96/71/EC77 attributes the nature of overriding mandatory provisions. Ingmar GB Ltd. v. Eaton Leonard Technologies Inc., (C-381–98) (2000), ECR 2000-I, p. 9305. Elisa María Mostaza Claro v. Centro Móvil Milenium SL (case C-168/05) (2006), ECR, 2006-I, p. 10421; Rev. arb. (2007), p. 199, note Idot, in which the Court affirms that the rules of Directive 93/13/EEC concerning unfair contract terms are a part of the European public policy. See also Asturcom Comunicaciones SL v. Cristina Rodríguez Noguera, (case C-40/08) (2009), ECR, 2009-I, p. 9579. See Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 12. Nuyts RDC (2009), p. 560. Also Hellner JPIL (2009), p. 459; Remien, in: Festschrift für Bernd von Hoffmann (2011), p. 336 et seq.; Renner, in: Calliess, Art. 9 Rome I, para. 20; Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 11. However, it is not necessary that the protection of a public interest is paramount, as suggested by Magnus, para. 59 et seq., and Martiny, in: Münchener Kommentar, para. 13.

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possibility also exists in the areas covered by the special choice-of-law rules of Arts. 6 and 8 of the Regulation (i.e. consumer and employment contracts); however, in these areas the conditions for the concurrent application of Art. 9 are rarely satisfied. By contrast, the effects of the proposed, broad understanding of Art. 9 are more important for the protection of those weaker parties, who are not benefitting from the special choice-of-law rules of the Regulation, in particular in those areas where an unrestricted party choice of the applicable law is permitted. This is the case, inter alia, for rental agreements, carriage of goods and persons, insurance, distribution (agency and exclusive distribution contracts) and other commercial transactions involving SME. 84 Although Art. 9 (1) does not clearly state it, only important public interests can justify

recourse to Art. 9.88 This results from the reference to a country’s political, social or economic “organization”: not all public interests are so important that they can be regarded as having an impact on a country’s organization. Recital 37 also stresses that the application of overriding mandatory provisions is possible only “in exceptional circumstances” and that this concept should be construed “restrictively”.89 85 Furthermore, the language of Art. 9 (1) makes clear that the provision in question must be

“crucial” for safeguarding the interests at stake. This implies that the application of the provision in the case at hand is not only necessary but is also the most effective way of promoting the underlying policy. This opens the door to a proportionality test.90 Thus, if the country’s public interest can be (sufficiently or even better) satisfied through the application of the law governing the contract, the court seized should refrain from resorting to Art. 9. This reasoning also has a significant consequence from a methodological point of view: contrary to traditional understanding, overriding mandatory provisions do not operate “blindly”, but should take into account the content of the law otherwise applicable to the contract. c) A provision with an overriding reach

86 The third element of the definition in Art. 9 (1) reflects the traditional understanding of

overriding mandatory rules. Because of their particular purpose and content, these rules derogate from the ordinary choice-of-law rules and demand to be applied to all situations falling within their scope, “irrespective of the law otherwise applicable to the contract under this Regulation”. The term “overriding”, which is now commonly used in legal English to qualify these provisions, refers to their ability to derogate from the ordinary choice-of-law rules. The same idea is present in the expressions used for these provisions in other languages (e.g. “norme di applicazione necessaria”, i.e. “norms of necessary application” in Italian).

88 89

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Magnus, para. 61. See also United Antwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare, (Case C-184/ 12) (2013), para. 49, where the Court held that “[…] to give full effect to the principle of the freedom of contract of the parties to a contract, […] the plea relating to the existence of a ‘mandatory rule’ within the meaning of the legislation of the Member State concerned, as referred to in Art. 7 (2) of [the Rome] Convention, must be interpreted strictly.” In the same sense see now also Republik Griechenland v. Grigorios Nikiforidis (C-135/15), para. 43 et seq. See Bonomi, Le norme imperative (1999), p. 219 et seq.; Bonomi YPIL (1999) p. 89 et seq.

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In some instances, the overriding reach of a provision expressly results from its wording, or 87 from the wording of other rules having the purpose of defining its scope of application.91 However, this is not very frequent. More commonly, a provision is simply accompanied by an express delimitation of its (territorial or personal) scope. Where the criterion adopted for this purpose does not coincide with that used by the ordinary choice-of-law rules in the relevant field, this is an indication that, in accordance with the intention of the legislator, that specific provision should be observed “irrespective of the otherwise applicable law”. Thus, when the national anti-trust law provisions are expressly declared to be applicable to all conduct having an effect on a country’s market,92 they will affect all transactions having such an effect, even if they are governed by a foreign law. However, this is not necessarily the case. An express definition of a provision’s scope does not necessarily mean that that provision is not subject to the ordinary choice-of-law rules. In fact, it may be the case that the provision is subject to a double limitation (that resulting on the ordinary choice-if-law rules and that based on its own scope); then, it does not have an overriding reach. These rules have been referred to as “self-limited” rules or “inherent limitations in statutes”.93 Under Art. 7 (2) Rome Convention, the overriding reach was the only element expressly 88 referred to as characterising a loi de police. In that framework, the fact that a provision was conferred an overriding reach by the legislator or by the courts could legitimately be regarded as sufficient for qualifying that provision as an overriding mandatory rule. Therefore, subject to the inherent limitations of European law,94 Member States’ legislators and courts were free to confer an overriding reach on their internal provisions and thus derogate from the choice-of-law rules of the Convention. This has changed with the definition in Art. 9 (1). The overriding reach has ceased to be a self-sufficient condition for a loi de police and is now to be regarded rather as the consequence of the other conditions, in particular of a norm being crucial for safeguarding a country’s public interests. Failing this, a provision cannot override the choice-of-law rules of the Regulation. At least in theory, this means that when a rule does not reflect a crucial interest of the 89 country, the national courts could (and should!) refuse its application based on Art. 9, even if that rule is expressly provided with an overriding effect.95 Admittedly, in practice, an express indication of the provision’s scope and/or of its overriding character will continue to be interpreted by the courts as meaning that the rule is crucial for a country’s public interests.96 91

92

93

94 95

96

A typical example is the clause included in several consumer law directives, pursuant to which the substantive provisions of the relevant directive are to be applied irrespective of the party choice of the law of a non-Member State. See supra, note 30. See for instance § 130 (2) of the German statute against restrictions of competition (GWB) or Art. 2 (2) of the Swiss anti-trust statute. Hay, Comments on “Self-Limited Rules of Law” in Conflicts Methodology, AJCL (1982), p. 281 et seq.; Lipstein, Inherent Limitations in Statutes and the Conflict of Laws, ICLQ (1977), p. 884 et seq. See infra, Art. 9 para. 91 et seq. Harris, p. 296 (“[…] an English court could refuse to apply its own law under Art. 9 (2), even in circumstances where the UK Parliament has clearly stated that is to be applied regardless of the governing law”). According to Hellner JPIL (2009), p. 460, “this would be unfortunate.” Nuyts RDC (2009), p. 560; Plender/Wilderspin, para. 12–007. According to these scholars, the fact that a rule expressly states its overriding reach is to be regarded as “strong prima facie evidence that respect of the rule was indeed regarded by a country as crucial to its public interests.”

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However, the European Court of Justice can now prevent an excessive use of Art. 9 by dictating more specific criteria for the “public interests-test” under Art. 9 (1). 90 In the majority of cases, mandatory provisions do not include an express statement as to

their overriding reach, nor an express definition of their scope. In such instances, the task of determining a provision’s scope and of stating, where appropriate, its overriding reach, rests entirely with the courts, which will have to, for this purpose, scrutinise the provision’s content and objectives.97 4. Other unwritten conditions a) Compatibility with EU law and public international law 91 Overriding mandatory provisions in force in the law of a Member State are obviously to be

treated, from the point of view of EC law, as all others national measures. As made clear by the decision of the European Court of Justice in the Arblade case,98 the characterization of national provisions as lois de police, “does not mean that they are exempt from compliance with the provisions of the Treaty.”99 Thus, although these provisions aim at safeguarding crucial interests of a Member State, they can only derogate from the fundamental freedoms under the very narrow conditions allowed by EU law. In particular, ‘the considerations underlying such national legislation can be taken into account by Community law only in terms of the exceptions to Community freedoms expressly provided for by the Treaty and, where appropriate, on the ground that they constitute overriding reasons relating to the public interest.’100 92 Moreover, the national mandatory provisions will have to comply with the principle of

proportionality, i.e., “they must be suitable for securing the attainment of the objective which they pursue, and they must not go beyond what is necessary in order to attain it.”101

93 This is nothing new from a theoretical point of view. Since EC law prevails over the domestic

law of the Member States, it is simply logical that it should also prevail over those national rules which pursue fundamental interests of the State concerned. It should be noted, however, that the definition of overriding mandatory provisions in Art. 9 has the effect of introducing a new test of compliance, which is distinct and logically prior to that of the compatibility of overriding mandatory norms with the principles of European law. The two 97

98

99

100

101

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United Antwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare, (Case C-184/12) (2013), para. 50. Jean-Claude Arblade, Arblade & Fils SARL and Bernard Leloup, Serge Leloup et Sofrage SARL (cases C-369/96 and C-376/96) (1999), ECR 1999-I, p. 8453, para. 30. See also Procédure pénale contre André Mazzoleni et Inter Surveillance Assistance SARL (case C-165/98) (2001), ECR 2001, p. I-2189, para. 22 et seq. Jean-Claude Arblade, Arblade & Fils SARL and Bernard Leloup, Serge Leloup et Sofrage SARL (cases C-369/96 and C-376/96) (1999), ECR 1999-I, p. 8453, para. 31. Jean-Claude Arblade, Arblade & Fils SARL and Bernard Leloup, Serge Leloup et Sofrage SARL (cases C-369/96 and C-376/96) (1999), ECR 1999-I, p. 8453, para. 31. Kamer van Koophandel en Fabrieken voor Amsterdam contre Inspire Art Ltd., (case C-167/01) (2003), ECR 2003-I, p. 10155, para. 133.

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tests have a different purpose (compliance with the definition of overriding mandatory provisions on one hand, conformity with EU law on the other) and scope (intra-EU cases or also cases involving third States). However, they are based on similar criteria (overriding interests, proportionality) and will therefore overlap to a certain extent. It is also obvious that overriding mandatory provisions must furthermore respect public 94 international law rules and principles, insofar as these are binding and applicable under the general principles.102 b) A connection with the enacting State (“Inlandsbeziehung”) Because of the similarity between overriding mandatory provisions and public policy, one 95 can wonder whether the former are, as with the latter, also subject to the condition that the situation presents a connection to the State that has enacted them (“Inlandsbeziehung” in the German terminology). Such a connection was required by Art. 7 (1) Rome Convention as a condition for giving effect to foreign lois de police; for the same purpose, a narrower condition is now set by Art. 9 (3), which allows only overriding mandatory provisions that are in force at the place of performance to be applied. By contrast, no such condition is mentioned in the first two paragraphs of Art. 9. Notwithstanding the lack of an express reference to such condition, it is submitted that a 96 close connection is implicitly required for the purpose of Art. 9.103 This follows from the condition, established by Art. 9 (1), that an overriding mandatory provision is to be, “regarded as crucial by a country for safeguarding its public interest”. This condition can only be satisfied when the situations falling within that provision’s scope are somehow connected to the State that has enacted the provision at hand.104 Furthermore, the need for a genuine connection also follows from public international law, which limits the scope of a State’s “jurisdiction to prescribe” to situations having a genuine connection with the enacting State.105 However, this condition does not need to be specifically examined besides the other conditions under Art. 9 (1). As mentioned, the existence of a genuine connection is necessarily implied in the test imposed by that provision. 5. The competence to examine the compliance with the conditions under Art. 9 (1) As mentioned, the definition of overriding mandatory provisions under Art. 9 (1) means 97 that this notion is part of European law and therefore implies the competence of the Euro102 103 104

105

See Rechtbank s’Gravenhage, 17.9.1982, CEP v. Sensor, RabelsZ (1983), p. 141, note Basedow, p. 147. Magnus, para. 82; in a number of well-known decisions, in: Münchener Kommentar, paras 122 et seq. This is confirmed by the Ingmar decision, in which the ECJ held that the mandatory provisions of the Commercial Agency Directive were applicable when “the commercial agent carries on his activity within the Community”: Ingmar GB Ltd. v. Eaton Leonard Technologies Inc., (C-381–98) (2000), ECR 2000-I, p. 9305, para. 25. See also Cass., Ch. com., 27.4.2011, RCDIP (2011), p. 624, note M-E Ancel, which refused the application of the French rules on the direct action of the sub-contractor in the absence of a sufficient connection to France. In the Sensor case, the Dutch judge refused the application of US embargo provisions, holding that they didn’t meet the genuine connection requirement set by public international law: Rechtbank s’Gravenhage, 17.9.1982, CEP v. Sensor, RabelsZ (1983), p. 141, note Basedow, p. 147. See also Renner, in: Calliess, Art. 9 Rome I, para. 27.

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pean Court of Justice to interpret it.106 The national court having the task to apply Art. 9 can seize the Court for a preliminary ruling under Art. 267 TFEU. 98 This is an important change of approach given that, under the Rome Convention, the

decision on whether to apply a national norm as an overriding mandatory provision fell within the discretion of the Contracting States.107 While it is not for the Court to define which national rules are “overriding mandatory,”108 it is nonetheless entitled, as with public policy,109 “to review the limits within which the courts of a Contracting State may have recourse to that concept.” 99 It is not easy to predict what the practical impact of this Court’s competence will be. It is

submitted that nothing will change in the cases where the application of a national provision is in any event contrary to EU law, as was the case in Arblade and Mazzoleni.110 In these instances, the Court of Justice will likely prefer to refer to the European freedoms rather than venturing into the arduous question of clarifying the concrete scope of the definition of overriding mandatory provisions of Art. 9 (1) of the Regulation. 100 However, there might be cases where the application of a national mandatory rule, albeit in

conformity with the principles of European law, does not comply with Art. 9 (1) of the Regulation. In these instances, the Court will certainly insist, as it already did under the Rome Convention in the Unamar case, that the national court seized must proceed to “a detailed assessment” of the conditions set up by Art. 9 (1).111 It is to be seen whether the Court will agree to fully assume its task, by formulating more specific criteria for the interpretation of the language of Art. 9 (1) (e.g. the meaning of the terms “public interests”) and/ or guidelines on the inclusion of specific kinds of provisions into the scope of that article. IV. Overriding Mandatory Provisions of the lex fori 101 After having defined overriding mandatory provisions, the Regulation describes in Art. 9 (2)

and 9 (3) the legal effect of these norms. For this purpose, it is convenient to distinguish the overriding mandatory provisions belonging to the lex fori, those belonging to a foreign lex causae and those belonging to the law of a “third” country. 102 As with Art. 7 (2) Rome Convention, Art. 9 (2) states that “[n]othing in this Regulation shall

restrict the application of the overriding mandatory provisions of the law of the forum”. As 106

107 108

109

110 111

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Hellner JPIL (2009), p. 458; Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 11, p. 136; Roth, in: Festschrift für Gunther Kühne (2009), p. 869. Nuyts RDC (2009), p. 557. Thus, the concern expressed by Plender/Wilderspin, para. 12–012, that a country might be required, “to treat its own rules as overriding even where a domestic characterization would not attribute this effect,” is unfounded. Dieter Krombach v. André Bamberski, (case C-7/98) (2000), ECR 2000-I, p. 1935, para. 23; Marco Gambazzi v. DaimlerChrysler Canada Inc. and CIBC Mellon Trust Company (case C-394/07) (2009), ECR 2009-I, p. 2563, para. 34. See supra, Art. 9 para. 91 et seq. United Antwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare, (Case C-184/12) (2013), para. 52.

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already mentioned, this is the normal effect of an overriding mandatory provision: such a norm is applicable, “irrespective of the law otherwise applicable” under Arts. 3 to 8 of the Regulation. As it results from the term “lois d’application immediate” used by legal scholars and adopted in some linguistic versions of the Regulation (in Portuguese: “normas de aplicação imediata”), these rules are of “immediate” application, i.e. their application does not depend on the ordinary choice-of-law rules. The terms “application” makes clear that the overriding mandatory provision determines 103 both its applicability conditions and its legal effect. Contrary to foreign mandatory provisions under Art. 9 (3), the provisions belonging to the lex fori are not only “given effect”. Nothing changes when the lex fori is in any event applicable to the contract by virtue of the 104 ordinary choice-of-law rules of the Regulation. By contrast, when the contract is governed by a foreign law, the overriding mandatory provisions of the lex fori take priority over the irreconcilable provisions of the foreign law otherwise applicable. Nevertheless, the provisions of the foreign lex contractus continue to be applicable, provided that they can be reconciled with the overriding mandatory provisions of the lex fori. Thus, the foreign lex contractus is not necessarily and entirely replaced, but continues to govern the contract, with the only exception being those aspects which are directly controlled by the overriding mandatory provisions. As already mentioned, the application of a national overriding mandatory provision is 105 subject to some conditions. First, the provision must comply with the conditions set by Art. 9 (1). Second, overriding mandatory provisions in force in a Member State cannot infringe on European law. Finally, public international law must also be respected when it is applicable in the State of the forum. When these conditions are satisfied, the Regulation, “does not restrict the application,” of 106 the overriding mandatory provision, as stated in Art. 9 (2). This language means that such provisions can be applied, but do not have to be. In other words, the question of whether to apply a national law provision within the meaning of Art. 9 is a decision of the court seized. Of course, the court will normally have to respect the lawmaker’s intention. However, as mentioned above, it also has to apply a proportionality test to ascertain whether the application of the provision at hand is the most effective way to promote the underlying policy.112 Although paragraphs 1 and 2 of Art. 9, by referring, respectively, to provisions of “a country” 107 and to provisions “of the law of the forum”, seem only to cover provisions of national law, it is not disputed that mandatory provisions of European law can also have an overriding reach and thus benefit from the immediate applicability under Art. 9 (2). Admittedly, Arts. 3 (4) and 23 of the Regulation also ensure, when they are applicable, the precedence of mandatory rules of European law; nevertheless, recourse to Art. 9 is necessary when the conditions of application of Arts. 3(4) and 23 are not satisfied. This is notably the case when not all elements of the situation are located in one or more Member States and when no special conflict-of-law rule is laid down by European law. Overriding mandatory provisions originating from public international law can also benefit from Art. 9 (2), when they are in

112

See supra, Art. 9 para. 85.

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force in the forum country. A typical example is provisions on commercial embargo included in resolutions of the UN Security Council. V. Overriding Mandatory Provisions of a Foreign lex contractus 1. Applicability of the provisions of the lex contractus 108 Art. 9 (2) of the Regulation only covers the overriding mandatory provisions of the law of the

forum, and Art. 9 (3) refers to overriding mandatory provisions of the law of the country where the contractual obligations have to be or have been performed. Neither Art. 9, nor other sections of the Regulation refer to the overriding mandatory provisions of the law of the contract, i.e. the law designated by the ordinary choice-of-law rules of the Regulation. 109 At first glance, the reasons for this omission are obvious. Art. 9 only refers to the rules which

are applicable, “irrespective of the law otherwise applicable to the contract”. It is implied that, subject to the public policy exception (Art. 21), the mandatory rules of the law governing the contract are in any event applicable by virtue of the ordinary choice of law rules, without the need to resort to Art. 9. This is obviously the case for “domestically mandatory” rules: by selecting a law as applicable to the contract, the choice-of-law rules refer to that law in its entirety, including both default rules and mandatory rules. A fortiori, this must be true for overriding mandatory rules, since these are, by definition, particularly important to the interests of the country, the law of which is applicable to the contract.113

110 This reading of Art. 9 corresponds to an approach known, among German scholars, as the

“Schuldstatutstheorie”.114 According to some experts, this was the prevailing view during the negotiations of the Regulation.115

111 However, this understanding is not unanimous. According to a different view, which is, in

particular, widely held among German scholars,116 the reference to the foreign lex contractus by the ordinary choice-of-law rules does not include the overriding mandatory provisions (“Eingriffsnormen”) of that legal system. Since these rules have their own applicability criteria, which do not necessarily coincide with the connecting factors adopted by the ordinary choice-of-law rules, their application depends on “special” conflict rules other than those governing the contract (“Sonderanknüpfung”).117 Under the Regulation, this reasoning implies that overriding mandatory rules of the lex contractus would only be applicable under the very restrictive conditions of Art. 9 (3).118 This counter view should be rejected because, for several reasons, it does not fit into the system of the Regulation.119

113

114

115 116

117

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Magnus, para. 134 et seq. See also the opinion of the A-G Szpunar in the case Republik Griechenland v. Grigorios Nikiforidis (C-135/15), para. 76. Or, more exactly, “Kumulationslösung” because it accepts the application of the overriding mandatory provisions of both the lex contractus and the law a third State under Art. 9 (3). See Martiny, in: Münchener Kommentar, para. 43; Roth, in: Festschrift für Gunther Kühne (2009), p. 870. Lando/Nielsen C.M.L. Rev. (2008), p. 1687. See for instance Martiny, in: Münchener Kommentar, para. 43; Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 78. On the theory of Sonderanknüpfung, see infra, Art. 9 para. 120.

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The main reason, which we have already referred to, is based on the clear wording of Art. 9 112 (1). Overriding mandatory provisions are defined as provisions which are applicable irrespective of the otherwise applicable law, i.e. as a derogation from the law governing the contract. A contrario, when the special conditions of Art. 9 are not satisfied, the only applicable rules are those of the law of the contract, irrespective of whether they are mandatory or not. Admittedly, this reading followed more clearly from the language of Art. 7 (1) Rome Con- 113 vention. By stating that “[w] hen applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection” (we emphasize), this provision clearly referred to the lois de police belonging to the law of a “third” country, i.e. a legal system other than the lex fori and the lex contractus. It was obvious, therefore, that overriding mandatory provisions belonging to the lex contractus were not covered by Art. 7 and should be applied as a part of the law of the contract. The wording of Art. 9 (3) is not so clear in this respect, since it does not distinguish between the lex contractus and the law of a third country. However, there is no indication that the drafters of the Regulation intended to depart from the approach of the Convention on this point.120 It should also be noted that the counter view is based on several assumptions which are not 114 necessarily shared by all of the Member States, and which in any event are not valid under the Regulation: – On one hand, the exclusion of the overriding mandatory provisions of the lex contractus is based on an understanding of such norms as “Eingriffsnormen” within the German meaning, as opposed to rules protecting the interests of individuals.121 However, as mentioned above, the definition of overriding mandatory provisions under Art. 9 (1) is broader, since it also encompasses rules protecting individuals. Now, although some commentators take the opposite view,122 there is no reason why a mandatory rule of the lex contractus aimed at protecting individuals should be discarded, simply because it has an overriding reach. – On the other hand, the counter view that the reference to the foreign lex contractus by the ordinary choice-of-law rules does not include the overriding mandatory provisions of that legal system is largely influenced by some older German decisions excluding the application of foreign rules of public law.123 The question of the applicability of foreign public law rules is not directly dealt with in the Regulation and we will not examine it here in detail. However, we would like to stress three points. First, the distinction between private and public law is blurred and increasingly disputed, and it does not even exist as 118

119

120

121 122 123

Martiny, in: Münchener Kommentar, para. 43; Remien, in: Festschrift für Bernd von Hoffmann (2011), p. 341; Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 78. This is accepted even by some of the proponents of the counter view: see Roth, in: Festschrift für Gunther Kühne (2009), p. 873. On the contrary, experts involved in the negotiations report that the application of the provisions of the lex contractus was regarded as a matter of course: Lando/Nielsen C.M.L. Rev. (2008), p. 1687. See supra, Art. 9 para. 75. Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 78. See in particular Bundesgerichtshof, 17.12.1959, NJW (1960), p. 1101; RCDIP (1961), with a note by Metzger.

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such in the legal systems of certain Member States (such as common law countries). Second, the German position on the non-applicability of foreign public law rules is not unanimously shared among the Member States. Third, non-applicability of foreign public law (even if it were accepted in principle) does not mean that private law effects cannot be extrapolated from foreign public law rules. This is expressly accepted by the Regulation: as a matter of fact, under Art. 9 (3) effect may be given to certain foreign overriding provisions even if they belong to public law. If this is possible under Art. 9 (3), there is no compelling reason to exclude it with respect to the mandatory rules of the lex contractus. 115 Moreover, it is certainly true that overriding mandatory provisions have their own applic-

ability criteria, which are often different from the connecting factors used by the ordinary choice-of-rules. However, applicability of these rules under the foreign lex contractus does not mean that such criteria will be disregarded. The rules of a foreign lex causae apply in any event only to the situations falling within their scope: therefore, the court seized must examine whether the relevant rule is applicable or not in the case at hand. In other words, the “self-limitation” of the foreign rule will not be ignored. If the norm does not cover the situation at hand, it will be discarded and other rules of the lex contractus will apply instead. So, the anti-trust legislation of the lex contractus will normally not apply unless the parties’ conduct had an impact on that country’s market. Similarly, the national rules protecting exclusive distributors will probably not apply when the distribution takes place on foreign markets.124 This has nothing to do with renvoi, excluded under Art. 20 of the Regulation.125 Moreover, the same is also true under Art. 9 (3): the overriding mandatory provisions of the law of the place of performance, referred to under that provision, are not based necessarily on that connecting factor and will only be given effect if the situation at hand falls within their scope. 116 The criticised opinion would also lead to some unacceptable consequences. First, if over-

riding mandatory provisions of the lex contractus were not applicable, they would have to be distinguished in each case from the other provisions of that law, including its “domestically” mandatory provisions. This would not only represent a very heavy burden for the court seized, but also prove extremely detrimental to legal certainty, thus running counter to the arguments that led to the new wording of Art. 9 (3). At the same time, the seized court would have the power of discarding certain provisions of the lex contractus without these being contrary to the public policy of the forum, thus circumventing the choice-of-law rules of the Regulation. Last but not least, the effect of the counter view is that foreign overriding mandatory provisions could only be given effect under the very narrow conditions of Art. 9 (3). Given that, one can wonder whether the restrictive wording of Art. 9 (3) would have been accepted during the negotiations. 2. The impact of the will of the parties 117 It follows from our understanding of Art. 9, that the overriding mandatory provisions of the

lex contractus are applicable even when that law has been chosen by the parties, as allowed by Art. 3, as well as by other rules of the Regulation. This means that the parties’ will can have an impact on the application of overriding mandatory provisions. 124 125

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See the decision of the Belgian Cour de cassation, 28.2.2008, Clunet (2011), p. 994, note Watté. Contra: Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 78.

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This is not particularly shocking. First, because the provisions of the lex contractus will only 118 be applicable if the situation falls within their scope: normally, the parties’ intention is not sufficient for that purpose. Second, because the parties, by entering a choice-of-forum or an arbitration agreement, can probably escape from the overriding mandatory provisions of the law of a country, the courts of which would otherwise have jurisdiction over their disputes.126 Under the new Art. 9 (3), they can even escape from the overriding mandatory provisions of other foreign countries, by entering into an agreement on the place of performance. That being so, there seems to be no compelling reason to exclude that the parties’ will can also lead to the application of such provisions. Can the parties also agree, through a “submission clause”, on the applicability of the over- 119 riding mandatory provisions of a given country, the law of which is not applicable to the contract?127 To answer this question, it is important to recall that under Art. 3 (1) of the Regulation, the parties can select to have the law applicable to only a part of their contract. Therefore, they should also have the right to submit to provisions governing specific aspects of the contract, the only limitation being consistency with the rules applicable under the law governing the contract as a whole. Furthermore, the parties can always incorporate by reference into their contract the provisions of a law other than the lex contractus.128 Although Recital 13 refers only to the incorporation of a non-State body of law or an international convention, this possibility should be recognised a fortiori with respect to the rules of a State’s legal system. VI. Overriding Mandatory Provisions of the Law of a “Third” State 1. General remarks a) Content Art. 9 (3) of the Regulation sets up the conditions for giving effect to foreign overriding 120 mandatory provisions as opposed to those belonging to the lex fori, covered by Art. 9 (2). The direct antecedent of Art. 9 (3) was Art. 7 (1) Rome Convention. This rule was inspired by the German doctrine of the “Sonderanknüpfung” (“separate connection”), pursuant to which overriding mandatory rules (“Eingriffsnormen”) are not subject to the ordinary choice-of-law rules but should be applied according to special criteria.129 In case law, the only direct forerunner of Art. 7 (1) of the Convention was the well-known 121 decision of the Dutch Supreme Court in the Alnati case.130 In this and other subsequent

126 127 128 129

130

See infra, Art. 9 para. 195 et seq. Remien, RabelsZ (1990), 473 et seq. Martiny, in: Münchener Kommentar, para. 46. Wengler, Die Anküpfung des zwingenden Schuldrechts im internationalen Privatrecht. Eine rechtsvergleichende Studie, ZvglRW (1941), p. 168 et seq.; Wengler, Sonderanknüpfung, positive und negative ordre public, JZ (1979), p. 175 et seq.; Zweigert, Nichterfüllung auf Grund auslänidscher Leistungsverbote, RabelsZ (1942), p. 283 et seq. The theoy had its roots in the reference, made by von Savigny’s, to “Gesetze von streng posituiver, zwingender Natur”: von Savigny, System des heutigen römischen Rechts, vol. VIII (1849), p. 182. See also Roth, in: Festschrift Gunther Kühne (2009), p. 860 et seq. Hoge Raad, 13.5.1966, RCDIP (1967), p. 522, note Struycken.

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decisions,131 Dutch courts accepted, at least in principle,132 that foreign overriding mandatory provisions could be given effect although they were not part of the law governing the contract, provided that a close connection existed between the situation and the enacting State. In other countries, although the direct applicability of foreign overriding provision was not recognised as a principle, the courts developed alternative approaches, based on substantive rules of the lex contractus or on public policy, which allowed them to sometimes give effect to such provisions.133 122 As mentioned above, Art. 9 (3) does not cover all foreign overriding mandatory provisions.

In particular, it does not deal with the provisions of the lex contractus, but only with those belonging to the legal order of a “third” State, i.e. a law other than the lex fori or the lex causae.134 Among these, effect may be given only to the provision of the law of the country where the contractual obligation has to be or has been performed. By contrast, the overriding provisions of the lex contractus are applicable as part of that legal system, provided that the situation falls within their scope. In this respect, the Regulation, as with the Rome Convention before it, deviates from the theoretical postulates of the “Sonderanknüpfung” doctrine.135 b) Purpose of Art. 9 (3) 123 Several arguments can be invoked for giving effect to foreign overriding mandatory provi-

sions not belonging to the lex contractus:136 – In some instances, the courts of a country may be willing to assist a foreign country in promoting its policies or, at least, in preventing the violation of its laws. The reason for this can be the wish to cooperate in the pursuit of specific common or shared interests, or more generally the idea of “international comity”, based among other on the assumption that foreign jurisdictions will reciprocate the courtesy shown to them.137 – By taking into account foreign mandatory rules, the courts can also shelter a party from “conflicting duties” arising out of the contract and/or contradictory laws of different countries. This concern is particularly important when a foreign State is in fact in a position to enforce its laws, and/or to impose effective sanctions for non-compliance (“Machttheorie”).138 – The quest for international harmony of decisions can also justify the application of foreign mandatory rules; in fact, it is desirable that judgments rendered in the forum 131

132

133 134

135 136

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Hoge Raad, 12.1.1979, Sewrajsingh RCDIP (1980), note van Rooij; Rechtbank s’Gravenhage, 17.9.1982, CEP v. Sensor, RabelsZ (1983), p. 141, note Basedow, p. 147. In the cases cited above, foreign mandatory provisions were actually never given effect, due to the absence of the required conditions. See infra, Art. 9 para. 186 et seq. Of course, in many cases lex fori and lex contractus are the same, so that the usual reference to a “third” country is not accurate: Martiny, in: Münchener Kommentar, para. 34 (“unechter Drittstaatsfall”). See supra, Art. 9 para. 120. See also the opinion of the A-G Szpunar in the case Republik Griechenland v. Grigorios Nikiforidis (C-135/15), para. 80. Thus, in the Ralli case, which directly influenced the wording of Art. 9 (3), English courts considered that they should not assist the parties in violating the laws of a foreign friendly country (see infra, Art. 9 para. 129). On the role of comity in this context, see Chong JPIL (2006), p. 37 et seq. On the “Machttheorie”, see Martiny, in: Münchener Kommentar, para. 39.

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be in harmony with those that could be rendered by other potentially competent courts in a foreign State.139 In turn, international uniformity prevents forum shopping and ensures that judgments can circulate freely, without clashing with the fundamental interests of other States concerned. Art. 9 (3) does not give guidance as to which of these (and possibly other) objectives should be pursued. In this respect, it is submitted that courts continue to enjoy a very wide discretion.140 By contrast, legal certainty pleads against giving effect to foreign overriding mandatory 124 provisions that are not part of the lex contractus. In fact, predictability is enhanced if the contract is governed by one single law designated by the choice-of-law rules, in particular when that law has been selected by the parties. Art. 9 (3) tries to strike a balance among these (and others) conflicting interests. c) The new conditions set by Art. 9 (3) The direct antecedent of Art. 9 (3) was Art. 7 (1) Rome Convention. This provision allowed a 125 court to give effect to foreign overriding mandatory norms on the sole condition that the situation presented a close connection with the State having enacted them. This decision was left to the court’s discretion. It had to be based on diverse considerations related to the nature of these rules and their purpose, as well as any consequences that would derive from their application or non-application. This innovative, open-ended provision141 had generated strong reactions. While some com- 126 mentators celebrated it as an important step forward, opening new perspectives for the future development of private international law, its detractors criticised the legal uncertainty that this provision would entail and feared that it could vest courts with a quasi-political role, well beyond the normal judge’s powers.142 Because of the serious objections voiced by some Contracting States, Art. 22 Rome Con- 127 vention allowed a reservation against Art. 7 (1) – an option chosen by seven Contracting States.143 Since reservations cannot be made with respect to a European regulation, a compromise had to be reached between the States that favoured Art. 7 (1) and those that were 139

140 141

142

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Bonomi YPIL (1999), p. 239 et seq.; Chong, JPIL (2006), p. 38 et seq.; Hellner JPIL (2009), p. 449. See also the Commission’s Green Paper COM (2002) 654. See also infra, Art. 9 paras 139–140 and 170 et seq. The only direct forerunner of Art. 7 (1) of the Convention was the line of Dutch case law initiated by the Hoge Raad decision in the well-known Alnati case: Hoge Raad, 13.5.1966, RCDIP (1967), p. 522, note Struycken. See also Hoge Raad, 12.1.1979, Sewrajsingh RCDIP (1980), note van Rooij, and Rechtbank s’Gravenhage, 17.9.1982, CEP v. Sensor RabelsZ (1983), p. 141, note Basedow, p. 147. Although the Dutch courts accepted, in principle, the applicability of foreign overriding mandatory provisions, they always refused to give effect to such provisions in the cases they had to decide. Although the direct applicability of foreign overriding provisions was not recognised elsewhere, the courts of other countries developed alternative approaches to sometimes give effect to such provisions: see infra, Art. 9 para. 185 et seq. For references to the doctrine, see Bonomi, Le norme imperative (note 3), p. 294, note 229, as well as p. 368 et seq. The excessive character of these criticisms is rightly underlined by Boschiero, p. 110. Estonia, Germany, Ireland, Luxembourg, Portugal, Slovenia and United Kingdom.

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opposed to it. While the Commission, followed by some Member States, had proposed to maintain the disputed provision,144 some Member States insisted on deleting it, following the precedent Rome II Regulation.145 Particularly strong was the opposition of the United Kingdom, which insisted on the suppression or substantial modification of Art. 7 (1) as a condition for opting into the Regulation.146 128 In this context, Art. 9 (3) is the fruit of a political compromise. The new provision preserves

the possibility of giving effect to the overriding mandatory provisions of a foreign state while imposing two more specific and restrictive conditions. The first such condition concerns the object of the mandatory rules in question. While the Convention posed no limitation in this regard and restricted itself to requiring that the norm be considered as an overriding mandatory provision in the legal order to which it belonged, Art. 9 (3) only permits a court to give effect to mandatory provisions which would, “render the performance of the contract unlawful”. The second condition is intended to specify, in a restrictive sense, the connection required between the situation and the State that enacted a mandatory norm: whereas the Convention simply required the existence of a “close connection”, without any further specification, the Regulation refers only to the norms of the country, “where the obligations arising out of the contract have to be or have been performed.” 129 The new provision goes back to the compromise proposals made in the Civil Law Commit-

tee by the Dutch and Swedish delegations.147 It is easy to recognise in its wording a sort of restatement of a rule originally formulated by the English doctrine148 and adopted in the well-known decision of the English Court of Appeal in the Ralli case.149 By virtue of this 144 145

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See Art. 8 (3) of the Commission’s Proposal. As mentioned above, Art. 16 Rome I Regulation only refers to the overriding mandatory provisions of the lex fori. This position was strongly influenced by the reactions of some stakeholders, in particular the City of London, who feared that the uncertainty engendered by Art. 8 (3) of the Commission’s Proposal could undermine business confidence in the United Kingdom. For an in-depth discussion of the United Kingdom position, see Chong JPIL (2006), p. 27 et seq.; Dickinson JPIL (2007), p. 53 et seq.; Harris, pp. 272 et seq. For details, see Hellner JPIL (2009), p. 453. Dicey, The Conflict of Laws, 2nd ed., London, 1908, p. 553. [1920] 1 K.B. 287, Ralli Bros v. Compañia Naviera Sota y Aznar (26 March 1920). The English company Ralli Brothers had chartered a ship belonging to the Spanish company Sota y Aznar in order to carry a cargo of jute from Calcutta to Barcelona. Under the terms of the parties’ agreement, the one half of the charter had to be paid in London upon the sailing of the ship from its port of embarkation, the remainder being due upon arrival in Barcelona. After the arrival of the goods at destination, the sender refused to pay the second portion of the price and invoked a Spanish decree setting, as a matter of mandatory law, the total price of the charter in an amount inferior to the agreed upon amount. The English judges accepted this defence despite the fact that the contract was governed by English law, on the grounds that they could not assist in the violation of the laws of “friendly foreign” countries. For other cases in which this rule was applied, see Dicey & Morris, The Conflict of Laws, 13e ed. (ed. L. Collins), London, 2000, No 32–141 et seq., p. 1246 et seq. In a distinct (although similar) line of precedents, English courts have also refused to enforce contracts which the parties had entered into with the intention of violating foreign mandatory provisions: Court of Appeal, 13.12.1924, Foster v. Driscoll, Law Journal, King’s Bench (1929), p. 282; House of Lords, 21.10.1957, Regazzoni v. Sethia, 2 All ER (1957); ICLQ (1958), p. 164, note Mann; High

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precedent, a contract, albeit valid under the law that governs it, is without effect if its performance requires the accomplishment of an act, which is considered unlawful by the law at the foreign place of performance (lex loci solutionis). The similarity of Art. 9 (3) with English case law obviously facilitated the decision of the United Kingdom to ultimately opt into the Regulation.150 By contrast, the second sentence of Art. 9 (3) is unchanged. As under Art. 7 (1) Rome 130 Convention, the court has discretion as to whether to give effect to the foreign overriding mandatory provision. In taking this decision, it has to consider the nature of the provision, its purpose as well as the consequences of its application or non-application. d) Overall appraisal Art. 9 (3) has the merit of not completely excluding the possibility of giving effect to the 131 overriding mandatory provisions of a third State.151 In this respect, this provision is better than Art. 16 Rome I Regulation. Although we are not aware of any court decision making use of the power conferred by Art. 7 (1) Rome Convention, it is important that the principle of the potential pertinence of foreign overriding mandatory provisions be preserved, because of the impact that this principle can have particularly in promoting international harmony of decisions and international cooperation. It should also be noted that Art. 7 (1) has exerted a certain influence on some national private international law codifications152 and that it is sometimes cited by arbitrators confronted with the question of whether to apply overriding mandatory provisions that do not belong to the lex causae. For these reasons, it is positive that Art. 7 (1) Rome Convention was not simply deleted, even if its preservation was possible only at the price of important concessions. Furthermore, the new provision is also applicable in those Member States, which had made a 132 reservation against Art. 7 (1) Rome Convention. Thus, the courts of those States now also have the possibility to give effect to foreign overriding mandatory provisions. This was already the case in some of those Member States based on different approaches, such as the “indirect application” of foreign rules as a matter of fact. However, this was not possible in all those Member States. It should also be recognised that, in many cases, the solution provided for by Art. 9 (3) does 133 permit adequate results. We mention, as an example, a contract which creates obligations that violate the antitrust laws of the place where it is to be performed. In such a case, a foreign court can give effect to the norms that render the performance of the contract unlawful.153

150 151

152

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Court of Justice, Chancery Div., 27.2.1959, In re Emery’s Investment Trust, 1 Ch. (1959), p. 410. On these cases, see Chong JPIL (2006), p. 33 et seq. However, a number of differences exist between Art. 9 (3) and the Ralli case law: see Harris, p. 306 et seq. In is worth recalling that, at one stage of the negotiation, Art. 8 (3) of the Commission’s Proposal was delated from the European’s Parliament draft report: see Harris, p. 291. Analogous provisions can be found, for example, in Art. 19 of the Swiss Law on Private International Law of 18 December 1987 and in Art. 3079 of the Civil Code of Québec of 1991. See also Hellner JPIL (2009), p. 467.

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134 Nonetheless, the conditions provided for in the new text clearly constitute a step backwards

with respect to the Rome Convention.154 First of all, the new conditions are not likely to substantially reduce the uncertainty connected with the effects of foreign overriding mandatory provisions. Certainly, the question will arise in the future only with respect to the rules of lex loci solutionis that render illicit the performance of a contractual obligation. To some extent, these restrictions limit legal uncertainty.155 Nonetheless, several factors remain difficult for the parties to predict: this is the case for a prohibitive legal norm to qualify as an overriding mandatory provision in the legal order to which it belongs and, above all, for the result of the discretionary evaluation that Art. 9 (3) continues to demand of the court. Moreover, the reference to provisions which, “render the performance of the contract unlawful,” is not easy to interpret and the determination of the place of performance can give rise to very serious difficulties, as is demonstrated by Art. 5 (1) Brussels I Regulation. 135 If uncertainty is inherent to the treatment of foreign overriding mandatory provisions, a

more serious objection is that the rationale of the two conditions included in Art. 9 (3) is unclear, so that the limits that they imply are far from convincing.156 136 In particular, the reference to the law of the place of performance is overly restrictive. Giving

effect to the overriding mandatory rules of the lex loci solutionis can certainly be appropriate, in particular when they render the performance of the contract unlawful. However, if one considers the possible reasons for giving effect to foreign overriding provisions, the a priori exclusion of provisions of this kind enacted in other foreign countries is not justified. Thus, if giving effect to a foreign provision is aimed at protecting one of the parties from a “conflict of duties”, the law of the country of domicile (or habitual residence, registered office, main place of business) of that party would seem particularly relevant.157 If the purpose is to promote international harmony and to prevent forum shopping, a court should be allowed to look into the law of the countries, where proceedings were or could have been brought by one of the parties in the case at hand. In order to facilitate the circulation of its own judgment, a court should be able to give effect to the provisions of the country (or countries), where that judgment would probably have to be enforced. Last but not least, if the seized court is prepared to assist foreign countries in pursuing specific policies, or in preventing evasion of the law, it should be allowed to give effect to the provisions of every country which has, in the case at hand, a legitimate interest in imposing compliance with its own rules. This is, in particular, the country, the law of which would have been applicable in the absence of the parties’ choice. As illustrated by these examples, it would have been possible to define more broadly the range of the relevant countries, while reducing the uncertainty related to the open formulation of Art. 7 (1) Rome Convention.158

154

155 156 157

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Most commentators criticize the new rule. According to a view, however, the new rule “might not bring about such great differences”: Hellner, JPIL (2009), p. 464. Republik Griechenland v. Grigorios Nikiforidis (C-135/15) (2016), para. 46. See infra, Art. 9 para. 149 et seq., 154 et seq. The compromise text proposed by The Netherlands originally also included a reference to provisions of the law of the parties’ habitual residence; however, according to Hellner, JPIL (2009), p. 454, this reference was deleted, because this would be relevant only, “in cases of trade embargoes, economic sanctions and the like,” and, “such cases were not considered sufficiently relevant to be included in the text.” See also the critique of D’Avout, p. 2167 et seq.

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Let us take, for example, the case of a contract concluded between parties domiciled in States 137 A and B in violation of a commercial embargo decreed by State A against State C. In the absence of a choice of law, the applicable law would be that of State A, but the parties have opted for the application of the law of State B. The contractual obligations must be performed in States B and C. These two legal orders consider the contract to be valid but the performance required of one of the parties is prohibited and punishable in State A where the debtor is domiciled. Under such circumstances, it may appear to be justified for the courts in State B to take into consideration the prohibitive norms of State A (domicile of the debtor). This should be possible for a number of reasons which the courts should be able to appreciate (i.e. in order to favour the uniformity of judgments as between States A and B, since the judges of both of the States are potentially competent; to guarantee the enforceability in State A of the judgment rendered in State B; to avoid a situation in which the debtor is confronted with an inextricable “conflict of duties” resulting from the foreign judgment condemning him to performance as opposed to the mandatory rules of his State of domicile; to assist the foreign and “friendly” State A in avoiding the violation of its prohibitive norms). However, such a possibility is excluded by Art. 9 (3) since the prohibitive norms in question are not those of the locus solutionis. In order to reduce the impact of the new conditions, it is submitted that Art. 9 (3) should not 138 be constructed in an overly restrictive way. This is also justified, because this provision does not require courts to give effect to the foreign overriding rules, but only allows them to do so.159 In light of the new conditions set by Art. 9 (3), it would be tempting to argue that the purpose 139 of this provision is also different from that of Art. 7 (1) Rome Convention. Thus, a commentator suggests that the “main rationale” of the new rule is, “to prevent parties from having to commit unlawful acts in a foreign state.”160 In a similar sense, the observation was made, by other scholars, that Art. 9 (3) is an expression of the so-called “Machttheorie.”161 In other words, the rule would now (only) aim to protect one of the parties from what we have called “conflicting duties.” If this were true, the other possible reasons for giving effect to foreign mandatory provisions, which were relevant under the Rome Convention, would not play a role anymore. Although convincing at first sight, we consider that such a reading of Art. 9 (3) is not 140 demanded by the wording of that rule, and would be overly restrictive. It should be noted, first, that the limitation to the provisions of the law of the place of performance that renders such performance unlawful, does not necessarily imply that the debtor’s interest is the only relevant consideration. In fact, such limitations can also be justified by a different approach, in particular if one assumes that the purpose of Art. 9 (3) is to assist a foreign State in preventing the evasion of its laws. In fact, since prohibiting provisions are particularly important from a country’s perspective, it may appear justified, in an attempt to reduce uncertainty, to put the emphasis on those norms. And the reference to the place of performance may be justified because this connecting factor gives legitimacy to a country’s assertion of its own overriding interests. This is also confirmed by the English case law on 159 160 161

Renner, in: Calliess, Art. 9 Rome I, para. 28. Harris, p. 328. In this sense, Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 63 et seq.

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which the recast is based (Ralli and others): in those decisions, English courts always stressed that the prohibiting provisions were those of “a friendly foreign country”: such a factor, which would be irrelevant if only the debtor’s interests were at stake, clearly illustrates that comity was (also) determinant for those decisions. The wording of Art. 9 (3) indirectly corroborates such a broader interpretation. On one hand, that rule does not require the foreign provisions at the place of performance to be effective. Now, if the purpose is the debtor’s protection, only foreign rules provided with effective sanctions should be taken into consideration, as the “Machttheorie” postulates. By contrast, comity can also result in the taking into account of foreign rules which the foreign country is not in a position to actually enforce. On the other hand, if only the debtor’s interests were relevant, giving effect to the foreign provision would essentially consist of exempting him from the consequences of nonperformance; in that case, it would have been sufficient for Art. 9 (3) to refer to the place where the obligation in question is to be performed, and not to the place of a past performance. Finally, one should also consider that the effect of Art. 9 (3), if interpreted narrowly, would probably often overlap with substantive law rules on impossibility or frustration of contract, thus excessively reducing the practical usefulness of that provision. 2. The conditions for giving effect to a foreign mandatory provision a) A foreign provision 141 As already mentioned, Art. 9 (3) only covers provisions enacted by a foreign country (or by a

foreign supranational organization). However, it does not apply to the provisions of the law designated by the ordinary choice-of-law rules to govern the contract, because these provisions are applicable by themselves as a part of the lex contractus. Because of the universal scope of the Regulation (Art. 2), Art. 9 (3) also covers provisions belonging to the law of a non-Member State. b) An overriding mandatory provision 142 As with the preceding paragraphs of Art. 9, Art. 9 (3) also refers to “overriding mandatory

provisions”. The definition of these provisions provided by Art. 9 (1) is also relevant for the purpose of Art. 9 (3).162 143 As discussed above, the qualification of a norm as being an overriding mandatory provision

is subject to three conditions: 1) the provision must be mandatory; 2) it must be regarded as crucial by a country for safeguarding its public interests; 3) it must be applicable irrespective of the law otherwise applicable to the contract.163 Since Art. 9 (3) deals with foreign provisions, these conditions must be satisfied under the foreign law of the State having enacted them. 144 The clearest cases, but probably also those least commonly occurring, are when the over-

riding reach of the foreign provision is expressly stated under foreign law. Failing an express statement in this sense, the court seized will have to rely on the case law of the foreign 162 163

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Freitag, IPRax (2009), p. 112. Obviously, when the foreign provision referred to by Art. 9 (3) is part of the law of a non-Member State, the law otherwise applicable to the contract is not the law determined under the Regulation, but that designated by the choice-of-law rules of the foreign State: Roth, in: Festschrift Gunther Kühne (2009), p. 866.

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country courts. Scholarly opinions can also be relevant to that effect, at least when they are the clear expression of a majority view. In the absence of such elements, a foreign provision should not be regarded as falling under Art. 9 (3). It is possible that the foreign country ignores the notion of an overriding mandatory provi- 145 sion. Even then, compliance with a domestic rule can be required in cross-border situations for public policy reasons.164 To determine if this is indeed the case, the court seized has to be satisfied that, under the law of the foreign country, the parties to the contract cannot derogate from the foreign rule in question by including a contractual term and/or by the choice of the law of a different country as applicable to the contract. Significant indications as to the public policy relevance of a specific provision can also be deduced from the foreign country’s case law on the enforceability of choice-of-forum and arbitration agreements and, in particular, on the recognition and enforcement of foreign decisions. If the provision at hand is regarded as an overriding mandatory provision (or a provision 146 belonging to public policy) in the foreign State that has enacted it, this will not be enough for the purposes of Art. 9 (3). In fact, such a characterization does not necessarily fit the definition of an overriding provision under Art. 9 (1). In theory at least, the court seized in a Member State should still verify whether the evaluation made in the foreign country corresponds to the standards set by the Regulation, in particular whether the foreign provision could really be regarded as “crucial” for the protection of a “public interest” within the meaning of the Regulation. The compliance with such criteria should also be examined by the European Court of Justice, if seized with a preliminary question. In practice, however, it seems unlikely, and after all unnecessary, that the seized court examine these aspects.165 If the foreign provision, because of its content or its purpose, does not reach the threshold required by Art. 9, the court seized can simply reject its application by making use of its discretion under Art. 9 (3). If a provision is not regarded as mandatory and overriding in the foreign State concerned, 147 the court seized will not be allowed to give effect to it under Art. 9 (3). This is true even if a provision of the same kind would qualify as an overriding mandatory provision under the law of the forum: if the foreign country does not regard its own provisions as crucial, it is not for the forum court to look after that country’s interests. A delicate question arises when the foreign provision, albeit not explicitly qualified as an 148 overriding mandatory rule (or as a rule belonging to public policy) in the foreign country, would nevertheless be applicable in the case at hand before that country’s courts on account of the ordinary choice-of-law rules of the foreign law. This circumstance alone should not be sufficient for the purpose of Art. 9 (3). However, the conclusion might be different if a closer examination of the content and purpose of the relevant choice-of-law rules reveals that they are based on public policy considerations. c) A provision that renders the performance unlawful Under Art. 9 (3), only those foreign overriding provisions which “render the performance of 149 164

165

This is the case for many common law countries. On the position of English law before the entry into force of the Rome Convention, see Harris, p. 297 et seq. See Harris, p. 297.

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the contract unlawful” can be given effect. Although the provision refers to norms having an impact on the lawfulness of the contract as such, this also covers norms that prohibit the performance of one or more specific obligations arising out of the contract.166 It is not relevant whether the performance is unlawful from the beginning or becomes unlawful at a later stage.167 The moment at which the provision was adopted or entered into force is also irrelevant, provided that the situation falls within its scope. 150 In some instances, the foreign provisions prohibiting the performance of the contractual

obligations will also directly affect the validity or the enforceability of the contract as a whole. Thus, the prohibition of exporting specific kinds of goods to a country under the terms of a trade embargo frequently means that the contract is treated as null and void. But this is not necessary for the purposes of Art. 9 (3). A foreign provision can be given effect even if it prohibits (or otherwise renders unlawful) the performance of one or more specific obligations; the possible consequences of this partial unlawfulness on the contract as a whole will then depend on the lex contractus. 151 At first glance, the wording of Art. 9 (3) seems to rule out provisions which positively impose

a specific behaviour on the parties to the contract, such as the obligation to pay damages in the event of gross negligence or intentional breach of the contract, or the obligation to pay compensation or an indemnity in the event of an anticipated termination of the contract.168 However, since non-compliance with such duties normally also renders the contract (and its performance) unlawful, it is submitted that these rules also fall within the scope of Art. 9 (3).169 In such a case, the place of performance will then be either the place where the specific duties in question should have been performed, or the place of performance of the main obligations under the contract. 152 Such a reading of Art. 9 (3)170 can probably also cover provisions that grant one of the parties

the right to a specific remedy, such as the rules of French law giving the subcontractor a direct action against the owner in the event of non-payment by the main contractor.171 However, it seems that Art. 9 (3) does not cover provisions that simply impose a duty of information on one of the parties, without sanctioning non-compliance with such duty by rendering the contract unlawful and/or unenforceable. It also does not cover the provision conferring on one of the parties the right to terminate the contract.172 153 Art. 9 (3) does not require that the foreign overriding provision is effective, i.e. is capable of

being applied in the case at hand, nor that it renders the performance of the contract 166 167 168 169 170

171 172

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Nuyts RDC (2009), p. 562. Freitag IPRax (2009), p. 113; Nuyts RDC (2009), p. 562. Contra: Nuyts RDC (200), p. 563. Nuyts RDC (2009), p. 562. For a broad reading see also Remien, in: Festschrift für Bernd von Hoffmann (2011), p. 344; Renner, in: Calliess, Art. 9 Rome I, para. 28. According to Hellner JPIL (2009), p. 461, the original idea was to include all provision “that would otherwise modify” the contract. Based on such broad understanding, he considers that Art. 9 (3) “would not exclude any internationally mandatory rule.” See also the opinion of the A-G Szpunar in the case Republik Griechenland v. Grigorios Nikiforidis (C-135/15), para. 87 et seq. See supra Art. 9 note 57. Freitag IPRax (2009), p. 113.

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impossible or more difficult. Admittedly, since the only relevant provisions are those at the place of performance, the foreign State will often be able to impose their application in practice. However, this is not a condition, nor the only reason for giving effect to such provisions. Thus, contrary to what has been suggested, Art. 9 (3) cannot be regarded as the expression of the so-called “Machttheorie”.173 d) A provision of the law of the place of performance Pursuant to Art. 9 (3), only overriding mandatory provisions of the law of the place of 154 performance can be given effect, at the court’s discretion.174 As mentioned above, this limitation is intended to reduce the uncertainty resulting from the reference made by Art. 7 (1) Rome Convention to the lois de police of all countries, with which the situation had a close connection. Based on the wording of Art. 9 (3), the relevant law is that of, “the country where the 155 obligations arising out of the contract have to be or have been performed”. This language closely resembles that in Art. 7 (1) Brussels Ibis Regulation (former Arts. 5 (1) Brussels I Regulation and Brussels Convention), which also refers, for jurisdictional purposes, to the place where, under the contract, the contractual obligations have been or should have been performed. Therefore, it would be tempting to borrow, for the interpretation of Art. 9 (3), the criteria developed with respect to the Brussels I Regulation. As is well known, the meaning of “place of performance” under those instruments was shaped by an important legislative reform in 2000 and by a significant number of decisions by the European Court of Justice. At first glance, a parallel interpretation of the two regulations seems desirable, both for the purpose of taking advantage of the existing case law and for ensuring a certain degree of uniformity between the two instruments. Moreover, giving effect to the overriding mandatory provisions of the Member State, the courts of which have jurisdiction under the Brussels I Regulation, would promote international harmony of decisions, while at the same time discouraging forum shopping.175 However, a closer examination makes it clear that this apparently appealing solution should be rejected.176 First of all, Art. 7 (1) Brussels I Regulation, as a jurisdictional rule, only refers to a place of 156 performance in a Member State. If the place of performance is in a non-Member State, that jurisdictional ground is not pertinent. By contrast, Art. 9 (3) also refers to foreign overriding 173

174

175

176

As suggested by some German scholars: see Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 63 et seq. On the “Machttheorie”, see Martiny, in: Münchener Kommentar, para. 39. Republik Griechenland v. Grigorios Nikiforidis (C-135/15) (2016), para. 50: “Art. 9 of the Rome I Regulation must therefore be interpreted as precluding the court of the forum from applying, as legal rules, overriding mandatory provisions other than those of the State of the forum or of the State where the obligations arising out of the contract have to be or have been performed”. See also Cour d’Appel de Paris, 25.2.2015 – 12/23757, and the remarks by Mankowski IPRax 2016, 488. The temptation of forum shopping is strong if, for example, the judge of the Member State of the defendant’s domicile (which is competent pursuant to Art. 2 of Regulation Brussels I) refuses to apply the overriding mandatory provisions of the Member State where the goods are to be delivered or a service provided, knowing that the court of this place – which is also competent by virtue of Art. 7 (1) of Regulation Brussels I – will clearly not hesitate to apply the overriding mandatory provisions of its law. Freitag IPRax (2009), p. 113 et seq.; Magnus, para. 101; Nuyts RDC (2009), p. 564; Remien, in: Festschrift für Bernd von Hoffmann (2011), p. 343.

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provisions enacted in a non-Member State, provided that the place of performance is located in that State. This is not expressly stated by that provision, but it clearly follows from the erga omnes reach of the Regulation’s provisions as announced in Art. 2. Thus, there is in any event no guarantee that the overriding provisions referred to by Art. 9 (3) are those of a Member State having jurisdiction under the Brussels I Regulation. This reduces the value of a uniform construction of the notion of place of performance under the two Regulations. 157 Furthermore, Art. 7 (1) and its construction are largely influenced by the jurisdictional

objectives of the Brussels I Regulation, in particular by the purpose of ensuring access to justice while preventing, at the same time, an excessive multiplication of the available fora. These concerns are absent in the case of Art. 9 (3). As mentioned above, this provision is in itself narrower than Art. 7 (1) Rome Convention and probably even too narrow. Therefore, there is no ground for a restrictive reading of the notion “place of performance”, since this would further limit the range of the potentially relevant foreign overriding provisions.177 158 This is the case with respect to the selection of the relevant obligation. It is well known that

Art. 7 (1) Brussels I Regulation refers, for certain contracts, to the place of performance of the obligation in dispute, whereas, for other contracts (sale of goods and provision of services), it targets the place of performance of the characteristic obligation (respectively, the delivery of goods and the provision of services). While such distinction is already questionable with respect to jurisdiction, it lacks any objective foundation in relation to overriding provisions. Thus, there is no serious reason for excluding from the scope of Art. 9 (3) a provision that prohibits, in a given country, the payment of the price or the performance of another contractual obligation, even if it is not the characteristic obligation of the contract.178 Although the national law of a Member State cannot give determinant guidance for the interpretation of a European law rule, it is instructive that the Ralli Brothers decision, from which the language of Art. 9 (3) is taken, in fact concerned the obligation to pay the price in a charter party.179 Indeed, giving effect to such norms may be considered appropriate for several reasons, such as preventing conflicting duties, assisting the foreign State in avoiding evasion of the law, or facilitating the recognition and execution of the judgment in that State. 159 Similar reasoning also applies with respect to the determination of the place of performance,

another very delicate issue. Under the Brussels Convention, the European Court of Justice used to refer to the law applicable to the contract.180 This approach is still valid under Art. 7 (1)(a) Brussels I Regulation, while concerning Art. 7 (1)(b) the Court has developed other criteria, based on that rule’s jurisdictional objectives. Once again, since the jurisdictional concerns underlying the Brussels I Regulation are not relevant for the purpose of the Rome I Regulation, the case law concerning Art. 7 (1)(b) should not be automatically referred to for the interpretation of Art. 9 (3). 177

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See also the opinion of the A-G Szpunar in the case Republik Griechenland v. Grigorios Nikiforidis (C-135/15), para. 91 et seq. Martiny, in: Münchener Kommentar, para. 116; Plender/Wilderspin, para. 12–027: according to these commentators, Art. 9 (3) “is also not limited to the obligation which forms the subject of the dispute.” In that case, the place of payment was also the place of delivery of the merchandise but it is clear that such a coincidence will not always be present. Industrie Tessili Italiana Como v. Dunlop AG, (case 12/76 (1976)), ECR 1976, p. 1473.

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How is then the place of performance to be determined for the purpose of Art. 9 (3)? In our 160 opinion, this question should not necessarily always be answered in the same way. In fact, it seems that, depending on the reasons for giving effect to a foreign overriding provision, the criteria to be used for determining the place of performance could be different. Thus, although the language of Art. 9 (3) clearly refers first to the place where the obligation 161 was actually performed, this criterion does not seem to be pertinent in the all too common situation (which according to one opinion, also corresponds to the main rationale of Art. 9 (3)), where the foreign mandatory provision is relied upon by the debtor in order to be exempted from liability. In such circumstances, the obligation has not yet been performed, hence the relevant place is that where the obligation is to be performed. To determine this place, the paramount criteria should be the parties’ agreement.181 Failing 162 such agreement, it is necessary to look into the law applicable to the contract.182 The place designated by the parties or by the default rules of the lex contractus is the one where the debtor has to perform its obligation: therefore, prohibiting rules in force at that place are certainly relevant from his perspective. Furthermore, the reference to the agreed place of performance or to the place pointed to by the rules of the lex contractus has the merit of respecting the parties’ expectations. It also allows the parties to “pre-determine”, by an agreement on the place of performance or, at least, on the applicable law, the range of the potentially applicable overriding provisions, thereby reducing the uncertainty created by Art. 9 (3).183 However, when the purpose for giving effect to the foreign provision is not (only) to protect 163 the debtor, but rather to assist a foreign country in preventing evasion of the law of the foreign country (i.e. comity), the place of actual performance can also be relevant, as spelled out by Art. 9 (3).184 In fact, even if the unlawful act of performance has already taken place, the forum court might be willing to give effect to the foreign rules in order to assist the foreign country in restoring legality (by declaring, for instance, that the contract is null and void). The actual place of performance is then relevant, even if it does not correspond to the parties’ agreement or to the default rules of the lex contractus. If the obligation has not yet been performed, the parties’ agreement will normally be relevant, unless the place of performance was chosen with the purpose of avoiding the foreign overriding provisions. It has been held that the place of performance should be determined by simply referring to 164 what is provided for by the foreign overriding mandatory provision itself.185 This suggestion is not convincing. On one hand, the applicability of the foreign provision does not necessarily depend on the location of the place of performance. On the other hand, even if it is the 181 182 183 184

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Harris, p. 315. Contra: Nuyts RDC (2009), p. 563. Martiny, in: Münchener Kommentar, para. 116. Freitag IPRax (2009), p. 114. Contra: Plender/Wilderspin, para. 12–028, who refer to Dicey, Morris and Collins, The Conflict of Laws, 14th ed. (2007), p. 1595, state that “[i]t is not enough that […] the act is unlawful by the law of the country in which it happens to be done […] It must be ‘unlawful by the law of the country in which the act has to be done,’ i.e. by the law of the country in which, according to its express or implied terms, the contract is to be performed.” Nuyts RDC (2009), p. 563.

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case, the reference to the notion of the foreign law would amount to applying the foreign law provision whenever it claims application and thus deprive the condition set by Art. 9 (3) of its meaning.186 Of course, a reference to the law of the forum would also be improper.187 165 A particular problem arises when a contractual obligation is to be performed in several

different countries. Here again, the reference to the solutions adopted under the Brussels I Regulation would be displaced. While it is normally excessive to allocate jurisdiction to the courts of all of these countries, there is no compelling reason to rule out the overriding provisions that, in one or more of these countries, render the performance unlawful.188 Of course, the effect of such provisions would probably be limited, at least initially, to the obligations to be performed in the country concerned, while their impact on the contract as a whole can only be assessed by the lex contractus.189 166 A similar approach should also be followed, at least in some cases, when the place of

performance is situated in one country, but single acts relevant for the performance must be effected in another country: for instance, the place of manufacturing or that of shipping of the goods can be relevant if these acts are prohibited by an overriding provision of the local law, even if the place of delivery is situated in a different country.190 In certain instances, the place of final destination of the goods could also be relevant, even when, strictly speaking, it is not the place of delivery.191 167 Because of the disparities between Art. 9 (3) and Art. 7 (1) Brussels I Regulation identified

above, it is possible that the court seized under the latter jurisdictional rule gives effect to the overriding mandatory provisions of a foreign country (a Member State or a non-Member State) where the contractual obligations (or some of them) are to be or have been performed. Similarly, a court having jurisdiction on a different ground (e.g. the courts at the defendant’s domicile, under Art. 4 Brussels I Regulation) might give effect to the provisions of the law of another Member State, even if the courts of that State would not have jurisdiction under Art. 7 (1) Brussels I Regulation. 3. The court’s discretion 168 When the above-mentioned conditions are satisfied, the seized court may give effect to a

foreign overriding mandatory provision. As already provided for in Art. 7 (1) Rome Convention, Art. 9 (3) only confers to the court a discretional power, but does not impose a duty to do so. 186 187 188 189 190

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See also Martiny, in: Münchener Kommentar, para. 116. Harris, p. 315. Freitag IPRax (2009), p. 114; Martiny, in: Münchener Kommentar, para. 116. Freitag IPRax (2009), p. 114; Harris, p. 316. For a similar reading, see Pfeiffer EuZW (2008), p. 628; Harris, p. 316 et seq.; Hellner JPIL (2009), p. 466 (these scholars seem to consider that it should be possible to give effect to import and export restrictions, even if the place of performance in a strictly legal term is not situated in the country having enacted those rules). This was the case in the well-known English cases Foster v. Driscoll and Regazzoni v. Sethia (see supra, note 143), as pointed out by Harris, p. 319. See also the decision by the German Bundesgerichtshof of 22.6. 1972, 59 BGHZ 82, in the case of the Nigerian masks,.

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According to a frequently voiced opinion, the principle of sincere cooperation enshrined in 169 Art. 4 (3) TEU might even include a duty of the EU Member States to assist each other in pursuing shared policies.192 However, this probably goes too far. Such a cooperation duty only exists when it is stated in a specific provision193 or when the rules enacted by another Member State reflect a policy of the European Union.194 Nevertheless, it is true that, in the relations among the Member States, the uniformity of decisions and mutual trust are of such outstanding importance that the application of the overriding mandatory provisions enacted by another Member State should be regarded as the normal solution.195 a) Reasons for giving effect to a foreign overriding provision As mentioned before, a court may have several reasons for giving effect to a foreign over- 170 riding mandatory provision. Some of these reasons reflect party interests (e.g. avoiding a “conflict of duties”, promoting international harmony of decisions or facilitating the recognition and enforcement of the decision), others State interests (e.g. assisting a foreign State in pursuing its policy in a certain area, or in avoiding evasion of the law). Since Art. 9 (3) does not give any indication in this regard, courts can freely exercise their discretion, provided that the other conditions set by that provision are satisfied. Admittedly, this creates the risk of diverging decisions in the EU Member States. Thus, the 171 national courts of different Member States may be more or less inclined to giving effect to foreign overriding provisions. In order to promote uniformity, some scholars call for clarifications by the ECJ.196 However, this wish sounds unrealistic. Under its present wording, Art. 9 (3) does not contain any indication on how and for what purposes a court’s discretion should be exercised. Any attempt by the European Court of Justice to limit or to orient that discretion would lack a sound legal basis. b) Factors to be taken into account When taking its discretional decision, the court must consider the nature and purpose of the 172 foreign provision as well as the consequences of its application or non-application. This language has been adopted from Art. 7 (1) Rome Convention. These conditions are quite vague and do not imply any significant restriction of a court’s discretion. Nevertheless, they show that the court decision should be motivated by and based on a detailed assessment of all the circumstances of the case.

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193 194

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On this question see Fetsch, Eingriffsnormen und EG-Vertrag (Tübingen 2002). In Republik Griechenland v. Grigorios Nikiforidis (C-135/15) (2016), para. 54, the ECJ answered in the negative the different question of whether Art. 4 (3) TEU might authorise a Member State’s court to give effect to overriding provisions other than those of the State of the forum or of the State where the obligations arising out of the contract have to be or have been performed. On this question, see also Mankowski IPRax (2016), 488. Martiny, in: Münchener Kommentar, para. 32. In particular, when the national provision implements an EU directive. In this case, it has even be suggested that the rules of a foreign Member State should be dealt with as if they were overriding provisions of the lex fori: Remien, in: Festschrift für Bernd von Hoffmann (2011), p. 339. Bonomi YPIL (1999), p. 246; Renner, in: Calliess, Art. 9 Rome I, para. 29; Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 73. See also the opinion of the A-G Szpunar in the case Republik Griechenland v. Grigorios Nikiforidis (C-135/15), para. 88. Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 70.

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173 The reference to the nature of the foreign provision is very broad, and far from clear.

Obviously, the court will have to take into account the content of the provision at hand. However, as discussed above, Art. 9 (3) only covers the norms that render the performance of the contract unlawful. In this respect, the court has no discretion. The court can also consider whether the foreign provision belongs to private or public law where such a distinction exists in the foreign legal system concerned, and look at the kind of sanctions provided for non-compliance (criminal or administrative law sanctions certainly hold more weight than simple private law sanctions). 174 Much clearer is the reference to the purpose of the rule, in other words to its underlying

policy. This aspect is also relevant, under Art. 9 (1), for a rule to qualify as an overriding mandatory provision: as mentioned above, it will only be appropriate for the provision to qualify as such if it is regarded as crucial by a State for safeguarding its public interests. It is obvious that the goal of the rule is also extremely important for the decision on whether to give effect to such a rule or not under Art. 9 (3). 175 The same is true for the consequences of the rule’s application or non-application. These

include the consequences for the parties to the contract, but also for third parties as well as for the States concerned (the foreign State having enacted the rule, but also the forum State and the State whose law is otherwise applicable to the contract). 176 The respective roles of these factors depend on the circumstances of the case and on the

reasons why the seized court is willing to give effect to a specific foreign provision. Thus, the purpose of the provision is particularly important when the reason for giving effect to it is to assist the foreign State in pursuing its policies. This objective becomes relevant only when the policy that underlies the foreign provision is somehow shared by the forum. Such a shared policy obviously exists when compliance with the foreign rule also directly furthers forum interests (or the interests of the European Union or those of the international community): e.g. a norm prohibiting arms or drug trafficking, or the abusive export of cultural goods. In this case, the argument for giving effect to the foreign provision is particularly strong. However, a shared goal may also be said to exist when the foreign provision, although not directly impacting on the forum interests, reflects policy choices that find their equivalent in the legal system of the forum (including European law): accordingly, although a State is not directly interested in ensuring compliance with foreign antitrust rules aimed at protecting free competition on a foreign market, local courts might consider it appropriate to assist the foreign State in imposing observance of those rules if they correspond to the anti-trust rules of the lex fori. 177 The purpose of the foreign provisions is less important when the main reason for giving

effect to them is not cooperation with the foreign State, but the protection of a party’s interests. Thus, in order to shelter a party from a conflict of duties, a court might be willing to give effect to foreign provisions based on an underlying policy even where no equivalent policy exists in the forum (subject to ordre public, of course). In other words, the consequences of ignoring the foreign rules hold more weight than the policy underlying them. 178 The consequences of a foreign norm’s application or non-application also play a key role

when the court’s primary concern is to further international harmony of decisions. This objective is particularly important within the boundaries of the European Union, where the

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choice-of-law rules are unified and the court decisions can freely circulate among the Member States. In this framework, to prevent forum shopping, it may be appropriate to give effect to the overriding mandatory provisions enacted by a foreign Member State, in which the court would also have had jurisdiction to hear the case. The nature and purpose of the foreign provisions only plays a secondary role in this respect. c) Limits to the court’s discretion In any event, the effects of the foreign provision should not contradict the public policy of 179 the forum. Courts will normally give due consideration to this while making use of their discretion under Art. 9 (3), so that it should not be necessary to resort to the public policy clause of Art. 21. As is generally the case, public policy also includes the fundamental principles of European law as well as crucial European policies. The overriding mandatory provisions of the law of the forum and those of European law must also be complied with. 4. Giving effect to a foreign overriding provision When the conditions set by Art. 9 (3) are fulfilled, effect can be given to a foreign overriding 180 mandatory provision, provided that the court decides, in its own discretion, to do so. The expression “to give effect” was already used in Art. 7 (1) Rome Convention. It was preferred to “apply”, because it covers both the “direct application” of the provision at hand and its “indirect application” under the law applicable to the contract.197 According to widely held opinion, the court can choose between these two options. If the court decides to apply a foreign provision, two different laws will concurrently apply to 181 the contract. The foreign law to which the overriding mandatory provision belongs will only control the specific issue regulated by that provision (“Sonderanküpfung”); for all other aspects, the contract will be governed by the lex contractus. In particular, the law applicable to the contract will determine the consequences of the unlawfulness of a contractual obligation on the contract as a whole.198 This amounts to splitting the contract (“depéçage”), similar to what happens with respect to overriding mandatory provision of the lex fori. If the two laws are irreconcilable, the foreign mandatory provision will prevail as a lex specialis. By contrast, the court can also decide to give effect to the foreign provision as a simple fact, 182 while applying the law applicable to the contract.199 In this case, subject to other specific provisions of the Regulation, the contract is entirely governed by one single law, determined by virtue of the ordinary choice-of-law rules. When applying the rules of the lex contractus, the court can however take into account the overriding mandatory provision enacted by the third State in order to give effect to them (“indirect application”, “materiellrechtliche Berücksichtigung” in German). In this case, the foreign rules, and their inobservance, are regarded only as a matter of fact, the legal consequences of which are determined by the lex contractus. The indirect application of the rules of a law other than the lex contractus is also provided 183 197

198 199

The admissibility of an indirect application of foreign lois de police was undisputed under the Rome Convention. See Report Giuliano/Lagarde, p. 26; Freitag IPRax (2009), p. 114 et seq. Harris, p. 312; Hellner JPIL (2009), p. 463. Freitag IPRax (2009), p. 115; Magnus, para. 121; Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 81.

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under Art. 10 (2) of the Regulation, pursuant to which, “regard shall be had,” to the law of the place of performance, “in relation to the manner of performance and the steps to be taken in the event of defective performance.” A similar rule is also included in Art. 17 Rome II Regulation, according to which “account shall be taken, as a matter of fact […] of the rules of safety and conduct which were in force at the place and time of the event giving rise to the liability,” to the purpose of “assessing the conduct of the person claimed to be liable.” 184 As is the case under the Rome II Regulation, foreign overriding mandatory provisions can be

given indirect effect in order to establish or exclude the parties’ liability under the contract, or to determine the degree of liability (e.g. simple or gross negligence). Moreover, they can be relevant for assessing the validity of the contract under the lex contractus. They can also help to determine the parties’ intent, which can be relevant with respect to the formation and the construction of the contract. 5. The impact of Art. 9 (3) on alternative ways for indirectly applying foreign overriding provisions 185 As with Art. 7 (1) Rome Convention, Art. 9 (3) is the expression of a private international

law approach to the question of the relevance of foreign overriding mandatory provisions. As such, it precludes the application of national private international law rules having the same nature and scope.200 This is probably also true for those countries where foreign overriding mandatory provisions were given effect via the notion of public policy.201 Given the existence of a specific rule in Art. 9 (3), it seems reasonable to consider that the public policy clause of the Regulation (Art. 21) cannot be applied for the same purpose. 186 However, in some countries, the courts have adopted another approach to addressing the

issue of foreign mandatory provisions based on the application of the substantive law rules of the lex contractus. According to this alternative methodology, the existence of a foreign mandatory provision, or the non-compliance with such a provision, are taken into account as simple facts, producing specific effects under the rules of the law applicable to the contract (so-called “Datumtheorie”).202 – Thus, the existence under a foreign law of a rule prohibiting specific conduct, which the debtor would have to engage in in order to perform a contractual obligation, is regarded, under a number of national contract law doctrines such as impossibility, frustration or 200

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As stated by the ECJ in the decision Republik Griechenland v. Grigorios Nikiforidis (C-135/15) (2016), para. 49, “the list, in Article 9 of the Rome I Regulation, of the overriding mandatory provisions to which the court of the forum may give effect is exhaustive.” Thus, it is obvious that the Belgian and Dutch courts are not allowed, in contractual disputes, to give effect to foreign mandatory provisions based, respectively, on Art. 20 (3) of the Belgian PIL Code or on Art. 7 (3) of Book 10 of the Dutch Civil Code. Thus, French courts have occasionally held that international public policy was opposed to the enforcement of a contract aimed at violating the law of a foreign State: Tribunal civil de la Seine, 4.1.1956, Spitzer v. Amunategui, RCDIP (1956), p. 679, note Batiffol (voidness of a contract concluded in violation of the Spanish foreign exchange regulation); Cour d’appel Paris, 9.2.1966, RCDIP (1966), p. 264 (voidness of a sale of war weapons to be smuggled). The Datumtheorie goes back to Ehrenzweig, Local and Moral Data in the Conflict of Laws, Buffalo Law Rev. (1966), p. 55 et seq. See also Jayme, Ausländische Rechtsregeln und Tatbestand inländischer Sachnormen, in: Gedächtnisschrift für Albert Ehrenzweig (1976), p. 35 et seq.

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hardship, as a reason for the exemption from liability in the event of breach or as a legitimate ground for terminating or adapting the contract.203 A key condition for such an outcome is, generally, that the foreign prohibition is effective, i.e. that the legal sanctions it provides for also have a concrete chance of being enforced.204 Moreover, some genuine connection must exist between the situation and the country that has enacted the prohibition.205 – German courts have gone even further, finding that a contract concluded in breach of a foreign overriding mandatory provision is to be regarded, at least in certain circumstances, as a contract offensive to morals (“sittenwidrig”), and, as such, null and void.206 After the entry into force of the Rome I Regulation, the question arises as to whether the 187 Member States’ courts are still allowed to follow this approach and, thus, to give effect to a foreign mandatory provision, despite the lack of one of the conditions now set by Art. 9 (3). Some commentators had taken a negative stance, arguing that the purpose of Art. 9 (3) is to cover, exhaustively, the effects of foreign overriding provisions.207 However, in the Nikiforidis case, the ECJ rejected this overly strict interpretation holding that Art. 9 (3) “does not preclude overriding provisions of a State other than the State of the forum or the State where the obligations arising out of the contract have to be or have been performed from being taken into account as a matter of fact, in so far as this is provided for by a substantive rule of the law that is applicable to the contract.”208 This ruling should be approved for several reasons: First, the scope Rome I Regulation is clearly limited to the determination of the law appli- 188 cable to the contract. It is a private international law instrument; as such, it does not purport to impact on the substantive rules of contract law in force in the Member States.209 If the substantive law rules of the law applicable under the Regulation lead to indirect effect being given to a foreign law provision, they should be applied, as is the case with all other substantive law rules belonging to the governing law. In this respect, one should also not lose 203

204 205

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Thus, German courts have occasionally held that the enactment of a foreign prohibition after the conclusion of the contract could be regarded as an impediment for the performance of the contractual obligations (§ 275 BGB), or as an event frustrating the purpose of the contract (“Wegfall der Geschäftsgrundlage”, now § 313 BGB): see the decision by the Bundesgerichtshof of 30.11.1972, 60 BGHZ 14, 11.3. 1982, 83 BGHZ 197, and 8.2.1984, IPRax (1986), p. 154. This approach is also an expression of the “Machttheorie” (see supra, Art. 9 para. 123). This sounds similar to Art. 9 (3). However, in general, the required connection is deemed to be present not only when the prohibiting norm is in force at the place of performance of the contractual obligation, but also in other circumstances, e.g. when that norm belongs to the law at the debtor’s domicile. See the decisions by the Bundesgerichtshof of 21.12.1960, Borax, 34 BGHZ 169, 24.5.1962, Borsäure, NJW (1962), p. 1436, and 22.6.1972, “Nigerian masks”, NJW (1972), p. 1572. Thorn, in: Rauscher (2011), Art. 9 Rom I-VO para. 81. See also Harris, p. 302 and 333. According to Freitag IPRax (2009), p. 115, only recourse to § 138 BGB is now excluded in Germany, whereas concepts like impossibility and frustration can still be used. For a similar solution: Magnus, para. 124. Republik Griechenland v. Grigorios Nikiforidis (C-135/15) (2016), para. 51. This ruling confirms the opinion of several commentators, such as Mankowski IPRax (2016), 491; Martiny, in: Münchener Kommentar, para. 117; Roth, in: Festschrift für Gunther Kühne (2009), p. 875; Renner, in: Calliess, Art. 9 Rome I, para. 32; Hellner JPIL (2009), p. 469 et seq. Republik Griechenland v. Grigorios Nikiforidis (C-135/15) (2016), para. 52.

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sight of the fact that the law applicable to the contract under the Regulation can be that of a non-Member State: it cannot be seriously argued that the contract law rules of a nonMember State should be discarded, when (and because) they lead to the foreign mandatory provision of a third country being given effect to. If this is true for the law of a non-Member State, it should also apply, a fortiori, to the law of a Member State. 189 Second, it could not be argued that the purpose of Art. 9 (3) (or its “effet utile”) would be

undermined by the concurrent use of substantive law rules. Certainly, the purpose of that provision is to limit the uncertainty connected with the broad wording of Art. 7 (1) Rome Convention. However, the doctrine of indirect applicability was mainly used in those States which made the reservation against that provision. Therefore, it would be surprising that the “recast” of Art. 7 (1) would impact on the case law of those States that never applied that provision. 190 Last but not least, the reference to substantive law rules should still be allowed for practical

reasons, i.e. in order to avoid the harsh consequences of the overly narrow conditions set by Art. 9 (3). This argument is particularly strong when a foreign mandatory provision not covered by Art. 9 (3) (for instance, because it does not belong to the law of the place of performance) makes the performance (subjectively) impossible, or creates hardship for one of the parties. 191 Since the use of the “Datumtheorie” is still possible after the entry into force of Art. 9 (3), a

very delicate question arises in those countries where foreign overriding provisions were taken into account by way of specific rules or doctrines whose characterization as belonging to substantive law or to private international law is disputed. Thus, in a number of wellknown decisions, English courts have held that certain foreign mandatory rules should be given effect as a matter of public policy. However, given that, in most of those cases, the disputed contract was governed by English law, “public policy” was not used (as in Art. 21 of the Regulation) as a device for rejecting foreign law, but rather as a substantive rule of English law requiring the application of a foreign provision. This is quite similar to the use that German courts have made of the notion of “Sittenwidrigkeit” within the meaning of § 138 BGB.210 If this is true, it could be argued that this line of authorities survives the entry into force of the Regulation and can be relied upon as an alternative avenue for giving effect to foreign mandatory provisions.211 VII. The Impact of Overriding Mandatory Provisions on Conflicts of Jurisdiction 192 As is the case with all rules included in the Rome I Regulation, Art. 9 only deals with issues of 210

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However, the exact meaning of these authorities is very controversial: see Harris, p. 299 et seq. For a different understanding, see Plender/Wilderspin, para. 12–024, who consider that English public policy could also have been used if the law applicable to the contract had been a foreign law. See also Royal Boskalis Westminster v. Mountain, [1997] EWCA Civ. 1140. Contra: Harris, p. 302 and 333. This author considers that, “it would seem more than a little unfortunate for the United Kingdom adamantly to insist upon a very narrow provision such as Art. 9 (3) […] only then to reintroduce its pre-Convention authorities from a bygone era.” We understand this position, but it should not be forgotten that the question does not only concern English case law, but also the case law of other Member States, who would have preferred a much broader provision than Art. 9 (3).

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applicable law. It does not provide any indication as to the effect of overriding mandatory provisions on judicial jurisdiction nor on the recognition and enforcement of foreign decisions. In Europe, these issues are regulated by the Brussels I Regulation and by the Lugano Convention as well as, to a certain extent, by the national rules in force in the individual Member States. 1. Overriding mandatory rules and jurisdiction a) General remarks There is an obvious link between overriding mandatory provisions and judicial jurisdiction. 193 Pursuant to Art. 9 (2), the overriding provisions of the lex fori take precedence over the ordinary choice-of-law rules of the Regulation. However, the application of the overriding provisions enacted by a Member State is not guaranteed when proceedings are initiated before a foreign country. When the court seized is that of another Member State, these provisions could be given effect under the conditions of Art. 9 (3); however, because of the discretionary nature of that paragraph, there is no guarantee that they will be. The situation is even more uncertain when the court seized is that of a non-Member State, since then the overriding provisions of a Member State will be given effect to only if this is mandated or permitted by the conflict rules in force in the country of the proceedings.212 In such a framework, one cannot exclude the possibility that the parties may try to escape undesired overriding provisions of a given law by initiating proceedings in a foreign State or, even more effectively, by conferring exclusive jurisdiction on a court (or the courts) of such a State. It follows that in order to ensure the effective enforcement of its overriding mandatory 194 provisions, a State should confer jurisdiction on its courts. Failing an express legislative basis for jurisdiction, the question arises as to whether jurisdiction can be impliedly inferred from the enactment of an overriding mandatory provision. This is obviously not possible when uniform jurisdictional rules are applicable, as is the case under the Brussels I Regulation and the Lugano Convention. Insofar as the reach of a State courts’ jurisdiction is still governed by national law,213 the answer depends on the features of each single country’s law.214 In many systems, however, jurisdictional rules must be expressly stated, and cannot be simply inferred from substantive law rules. b) Overriding mandatory provisions and choice-of-court agreements A delicate and much debated question concerns the impact of overriding mandatory provi- 195 sions on the enforceability of a choice-of-court agreement. The question can arise before the courts of the State that has enacted an overriding mandatory provision, when the parties have conferred jurisdiction on the court (or the courts) of a foreign State. Should the court seized decline jurisdiction (with the risk that the overriding provision will not be enforced) or should they consider that the choice-of-court agreement is unenforceable? By contrast, if the foreign selected court is seized, the parties’ agreement will normally be regarded as valid.215 212 213 214 215

Or, in the case of an “indirect” application, by the substantive rules of the lex contractus. In particular, when the defendant is domiciled in a non-Member State (Art. 6 Brussels I Regulation). See Bureau/Muir Watt RCDIP (2009), p. 11. Unless the selected court decides to give effect to the foreign overriding mandatory provision, including its jurisdictional effects, and declines jurisdiction. However, this seems very unlikely in practice.

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196 In some instances, specific jurisdictional rules exclude the validity or enforceability of such

an agreement. This is the case in the area covered by exclusive or mandatory jurisdictional rules. Thus, for disputes relating to tenancies of immovable property, Art. 24 Brussels I Regulation confers exclusive jurisdiction on the courts of the Member State where the property is situated, thereby excluding choice-of-court agreements. Similarly, in the field of insurance, consumer and employment contracts, the protective provisions of Arts. 15, 19 and 23 Brussels I Regulation rule out choice-of-court agreements entered into before the dispute arises, unless they are more favourable to the weaker party. Indirectly, these provisions ensure the application of overriding mandatory provisions that might be in force in the country, the courts of which have jurisdiction. 197 According to prevailing opinion, the existence of overriding mandatory provisions cannot

have any impact on the validity of a choice-of-court agreement under Art. 25 Brussels I Regulation.216 As is well known, this provision sets a number of substantive and formal conditions for the validity of a choice-of-court agreement, but it does not refer to overriding mandatory provisions. Since the latest recast, Art. 25 (1) refers, for the substantive validity of the agreement, to the law of the State, the courts of which were selected by the parties. By contrast, no reference is made to the law of the State, the courts of which have been derogated from by the party agreement.217 Therefore, the fact that the law of the country, whose jurisdiction is excluded, contains an overriding mandatory provision, does not affect the validity of the forum selection. 198 This conclusion is not problematic. Since Art. 25 Brussels I Regulation only governs agree-

ments conferring jurisdiction to the court (or the courts) of a Member State, the risk of avoidance of an overriding provision is quite limited. On one hand, when the provision belongs to EU law, it will also have to be applied by the selected court. On the other, the selected court will be able to give effect to the overriding provisions of another Member State under Art. 9 (3); as mentioned above, recourse to this rule should be regarded, in such circumstances, as the normal solution.218 199 Much more delicate is the question of the impact of overriding mandatory provisions on the

validity of choice-of-court agreements conferring jurisdiction to the courts of a non-Member State. In this case, the risk of avoidance is much higher. Before the entry into force of the 2005 Hague Choice-of-Court Convention, such agreements were governed only by the national rules of each Member State, and national courts had given different, contradictory answers to the question. Thus, the French Cour de cassation decided that the fact that a provision of French law is overriding does not mean that it impacts on the validity of an exclusive choice-of-court agreement conferring exclusive jurisdiction to the courts of a foreign country.219 The opposite conclusion was arrived at by the German courts. According 216

217

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Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 33; Mankowski, in: Rauscher (2011), Art. 23 Brüssel I-VO, para. 10; Lüttringhaus IPRax (2014), p. 151. Moreover, since any question of validity of the choice-of-court agreement is now to be decided, in the first instance, by the selected court(s) under Art. 31 (2), the excluded courts will frequently even lack the opportunity to check the validity of the agreement against their overriding provisions: Lüttringhaus, IPRax (2014), p. 151. See supra, Art. 9 para. 169. Cour de cassation, 22.10.2008, RCDIP (2009), p. 69, with a commentary by Bureau/Muir Watt, p. 1 et seq.;

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to the German case law, a choice-of-court agreement should be considered as unenforceable, when, under the circumstances of the case, it appears that the selected court will not apply a German overriding mandatory provision such that their decision will not be capable of being recognised in Germany.220 A similar approach was also followed in some English cases.221 The 2015 Hague Choice-of-Court Convention does not provide a clear-cut answer. In fact, it states in Art. 6(c) that that the court seized in violation of an exclusive choice-ofcourt agreement shall suspend or dismiss proceedings unless giving effect to the agreement ‘would be manifestly contrary to the public policy’ of the forum. However, while in certain Contracting States the breach of an overriding mandatory provision might be regarded as a manifest public policy violation, the same might not be true in other States. Overriding mandatory provisions cannot have an automatic impact on the enforceability of 200 choice-of-court agreements.222 As the German and English position tends to confirm, such an effect is only justified when a detailed analysis of the circumstances of the case makes clear that, in the event of non-compliance with a country’s overriding provisions, the decision to be rendered by the foreign selected court will not be capable of recognition in that country. Failing this, to strike down a priori the choice-of-court agreement would be overkill. Therefore, a sort of “recognition prognosis” should be effected, similar to that which is required in the case of international lis pendens.223 This is a possible answer to the question. However, one should also consider that the 201 “recognition prognosis” is particularly delicate when an overriding mandatory provision is at stake. As a matter of fact, it is possible that the decision to be rendered by the foreign selected court will be capable of recognition in the State having enacted the overriding provision. This is for several reasons: – It should be considered, first, that the parties’ choice of a foreign court does not neces-

220

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Clunet (2009), p. 599, with a note by Jobard-Bachellier/Train; Dalloz (2009), p. 200, with a note by JaultSeseke. An overview on the debate in France is given by Bureau/Muir Watt RCDIP (2009), p. 15 et seq. In their more recent decisions, German courts were confronted with cases in which choice-of-court agreements in favour of US courts would probably lead to the non-compliance with the rules of the Commercial Agents Directive, which qualify as overriding mandatory provisions according to the Ingmar case law (on the Ingmar decision, see supra, Art. 9 para. 41): Bundesgerichtshof, 5.9.2012, IHR (2013), p. 35; Oberlandesgericht Munich, 17.5.2006, IPRax (2007), p. 294. See also the previous decisions of the Bundesgerichtshof of 30.1.1961, NJW (1961), p. 1061; 21.12.1970, NJW (1971), p. 325; 30.5.1983, NJW (1983), p. 2772; 12.3.1984, NJW (1984), p. 2037; 15.6.1987, NJW (1987), p. 3193. Among the scholars, see Rühl IPRax (2007), p. 294 et seq.; Antomo IHR (2013), p. 225 et seq.; Lüttringhaus IPRax (2014), p. 151. In the case The Hollandia, [1982] 3 All E.R. 1141, the English House of Lords held that an agreement conferring jurisdiction on the court of a State which was not party to the Hague-Visby Rules was valid, unless it was established that the chosen forum would apply a rule limiting the carrier’s liability to a lower sum than that provided by those rules. In the case Accentuate Ltd v. Asigra Inc of 30.10.2009, [2009] EWCH 2655, the High Court of Justice held that an arbitration agreement aimed at avoiding the application of the Commercial Agents Directive was unenforceable. See also the American decisions in the Lloyd’s case: Muir Watt, L’affaire Lloyd’s: globalisation des marches et contentieux contractuel, RCDIP (2002), p. 509 et seq. See also Radicati di Brozolo RCDIP (2003), p. 6 et seq.; Antomo IHR (2013), p. 232. See Art. 33 (1) (a) Brussels I Regulation.

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sarily lead to non-compliance with the overriding mandatory provision in force in the country, whose courts’ jurisdiction has been derogated from. In fact, it cannot be a priori excluded that the selected court, based on its own conflict rules, will apply (or give effect to) that provision as part of the law applicable to the contract, or as foreign overriding provision under a rule similar to Art. 9 (3) or another equivalent mechanism (such as public policy or “indirect” application).224 – It is also possible that the foreign court, without giving effect to the overriding provision at stake, arrives at a similar substantive result by applying the rules of the lex contractus.225 – Certainly, in some instances, it may be evident from the outset that the selected foreign court will not give effect to the overriding provision in question. Even then, it cannot always be discounted that the foreign decision will not be capable of recognition and enforcement in the forum. As a matter of fact, even from the perspective of the enacting State, non-compliance with an overriding mandatory provision does not always amount to a violation of public policy.226 Accordingly, if a country’s public policy is not disturbed, there seems to be no compelling reason for that country’s courts not to honour the parties’ agreement conferring jurisdiction on a foreign court. 202 It is evident that a prognosis based on these factors is extremely burdensome and time-

consuming for a court. Moreover, it is necessarily tainted with a great amount of uncertainty. That being so, one could wonder whether the solution adopted by the French courts is not the best one, at least for practical reasons. This implies that a choice-of-court agreement should, at least in principle, be honoured despite the existence of an overriding mandatory provision, thus giving a chance to the foreign court to give effect to that provision or, at least, to get to a similar result. If, at the end of the day, the foreign decision proves to be irreconcilable with the overriding provision, it will always be possible for the State concerned to deny it recognition and enforcement a posteriori.227 203 A similar reasoning has often led national courts to recognize the enforceability of arbitra-

tion agreements, notwithstanding the fact that the dispute in question involved the public policy or the lois de police of one or more States.228 In such circumstances, national courts often reserved the right to have a “second look” on the arbitral award, to be sure that the local overriding policies were not disregarded by the arbitrators.229 Certainly, the solution adopted in the field of arbitration cannot automatically be transposed to litigation before state 224 225

226 227 228

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See supra Art. 9 paras. 186 et seq. This reasoning was followed by the American courts in the Lloyd’s case: Bureau/Muir Watt RCDIP (2009), p. 12. See infra, Art. 9 para. 210. Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 33. This sort of reasoning led the US Supreme Court, in the landmark Mitsubishi case, to accept the arbitrability of disputes involving the violation of US anti-trust statutes: 473 US 614 (1985). In Switzerland, it is also uncontroversial that a dispute is capable of being settled by arbitration even if it involves public policy issues: DTF 118 II 353 (1992), Fincantieri. In the same vein, see the recent decision of the French Cour de cassation of 8.7.2010, Doga RCDIP (2010), p. 743, with a note by Bureau/Muir-Watt. This approach was initiated by an often cited passage of the US Supreme Court in the Mitsubishi case: 473 US 614 (1985), footnote 19. The European Court of Justice also held that the non-compliance by arbitrators with the EU anti-trust legislation implies a public policy violation, which the Member States’ courts must sanction if they are seized with an action to set aside the award: Eco Swiss China Time Ltd v.

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courts.230 With respect to the question at hand, however, some consistency between the solutions retained in these two areas of law is desirable, because both arbitration and choiceof-court agreements can be used by the parties as alternative means for avoiding a country’s overriding provisions. Some authors seem to consider that this solution is unsatisfactory, because, on one hand, not 204 all foreign decisions need to be recognised and enforced in the State that has enacted an overriding provision231 and, on the other, the non-compliance with such a provision is not always sanctioned by a denial of recognition. This would lead to “inactivating” overriding provisions.232 However, one should consider that if the decision does not need to be recognised and enforced in the forum State, a party could in any event escape from that State’s overriding provision by simply seizing a court abroad. Under such circumstances, the claim of a country to impose compliance with its own overriding provision seems in any event rather unrealistic. On the other hand, the fact that a State is not prepared to deny recognition to a foreign decision seems to indicate that its interest in the enforcement of its own policies is, after all, not so crucial. A fortiori, this should not lead to striking down a freely negotiated choice-of-forum agreement. Admittedly, our approach can cause some inconvenience to the parties who rely on the 205 application of an overriding provision. That party will first be subject to the jurisdiction of the selected court and will have access to the courts of the State having enacted the overriding provision only once (and if) the selected court’s decision is denied recognition. However, it is not certain that the parties’ interest would be better protected by the opposite solution. One should consider that, even if the choice of court agreement is denied enforcement in the State having enacted the overriding provision, it will normally be regarded as valid in the country of the selected court. This will frequently lead to parallel proceedings and, in the end, to a denial of recognition of the decision rendered in the country of the overriding provision.233 That being so, respecting the choice-of-court agreement is probably the most promising way to achieve harmonious solutions, in particular if the foreign court can be convinced of the opportunity to take into account the overriding mandatory provision.234 Should the answer be different when the overriding provision is not purely national, but is 206 based on EU law? It has been suggested that the EU law principle of effectiveness (“effet utile”) would require the Member States’ courts to strike down a choice-of-forum agreement

230 231 232 233

234

Benetton International NV, (case C-126/97) (1999), ECR 1999-I, p. 3055. The same should apply at the stage of recognition and enforcement of the award. Bureau/Muir Watt RCDIP (2009), p. 14 et seq.; Rühl IPRax (2007), p. 300 et seq. Thorn, in: Rauscher (2011), Art. 9 Rom I-VO, para. 33. Bureau/Muir Watt RCDIP 108 (2009), 1, 18, 22. Thus, in the most recent cases decided by the German courts (see supra, note 210), the commercial agent was recognised as having the right to seize German courts notwithstanding the choice of a court in the US. Therefore, he was able to obtain a decision based on the provisions implementing the Commercial Agents Directive. However, that decision will probably have very little chance to be recognised and enforced in the US, at the domicile of the principal, because the forum selection agreement is probably regarded as perfectly valid there. Contra: Bureau/Muir Watt RCDIP 108 (2009), 1, 13.

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whenever it can lead to non-compliance with an overriding mandatory provision of EU law.235 However, this approach seems overly strict. In the field of arbitration, the European Court of Justice held that, if an arbitral award fails to comply with overriding mandatory provisions of EU law (in particular, antitrust rules), a Member States’ court seized with annulment proceedings should set aside the award as being contrary to the European public policy.236 By doing so, the Court impliedly recognised that the dispute was capable of being decided by arbitration and that the validity of the arbitration agreement was not in question. Mutatis mutandis, we consider that, notwithstanding the existence of a EU law overriding provision, the principle of effectiveness does not necessarily require that the choice of forum in a third country is struck down, provided that non-compliance with that provision is then sanctioned at the stage of recognition and enforcement. 2. Overriding mandatory provisions and the recognition and enforcement of foreign decisions 207 Can non-compliance with a country’s overriding mandatory provisions be sanctioned in

that country by a denial of the recognition and enforcement of a foreign decision? The answer to this question depends on the circumstances. 208 It should be noted, first, that in the EU Member States recognition and enforcement of

decisions in contractual disputes is governed by different sources. The Brussels I Regulation and the Lugano Convention are applicable when the decision was rendered, respectively, in another Member State or in an EFTA State party to the Lugano Convention. Decisions rendered in “third” States are still governed by the national recognition rules of the single Member States, subject to other specific, mostly bilateral, treaties. Notwithstanding this plurality of sources, some common points can be identified. 209 It is worth mentioning, first, that the overriding mandatory provisions cannot prevail as

such over a foreign decision. The almost universal prohibition of a “révision au fond”237 makes it impossible for the courts of the requested State to reform a foreign decision by imposing the direct application of the local provisions. Of course, if recognition is denied, it will normally be possible to initiate fresh proceedings in that State, in which the courts will be able to apply the overriding provisions of the lex fori.

210 In certain cases, recognition and enforcement can be denied on the ground that the foreign

court lacked jurisdiction (so-called “indirect” jurisdiction). This is for instance the case when the jurisdiction of the courts in the requested State was exclusive.238 The same also applies when the jurisdiction of the foreign court was based on a choice-of-court agreement which is considered as unenforceable in the requested State.239 In this respect, the solution

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Rühl IPRax 2007, 298 et seq. Eco Swiss China Time Ltd v. Benetton International NV, (case C-126/97), (1999), ECR 1999-I, p. 3055. See Art. 52 Brussels Ibis Regulation. See Art. 45 (1) (e) Brussels Ibis Regulation. Of course, if the choice-of-court agreement is considered as enforceable, it will not be possible to invoke a lack of indirect jurisdiction to deny recognition and enforcement: Bureau/Muir Watt RCDIP (2009), p. 19.

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given to the question of the enforceability of choice-of-court agreements240 is also relevant for the purpose of recognition and enforcement. When a lack of jurisdiction cannot be invoked, a denial of recognition and enforcement can 211 be based on a violation of the public policy of the requested State.241 In many countries, the notion of public policy not only includes fundamental rights and moral values, but also covers the essential policies of the countries. Thus, overriding interests relating to a country’s social, economic or political organization are often regarded as a part of that country’s public policy. It should be noted, however, that, in international situations, the notion of public policy is 212 conceived in more and more narrow terms: “international” public policy is not equivalent to “domestic” public policy.242 This is particularly true in the relationship among the EU Member States. Thus, it is clear under the Brussels I Regulation that the limits of the concept of public policy are fixed by EU law and can be reviewed by the European Court of Justice.243 Therefore, it may happen that the interests promoted by certain overriding provisions are not covered by the restrictive notion of public policy.244 Furthermore, it is widely admitted that the role of public policy is particularly limited when it comes to recognition and enforcement of foreign decisions, as opposed to the application of foreign law. As is well known, a decision can only be regarded as contrary to public policy when it leads to a result that cannot be tolerated in the requested State. Therefore, the simple fact that an overriding mandatory provision of that State was not applied (nor given effect to), does not justify, in itself, a denial of recognition. Even if the foreign court did not apply the overriding provision, it may well be that it arrived at a result which is equivalent, or at least compatible with, the fundamental interests of the requested country.245 For all of these reasons, it is possible that non-compliance with overriding mandatory provisions is not sanctioned. Article 10: Consent and material validity 1. The existence and validity of a contract, or of any term of a contract, shall be determined by the law which would govern it under this Regulation if the contract or term were valid. 240 241 242

243 244

245

See supra, Art. 9 paras. 195 et seq. Bureau/Muir Watt RCDIP 98 (2009), p. 18 et seq. This phenomenon is even more accentuated in the field of arbitration, where there is a strong trend, at least in certain jurisdictions, to reserve the use of public policy to the violation of only universally accepted principles and values (“transnational public policy”), with the exclusion of those specific States’ interests which are normally furthered by overriding mandatory provisions. See for instance BGE 132 III 389: non-compliance with a country’s antitrust laws never amounts to a public policy violation. However, this very liberal trend should not automatically be extended to state courts’ litigation. See supra, Art. 9 paras. 59 and 98. See Rémy, Exception d’ordre public et mécanisme des lois de police en droit international privé (2008), on the distinction between the public policy values and the objectives of the lois de police. Once again, this trend is particularly strong in the field of arbitration. Thus, the French Cour de cassation held that the non-compliance with antitrust rules only amounts to a public policy violation when it is “blatant, effective and concrete”, i.e. when it is self-evident (“ça crève les yeux”): see Cass. RCDIP 95 (2006), 104 with note Bollée; Cass. Rev. arb. 2008, with note Loquin.

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2. Nevertheless, a party, in order to establish that he did not consent, may rely upon the law of the country in which he has his habitual residence if it appears from the circumstances that it would not be reasonable to determine the effect of his conduct in accordance with the law specified in paragraph 1. I. II. III.

Scope of application . . . . . . . . . . . . . . . . . . . . . . . . 1 The clause on the applicable law . . . . . . . . . . 7 The exception to the general rule . . . . . . . . . 17 1. Art. 10 (2) and legal entities . . . . . . . . . . . . 22

IV.

2. The reasonableness standard: general remarks and prospects for commercial entities . . . . . . . . . . . . . . . . . . . . . . 24 International conventions . . . . . . . . . . . . . . . . . 28

I. Scope of application 1 According to Art. 10,1 the existence and validity2 of the contract, or one of its provisions, are

determined by the law which would govern the contract or the dispositions if they were valid. Thus, Art. 10 (not laying down a conflict-of-laws rule for issues related to the formal validity of the contract, but being rather applicable for all pathological issues connected with the agreement that do not concern the formal requirement of the contract),3 not only deals with the issue of the existence and validity of the contract as a whole, but also of single clauses of the contract itself, having the provision at hand, under this point of view, a double scope of application. 2 The “double” scope of application of Art. 10, by stating that the law which would govern the

contract also has to determine its existence and validity, as well as the existence and validity of single clauses, whose rule is very similar to the one enshrined in Art. 12, listing the elements regulated by the lex contractus, could at first point towards a monistic approach of the Regulation itself, according to which the contract, and all its clauses, have to be subject to one, and only one single law. Even though in principle there seems to be the “desire”4 of 1

2

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In general, on Art. 10 see in the legal scholarship, Ferrari, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/Schulze/Staudinger, Internationales Vertragsrecht (2012), p. 266; Cortese, in: Salerno/Franzina (eds.), Regolamento CE n. 593/2008 del Parlamento europeo e del Consiglio del 17 giugno 2008 sulla legge applicabile alle obbligazioni contrattuali (“Roma I”), in: (2009) Nuove Leggi Civ. Comm., 804; Stone, EU Private International Law (2010) p. 324; Nishitani, in: Ferrari/Leible (eds.), Rome I Regulation. The Law Applicable to Contractual Obligations in Europe (2009), p. 51, p. 74. On Art. 8 of the 1980 Rome Convention on the law applicable contractual obligations (80/934/EEC: Convention on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980, OJ 1980 L 266/1), legal antecedent to Art. 10, see, Kropholler, Internationales Privatrecht (6th ed. 2006), p. 456 and Del Prato, in: Bianca/Giardina (eds.), Convenzione sulla legge applicabile alle obbligazioni contrattuali (Roma, 19 giugno 1980), in: (1995) Nuove Leggi Civ. Comm., 1023. On the autonomous interpretation of the notions of existence and validity of the contract in the context of Art. 10, see Ferrari (fn. 1), p. 268. It should also preliminary be recalled that the issue of the existence and validity of the contract is a different matter from the matter of formal validity of the contract, which is dealt with by Art. 11. In particular, issues of existence and validity of the contract are not connected to the formal requirements to externalize the will of the parties, but are rather connected with the different issue of determining the minimum requirements to qualify the contract as “existing”. On this point cf. Del Prato (fn. 1), 1023, 1024.

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the EU law-maker to assess all the possible elements by the lex contractus,5 a systematic study reveals that this principle is not absolute: the dépéçage can indeed also operate with regard to Art. 10,6 which furthermore has to be read in light of Art. 11, on the formal requirements, and in light of Artt. 1 and 13, according to which questions related to the status and legal capacities of natural persons are not regulated by the lex contractus. The concurrence of all such laws goes against the full realization of the principle of the lex contractus being the law regulating all the aspects related to the contract and its provisions. This being said, it seems possible to identify some issues that are regulated by the law 3 identified according to the conflict-of-laws rule in Art. 10 (1): i) the effects of the contractual proposal, including the consequences of possible withdrawals and possible deadlines for the acceptance of the proposal. It should though be highlighted that scholars are not unanimous on the post-mortem effectiveness of the proposal: whilst some argue that the applicable law should be identified according to Art. 10,7 others argue that the effectiveness of such proposal should be governed by the lex successionis;8 ii) the effects of late acceptances of the proposal; iii) the existence and scope of the right to termination of the contract;9 iv) vitiating factors that can render null or void a contract, or some of its clauses;10 v) moreover, Art. 10 could raise some problems in so far as it seems to comprehend within its scope of application the value of the silence as a way to accept the proposal and the contract.11 It does not seem unanimous whether or not some commercial practices on silence and acceptance should be falling within the scope of application of one provision, or in others. With regard to the last point, the issue on how the silence of one party can be qualified, since 4 it may fall within the questions related to the consensus between the parties themselves, and thus within the scope of application of Art. 10, or within the questions of formal validity of the agreement, and thus within the scope of application of Art. 11, the Giuliano/Lagarde Report clearly states that the qualification of silence falls within the scope of application of the provision related to existence and validity of the contract, as well as any other question related to the consensus between the parties.12 This in spite of the fact that the issues at hand can nonetheless be of relevance for questions of formal validity dealt with by Art. 11. 4

5 6

7 8 9 10 11 12

Kropholler (fn. 1), p. 456, writing “Das entspricht dem Wunsch, eine einzige Rechtsordnung über das gesamte Rechtsgeschäft entscheiden zu lassen. Dem Vertragsstatut unterliegen damit insbesondere Angebot und Annahme, einschließlich der Einbeziehung und Wirksamkeit von Allgemeinen Geschäftsbedingungen, sowie Willensmängel”. Cf. Ferrari (fn. 1), p. 272. Within the limits set by Art. 12. Cf. Villani, La Convenzione di Roma sulla legge applicabile ai contratti (2000), p. 186; Del Prato (fn. 1), 1023, 1025 and Cortese (fn. 1), 804, 809. Heimberg, in: Czernich/Heiss, EVÜ Kommentar (1999), p. 195. On these see ex multis Ferrari (fn. 1), p. 268 and Cortese (fn. 1), 804, 805. BGH, IPRax 1998, 285. Villani (fn. 6), p. 186. Cf. Ferrari (fn. 1), p. 268 and Cortese (fn. 1), 804, 805. Report on the Convention on the law applicable to contractual obligations by Mario Giuliano, Professor, University of Milan, and Paul Lagarde, Professor, University of Paris I, OJ 1980 C 282/1, Art. 8, reading

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5 On the consequences of silence in contractual matters, also Art. 10 (2) comes into play; it is

here noteworthy to anticipate that this provision allows the contracting party wishing to establish that s/he did not consent, to invoke the law of his/her habitual residence in all those circumstances in which it would not seem reasonable to assess his/her behaviour in light of the law identified according to the general principle enshrined in Art. 10 (1). It follows that, when according to the law which would govern the issue of silence in contractual matters, such silence should be interpreted as acceptance of the proposal, and such party is habitually resident for example in Germany, this party could argue that his/her silence, coming from a natural person, shall not be considered as acceptance according to the German substantive contractual law.13 6 The same conclusion is valid not only for the clauses contained in the contract itself, but for

provisions contained in general terms and conditions as well.14 If the contract, its provisions and the general terms and conditions are valid under the law applicable to the contract, it remains to assess the validity of general terms and conditions sent by one party to the other, who does not accept nor contest them. Also in this case the legal value of the silence of this party has to be governed by the law applicable to the contract (also in light of what is provided for in the general terms and conditions).15 II. The clause on the applicable law 7 There are no doubts on the fact that Art. 10 also operates for the assessment of the validity of

a choice-of-law clause,16 even when contained in the general terms and conditions.17 Art. 3 (5) is unambiguous in this regard. The rule of Art. 10 (1) is also applicable when the existence and the validity of single clauses of general terms and conditions have to be assessed; as it has already been mentioned, the choice-of-law clause contained in general terms and conditions has to be presumed valid, and thus applied.18

13

14 15

16

17

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that “[t]he solution adopted by the Group in this respect is designed inter alia to solve the problem of the implications of silence by one party as to the formation of the contract. The word ‘conduct’ must be taken to cover both action and failure to act by the party in question; it does not, therefore, relate solely to silence.” Cf., on Art. 31 II EGBGB, German antecedent to Art. 8 (2) of the 1980 Rome Convention on the law applicable to contractual obligations, who was the “international antecedent” to Art. 10, OLG Schleswig 19 September 1989–3 U 213/86, IPRspr. (1989), 48. Ferrari (fn. 1), p. 269. KG 2 February 2006–2 U 101/01, ZIP (2006), 1579: “Das neue Angebot […] hat die Beklagte durch Schweigen angenommen und zwar – mit Blick auf die Regelung in Art. 31 EGBGB – unabhängig davon, ob marokkanisches oder deutsches Recht Anwendung findet, da das Schweigen der Beklagten unter den hier gegebenen Umständen nach beiden Rechtsordnungen Zustimmung bedeutet”. This in light of Art. 3 (5), according to which “[t]he existence and validity of the consent of the parties as to the choice of the applicable law shall be determined in accordance with the provisions of Articles 10, 11 and 13”. Cf. Del Prato (fn. 1), 1023, 1027. Cf. BGH, 25 October 2005 – XI ZR 78/04, NJW RR, 2005, 1071, reading “[f]ür die Wirksamkeit einer in Allgemeinen Geschäftsbedingungen enthaltenen Rechtswahlklausel ist nach Art. 31 Abs. 1 EGBGB das Recht maßgebend, das nach der Klausel angewendet werden soll”. Cf. also OLG Hamm 1 December 1988–4 U 120/88, in: NJW RR (1989), 496, 497. Rechtbank Dordrecht 3 November 2010–80250/HA ZA 09–2220, available at http://www.uitspraken.nl/

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Thus, the matter of the validity of the choice-of-law, in respect to the matter of the validity of 8 the contract, is autonomous on one side (since the validity of this clause does not directly affect the validity of the contract as a whole), but instrumental on the other, since according to Art. 10 (1) it is in light of the chosen law that the existence and the validity of the whole contract, or some of its provisions, electio iuris included, have to be assessed. If the contract contains a choice-of-law clause, according to Art. 10 (1) and Art. 3 (1), the law which governs the existence and validity of the contract itself is the law chosen by the parties with such clause, either expressively or impliedly.19 A particular problem arises when the parties change the law applicable to the contract. No 9 doubt the validity of this change is also governed by the new chosen law. The problem arises when this new choice of law is not valid: the answer to the question depends upon the succession of the clauses themselves and upon their validity or invalidity. A first scenario is where both choice-of-law clauses are invalid; a hypothesis where the solution seems to lead straight forward to the application of the general conflict-of-laws rules enshrined in the Rome I Regulation, which are applicable in absence of a valid electio iuris. A different case, though again of easy solution, is where only the second choice-of-law clause 10 is deemed to be invalid: here, the first choice will still stand, whilst the change will have no effects. On the contrary, if it is the first choice that is deemed to be invalid, whilst the second is not, the solution to the case does not seem uncontroversial. In particular, a more deep analysis of the single case appears to be necessary: even though in this scenario the subsequent choice-of-law does not seem to have effects, being aimed at the modification of a clause which is per se invalid, it must be assessed whether or not such second choice is autonomous from the first, or if it is meant to correct the first erroneous one;20 if this should be the case, then the validity and effectiveness of the second choice-of-law clause should be recognized. Another case which must be kept in mind is where it is not the choice of the parties which 11 changes over time, but the substantive law chosen. In this sense, a clear distinction between the substantive parties’ autonomy (according to which the contract, its existence and validity has to be interpreted as the choice would be valid), and the private international parties’ autonomy should be made in particular, according to the latter, the choice of the parties has to be followed even in those cases where the contract, or some of its provisions, does not exist

19

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uitspraak/rechtbank-dordrecht/civiel-recht/civiel-recht-overig/eerste-aanleg-enkelvoudig/ecli-nl-rbdor2010-bo3193. It remains that given the applicability of the law which was implicitly chosen by the parties and that clearly results from contractual provisions or from the circumstance of the case (Art. 3 (1)), the existence and validity of the contract can be assessed according to the law of the State referred to by the parties in their agreement or accordingly to the lex fori. It must indeed be recalled that, according to Art. 3, the choice of the law applicable to the contract does not necessarily have to be expressively made by the parties, being this choice also clearly demonstrated by the terms of the contract or the circumstances of the case. Even in this last scenario, the validity of the (implied) choice of law has to be governed by the law applicable to the contract according to the general provisions. Cf. on this point Ferrari (fn. 1), p. 266. In the case law see, Rechtbank’s Gravenhage 1 February 2012–404341/HA ZA 11–2504, available at http://ui tspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBSGR:2012:BV5616. In the scholarship see Del Prato (fn. 1), 1023, 1026.

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or is invalid according to the chosen law governing the contract.21 Since the Rome I Regulation admits the application of different laws (dépeçage) to the contract, it is also possible that the parties choose different laws to be applied to part of the contract.22 12 It still remains the case where only some clauses of the contract do not exist or are invalid: in

such a case, a case-by-case approach has to be followed in order to determine whether or not the invalid clauses are instrumental or autonomous from the valid ones, being only in the last case possible to “confine” the nullity and voidness of the first clauses and “save” the rest of the contract. 13 The fundamental principle for the assessment of the existence and the validity of the con-

tract rests upon a clear fictio iuris: the existence and validity of the contract and its clauses are presumed to be valid in order to determine the applicable lex contractus, according to which, later on, the real existence and validity of the contract has to be assessed. It is thus not surprising that domestic courts have affirmed that in an international sales contract where the defendant challenges the existence of the consent according to Art. 10, it is necessary to identify first the putative proper law of the “imaginary contract”, to assess the existence and validity of the latter, and thus the defences of the defendant,23 only at a subsequent stage. 14 A fictio iuris which has also been adopted by, for example, the Brussels Ibis Regulation24

(recasting the Brussels I Regulation,25 and applicable starting from January 10th, 2015), whose provision on choice-of-court agreements similarly states that the prorogation agreement has to be considered “null and void as to its substantive validity under the law of that Member State”, since, also similarly, the choice-of-court clause of a contract “shall be treated as an agreement independent of the other terms of the contract” and that “[t]he validity of the agreement conferring jurisdiction cannot be contested solely on the ground that the contract is not valid” (Art. 25, paras. 1 and 5).26 15 In the case law,27 the lex contractus, according to the principle enshrined in Art. 10 (1), has 21 22 23

24

25

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On the conflict-of-laws rule enshrined in Art. 10 (1) of the Rome Regulation, see infra para. 3. Cf. Art. 3 (1), last sentence, and Art. 10 (1). Cf. The Spanish Audiencia Provincial Almería 01 July 2002–205/2002, available at http://www.juntadean dalucia.es/boja/2003/153/68. In the same terms, taliking about “putative law”, cf. Stone (fn. 1), p. 324 and Morse, in: Beale (ed.), Chitty on Contracts, Vol. I, General Principles (2008), p. 2165, p. 2308. Regulation No 1215/2012/EU of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ 2012 L 351/1. Council Regulation No 44/2001/EC of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ 2001 L 12/1. On prorogation agreements see in the scholarship Hess C.M.L. Rev. (2012), 1075; Kohler, in: Pocar/ Viarengo/Villata (eds.), Recasting Brussels I (2012), p. 199; Magnus, in: Lein (ed.), The Brussels I Review Proposal Uncovered (2012), p. 83; Penasa, Int’l Lis (2013), 117; Queirolo, in: Pocar/Viarengo/Villata (eds.), Recasting Brussels I (2012), p. 183; Rogerson, in: Lein (ed.), The Brussels I Review Proposal Uncovered (2012), p. 103; Villata, in: Pocar/Viarengo/Villata (eds.), Recasting Brussels I (2012), p. 219; Gaudemet-Tallon/Kessedjian, Révue trim. de dr. européen (2013), 435; Nielsen C.M.L. Rev. (2013), 503; Carbone, Diritto comm. Int. (2013), 651; Nuyts, Rev. crit. dr. int. pr. (2013), 1 and Queirolo Yb. PIL (2014).

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been applied to determine i) the existence of a sufficient offer and acceptance or other formative acts;28 ii) the existence of the contract in case the letter of acceptance is lost;29 and iii) the effects of mistakes, pressures and misrepresentations of one party on the existence of the agreement.30 It should also be noted that the renvoi of Art. 10 to the law which governs the contract is 16 formal in nature, meaning that the applicable law could change over time and these changes will affect the existence and validity of the contract itself. Still, if the parties agree, the problem can be easily overcome, since they will always have the right to choose another applicable law according to Art. 3. III. The exception to the general rule According to Art. 10 (2), in order to establish that s/he did not consent, a party can rely upon 17 the law of his/her habitual residence in those cases in which the consent is deemed to be valid under the law governing the contract, if it “would not be reasonable to determine the effect of his conduct in accordance” to the latter. The exception to the general rule of Art. 10 (1), as already mentioned (see supra, para. 4), was 18 introduced to resolve the problem of silence in the formation of the contract, even though not being confined to this issue, the provision speaking of “conduct” rather than mere “silence”:31 reasons of substantive justice led the EU law-maker to introduce an exception to the general provision of Art. 10 (1) and to allow in the matters at hand the application of the law which is closest to the centre of main interests of the party challenging the consent. The absence of such an “escape clause” could have led to abuses, for example in those cases where one party sends general terms and conditions containing a choice-of-law clause governed by a law according to which the general terms and conditions are deemed to be accepted if not contested in a defined period of time.32 So, in general terms, the provision at hand seems destined to find application especially in those circumstances where one party changes the terms of the contract after the agreement is reached by way of unilateral communications.33 In giving one party (any party)34 the possibility to rely upon the law of the country of his/her 19 habitual residence, Art. 10 (2) does not bear any specification on whether such element has to be evaluated at the time the contested consent was given (or not given), or at the time the claim has been brought before a court. Part of the legal scholarship argues that the first 27 28

29 30 31 32

33 34

See on this case law, Stone (fn. 1), p. 325. Schuhmaschinen AG v. Kamborian Shoe Machine Co. (1961) 111 L.J. 519, on which see also Morse (fn. 23), p. 2309. Morse (fn. 23), p. 2309. Dimskal Shipping Co SA v. ITWF (The Evia Luck) [1992] 2 AC 152. Ferrari (fn. 1), p. 273; Villani, (fn. 6), p. 187; Morse (fn. 23), p. 2310 and Del Prato (fn. 1), 1023, 1027. See Stone (fn. 1), p. 326, noting how the provision could be invoked by an English resident who ignored an offer “received from abroad and governed by a foreign law under which silence was treated as consent”. Cf. in the same terms, Del Prato (fn. 1), 1023, 1027. Cortese (fn. 1), 804, 806. Being this the offering as well as the accepting party; Ferrari (fn. 1), p. 272.

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option should be followed, since it is only at that point in time that the invoking party has a legitimate reliance on a given law.35 Even though it could be argued that, by comparison with other provisions dealing with “mobile” connecting factors,36 this solution should be excluded, it seems nonetheless that the law of the habitual residence referred to by Art. 10 (2) should still be the one of the State where the invoking party had his/her residence at the time consensus was given (or not given). Any other solution would be detrimental, since any party wishing to “get rid” of an agreement regularly taken could move to a country whose law is better suited to contest the existence of the consent. Thus, in order to avoid and not legitimize possible abuses, Art. 10 (2) should be read as making reference to the law of habitual residence at the time the contested consent was given (or not given). 20 It must also be noted that Art. 10 (2) is only applicable where one party challenges the

existence of the consent; thus, the law of the habitual residence of one party shall not be applicable in all other circumstances, for example those in which one party has an interest to prove the existence and validity of the consent,37 or to prove that the consent was given, but is invalid. 21 Following the above, Art. 10 (2) can only be invoked when specific conditions are met.

Firstly, i) one party has to specifically challenge the existence of the consent;38 secondly, ii) the lex contractus must be different from the law of the habitual residence of the challenging party;39 and, thirdly, iii) the consent of the party must be differently assessed by the different laws40 (i.e., the consent is deemed valid under the law governing the contract, and not by the law of the habitual residence, since if the consent is already excluded by the law governing the contract, Art. 10 (2) finds no application).41 Moreover, iv) it is necessary that from the

35 36

37

38

39 40

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Cortese (fn. 1), 804, 807. For example, in the context of insurance contracts, where the applicable law is deemed to be the law of place where the risk is located, Art. 7 (3), last sentence, clearly states that this law is the law of the place where the risk is situated at the time the contract is concluded, and not the law of the place where the risk is located at the time the claim is brought before a court of law. The fact that such specification is not transposed also in Art. 10 (2) could in theory lead someone to argue that, without such specification, the law of the place of habitual residence has to be evaluated in the context of the latter provision at the time the claim is brought before a court of law. Cf. Villani, (fn. 6), p. 187; Del Prato (fn. 1), 1023, 1026; Cortese (fn. 1), 804, 806; Kropholler (fn. 1), p. 457; Ferrari (fn. 1), p. 273 and Morse (fn. 23), p. 2310. In the case law see, OGH 13 December 2012, 1 Ob 48/ 12h, ÖBA (2013), 506, with note Thiede, 513. Already on the EGBGB, see BGH 19 March 1997 – VII ZR 316/96, NJW (1997), 1697. Ferrari (fn. 1), p. 276 (though arguing that from the text, whilst courts shall not apply ex officio the provision at hand, it is sufficient for the invoking party to contest the consent); Villani, (fn. 6), p. 188 and Cortese (fn. 1), 804, 806. The wording “may rely upon”, used by Art. 10 (2) clearly points towards the idea that judges shall not apply ex officio the provision at hand. Confirming such idea, Egon Oldendorff v. Libera Corp., (1995) 2 Lloyd’s Rep., 64, arguing that onus probandi rests upon the invoking party (cf. Stone (fn. 1), p. 326). Ferrari (fn. 1), p. 274. See in the case law, KG 2 February 2006–2 U 101/01 (fn. 15), where both Moroccan and German law treated silence as acceptance of the contract. Ferrari (fn. 1), p. 274.

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circumstance of the case the effects following the application of the law which governs the contracts are unreasonable.42 1. Art. 10 (2) and legal entities As the exception contained in Art. 10 (2) is conceived as a way to protect parties from 22 possible abuses in cases where their conduct is unreasonably treated by the law governing the contract as acceptance of the proposal, it is clear that natural persons are the first beneficiaries of this protection, these being contractually weaker and less experienced than possible commercial actors. The question thus is whether or not also corporate entities can invoke the provision at hand. Art. 10 (2) does not per se exclude the possibility for commercial entities to rely upon the 23 exception at hand; domestic case law argued that the principle of the 1980 Rome Convention can also be invoked by companies.43 Such conclusion has to be upheld in light of the wording of the provision itself, which is not referring neither to a contractually weaker party, neither to natural persons, but rather to “party”, this being any kind of party to the contract, regardless its natural or corporative nature. 2. The reasonableness standard: general remarks and prospects for commercial entities It still remains to be determined what reasonable within the context means, how such 24 concept has to be interpreted and within which limits it can be invoked and applied. In general terms, Art. 10 (2) has to be applied cautiously:44 in particular, what has to be 25 unreasonable is not the fact that a party has given his/her consent, but the unreasonable must be the application of the (unreasonable)45 law which governs the contract and its validity according to Art. 10 (1). In other terms, unreasonable would be the creation of a binding agreement in those cases where a “normal contracting party” would not expect a binding agreement to follow his/her conduct.46

42

43 44 45

46

In other words, it is necessary to establish the reasonableness of the behaviour of the party challenging the consent, or the validity of general terms and conditions of the contract. In this sense, see OLG Schleswig 19 September 1989 – 3 U 213/86 (fn. 13), where the court held that in those circumstances where the silence of one party is deemed, by the law governing the contract, as an acceptance of the contractual proposal, the party challenging the consent can rely upon the law of his/her habitual residence if, according to the latter, silence of natural persons is not to be considered as acceptance. Cf. Egon Oldendorff v. Libera Corp. (fn. 38), on which see Morse (fn. 23), p. 2310 and Stone (fn. 1), p. 326. Stone (fn. 1), p. 326. It is thus not the conduct that must be unreasonable, but the rules on the behaviour; see Del Prato (fn. 1), 1023, 1029. In this sense, agreeing to an English choice-of-court clause and to an English choice-of-law clause was not deemed to be per se unfair or unreasonable; thus, the application of the law of the habitual residence of the invoking party was excluded in the context of a bill of lading based relationship (Horn Linie v. Panamaricana Formas E Impresos, [2006] EWHC 373 (Comm.), on which see Stone (fn. 1), p. 326). Clearly, Cortese (fn. 1), 804, 807.

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26 It is thus not sufficient only to analyze the behaviour of the party, but also a scrutiny of all the

circumstances of the case has to be carried out.47 Since the standard of “reasonableness” seems to be a general clause more typical of common law countries48 than of civil law,49 it is believed that multiple factors have to be taken into consideration when addressing this standard. Even though it seems impossible to offer a clear and complete outline of all such circumstances,50 which must be evaluated on a case-by-case basis, it seems still possible to exclude the applicability of Art. 10 (2) when the party challenging the consent is a business man regularly dealing with a law according to which a particular behaviour is considered as acceptance of the contractual offer.

27 In such scenario, it seems possible to make reference to the already mentioned application of

the Brussels I Regulation and, in particular, to the choice-of-court provisions on prorogation agreements concluded in forms allowed by international trade and commerce of a specific market and geographical area.51 In these sense, within commercial relationships between businessmen, domestic courts52 have rejected the application of the principle of Art. 10 (2) where the application of the law of the habitual residence has been considered commercially unreasonable,53 in the sense that the application of the law of habitual residence of one party would be contrary to legitimate commercial expectations. Thus, in professional commercial relationships, the duty of the court is to find, by a case-by-case approach, the right balance between the legitimate expectations of one party that arise out of usages of international trade and commerce on the one side, and the interest of the party challenging the consent: a duty that does not allow the creation of specific general rules and that could turn out to be fulfilled, in the practice, as to make Art. 10 (2) indeed applicable to companies, but of limited use where the invoking party should have known (due to widely accepted usages or well established relationships with its counter-party) that its silence is treated by the applicable law as acceptance of the offer. IV. International conventions 28 The above is true for all contracts falling within the scope of application as long as no

international convention uniformly regulating the consent (or some of its aspects)54 is applicable, since international treaties of substantive law, by way of their speciality, take precedence over uniformed conflict-of-laws rules.55 In other words, the rules enshrined in 47 48 49 50 51

52 53 54

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Ferrari (fn. 1), p. 272; Morse (fn. 23), p. 2310 and Del Prato (fn. 1), 1023, 1028. Del Prato (fn. 1), 1023, 1028. Cf., for example, concerning French law, Khairallah RTD civ. (1984), 439. Of the same idea Del Prato (fn. 1), 1023, 1029. See Brussels Ibis Regulation, Art. 25 (1) (c) (“in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned”). On this provision, see in the case law Mainschiffahrts-Genossenschaft eG (MSG) v. Les Gravières Rhénanes SARL, (Case C- 106/95) [1997] ERC I 911 and Trasporti Castelletti Spedizioni Internazionali SpA v. Hugo Trumpy SpA., (Case C-159/97) [1999] ERC I-1597. Egon Oldendorff v. Libera Corp. (fn. 38). Ferrari (fn. 1), p. 276; Morse (fn. 23), p. 2310 and Cortese (fn. 1), 804, 807. As, for example, Part II of the CISG, 1980 United Nations Convention on Contracts for the International Sale of Goods, in: U.N.T.S. Vol. 1489, p. 3.

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Art. 10 are not general principles also applicable outside the scope of application of EU contract law. Here, a decision of the Hoge Raad56 can be recalled. A Dutch company sold infected tomato 29 plants to a Belgian company and the buyer claimed compensation for damages suffered, even though upon delivery he signed a receipt, which indicated that the general terms and conditions of the Dutch Plant-Breeders Society were applicable. These terms and conditions indicated both that liability for substandard plants by the seller could not exceed the purchase price and a dispute exoneration clause. The Hoge Raad determined that the CISG be applied to the case and that, under Art. 7 (2) CISG, questions falling within the scope of application of the Convention, but not expressly provided for in the Convention, must be settled by reference to the general principles on which the Convention is founded on, or, in the absence of such principles, by reference to the law which is applicable according to the rules of private international law. On the matter of the validity of the consent, falling within the scope of application of the Convention, the Court decided that the question whether the buyer consented to the application of the general terms and conditions, including the exoneration clause, must be settled by reference to the rules of the Convention rather than by reference to any system of law applicable under rules of private international law. In other terms, the Court excluded the applicability of Art. 10 (2) for matters falling within the scope of application of Art. 7 (2) of the Vienna Convention. Article 11: Formal validity 1. A contract concluded between persons who, or whose agents, are in the same country at the time of its conclusion is formally valid if it satisfies the formal requirements of the law which governs it in substance under this Regulation or of the law of the country where it is concluded. 2. A contract concluded between persons who, or whose agents, are in different countries at the time of its conclusion is formally valid if it satisfies the formal requirements of the law which governs it in substance under this Regulation, or of the law of either of the countries where either of the parties or their agent is present at the time of conclusion, or of the law of the country where either of the parties had his habitual residence at that time. 3. A unilateral act intended to have legal effect relating to an existing or contemplated contract is formally valid if it satisfies the formal requirements of the law which governs or would govern the contract in substance under this Regulation, or of the law of the country where the act was done, or of the law of the country where the person by whom it was done had his habitual residence at that time. 4. Paragraphs 1, 2 and 3 of this Article shall not apply to contracts that fall within the scope of Article 6. The form of such contracts shall be governed by the law of the country where the consumer has his habitual residence. 5. Notwithstanding paragraphs 1 to 4, a contract the subject matter of which is a right in rem in immovable property or a tenancy of immovable property shall be subject to the requirements of form of the law of the country where the property is situated if by that law:

55

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Ferrari (fn. 1), p. 279; Magnus, in: Ferrari/Leible (eds.), Rome I Regulation. The Law Applicable to Contractual Obligations in Europe (2009), p. 27, p. 34 and Garcimartín Alférez EuLF 2008, I-61, I-65. Hoge Raad 28 January 2005 – C03/290HR, available at http://cisgw3.law.pace.edu/cases/050128n1.html.

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(a) those requirements are imposed irrespective of the country where the contract is concluded and irrespective of the law governing the contract; and (b) those requirements cannot be derogated from by agreement.

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international privé (LDIP)/Convention Lugano (CL) (2011) Cheshire, North/Fawcett, Private International Law (14th ed. 2008) M J Davies/D V Snyder, International Transactions in Goods. Global Sales in Comparative Context (2014) Dölle, Die 7. Haager Konferenz, 17 RabelsZ (1952), 161 Dolinar, Die bedingte Parteihandlung, ÖJZ 1970, 85 Downes/Heiss, Sprachregulierung im Vertragsrecht: Europa- und internationalprivatrechtliche Aspekte, 98 ZVglRWiss (1999), 28 Downes/Heiss, Ausschluß des favor offerentis bei Formvorschriften des (europäisierten) Verbrauchervertragsrechts: Art. 9 EVÜ und komplexe Schutzformen, IPRax 1999, 137 Droz, Regards sur le droit international privé comparé (1992) (= Regards sur le droit international privé. Cours général de droit international privé, 229 Rec. des cours [1991] 9) Editorial Comments, On the way to a Rome I Regulation, 43 C.M.L. Rev. (2006), 913 Ekelmans, Le dépeçage du contrat dans la Convention de Rome du 19 juin 1980 sur la loi applicable aux obligations contractuelles, in: Mélanges offerts à Raymond Vander Elst, Vol. I (1986), 243 Cl Ferry, La validité des contrats en droit international privé (1989) Freitag, Sprachenzwang, Sprachrisiko und Formanforderungen im IPR, IPRax 1999, 142 Fucik, Der Vergleich, ÖJZ 2008, 741 L L Fuller, Consideration and Form, 41 Col. L. Rev. (1941), 799 Furrer/Girsberger/Müller-Chen, Handkommentar zum Schweizer Privatrecht. Internationales Privatrecht (2nd ed. 2012) R Garnett, Substance and Procedure in Private International Law (2012) Geimer, Auslandsbeurkundungen im Gesellschaftsrecht, DNotZ 1981, 406

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Chapter II: Uniform Rules Genin-Meric, La maxime locus regit actum. Nature et fondement (1976) Giuliano/Lagarde, Report on the Convention on the law applicable to contractual obligations, OJ 1980 C 282/1 Götze/Mörtel, Zulässigkeit der Einreichung der GmbH-Gesellschafterliste durch einen ausländischen Notar, NZG 2014, 369 P Hay/P J Borchers/S C Symeonides, Conflict of Laws (5th ed. 2010) Heindler/Verschraegen, Bestimmungen von Abschnitt VI. des Russischen Zivilgesetzbuches (IPR) idF Föderales Gesetz vom 30.9.2013 Nr. 260-FZ “Über die Änderung des Dritten Teiles des Zivilgesetzbuches der Russischen Föderation”, IPRax 2014, 459 Heiss, Formvorschriften als Instrument europäischen Verbraucherschutzes, in: Schnyder/Heiss/Rudisch (eds.), Internationales Verbraucherschutzrecht – Kolloquium zu Ehren von Fritz ReichertFacilides (1995) 87 K Heldrich, Die Form des Vertrages, 147 AcP (1941), 89 Henssler/Strohn (eds.) Gesellschaftsrecht (3rd ed. 2016) Hermanns, Das Mysterium der Auslandsbeurkundung – Neues aus Düsseldorf, RNotZ 2011, 224 Hermanns, Basel II für Anteilsabtretungen – Neues aus Karlsruhe?, RNotZ 2014, 229 von Hoffmann/Höpping, Zur Anknüpfung kausaler Forderungszessionen, IPRax 1993, 302 Holzhammer, Der Prozessvergleich, in: FS Schima (1969) 217 Honsell (ed.) Internationales Privatrecht (3rd ed. 2013) Hug, Die Substitution im IPR (1983) Hüßtege/Mansel, Nomos Kommentar, BGB. RomVerordnungen, Bd. 6 (2014) Jayme, Form schuldrechtlicher Verträge über Grundstücke im Ausland, NJW 1972, 1618 Jayme/Götz, Vertragsabschluß durch Telex – Zum Abschlußort bei internationalen Distanzverträgen, IPRax 1985, 113 Jessurun D’Oliveira, “Characteristic Obligation” In The Draft EEC Obligation Convention, 25 Am. J. Comp. L. (1977), 303 Jitta, La méthode du droit international privé (1890) I G F Karsten, Convention on the Law Applicable to

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Article 11 Agency. Draft Convention adopted by the Thirteenth Session and Explanatory Report/Convention sur la loi applicable aux contrats d’intermédiaires et à la représentation. Projet de Convention adopté par la Treizième session et Rapport explicatif (1979) P Kaye, The New Private International Law of Contract of the European Community. Implementation of the EEC’s Contractual Obligations Convention in England and Wales under the Contracts (Applicable Law) Act 1990 (1993) Kindler, Geschäftsanteilsabtretungen im Ausland und notarielle Pflicht zur Einreichung der Gesellschafterliste, RIW 2011, 257 Klauser/Kodek (eds.) Jurisdiktionsnorm und Zivilprozessordnung samt Einführungsgesetzen und Nebengesetzen, sowie den Vorschriften des Europäischen Zivilprozessrechts (17th ed. 2012) König, Der gerichtliche Vergleich in der österreichischen Lehre, JBl 1971, 467 Kropholler, Auslandsbeurkundungen im Gesellschaftsrecht, 140 ZHR (1976), 394 Lagarde, Le nouveau droit international privé des contrats après l’entrée en vigueur de la Convention de Rome de 19 juin 1980, 80 RCDIP (1991), 287 Lagarde, Remarques sur la proposition de règlement de la Commission européenne sur la loi applicable aux obligations contractuelles (Rome I), 95 RCDIP (2006), 331 Lagarde/Tenenbaum, De la convention de Rome au règlement Rome I, 97 RCDIP (2008), 727 Lando, The EEC Convention on the Law Applicable to Contractual Obligations, 24 C.M.L. Rev. (1987), 159 Lando, in: International Encyclopedia of Comparative Law, Vol. III, Private International Law, Chapter 24, Contracts (1976) Lando, On the Form of Contracts and the Conflict of Laws, in: FS Schmitthoff (1973) 253 Lando/P A Nielsen, The Rome I Proposal, 3 JournalPIL (2007), 29 Lando/P A Nielsen, The Rome I Regulation, 45 C.M.L. Rev. (2008), 1687 S Lemaire, Interrogations sur la portée juridique du préambule du Règlement Rome I, in: Dossier Règlement Rome I réalisé sous la direction de S. Bollée et S. Lemaire, 31 Rec. Dalloz (2008), 2157 H Lewald, Règles générales des conflits de lois.

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Article 11 Contributions à la technique du droit international privé (1941) = 69 Rec. des cours (1939-III), 1 Loussouarn/Bourel/de Vareilles-Sommières, Droit international privé (9th ed. 2007) Magnus, Die Rom I-Verordnung, IPRax 2010, 27 Magnus/Mankowski, The Green paper on a Future Rome I Regulation – on the Road to a Renewed European Private International Law of Contracts, 103 ZVglRWiss (2004), 131 Magnus/Mankowski, Brussels I Regulation (2nd ed. 2011) Mankowski, Der Vorschlag für die Rom I-Verordnung, IPRax 2006, 101 Mankowski, Die Rom I-Verordnung – Änderungen im europäischen IPR für Schuldverträge, IHR 2008, 133 Mankowski, The Principle of Characteristic Performance Revisited Yet Again, in: Liber Amicorum Kurt Siehr (2010) 433 Mankowski, Änderungen bei der Auslandsbeurkundung von Anteilsübertragungen durch das MoMiG oder durch die Rom I-VO?, NZG 2010, 201 Mankowski, Formzwecke, JZ 2010, 662 Mankowski, Dépeçage unter der Rom I-VO, in: FS Ullrich Spellenberg (2010) 261 Mansel, Substitution im deutschen Zwangsvollstreckungsrecht, in: FS Lorenz (1991) 689 Marsch, Der Favor Negotii im deutschen Internationalen Privatrecht (1976) Marschall von Bieberstein, Prozessuale Schranken der Formfreiheit im internationalen Schuldrecht, in: FS Beitzke (1979) 625 Martiny, Europäisches Internationales Vertragsrecht vor der Reform, ZEuP 2003, 590 Martiny, Neues deutsches internationales Vertragsrecht. Das Gesetz zur Anpassung der Vorschriften des Internationalen Privatrechts an die Rom I-Verordnung, RIW 2009, 737 Max Planck Institute for Foreign Private and Private International Law, Comments on the European Commission’s Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernization, 68 RabelsZ (2004), 1 Max Planck Institute for Comparative and International Private Law, Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the law

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Rome I Regulation applicable to contractual obligations (Rome I), 71 RabelsZ (2007), 225 P Mayer/V Heuzé, Droit international privé (11th ed. 2014) Kl J Müller, Auslandsbeurkundung von Abtretungen deutscher GmbH-Geschäftsanteile in der Schweiz, NJW 2014, 1994 M Müller, Abtretung eines GmbH-Anteils in der Schweiz und einzuhaltende Form, RIW 2010, 591 Müller-Chen, Übertragung und Verpfändung deutscher GmbH-Geschäftsanteile in der Schweiz nach Inkrafttreten der schweizerischen GmBH-Revision, IPRax 2008, 45 P E Nygh, The Reasonable Expectations of the Parties as a Guide to the Choice of Law in Contract and Tort, 251 Rec. des cours (1995), 269 R Fr Oppong, Private International Law in Commonwealth Africa (2013) von Overbeck, L’unification des règles de conflits de lois en matière de forme de testaments (1961) Palandt, BGB (75th ed. 2016) Papassiopi-Passia, The Law Applicable to Formal Validity of Contracts According to the Rome Convention 1980 on Applicable Law to Contractual Obligations, 23 RHDEur (2003), 541 Pfeiffer, EuZW 2008, 622 Plender/Wilderspin, The European Private International Law of Obligations (3rd ed. 2009) Pocar (ed.) Commentario del nuovo diritto internazionale privato (1996) Rechberger, ZPO-Zivilprozessordnung (4th ed. 2014) Rehm, Wirksamkeit in Deutschland vorgenommener Akte ausländischer Urkundspersonen?, 64 RabelsZ (2000), 104 Reithmann, Substitution bei Anwendung der Formvorschriften des GmbH-Gesetzes, NJW 2003, 385 Rigaux, La loi applicable à la forme des actes juridiques, in: Liber Amicorum A. F. Schnitzer (1979) 381 Rigaux, Droit privé matériel et règles de conflit de lois, Revue belge de droit international 1991 No. 2, 385 P Rogerson, Collier’s Conflict of Laws (4th ed. 2013, reprint 2014) Rummel, ABGB Kommentar, 2. Band, 6. Teil: IPRG, EVÜ (3rd ed. 2004) S Sánchez Lorenzo, La eficacia registral de las escrituras públicas de compraventa de immuebles otor-

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Chapter II: Uniform Rules gadas ante notario extranjero a la luz de la doctrina reciente de la DGRN, La Ley No. 6425 (2006), 1 Schönwerth, Die Form der Rechtsgeschäfte im Internationalen Privatrecht – Art. 11 EGBGB. Zu den Grenzen der alternativen Ortsformanknüpfung. Zur Zulässigkeit der Substitution durch Beurkundung im Ausland (1996) Schulz, Die Substitution ausländischer Rechtstatsachen (1998) G Schulze, Übertragung deutscher GmbH-Anteile in Zürich und Basel, IPRax 2011, 365 Siehr, Niederlande: Gesetz vom 19. Mai 2011. Zur Feststellung und Einführung von Buch 10 (Internationales Privatrecht) des Bürgerlichen Gesetzbuchs, 78 RabelsZ (2014) 615 Spellenberg, Atypischer Grundstücksvertrag, Teilrechtswahl und nicht ausgeübte Vollmacht, IPRax 1990, 295 Spickhoff, Nachträgliche Rechtswahl: Interlokales und intertemporales Kollisionsrecht, Form, Rückwirkung und Beweislast, IPRax 1998, 462 Stürner, Die notarielle Urkunde im europäischen Rechtsverkehr, DNotZ 1995, 343 Symeonides, Les grands problèmes de droit international privé et la nouvelle codification de Louisiane, 81 RCDIP (1992), 223 Symeonides, The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments, 61 Am. J. Comp. L (2013), 873 Symeonides, Codifying Choice of Law Around the World. An International Comparative Analysis (2014) I.

II. III. IV. V. VI.

Introduction 1. General remarks . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Favor negotii, favor gerentis, favor validitatis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3. Relationship with existing international conventions . . . . . . . . . . . . . . . 22 Legislative history of Art. 11 Rome I . . . . . 23 Scope of application . . . . . . . . . . . . . . . . . . . . . . . . 29 Form, substance and procedure . . . . . . . . . . . 39 Choice of law agreement and dépeçage . . 51 The law applicable to the form 1. Presence in the same country (Art. 11(1) Rome I) . . . . . . . . . . . . . . . . . . . . . . 58 a) General remarks . . . . . . . . . . . . . . . . . . . . . . . . . 58

J-L Thireau, Charles du Moulin, 1500–1566 (1980) van Venrooy, Internationalprivatrechtliche Substitution (1999) L P W van Vliet, Transfer of movables in German, French, English, and Dutch Law (2000) L P W van Vliet, Transfer of movables as a legal act, M-EPLI, Working paper No. 2011/24, 504, http:// papers.ssrn.com/sol3/papers.cfm?abstract_id=1688 923 Verschraegen (ed.), Private International Law, International Encyclopaedia of Laws (since 2001, with regular updates) Verschraegen, Internationales Privatrecht. Ein systematischer Überblick (2012) Verschraegen/Heindler, Änderungen im russischen Internationalen Privatrecht, IPRax 2014, 451 Vischer, Internationales Vertragsrecht. Die kollisionsrechtlichen Regeln der Anknüpfung bei internationalen Verträgen (1962) Vischer, 10 Jahre IPRG unter besonderer Berücksichtigung des internationalen Schuldrechts, in: Liber Amicorum Kurt Siehr (2000) 797 ten Wolde/Knot/Baarsma, Dutch Civil Code Book 10 – On the Conflict of Laws (19 May 2011), Yb. PIL Vol. 13 (2011), 657 Zachariasiewicz, The New Polish Act on Private International Law of 4 February 2011, Yb. PIL Vol. 13 (2011), 641 Zweigert, Zum Abschlussort schuldrechtlicher Distanzverträge, in: FS Ernst Rabel I (1954) 631 Zweigert, Form der Vollmacht, 24 RabelsZ (1959), 334.

b) c) 2. a) b) 3. 4. a) b) 5. a)

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Lex causae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Lex loci . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Distance contracts (Art. 11(2) Rome I) 76 General remarks . . . . . . . . . . . . . . . . . . . . . . . . . 76 Habitual residence . . . . . . . . . . . . . . . . . . . . . . . 83 Unilateral acts (Art. 11(3) Rome I) . . . . 86 Consumer contracts (Art. 11(4) Rome I) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Ambit of the provision . . . . . . . . . . . . . . . . . . 92 EU Directives relating to consumer transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Contracts on real estate (Art. 11(5) Rome I) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 Scope of the provision . . . . . . . . . . . . . . . . 104

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Article 11 b) Synchronization of applicable laws . . 107 c) The “if-clause” . . . . . . . . . . . . . . . . . . . . . . . . . 109 6. Selected controversial issues . . . . . . . . . . 112

Rome I Regulation VII. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 VIII. Overriding mandatory provisions . . . . . . . 119 IX. Public policy and evasion of the law . . . . 128

I. Introduction 1. General remarks 1 Form requirements, such as the writing requirement, may serve various purposes and thus

fulfill different functions, among many of them providing evidence (evidentiary function), cautioning on what will be or has been agreed upon (cautionary function), and signaling that legal rights and duties are at stake (signaling function).1, 2 These purposes and functions are nowhere really questioned, but in the context of cross-border contractual obligations form requirements lose their impact to a growing degree. This is primarily due to the fact that formal obstacles are considered to be an undesirable burden, and the general policy that the overall maxims of favor negotii, favor gerentis and favor validitatis are the goals to achieve: By and large, contractual obligations should not necessarily be considered formally invalid “merely” because form requirements are not met. Hence, they lose their clout.3 At the end of the day, the rationale of these maxims is to mirror the ultimate goal, the validity of the contractual obligation, and thus party autonomy.4 2 The various forms differ in grades of formality and costs. The writing requirement, usually

accompanied by the signature of the contracting parties, is the mildest form requirement, whereas notarial or judicial recording involve the co-operation of the relevant authorities and are subject to fees and expenses; a notarial deed ranks among the strictest form requirements and usually involves substantial costs. 3 The form requirements vary from country to country and so do the legal consequences and

remedies, if they are not complied with. In some cases the transaction is null,5 in others the 1

2

3

4 5

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I wish to acknowledge in particular the assistance of Mag.a K Huber, Mag. M Komuczky and Mag.a L Zulehner for critically reviewing the manuscript, and the latter for harmonizing the footnotes and cross-references; Mag. S. A Müller, Mag. C Dorfmayr, Mag.a U Schreiner, Mag. M Komuczky and Mag.a K Zwins contributed to the proof reading. See e.g. Mankowski JZ 2010, 662, 664; Schönwerth, Die Form der Rechtsgeschäfte im Internationalen Privatrecht – Art. 11 EGBGB (1996) pp. 36 et seq.; Lando, in: International Encyclopedia of Comparative Law, Vol. III, Chapter 24 (1976), pp. 98 et seq.; Lando, in: FS Schmitthoff (1973), p. 253, 255 et seq.; Blumenwitz DNotZ 1968, 712, 736 fn. 86, 737, 750; K Heldrich, 147 AcP (1941), 89, 91 et seq.; Fuller 41 Col. L. Rev. (1941), 799, 800–802, also cited in Davies/Snyder, International Transactions in Goods. Global Sales in Comparative Context (2014) p. 145 note 32. In the context of consumer contracts form requirements have a particular weight: Form requirements seem to stand for substantive correctness in the guise of form and they are, according to Art. 11(4) Rome I, governed by the law where the consumer has his habitual residence (cf. VI.4. note 92 infra). However, the more formalities in the interest of consumers are required, the less may be his protection at the end of the day. See more detailed e.g. Heiss, in: FS Reichert-Facilides (1995), p. 87, 96 et seq. See i. a. Papassiopi-Passia, RHDEur 23 (2003), 541; Nygh, 251 Rec. des cours (1995), 269, 296. E.g. Art. 76 (2) GmbHG (Austrian Act on private limited-liability companies).

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transaction is regarded valid once it was fulfilled.6 Generally, but not exclusively, international transactions are unlikely to be subject to strict form requirements. In commercial business transactions, freedom of form has become a standard since decades, very prominently in the CISG.7 This trend is backed by initiatives from various international organizations. Just by way of 4 example, the UNCITRAL Model Law on Electronic Commerce (MLEC)8 has been enjoying a remarkable success, and was adopted by many States, especially the UK, Canada, the US, Australia and various countries in Asia and Africa.9 The point worthwhile to be mentioned here is that where information must be “in writing”, a “data message” fulfills this legal requirement,10 a term that is broadly defined.11 Where a signature is required, this legal requirement is fulfilled by a data message, if the signatory is identified, the approval is indicated and the used data message is sufficiently reliable and appropriate for the respective purpose.12 The use of emoticons for example might be a “data message”.13 Another example are The Hague Principles on Choice of Law in International Commercial Contracts, which do not require a specific form requirement for a choice of law agreement, but give the parties the possibility to agree on a specific form.14 The Proposal for a Regulation of the European Parliament and of the Council on a Common 5

6

7

8 9

10 11 12 13 14

E.g. Art. 943 ABGB (Austrian Civil Code); Art. 1346 (2) ABGB (Austrian Civil Code); Art. 766 BGB (German Civil Code). E.g. Art. 11 and Art. 29 CISG. Art. 96 CISG authorizes a reservation, but only 8 out of 85 contracting parties, notably Argentina, Armenia, Belarus, Chile, Paraguay, the Russian Federation, Vietnam and Ukraine made one (as of 1.9.2016, http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CI SG_status.html). How to proceed when one State has abstained from such declaration, whereas the other State has done the contrary seems to be open to debate. In a recent US-American-Argentinian case this question evolved (see Forestal Guarani S.A. v. Daros International, Inc., 613 F.3d 395 (3th Cir. 2010), available online at http://www.cisg.law.pace.edu/cisg/wais/db/cases2/100721u1.html, and printed in Davies/Snyder (fn. 2), pp. 146 et seq. The majority was in favor of consulting conflict rules in order to determine the applicable law, whereas Circuit Judge Cowen dissented and urged to directly apply Argentina’s form requirement (agreement in writing) without a conflict of law analysis. The majority’s opinion was in my view correct. As to the “pratique constant du commerce international” see Droz, Regards sur le droit international privé comparé (1992), p. 253, also cited in Nygh, 251 Rec. des cours (1995), 269, 298. Adopted on 12 June 1996. See as of 1.9.2016, http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/1996Mo del_status.html). Art. 6 MLEC. Art. 2 lit. (a) MLEC. Art. 7 MLEC. Consent requires that the requirements of Art. 7 MLEC are met. See Art. 5 The Hague Principles on Choice of Law in International Commercial Contracts (available at: https://assets.hcch.net/docs/5da3ed47-f54d-4c43-aaef-5eafc7c1f2a1.pdf). The Principles came into force on 19th March 2015. So far, Paraguay has been the only state which implemented them (https://assets.hcc h.net/upload/contractslaw_py.pdf; Paraguayan Law 5393 of 2015, promulgated on 15th January 2015).

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Rome I Regulation

European Sales Law (“CESL”)15 expressly states that a contract, statement or any other act which is governed by it need not be made in or evidenced by a particular form, unless otherwise stated in the CESL.16 The CESL was drafted as a second contract law regime within the national law of each EU Member State and can be agreed upon in cross-border contracts (so-called “opt-in solution”).17 However, the scope of the CESL would not have covered all issues of contract law, therefore the applicable law still must be determined, notably by the operation of Rome I.18 The proposal for a Common European Sales Law was withdrawn due to widespread and harsh criticism. 6 Both the Convention on the law applicable to contractual obligations (Rome Convention)

and the Rome I Regulation (Rome I) list various connecting factors to determine the applicable law regarding the formal validity and prescribe that a contract is formally valid if the requirements of at least one legal system are met. Art. 11 Rome I is essentially similar to Art. 9 Rome Convention19 and regarded as “most liberal”.20 7 Many legal systems outside the EU have been inspired by the unification rules on private

international law elaborated by the EU, such as Armenia, Belarus, FYROM (Former Yugoslav Republic of Macedonia), Japan, Kyrgyzstan, Liechtenstein, Moldova, Quebec, South Korea, Switzerland, Taiwan, Turkey, Ukraine, and Venezuela.21 Although i.a. Rome I influenced the latest Russian reform on conflict of laws as well, the latter provides for a different 15

16 17 18 19

20

21

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Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law (CESL) COM (2011) 635 final. Art. 6 CESL; Art. 34 CESL. The cross-border nature is to be determined by Art. 4 CESL Regulation. See also Recitals (13), (14). Or, as the case may be by Rome II, see COM (2011) 635 final, p. 6; Art. 3, 4. Bělohlávek, Rome Convention/Rome Regulation Vol. 2 (2011) Art. 11 Rome I paras. 11.1 et seq.; Plender/ Wilderspin, The European Private International Law of Obligations (3rd ed. 2009) p. 425 note 14–072; Vrellis/Tsouca, in: Verschraegen (ed.), Private International Law, International Encyclopaedia of Laws (2009), p. 75. For a comparison between Art. 9 Rome Convention and Art. 11 Rome I see i.a. Verschraegen, Internationales Privatrecht (2012) overview on pp. 268 et seq., and notes 1472 et seq. See e.g. Nygh, 251 Rec. des cours (1995), 269, 316. Pauknerová, in: Verschraegen (ed.), Private International Law, International Encyclopaedia of Laws (2011), p. 95 note 120a considers Art. 11 Rome I in comparison with the autonomous Czech conflict rules to be “liberal” too. See Symeonides 61 Am.J.Comp.L. (2013), 873 note 9. Argentina adopted its latest Bill on the Civil and Commercial Code on October 1, 2014, which was published on October 7, 2014, and will enter into force on January 1, 2016: República Argentina, Ley 26.994, B.O. 8/10/2014. Sección 10a, Art. 2649 provides reference rules for solemn forms (“formas y solemnidades”). Basically, the lex loci applies (para. 1); if the act was realized elsewhere, the equivalence between the required form and realized form must be determined (para. 2), and when the contract was concluded between persons present in different countries, the law where the offer was accepted or the law that governs the contractual relationship applies (para. 3). Art. 2649(1) is similar to series of foreign codifications, i.a. Art. 11 EGBGB, Art. 124(1) Swiss IPRG, see for further explanations Dreyzin de Klor, in: Verschraegen (ed.), Private International Law, International Encyclopaedia of Laws (2016), note 254. During the elaboration of the 2007 Turkish Act on Private International Law the Rome Convention was an issue, but it mirrors it only partly (Art. 7 of the PIL Act), see Tekinalp/Nomer/Boztosun, in: Verschraegen (ed.), Private International Law, International Encyclopaedia of Laws (2012), notes 243, 247. Characterization, though, follows the lex fori, Tekinalp/Nomer/ Boztosun, note 250.

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set of reference rules, in that they nevertheless reflect the spirit of the latest developments in the EU by some degree of liberalization, but do not copy them as such. Transactions (and by analogy the power of authority) are governed by the lex causae, alternatively by the lex loci. If one of the contracting parties is a Russian national, and the transaction concluded in another country is formally invalid, it will be held formally valid, if the corresponding Russian form requirements are met.22 Interestingly, a consumer can opt for the application of the country where he is domiciled, and this needs not be in Russia.23 Recent codifications of private international law, e.g. Book 10 of the Dutch Civil Code on the 8 Conflict of Laws, which entered into force on January 1, 2012,24 and the new Polish Act on Private International Law of February 4, 2011, which entered into force on May 16, 201125 acknowledge, of course, the priority of Rome I.26 It appears that the rules apply to the extent that contracts and relevant acts are not governed by Rome I.27 Parallel domestic, international and European Union reference rules are no anomaly. They result from the fact that a whole range of issues for which conflict rules are required are excluded from the material scope of application of Rome I, and also Art. 25(1) Rome I leaves some flexibility to the Member States.28 22

23

24

25 26 27

28

See for a similar rule (Art. 1116 Civil Code) in Belarus Danilevich, in: Verschraegen (ed.), Private International Law (2012), note 221. Art. 1209 Point 1 Russian Civil Code. As to the Russian reform, see Verschraegen/Heindler IPRax 2014, 451, 452 et seq., and for the translation, see Heindler/Verschraegen IPRax 2014, 459, 460 et seq. Wet van 19 mei 2011 tot vaststellingen invoering van Boek 10 (Internationaal privaatrecht) van het Burgerlijk Wetboek (Vaststellings- en Invoeringswet Boek 10 Burgerlijk Wetboek), Staatsblad 2011, no. 272. For the English translation by ten Wolde/Knot/Baarsma, see Yb. PIL Vol. 13 (2011), 657; the German translation by Siehr was published in 78 RabelsZ (2014), 615. Translated by Zachariasiewicz Yb. PIL Vol. 13 (2011), 641. Art. 10:1 Dutch Civil Code; Art. 28 of the Polish Act on Private International Law. The relevant reference rules on formal validity of contracts between persons who are in the same country and contracts concluded between persons who are in different countries of the Dutch Civil Code mirror Art. 11(1) and (2) Rome I. Regarding contracts concluded by an agent, all depends on the construction of Art. 11(3) Rome I, because this provision only uses the term “person”. See on the construction of Art. 11 (3) Rome I sub VI.3. note 91 infra. To the extent that the habitual residence of the “parties” according to Dutch law is meant to include their agents, there is no difference. The rules of the Polish Act appear to be more complicated. A juridical act is governed by the law applicable to such act or by the lex loci (Art. 25(1) sent. 1 and 2); for contracts concluded between persons who are in different countries when making the declaration of intent, compliance with the formal requirements provided for such a contract in either state suffices (Art. 25(1) sent. 3), and if the juridical act was carried out by a representative, the “circumstances” on the part of the representative are taken into account, when Art. 25(1) sent. 2 and 3 are relevant (Art. 25(3)). Whether such deviations from Rome I contribute to the transparency of conflict rules and are user-friendly remains to be seen. In some countries transparency is minor than in others. Just for the sake of example: Estonia appears to cope with an amalgam of reference rules from the former Soviet Civil Code, some contained in its own General Part of the Civil Code, which applies to long-term contracts concluded before September 1, 1994, and the rules introduced by the Private International Law Act, applicable to contracts concluded after July 1, 2002. See the concerns expressed by Sein/Torga, in: Verschraegen (ed.), Private International Law, International Encyclopaedia of Laws (2013), note 53. The non-EU sources provide for reference rules on formal validity of contracts, see Sein/Torga, notes 146 et seq.

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9 One might have hoped that (the Rome Convention and) the Regulation would bring a

certain level of “common standards” and let EU-Member States hesitate to introduce too many deviations from the conflict rules on contractual obligations, even if they do not fall within the material scope of Rome and/or are merely of subsidiary nature.29 Although Rome I is not a copy in the form of a Regulation, the differences between the two legal sources are rather marginal. First of all, generally Art. 11(1) and (2) Rome I do not distinguish between the conclusion of a contract between the parties or through their agents, but provide an exception, this being the limitation to the sole relevance of the law of the country of habitual residence of the parties.30 Art. 9(3) Rome Convention, by contrast, entirely equates the situation where an agent acts for a party to where the party acts personally for the purposes of Art. 9(1) and (2) Rome Convention. Art. 11(2) Rome I widens the range of relevant reference rules by including the law of the country where either party had his habitual residence; this also applies to the reference rules relating to unilateral acts. The reference rules on real estate were altered slightly: Art. 9(6) Rome Convention relates to contracts the subject matter of which is “a right in immovable property or a right to use such property” and states that such contracts shall be subject to the mandatory form requirements of the lex rei sitae, provided such requirements are imposed irrespective of the country where the contract is concluded and irrespective of the law governing the contract. Art. 11(5) Rome I refers to contracts the subject matter of which is “a right in rem or a tenancy in immovable property” to which the lex rei sitae shall be applied, provided the form requirements are imposed irrespective of the lex loci and the law governing the contract, and provided such form requirements cannot be derogated from by agreement.31

10 Lacking an exception in Art. 11 Rome I renvoi (Art. 20 Rome I) is, by principle, excluded.

This means that the law applicable regarding the form of a contract is the law in force in that country, other than its rules of private international law.

29

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Some future EU-Member States, as e.g. Serbia, are obliged to gradually adapt their legal system, including the rules on private international law, to the acquis communautaire. See the Stabilization and Association Agreement of April 29, 2008 between the European Communities and their Member States and Serbia (SAA), Art. 72(1). The relevant work is in progress. Cf. Stanivuković/Živković, in: Verschraegen (ed.), Private International Law, International Encyclopaedia of Laws (2014), note 42. The English version of the Serbian PIL-Act is available at: http://arhiva.mpravde.gov.rs/cr/news/vesti/zakon-o-medjunarodno m-privatnom-pravu-radna-verzija.html. Montenegro finds itself in a similar position, because the Stabilization and Association Agreement with the EU was signed in 2010, followed by the negotiation on the accession to the EU in 2012. See the Screening Report Montenegro regarding Chapter 24 – Justice, freedom and security, in which it is mentioned that Montenegro ensures the adoption of a Private International Law Act by the end of 2012, p. 6; online available at: http://ec.europa.eu/enlargement/pd f/montenegro/screening_reports/screening_report_montenegro_ch24.pdf. The enactment is delayed, though, was announced for 2013, see Kostić-Mandić/Stanivuković/Živković, in: Verschraegen (ed.), Private International Law, International Encyclopaedia of Laws (2013), note 28. Art. 11 (2) Rome I. Just for the sake of an example: Concerns were expressed regarding the Hungarian Land Registry Act, which does not appear to be in line with Art. 11(5) Rome I, in that the registration of the title requires conformity with non-mandatory domestic law and practice seeks a declaratory court judgment to serve as a basis for registration, see Nagy, in: Verschraegen (ed.), Private International Law, International Encyclopaedia of Laws (2012), note 207.

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Recital (29) Rome I provides that references to rights and obligations constituting the terms 11 and conditions governing i.a. the issuance of transferable securities and references to the subscription and redemption of units in collective investment undertakings should include, amongst other mandatory rules, those matters referred to in Artt. 10, 11, 12 and 13 Rome I in order to ensure that all the relevant contractual aspects of an offer binding the issuer or the offerer to the consumer are governed by a single law. The review clause entailed in Rome I32 has until now remained a theoretical call to the 12 Commission. The deadline of 17 June 2013 expired and no report, nor any proposals to amend Rome I have been submitted. Yet, subsidiary EU law dealing with the consumer related matters mentioned in Recital (29) Rome I would have to make sure that Art. 11 Rome I is duly referred to. The issue of “battle of forms” is not one of form requirements, but of substance and relates to 13 offer and acceptance, thus to contract formation typically by the use of standard forms.33 2. Favor negotii, favor gerentis, favor validitatis It is generally said that the alternative reference rules evidence the purpose of contract 14 validation (favor negotii) and the interests of cross-border transactions (favor gerentis), as they allow the application of any of the enumerated laws. Hence, they are result-oriented rules in order to enhance the formal validity (favor validitatis) of the contractual obligation (contract or unilateral act).34 By and large, these reference rules seem to attract little attention, unlike for example conflict rules on capacity (which are neither dealt with by the Rome Convention nor by Rome I) or reference rules on the substance matter. By definition alternative reference rules are designed to enhance the formal validity of 15 juridical acts, more specifically of contracts and unilateral acts. Such “rules of validation” reflect the presumed intention of the parties to conclude a contract that is valid, rather than invalid.35 Perhaps the lacking case law of the ECJ as well as the relatively scanty discussion on the reference rules relating to formal validity mirror their successful application and general acceptance of the validation policy. This policy does not prosper “only in America”.36 Interestingly, in Commonwealth Africa, it seems that the issue of formal validity has been authoritatively decided in South Africa only. South African courts adopt a facultative approach and thus ensure that a contract which is valid under the lex loci cannot be put in question by another law to defeat its formal validity.37 In Creutzburg v. Commercial Bank of Namibia Ltd38 the Supreme Court of Appeal held that the formal validity of a suretyship agreement39 is to be determined by the law of the country where the contract was entered into, and thus 32 33 34

35 36 37 38

Art. 27(1)(b) Rome I. See for a recent comparative study Davies/Snyder (fn. 2), pp. 118 et seq. As for the variety of reference rules on form validity, see Symeonides, Codifying Choice of Law Around the World: An International Comparative Analysis (2014) pp. 299 et seq. See e.g. Nygh, 251 Rec. des cours (1995), 269, 338 et seq. with further comparative references. See Symeonides (fn. 34), p. 287. See Oppong, Private International Law in Commonwealth Africa (2013) p. 145. Available at http://www.saflii.org/za/cases/ZASCA/2004/117.html; also cited by Oppong (fn. 37), p. 145 note 54.

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rejected the claim by the appellants that the deed should be governed by South African law, under which it was invalid for lack of compliance with specific domestic provisions.40 16 It follows from the connecting factors enumerated in Art. 11 Rome I (and also Art. 9 Rome

Convention) that the principle of favor negotii characterizes the conflict rule on formal validity. This is i.a. reflected in the additional rule of attachment on habitual residence of the contracting parties in Art. 11(2) and (3) Rome I. These statutory reference rules are, therefore, result-selective, in that it is by principle considered to be desirable that the contractual obligation is formally valid.41 17 The alternative attachment (lex causae or lex loci) provided for by Rome I (and prior to

Rome I by the Rome Convention) for persons or their agents who are present in the same country is subject to special rules for consumer contracts and contracts regarding immovable property.42 That it is sufficient to comply with the lex loci is not new. Quite to the contrary, for ages the maxim locus regit actum has been acknowledged and applied by the Contracting States of the Rome Convention.43 The reasons are manifold: E.g. tradition, justice, and last but not least convenience. It seems that parties are less aware of formalities and therefore pay more attention to the content of the contract. At the end of the day formalities must be met and the parties turn to local support where they agreed upon the terms of their contractual obligation. The form of a contractual obligation mirrors the formal intention of the party/parties to engage in a legal transaction. Formal requirements, therefore, have a direct impact on the formal validity of such a transaction, but not on the subject matter. 18 In some cases, especially regarding distance contracts, the place of completion of the con-

tract may seem uncertain.44 Such may be the case when acceptance is forwarded from one country and received in another and both legal systems have a different view on where exactly the contract was concluded. The solution adopted after lengthy debates by the Rome Convention in Art. 9(2) and regarded as a “liberal” option was to consider a contract concluded between persons in different countries to be formally valid if it satisfies the require39

40 41

42 43

44

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The agreement entailed a clause providing that it shall in all respects be governed by the law of South Africa and/or Namibia. In casu with S. 6 of the General Law Amendment Act 50 of 1956. Symeonides (fn. 34), pp. 299 et seq., comes to the same conclusion while comparing over 50 legal systems, these systems however, “differ widely on the degree of preference that policy should enjoy and on the means used to attain it.” Cf. VI.4. note 92 et seq. and VI.5. note 104 et seq. Giuliano/Lagarde, Report on the Convention on the law applicable to contractual obligations, OJ 1980 C 282/1, 30; Dicey/Morris/Collins, The Conflict of Laws (15th ed. 2012) para. 32–128 even claim universal application. It was claimed that the rule has attained the nature of international customary law, see Vischer, Internationales Vertragsrecht. Die kollisionsrechtlichen Regeln der Anknüpfung bei internationalen Verträgen (1962) p. 151. Dealing with the principle on a dogmatic level Genin-Meric, La maxime locus regit actum. Nature et fondement (1976) pp. 144 et seq.; see also Loussouarn/Bourel/de VareillesSommières, Droit international privé (9th ed. 2007) p. 495 et seq. The problem is, of course, not new. See e.g. the discussion on conclusion of a contract by telex by Jayme/ Götz IPRax 1985, 113 et seq. regarding Brinkibon Ltd. v. Stahag Stahl und Stahlwarenhandelsgesellschaft mbH, (1982) 1 All E. R. 293, House of Lords.

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ments as to form laid down by the law of one of those countries or of the law governing the substance of the contract.45 Art. 11(2) Rome I added the alternative of the law of the state of the habitual residence of one of the parties.46 As the lex causae is one of the alternative laws that by principle governs the formal require- 19 ments, some remarks are dedicated to the lex causae as such. The Rome Convention presumes that lacking a choice of law agreement “the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of an entity corporate or unincorporated, its central administration.”47 The fundamental relevance of the “characteristic performance-”principle, a doctrine of Swiss origin and, hence, of a non-EU Member State,48 has been facing considerable criticism.49 The nonmonetary performance as the characteristic performance has been claimed to favoring the professional party and is of no avail where the characteristic performance cannot be determined, as may be the case in complex contracts (e.g. joint venture-contracts, foreign exchange transactions). Whether the doctrine reveals itself “as a functional and loyal handmaiden of capitalist society, in which the weaker party – consumers, employees,50 those needing insurance, those seeking special help, etc – gets the wrong end of the stick”51 is a fundamental issue, which cannot and needs not be discussed here.52 According to the current law it suffices if the formal requirements set up by the lex causae are met. Rome I mainly, but not entirely, follows the attachment rules laid down by the Rome 20 Convention. Lacking a choice of law agreement, Artt. 4 et seq. Rome I apply. The general rule of Art. 4 Rome I first sums up rules for specific contracts (a)-(h), and mandates the application of the doctrine of characteristic performance under the conditions laid down in Art. 4(2) Rome I, which is, quite similar to the Rome Convention, relativized by Art. 4(3) and (4) Rome I. There is no need to delve into details, suffice it to say that without prejudice to special rules provided for in Art. 11 Rome I, the lex causae as alternative rule of connection for the formal validity of contractual obligations automatically reflects the philosophy of localizing the contract at the seat, or as Vischer claimed53 in the national economy of the State, of that party who owes the non-monetary performance to the other party, and thus offers and/or produces the goods and services.54 The interests of the so-called weaker parties 45

46 47 48

49 50

51 52 53 54

Giuliano/Lagarde (fn. 43), p. 31; this was regarded by Italian scholars as a “soluzione ‘minimale’”, which promotes the harmony of decisions, see e.g. Ballarino/Bonomi, Diritto internazionale privato (2nd ed. 1996) p. 624. Cf. VI.2. note 83 infra. Art. 4(2) Rome Convention. Vischer, in: Liber Amicorum Kurt Siehr (2000), p. 797, 806; Jessurun D’Oliveira 25 Am. J. Comp. L. (1977), 303 (304 with further references, and 306 n. 8: pointing to Schnitzer). See, however, earlier references mentioned by Mankowski, in: Liber Amicorum Siehr (2010), p. 433, 434 note 4. Quite directly from e.g. Jessurun D’Oliveira 25 Am. J. Comp. L. (1977), 303, 303 et seq. The attention should probably be aimed at the weakness of the party and not so much at who performs characteristically. Jessurun D’Oliveira 25 Am. J. Comp. L. (1977), 303, 327. But see e.g. Mankowski (fn. 48), p. 433, 441 et seq. with many references. Vischer (fn. 43), pp. 109 et seq. Jessurun D’Oliveira 25 Am. J. Comp. L. (1977), 303, 328, found hard words for such legislative choice and

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are, at least to some extent, met by Artt. 6–8 Rome I and regarding the formal validity of consumer contracts, by Art. 11(4) Rome I. The formal validity of all other contracts and unilateral acts face a general system of reference rules. They too reflect a value judgment in that form requirements, without prejudice to contracts on real estate (Art. 11(5) Rome I), shall not outweigh questions of substance: The contract/unilateral act must, if feasible under the applicable law, be upheld. 21 All considerations regarding the sense of forms appear to be marginalized. Yet, this is not

necessarily the case. The maxim favor validitatis55 has limits. The reference rules set up in Art. 11 Rome I are exhaustive. There is no way to recur to another law, when the reference rules do not provide so. This also applies if under every law to which they refer the contractual obligation is formally invalid. The forum has no means to refer to such third law, because renvoi is explicitly excluded by Art. 20 Rome I.56 3. Relationship with existing international conventions 22 According to Art. 25(1) Rome I the Regulation shall not prejudice the application of inter-

national conventions to which one or more Member States are parties when it was adopted, which was on 17.6.2008, and which lay down conflict-of-law rules relating to contractual obligations. This means that such conventions take priority over Art. 11 Rome I, if they deal with issues of form. II. Legislative history of Art. 11 Rome I 23 After the adoption of Brussels I57 that replaced the Brussels Convention of 1968, and the

adoption of Rome II,58 the Rome Convention was the only instrument dealing with private international law left in international treaty form. The Commission esteemed such drawbacks “all the less acceptable” as Brussels I, Rome II and the Rome Convention “form an indissoluble set of Community rules of private international law relating to contractual and non-contractual obligations, civil and commercial matters.”59 The Proposal was preceded by extensive consultation of the Member States, other institutions as well as civil society i.a. via the Green Paper of 14 January 200360 and the relating public hearing which took place on 7

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57 58

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claimed this to be “a reflection of the prejudices of Helvetian hotel-keepers and cuckoo-clock makers, prejudices that will not be shared in countries that export tourists and import cuckoo-clocks, and whose economy will be just as much involved.” On this issue see the comparative study on French and American law by Ferry, La validité des contrats en droit international privé (1989) passim. Therefore, also renvoi in favorem is prohibited. As to the French discussion on this issue see e.g. Mayer/ Heuzé, Droit international privé (11th ed. 2014) p. 563 note 799 and fn. 124. Commented in English by e.g. Magnus/Mankowski, Brussels I Regulation (2nd ed. 2011). Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II), OJ 2007 L 199/40. Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM (2005) 650 final, Explanatory memorandum, 2. Green paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernization, COM (2002) 654 final. See e.g. Martiny, in: Leible (ed.), Das Grünbuch zum Internationalen Vertragsrecht. Beiträge zur Fortentwicklung des

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January 2004. On 29 January 2004 the European Economic and Social Committee61 and on 12 February 2004 the European Parliament62 delivered a favorable opinion regarding the conversion of the Rome Convention into a Community instrument and some minor amendments were made at this stage.63 The Commission expressed the wish to introduce further alternative connecting factors in 24 view of the growing frequency of distance contracts, as it deemed the rules of the Rome Convention governing the formal validity of contracts as being too restrictive.64 It seemed that in the context of distance contracts the place where an offer was made or an acceptance occurred did not meet the needs of current commerce anymore as the use of modern ITmethods, e-commerce in particular, would question the determination of such a place. Therefore, the conflict rule ought to be widened to the habitual residence of the parties at the time of conclusion of the contract. The specific rules for contracts concluded by an agent – previously laid down in Art. 9(3) Rome Convention – were incorporated in Art. 10 (1) and (2) of the Proposal (now Art. 11 (1) and (2) Rome I).65 Among many replies to the questionnaire, Magnus and Mankowski wrote a Joint Response 25 to Question 17 (Formal requirements).66 Both authors were of the opinion that Art. 9 Rome Convention meets modern challenges. They argued that a valid contract lies in the interest of the parties and they therefore would demonstrate that their contract complies with the formal requirements of the applicable law and would consequently advance evidence – where needed – on where they expressed their contractual intention. The addition of the connecting factor of habitual residence of a party, who declared a contractual intention, would bring no improvement either, as it seems to imply that that is the place where such declarations are made. Instead, it would make no substantial difference whether the parties

61

62

63

64

65

66

Europäischen Kollisionsrechts der vertraglichen Schuldverhältnisse (2004), p. 109, 124 et seq.; Martiny ZEuP 2003, 590, 608; Bonomi Yb. PIL Vol. 5 (2003), 53. Opinion of the European Economic and Social Committee on the Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernization, INT/176, 29.1.2004. European Parliament Resolution on the prospects for approximating civil procedural law in the European Union (COM [2002] 654 – COM [2002] 746 – C5–0201/2003–2003/2087 [INI]), A5–0041/2004. See i.a. Editorial Comments, 43 C.M.L. Rev. (2006), 913; Bonomi Yb. PIL Vol. 10 (2008), 165 et seq. with further references. Note that for some contracting parties of the Rome Convention the reference rules relating to the form represented a noticeable change to their domestic law, including case-law. The French Cour de Cassation for example, rigidly used to apply the law of the country where the contract was made, unless it was clear that the parties wished to have their contract governed by the lex causae or the law of the country whose nationals they were. That case-law was consistently criticized e.g. by Rigaux, in: Liber Amicorum A F Schnitzer (1979), p. 381, 388 et seq. with references to the case law. Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM (2005) 650 final, Explanatory memorandum, 8. See in depth and critically i.a. Lagarde 95 RCDIP (2006), 331. Magnus/Mankowski 103 ZVglRWiss (2004), 131, 181 et seq.

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conclude their contract in e-commerce or use traditional techniques; therefore, legislative action was judged neither necessary nor useful.67 26 However, others were of the opinion that further need to locate the place where declarations

are made by adding further connecting factors would be useful. This was i.a. suggested by the Max Planck Institute (MPI) in its Comments on the Rome I Proposal.68 According to the MPI, the habitual residence as connecting factor seemed appropriate also for contracts concluded between parties present in the same country as well as for unilateral acts, and relevant for the party submitting a declaration and for the other party.69 The Commission adopted the wide approach in its Proposal and argued that the rules in the Rome Convention governing formal validity of contracts “given the growing frequency of distance contracts” were “clearly too restrictive”. The Commission thus wished to “facilitate the formal validity of contracts and unilateral acts”.70 In its Opinion on the Rome I Proposal the European Economic and Social Committee referred to the growing frequency of distance contracts and acknowledged that Art. 10 “meets the need for simpler rules on formal validity of contracts or unilateral acts by introducing additional rules on the applicable law”.71 This argument is rather surprising, as additional rules rarely reflect simpler rules. Clearly, the Committee approved the Commission’s Proposal. The European Parliament, however, limited the relevance of habitual residence as connecting factor to distance contracts and unilateral acts without offering any justification.72 27 The Commission’s Proposal referred to the mandatory rules as provided for in Art. 8 (now

Art. 9 Rome I) regarding the mandatory requirements of form for contracts the subject matter of which is a right in immovable property or a right to use immovable property.73 This remained uncommented by the MPI74 as well as in the Opinion from the European Economic and Social Committee,75 but the European Parliament amended the wording as well as the content, again without justification. The text was similar to Art. 9(6) Rome 67

68 69 70

71

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73

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Magnus/Mankowski 103 ZVglRWiss (2004), 131, 181 et seq. point 10.1.; critical also Pfeiffer EuZW 2008, 622, 629; Mankowski IHR 2008, 133, 149; Martiny (fn. 60), p. 109, 131. Max Planck Institute for Comparative and International Private Law 71 RabelsZ (2007) 225, 317 et seq. Max Planck Institute for Foreign and International Private Law 68 RabelsZ (2004) 1, 77 et seq., 110 et seq. Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM (2005) 650 final, 1, 8. Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on the law applicable to contractual obligations (Rome I), OJ EU 2006 C 318/56 (60 sub 3.3.6.). See Cr Dumitrescu, Report of 21 November 2007 on the proposal for a Regulation of the European Parliament and of the Council on the law applicable to contractual obligations (Rome I), Committee of Legal Affairs, (COM [2005] 0650 – C6–0441/2005–2005/0261 [COD]) – Draft European Parliament Legislative Resolution, Amendment 49, A6–0450/2007; European Parliament, Legislative resolution of 29 November 2007 on the proposal for a Regulation of the European Parliament and of the Council on the law applicable to contractual obligations (Rome I) (COM [2005] 0650 – C6–0441/2005–2005/0261 [COD]), P6_TA(2007)0560. Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM (2005) 650 final, 1 (18). Max Planck Institute for Comparative and International Private Law 71 RabelsZ (2007) 225, 318. Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the

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Convention and reads as follows: “4. Notwithstanding paragraphs -1 to 3 of this Article, a contract the subject matter of which is a right in rem in immovable property or a tenancy of immovable property shall be subject to the requirements of form of the law of the country where the property is situated if by that law those requirements are imposed irrespective of the country where the contract is concluded and irrespective of the law governing the contract, and cannot be derogated from by agreement”.76 Art. 11(5) Rome I reflects this amendment.77 The connecting factors provided for questions on formal validity were somewhat more 28 restrictive under the Rome Convention. At the time it was thought that the connections between questions of form and questions of evidence (then Art. 14 Rome Convention) would make it desirable to limit the number of laws applicable to formal validity. Hence, the possibility of applying the law of the common nationality or habitual residence of the parties was rejected.78 The Rome Convention was taken as a basis but revised, modernized and shaped into a regulation.79 Therefore, the interpretative case law of the ECJ on the Rome Convention is relevant regarding Rome I as well. Lacking any case law of the ECJ regarding Art. 9 Rome Convention and Art. 11 Rome I, the Explanatory Report on the Rome Convention drawn up by Giuliano/Lagarde80 is of particular importance. This is all the more true as such a report is missing regarding Rome I; instead, a very long Preamble with 46 Recitals serves as a basis to interpret the Regulation.81 III. Scope of application Art. 11(1) and (2) Rome I cover contracts, whereas unilateral acts are dealt with in Art. 11(3) 29 Rome I. Special rules of attachment, which relativize the maxim of freedom of form, are provided for in Art. 11(4) Rome I (consumer contracts) and in Art. 11(5) Rome I (contracts on real estate, i.e. on immovable property). The material scope of Rome I as defined in Art. 1(1–3) Rome I is of utmost importance as it 30 delimits the contracts and unilateral acts whose formal validity falls under Art. 11 Rome I, put differently: Art. 11 Rome I does not apply to the formal validity of acts relating to contracts and unilateral acts which are excluded from the material scope of application of Rome I.82

76 77 78 79

80 81

82

European Parliament and of the Council on the law applicable to contractual obligations (Rome I), OJ EU 2006 C 318/56 (60 sub 3.3.6.). Cr Dumitrescu (fn. 72). See i.a. Vrellis/Tsouca (fn. 19), note 179. Cf. VI.5. note 104 et seq. infra. Giuliano/Lagarde (fn. 43), p. 30. To the extent that formal validity was an issue at all and not criticized, the reference rules of Rome I were welcomed in a very broad way, see e.g. Lando/Nielsen 45 C.M.L. Rev. (2008), 1687, 1717. Giuliano/Lagarde (fn. 43). More on this issue Lagarde/Tenenbaum 97 RCDIP (2008), 727, 729 et seq.; Lemaire 31 Rec. Dalloz (2008), 2157, dealing with the interpretative value of the preamble. Authors have also dedicated attention to the considerations, traditions and policies underlying the Rome Convention, see e.g. Lando 24 C.M.L. Rev. (1987), 159 et seq. But it is not, as Lando’s title and the content of his contribution might suggest, an “EEC Convention”. The situation was the same under the Rome Convention, see Giuliano/Lagarde (fn. 43), p. 29.

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31 Rome I deals with contractual obligations only. Therefore, legal acts referring to obligations

other than contractual ones do not fall within the scope of application of the Regulation. Legal systems, such as the German, Austrian and Spanish,83 distinguish between the contractual transfer of rights (“titulus”, e.g. sale of immovable, contractual transfer of shares)84 and the transfer of rights in rem, by which property rights are transferred (“modus”).85 The first will be connected according to Rome I, the latter according to national conflict rules. Art. 11(5) Rome I is pertinent for the form requirements of a sales contract on immovable property, but the transfer of rights in rem do not follow the conflict rules of Rome I, as the Regulation is limited to contractual obligations. The contractual transfer of shares for example falls within the ambit of Rome I, whereas specific issues of corporation law relating to any limits regarding the purchase of shares are governed by the reference rules on corporation law and are excluded from the material scope of Rome I.86 32 The distinction between acts concerning contractual obligations and other obligations is

important with regard to unilateral acts as well. First of all, such acts must have the intention to have legal effects. Secondly, they only fall within the scope of Rome I, if they relate to an existing or a contemplated contract. Giuliano/Lagarde mention a notice of termination, the remission of a debt, a declaration of rescission or repudiation as examples.87 The form of these unilateral acts will be connected according to Art. 11 Rome I. However, unilateral acts that are not connected with a contract, such as the recognition of a debt not arising under a contract,88 or lacking the intention to have legal effects, such as an invitatio ad offerendum, fall outside the scope of Rome I.89 33 According to Art. 1(3) Rome I the Regulation shall not apply to evidence and procedure,

without prejudice to Art. 18 Rome I.90 The form of procedural acts is basically governed by the lex fori. Some procedural acts are also substantive by nature, such as court settlements. The mainstream opinion in Germany91 considers such settlements as both a procedural agreement and a contract relating to substantive law (“Theorie der Doppelnatur”), by which each act follows its own rules, although they both are intrinsically tied to one another. The power of attorney for concluding a procedural agreement implies the authority to conclude an agreement relating to substantive law. Any defects of such an agreement, such as unconscionability, effect the procedural agreement. The view in Austria is different. Such settlements are regarded as neatly separated from each other (“Theorie des Doppeltatbestands”).92 To that extent, agreements relating to substantive law (intrinsically tied with the 83 84 85

86

87 88 89 90 91

688

See on this issue i.a. Añoveros Terradas Yb. PIL Vol. 7 (2005), 277, 279 et seq. Mankowski NZG 2010, 201, 205. On the issue of “real agreements” in the context of the DCFR, see van Vliet, Transfer of movables as a legal act, M-EPLI, Working paper No. 2011/24, 504, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=168 8923. See Magnus, in: Staudinger, Art. 1 Rom I-VO notes 65 et seq., notes 79 et seq., note 87; Magnus, in: Staudinger, Art. 4 Rom I VO note 220 with further references. Giuliano/Lagarde (fn. 43), p. 29. Giuliano/Lagarde (fn. 43), p. 29. von Hein, in: Rauscher, Art. 11 Rom I-VO note 7. Cf. Art. 18 (Ferrari). BGH NJW 2011, 2141 note Born; Baumbach/Lauterbach/Albers/Hartmann, Zivilprozessordnung (75th ed. 2016) Anh § 307 note 4 with further references.

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court settlement under German law, and separately from the court settlement under Austrian law) may fall within the scope of Rome I.93 The formal validity of legal acts which require some cooperation of public officials may 34 depend upon the rules from which the public official derives his authority and therefore the formal requirements of the legal act are subject to those rules. Consequently, if these rules are not entirely complied with, the legal act may be considered invalid under these provisions. However, as Art. 11 Rome I lists alternative rules of attachment, the legal act may still be formally valid, if it satisfies the formal requirements of another law provided for by Art. 11 Rome I.94 Contracts and unilateral acts need to be distinguished. The reason for this is that the form of 35 contracts between parties present in the same country (Art. 11(1)) is governed by the law which governs it in substance (lex causae) or by the law of the country where the contract is concluded (lex loci actus). The form of unilateral acts (Art. 11(3)), by contrast, is subject to the law which governs or would govern the contract in substance, or the law of the country where the act was done, or the law of the country where the person by whom it was done had his habitual residence at that time. The attachment of the form of unilateral acts is therefore subject to the additional connecting factor of the habitual residence of the person who did the unilateral act. The ECJ warrants the uniform interpretation of EU instruments, such as Rome I, therefore it 36 is up to the court to decide whether a legal act qualifies as a contract or as a unilateral act. The qualification of the remission of a debt for example differs from country to country.95 Giuliano/Lagarde regard such remission as a unilateral act.96 It remains to be seen how the ECJ will qualify such acts. Art. 1(3) Rome I excludes rules of evidence and procedure from its entire scope of applica- 37 tion, however without prejudice to Art. 18 Rome I which is dedicated to evidence and procedure. Interestingly, Art. 18(2) Rome I provides that a contract or an act intended to have legal effect is not only provable by any mode of proof recognized by the lex fori, but also by any of the laws referred to in Art. 11 Rome I under which the contract or act is formally valid. The only requirement set up is that the forum can administer such mode of proof. This counter exception to the exclusion of rules of evidence and procedure from the material scope of application of Rome I is not highlighted in the Preamble of Rome I. The purpose is to facilitate the giving of evidence and the burden of proof in all contractual obligations

92

93 94 95

96

OGH, 3 Ob 50/83, SZ 56/98; Gitschthaler, in: Rechberger, ZPO, § 206 note 6; Klauser/Kodek (eds.), Jurisdiktionsnorm und Zivilprozessordnung samt Einführungsgesetzen und Nebengesetzen, sowie den Vorschriften des Europäischen Zivilprozessrechts (17th ed. 2012) § 204 ZPO E 1, E 2, E 13; Fucik ÖJZ 2008, 741, 745 et seq.; König JBl 1971, 467, 470; Dolinar ÖJZ 1970, 85, 118, 119, 144 et seq.; Holzhammer, in: FS Schima (1969), p. 217. Winkler v. Mohrenfels, in: Staudinger, Art. 11 EGBGB note 95. Giuliano/Lagarde (fn. 43), p. 29. E.g. Austria, Germany, France and Switzerland consider remission of debt a contractual act, while Italian law considers remission of debt to be a unilateral act. Giuliano/Lagarde (fn. 43), p. 29.

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falling within the ambit of Rome I and to widen the modes of proof in favorem negotii.97 Such rules must be rules of substance, and as such they extend the material scope of application. 38 Whether foreign (notarial) forms correspond to national requirements and can, therefore,

serve as a substitute, is not an issue falling within the scope of Art. 11 Rome I, but one of substantive law.98 The parallel to Art. 11 Rome I is the maxim of favor negotii.99 The question is, whether the form requirements of the proper law can be fulfilled elsewhere, i.e. whether for example the need for a notarial recording mandated by the proper law is met by a foreign recording. For this purpose, it needs to be assessed whether the foreign recording can be deemed equivalent to the domestic recording of the proper law. All depends on purpose of the form requirement at stake.100 IV. Form, substance and procedure 39 Basically, questions of procedure101 are governed by the lex fori.102 This generally recognized 97 98

99 100 101

102

690

Magnus, in: Staudinger, Art. 18 Rom I-VO note 3. The notion “substitution” was developed by Lewald, Règles générales des conflits de lois. Contributions à la technique du droit international privé (1941) pp. 126 et seq. and features in many publications. For the sake of examples e.g. Rehm 64 RabelsZ (2000), 104, 106 et seq.; van Venrooy, Internationalprivatrechtliche Substitution (1999) passim; Schulz, Die Subsumtion ausländischer Rechtstatsachen (1997) pp. 51 et seq.; Mansel, in: FS Lorenz (1991), p. 688, 689 et seq.; Hug, Die Substitution im IPR (1983) pp. 1 et seq. See for the matter of equivalence of a German notarial deed with Spanish requirements the critical discussion by Añoveros Terradas Yb. PIL Vol. 7 (2005), 277, 280 et seq. The Resolution discussed by Añoveros Terradas was overruled by the judgment AP of Santa Cruz de Tenerife, No. 391/2006. This result was reaffirmed by judgment TS of June 19, 2012, according to which a German notary can record the title of real estate property and is apt to be registered in the Spanish register of real estate. This is in conformity with the Spanish conflict of laws rules. See also Fernández Arroyo/Checa Martínez/Maestre Casas, in: Verschraegen (ed.), Private International Law, International Encyclopaedia of Laws (2016), note 40 fn. 44. Costa Rican law, by contrast, allows the choice of law regarding the form of contracts and acts between the law of Costa Rica and the law of the place where the contract is concluded or the act is performed. The choice of law is however subject to the provision determining that if Costa Rican law requires a specific form deviating forms will not be regarded as formally valid, see Peralta, in: Verschraegen (ed.), Private International Law, International Encyclopaedia of Laws (2013), note 101. Art. 2667 of the new Argentinian Bill requires regarding the transfer of real estates situated in Argentina the mandatory form provided for in domestic law, see Dreyzin de Klor (fn. 21), note 320, 321. Schulze, in: Ferrari e.a. (eds.), Internationales Vertragsrecht (2nd ed. 2012) Art. 11 Rom I notes 1, 2. See also VI.6. note 112 infra. See for a fundamental contribution on this issue i.a. Garnett, Substance and Procedure in Private International Law (2012) passim. However, according to Swiss case law for example, procedural rules are subject to Art. 124 Swiss IPRG (reference rule relating to the formal validity), if they serve to influence directly or indirectly the manifestation of intent by either party and if their substantive character prevails over the procedural nature. The Swiss Federal Court qualified Art. 1341 French CC, which required specific forms for all objects priced or evaluated above FF. 50, and excluded testimonial evidence, as primarily procedural by nature, i.e. exclusion of such evidence; it argued that the substantive character outweighs the procedural nature to such extent that Swiss judges have to pay regard to it, see BGE 102 II 270, 279 et seq. As to a similar provision in Italy, see e.g. Ballarino/Bonomi (fn. 45), p. 628: Art. 2721 Italian Civil Code (the current limit

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principle takes priority over the maxim of party autonomy and operates as choice-limiting mechanism. However, form and substance are governed by the applicable law that must be ascertained by 40 the relevant conflict rules. This principle is generally accepted.103 It is therefore important to distinguish procedural issues from matters of substance and form. The forum needs to qualify such issues in order to apply the correct set of rules. What exactly can be qualified as a matter of form in the context of private international law104 is not exhaustively defined. Indeed, the distinction between form and substance is very difficult to draw. For example, not even the Hague Convention on the Conflicts of Laws relating to the Form of Testamentary Dispositions105 provides for a legal definition, a Convention where one might expect one.106 The Hague Convention on the Law Applicable to Agency for example even excludes matters of form from its substantive scope of application.107 The general trend at the Hague

103 104

105

106

107

is J 2,58). The provision is not mandatory. The judge can admit the proof by witnesses taking into consideration any circumstances he deems fit. Hence, case law more than the legal text influences practice. See for a recent decision Italian Cass. Civ., Sez. I, n. 7905/13, at: http://www.dirittoegiustizia. it/allegati/8/0000060009/Corte_di_Cassazione_sez_I_Civile_sentenza_n_7905_13_depositata_il_28_m arzo.html. Full text available at: http://www.personaedanno.it/index.php?option=com_content&view=a rticle&id=42235&catid=196&Itemid=443&mese=04&anno=2013. On procedural limits of freedom of form see Marschall von Bieberstein, in: FS Beitzke (1979), pp. 625 et seq. Art. 1341 French CC was amended by Loi n 80–525 du 12 juillet 1980 and reads: “Il doit être passé acte devant notaires ou sous signatures privées de toutes choses excédant une somme ou une valeur fixée par décret, même pour dépôts volontaires, et il n’est reçu aucune preuve par témoins contre et outre le contenu aux actes, ni sur ce qui serait allégué avoir été dit avant, lors ou depuis les actes, encore qu’il s’agisse d’une somme ou valeur moindre.” The Décret to which Art. 1341 French CC refers (Décret n 80–533 du 15 juillet 1980 pris pour l’application de l’article 1341 du code civil) was meanwhile amended by Décret n 2004–836 du 20 août 2004. The current amount is J 1.500. The information is available at: http://www.legifrance.gouv.fr/a ffichCodeArticle.do?idArticle=LEGIARTI000006438186&cidTexte=LEGITEXT000006070721.. The application of the lex fori to matters of procedure is also reflected in international conventions, see e.g. Rigaux, RBDI No. 2, 385, 392. See e.g. Dicey/Morris/Collins (fn. 43), para. 7–002. See e.g. Marsch, Der Favor Negotii im deutschen Internationalen Privatrecht (1976) pp. 42 et seq.; Bassermann, Der Begriff der Form des Rechtsgeschäfts im internationalen Privatrecht (1969) passim. Art. 2 Convention of 5 October 1961 on the Conflicts of Laws Relating to the Form of Testamentary Dispositions, available at http://www.hcch.net/index_en.php?act=conventions.text&cid=40. Art. 5 of the Convention merely states that “For the purposes of the present Convention, any provision of law which limits the permitted forms of testamentary dispositions by reference to the age, nationality or other personal conditions of the testator, shall be deemed to pertain to matters of form. The same rule shall apply to the qualifications that must be possessed by witnesses required for the validity of a testamentary disposition.” Art. 2(b) of the Convention of 14 March 1978 on the Law Applicable to Agency, available at http://www.h cch.net/index_en.php?act=conventions.text&cid=89. It was considered to be a delicate question of private international law on which agreement may not have been possible. In addition, special reference rules on the form of agency might have been incompatible with (the then) current or future conflict rules on contracts. See Karsten, Convention on the Law Applicable to Agency. Draft Convention adopted by the Thirteenth Session and Explanatory Report (1979) p. 409 [39] note 120.

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Conference has been to exclude issues of qualification108 and, instead, to determine what should be regarded as a matter of form for the purpose of a specific legal source. Yet, the Rome Convention as well as Rome I set up reference rules relating to form and other reference rules relating to substance; this is why the distinction must be drawn. The issue is, of course, neither restricted to the Rome Convention nor to Rome I nor is it of purely theoretical importance.109 Within the scope of application of Rome I, Member States are bound by the classification of certain rules as substantive (scope of application of the lex causae), thereby reducing the margin of appreciation on the national level. Some French authors have suggested aspects by which form and substance might and should be distinguished.110 Following this, forms are regarded as exterior manifestations of will; they are imposed on the parties in their interest, in the interest of their partners and thirds, in order to give the juridical act its exact signification. This definition, so it is said, constitutes the justification of the maxim locus regit actum.111 It is admitted that in practice intricate problems evolve due to complex purposes of certain form requirements (public knowledge, protection, proof and publicity) out of which the quintessence of the instant form needs to be filtered out.112 41 The Rome Convention as well as Rome I require an autonomous interpretation. Hence,

while adopting the Rome Convention, the need was felt to attempt at least a description of what were supposed to be matters of form. A classic example is prescription (limitation periods): under US-American law113 for example traditionally classified as procedural by nature, whereas in European countries, including England and Wales,114 already before Rome I and Rome II were elaborated, regarded as a matter of substance. Art. 12(1)(d) Rome I regards the “various ways of extinguishing obligations, and prescription and limitation of 108 109

110

111 112 113 114

692

Dölle 17 RabelsZ (1952), 161, 179. The determination of matters of form is certainly not a modern issue, quite to the contrary. It was on the agenda of the first Hague Conference of 1893 and was discussed in commissions and in the plenary session. But, as von Overbeck recalled, “on fut d’avis que la forme en général était une matière trop théorique pour faire l’objet d’une convention et on décida de ne pas insérer de projet dans le Protocole final.”, see von Overbeck, L’unification des règles de conflits de lois en matière de forme de testaments (1961) p. 27 (with references). The issue has been discussed in France since the 16th century, most importantly by Dumoulin, called the “prince des légistes”, see Thireau, Charles du Moulin, 1500–1566 (1980) p. 1. Loussourarn/Bourel/de Vareilles-Sommières (fn. 43), p. 500 note 369. Loussourarn/Bourel/de Vareilles-Sommières (fn. 43), p. 501 note 369. See Hay/Borchers/Symeonides, Conflict of Laws (5th ed. 2010) para. 1138 note 5 (with many references). Under traditional common law all depended on whether a right is extinguished in which case the rule was regarded as substantive by nature, or a remedy was barred in which case the rule was regarded as procedural. This approach was abandoned by the UK by the Foreign Limitation Periods Act 1984, based on the recommendation of the Law Commission, Classification of Limitation in Private International Law, LC No. 114 (1982). For comments and further references see Dicey/Morris/Collins (fn. 43), para. 7– 058. As a matter of interest see the Report of the Law Reform Committee on Limitation Periods in Private International Law, Singapore Academy of Law, Law Reform Committee (January 2011), in which was suggested to follow the English model, and the Singapore Proposed Foreign Limitation Periods Bill, in Annex B. The Foreign Limitation Periods Act 2012, based on the Report of the Singapore Law Reform Committee, entered into force on 1st June 2012. See Republic of Singapore Government Gazette (No. 11, and No. 13 of 2012) (available at: http://statutes.agc.gov.sg/aol/home.w3p).

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actions” as a matter of substance. Recent case law in the USA seems to indicate that the traditional qualification of statutes of limitation (as procedural) has to some extent and by some courts been abandoned, but cannot yet be regarded as persuasive.115 This may change, though, as also other important non-European legal systems have amended their law (e.g. Singapore116 and the People’s Republic of China117). The same holds true for the 1986 Hague Sales Convention, which never entered into force, 42 but has literally the same provision as Rome I,118 and for the Draft Hague Principles on the Choice of Law in International Commercial Contracts.119 The Draft Hague Principles state that the formal validity of the choice of law is not subject to any requirement as to form, unless the parties agree otherwise.120 If they choose the applicable law to govern their crossborder commercial contract, one may suppose that the lex causae governs the formal requirements for such contracts. Sometimes form and substance are interconnected or may not be distinguished from one 43 another. Such is the case, for example, when certain requirements are not only formal by nature, but also substantive, and they cannot be treated independently from each other. In the context of the reference rule applicable to the formal validity of a contract, the Swiss Federal Court argued on the basis of a very similar conflict rule to Art. 11(1) Rome I121 that in such a case only the lex causae (instead of the various laws applicable to the formal validity) is decisive. The relevant Swiss law122 provides the indication of a maximum sum regarding the liability in the suretyship instrument, which was regarded by the Court as a form

115 116 117

118

119

120 121

122

See the Californian cases discussed in Hay/Borchers/Symeonides (fn. 113), paras 1138 et seq. Cf. fn. 114 supra. Art. 7 Law of the People’s Republic of China on the Laws Applicable To Foreign-Related Civil Relations (Adopted at the 17th session of the Standing Committee of the 11th National People’s Congress on October 28, 2010) states as follows: “Limitation period is governed by the law that should be applicable to the foreign-related civil relation.” (available at: http://www.wipo.int/wipolex/en/details.jsp?id=8423). Art. 12(g) Convention of 22 December 1986 on the Law Applicable to Contracts for the International Sale of Goods (available at http://www.hcch.net/upload/conventions/txt31en.pdf). Interestingly, the 1955 Hague Sale of Goods Convention (Convention of 15 June 1955 on the law applicable to international sales of goods, available at http://www.hcch.net/upload/conventions/txt03en.pdf), which did enter into force on 1 September 1964, excluded the form of the sales contract explicitly from its scope of application. Art. 9(1)(d) Hague Principles (fn. 14), with a slight linguistic difference in comparison to the 1986 Convention and Art. 12(1)(d) Rome I, in that they mention “limitation periods” instead of “limitation of actions”. Art. 5. Hague Principles (fn. 14). Art. 124 I Swiss IPRG. Although it is said that the Rome Convention was influenced by Swiss law, the Swiss legislator did take into account the Rome Convention while elaborating its own Private International Law Act, and the enactment of Rome I was an occasion to reconsider the Swiss Act altogether, i.a. to prevent forum shopping, see e.g. Bonomi, in: Bonomi/Cashin Ritaine (eds.), La loi fédérale de droit international privé: vingt ans après. Actes de la 21e Journée de droit international privé du 20 mars 2009 à Lausanne (2009), pp. 111, 112 et seq., 119 et seq., 128, who comes to the conclusion that a global reform of the Swiss Act is not necessary. Art. 493 para. 1 OR.

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requirement as well as a substantive requirement of validity.123 This is approved by Swiss doctrine.124 44 Further controversial examples are issues of evidence and remedies for breach of contract

(including assessment of damages). On a case by case-basis courts have to examine the purpose of the distinction between matters of substance and procedure as well as the implications of such distinction in the instant context.125 45 Art. 1(3), subject to Art. 18 Rome I, excludes matters of evidence and procedure, whereas

Art. 12 Rome I defines the scope of the governing law (lex causae).This law will govern the case, unless its application would lead to a result that is manifestly incompatible with the public policy of the forum.126 46 Giuliano/Lagarde describe matters of form as including “every external manifestation re-

quired on the part of a person expressing the will to be legally bound, and in the absence of which such expression of will would not be regarded as fully effective”.127 This means that some formalities, such as in writing, drawn up before a notary, or witnessed, are required in order for the contract or contractual legal act to be valid. The definition does not include, however, specific provisions for the protection of disabled persons or where the validity of an act requires that a third party is informed in order to be binding upon this third party.128 47 In the Green Paper, the Commission described matters of form as “any external behaviour

imposed by law on the author of a legal transaction, such as the requirement of a written document, a hand-written endorsement or a deed.”129 Whether a public act that might be required for validating a contractual obligation is to be qualified as a matter of form or a matter of substance is unclear, particularly in the context of registration.130 Much will depend on the individual case. 48 The same holds true regarding the use of a specific language prescribed by law. Many

authors opt for a formal qualification,131 some prefer to consider such statutory duty as 123

124

125 126

127 128 129

130 131

694

BGE 117 II 490, 493 E.3.: The suretyship declaration had been signed in Germany under less strict form requirements, whereas the relevant provision of the Swiss Code of Obligations (Art. 493 para. 1 OR) requires the indication of the maximum sum of liability. This provision, the Court argued, covers both the formal as well as the substantive validity. Schnyder/Doss, in: Handkommentar zum Schweizer Privatrecht. Internationales Privatrecht (2nd ed. 2012) Art. 124 IPRG note 1. Dicey/Morris/Collins (fn. 43), para. 7–004 with further references, and paras 7–006, 7–007. Art. 21 Rome I. As to distinctions to be drawn under English law see Dicey/Morris/Collins (fn. 43), paras 7–062, 7–063. Giuliano/Lagarde (fn. 43), p. 29. Giuliano/Lagarde (fn. 43), p. 29. Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernization, COM (2002) 654 final, 38 sub 3.2. 2012.1. Not a matter of form: von Hein (fn. 89), Art. 11 Rom I-VO note 11. I.a. von Hein (fn. 89), Art. 11 Rom I-VO note 11; Downes/Heiss 98 ZVglRWiss (1999), 28, 41; Freitag IPRax 1999, 142, 147 et seq.

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matter of substance.132 Considering the typical purpose that form requirements pursue, such as protection against precipitance, safeguarding of counselling, preservation of evidence, on the one hand, and the relationship between consent and material validity (Art. 10 Rome I) on the other, it seems appropriate to tend to a qualification as a matter of substance.133 It goes without saying, though, that where the law prescribes the use of a particular language in public acts (administrative or judicial decisions) the language is not a matter of substance, but one of public law.134 Neither Art. 9 Rome Convention nor Art. 11 Rome I define what “formal validity” means. 49 The difficulty of defining this notion was duly recognized but left open from the very beginning. Giuliano/Lagarde argue that its “importance has been slightly reduced in consequence of the solutions found for the problem of the connecting factor which to some extent equate formal and material validity.”135 Substance and form are closely and logically related. This is why the application of the lex 50 causae to questions of formal validity is not disputed. If the parties choose the applicable law and thereby subject the contract to a law other than that which previously governed it (or at a later stage amend their choice) such change in the applicable law made after the conclusion of the contract shall not prejudice its formal validity under Art. 11. Rome I.136

132 133

134

135

136

I.a. Thorn, in: Palandt Art. 11 Rom I-VO note 3. If a legal system mandates a specific language for e.g. (notarial or judicial) recordings, such a requirement will be regarded as procedural by nature, see e.g. Blumenwitz DNotZ 1968, 712, 727. Rigaux, Revue belge de droit international, 1991 No. 2, 385, 391; e.g. Art. 7 (Hague) Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters; Art. 4 (Hague) Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters; Art. 33 (Hague) Convention of 2 October 1973 Concerning the International Administration of the Estates of Deceased Persons; Art. 24 (Hague) Convention of 25 October 1980 on the Civil Aspects of International Child Abduction; Art. 7 (Hague) Convention of 25 October 1980 on International Access to Justice; Art. 54 (Hague) Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children; Art. 51 (Hague) Convention of 13 January 2000 on the International Protection of Adults; Art. 13(4) (Hague) Convention of 30 June 2005 on Choice of Court Agreements; and Artt. 44, 45 (Hague) Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance (all Conventions are available at http://www.hcch.net/ index_en.php?act=conventions.listing). Giuliano/Lagarde (fn. 43), p. 29; and, among many others Verschraegen, in: Rummel (ed.), ABGB Kommentar, 2. Band, 6.Teil: IPRG, EVÜ (3rd ed. 2004) Art. 9 notes 6 et seq., p. 410 et seq.; Treves, in: Pocar (ed.), Commentario del nuovo diritto internazionale privato (1996), pp. 272 et seq. Art. 3(2) Rome I; Art. 3(2) Rome Convention. The BGH decided after the incorporation of the Rome Convention in the EGBGB (on 1.9.1986; G. zur Neuregelung des IPR v. 25.7.1986, BGBl I 1986, 1142; BT-Drucks. 10/504, 1, 48 et seq.) that a choice of law agreement by which the preceding choice was amended requires no specific form under the lex causae (which in casu coincided with the lex loci). The Court also was of the opinion that such choice was effective ex tunc, see BGH 22.1.1997 IPRax 1998, 479, 481; Spickhoff IPRax 1998, 462, 464 et seq. Years before the BGH decided on the alternative attachment of form requirements, the regional court Stuttgart omitted to examine whether the form requirements of a voluntary assignment under the lex loci were complied with, to be attached according to Art. 11(1)

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V. Choice of law agreement and dépeçage 51 Contrary to Art. 4(1) sent. 2 Rome Convention Art. 4 Rome I does not provide for statutory

(objective) dépeçage, but the Regulation does provide for a series of special rules of attachment.137 These rules and dépeçage in the strict sense share the same goal: Both aim, by principle at least, at attaining rational results.138 Under Rome I dépeçage in the strict sense is an issue which is relevant in the context of a choice of law agreement only. 52 As Art. 11 Rome I is relevant for choice of law agreements (Art. 3(5) Rome I) such agree-

ments enjoy the same preferential treatment regarding the formal validity as do other contractual obligations falling within the ambit of Rome I. 53 The parties are free to choose the law applicable to their contractual obligation within the

limits of Art. 3, Art. 5(2)(a-e), Art. 6(2), Art. 7(3) and Art. 8(1) Rome I. Hence, they can also prefer to split up their choice (dépeçage) according to Art. 3(1) sent. 3 Rome I, and might wish to choose the law of one country regarding the form requirements and the law of another country regarding the substance matter.139 A double split, i.e. double choice140 by choosing for example two relevant laws each for the formal and for the substantive validity does not seem to be allowed. Art. 3(1) sent. 3 Rome I mandates that the choice relates either to the entire contract or to a part of it.141 54 If the parties choose the law of one country that shall govern their contractual obligation,

this law will also govern the form requirements.142 But regarding consumer contracts, the scope of action is much narrower. Art. 11(4) Rome I leaves no choice: The law of the country where the consumer has his habitual residence must be applied, which implies that the parties cannot opt for voluntary dépeçage regarding the form of their contract.143 The rationale is to protect the consumer who is, stereotypically, considered to be the weaker party and, by hypothesis, knows the law of the country in which he habitually resides, best. Yet, it may well be that the chosen law is more advantageous to the consumer than the law in force in the country of his habitual residence. Some English authors,144 therefore, wish to apply

137 138 139

140 141 142

143 144

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EGBGB, then reflecting Art. 9 Rome Convention, see LG Stuttgart 16.9.1992, IPRax 1993, 330 nr. 40; von Hoffmann/Höpping IPRax 1993, 302, 304 et seq. In German terminology known as “Sonderanknüpfung”. See e.g. Symeonides 81 RCDIP (1992), 223, 266. Magnus, in: Staudinger, Art. 3 Rom I-VO notes 106, 109, 112; Magnus, in: Staudinger, Art. 6 Rom I-VO note 150 with further references. See e.g. Bälz IPRax 2005, 44, 46. Cf. note 67 infra. See e.g. BGH IPRax 1998, 479, 481: The parties orally agreed after the conclusion of the agency contract that the law of West Germany instead of the law of the GDR (as originally agreed upon) should govern their contract. Art. 27(2) EGBGB (incorporation of Art. 3(2) Rome Convention) provided for the possibility of a subsequent change of law and referred in Art. 27(4) EGBGB to Art. 11 EGBGB. According to Art. 11(1) EGBGB the lex causae, in the present case West German law which required no specific form, governed the form issue. Hence, the oral subsequent choice of law was valid. Art. 3(2) Rome I in connection with Art. 11(1) Rome I lead to the same result. Magnus (fn. 139), Art. 6 Rom I-VO, note 150 with further references. Dicey/Morris/Collins (fn. 43), para. 33–151.

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“the better law”, i.e. the law that protects the consumer’s interests better. If the consumer seeks enforcement of the contract which is formally invalid under the law of his habitual residence, but formally valid under the chosen law, the (strict) rule of Art. 11(4) Rome I should not be applied. Whereas if the professional seeks protection under the chosen law, this would be to the detriment of the consumer and in such cases Art. 11(4) Rome I ought to be applied. However, it seems that the provision offers no alternative but to apply the law of the country where the consumer has his habitual residence.145 Formal validity of a contract may be at stake in case of voluntary (subjective) or statutory 55 (objective) dépeçage (provided for in Art. 4(2) Rome Convention). Two or more laws will govern the different issues of substance of the contract and one of them will determine the formal validity of the contract. Giuliano/Lagarde suggested applying the law applicable to the part of the contract most closely connected with the disputed condition on which its formal validity depends.146 Authors have raised the question whether it is possible to claim that one of the laws applicable to (parts of) the substance matter should govern the form of the contractual obligation.147 Other authors claim that the suggestion advanced by Giuliano/ Lagarde leads to a circular reasoning, because whether a contract or unilateral act is formally valid depends on the law applicable to the formal validity. They argue that if the contractual obligation is governed by different laws and, hence, is separable, this should also be relevant for the applicable law to the formal validity, bearing in mind that the lex loci applies alternatively. The law according to which the separable parts are formally valid then decides whether the contract can be upheld.148 Admittedly, none of the solutions is user-friendly, and that voluntary dépeçage is a rare phenomenon in practice is no comfort. Considering the need for foreseeability of the applicable law the application of the lex loci as coequal alternative (under Art. 11(1) and (3) Rome I) might serve this purpose best. Distance contracts are governed by different laws and the purpose here is also validation of the contract, therefore the mildest form requirements should apply. A distinction regarding distance contracts and other contracts in matters of dépeçage might, however, deter the overall purpose of the Regulation altogether. Therefore, it seems advisable to plead in favor of the milder form requirements independently of what kind of contract/unilateral act is at stake. Parties can at any time agree upon another law that governs their contract (Art. 3(2) Rome I). 56 The Regulation does not submit such party autonomy to a reference rule. Hence, the applicable law has no say in this regard. This also applies to a subsequent agreement replacing the former chosen lex causae by another law.149 A different issue is whether an implied waiver of the form privileges offered by Art. 11 57 Rome I should be treated with caution. The answer is in the affirmative, because the re145 146

147

148 149

Cf. VI.4.a) infra. Giuliano/Lagarde (fn. 43), p. 30. See also Dicey/Morris/Collins (fn. 43), para. 32–135; Plender/Wilderspin (fn. 19), p. 426 note 14–072. Kaye, The New Private International Law of Contracts of the European Community. Implementation of the EEC’s Contractual Obligations Convention in England and Wales under the Contracts (Applicable Law) Act 1990 (1993) pp. 283 et seq. Winkler von Mohrenfels, in: Staudinger, Art. 11 Rom I-VO note 64. von Hein, in: Rauscher, Art. 3 Rom I-VO note 90; Martiny, in: Münchener Kommentar BGB, vol. X (6th ed. 2015) Art. 3 Rom I-VO note 78; Magnus (fn. 139), Art. 3 Rom I-VO note 119.

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ference rules have i.a. the purpose to uphold a contract. Any waiver may, therefore, reduce such policy and it should not be assumed that a party impliedly renounces a favorable position.150 VI. The law applicable to the form 1. Presence in the same country (Art. 11(1) Rome I) a) General remarks 58 If the parties are present in one and the same country at the time they conclude a contract, it

will be formally valid if it satisfies the formal requirements of the lex causae or of the lex loci. This is not a “guillotine à conflit”151 by which the material result of the reference result is indifferent. Art. 11(1) Rome I includes a material norm (“Sachnorm”) and thus “decides” itself on the formal validity, whereby this result depends on the compliance with the formal requirements of the law referred to. The rule is not neutral, but result-oriented. 59 Art. 11(1) Rome I deals with contracts concluded between persons or their agents who are in

the same country at the time of conclusion. The provision clearly demands the mere presence of those who actually are involved in the conclusion of the contract. The acting persons can be either both persons, or both agents, or one person and the agent of the other. What counts is their instant presence in the same country, but not necessarily in the same place, at the time of conclusion of the contract. Lacking this condition, the formal validity will be regarded as a distance contract and falls under Art. 11(2) Rome I. 60 As the presence in the same country suffices, the technical device by which the acting

persons communicate and conclude the contract is not relevant. 61 As Art. 11(1) Rome I is dedicated to contracts concluded between persons/agents who are in

the same country at the time of conclusion, the question arises what “conclusion in the same country” means.152 It is sufficient for the purpose of Art. 11(1) Rome I that each party makes the relevant declaration of intention to conclude a contract in one and the same country while concluding the contract. Hence, the place to which the declaration was dispatched is immaterial.153

62 Art. 11(1) Rome I requires the presence of the parties/their agents in the same country and

thereby seems to assume that a contract is concluded in the country where they are present and thus the lex loci applies alternatively. However, some authors raised the question how 150 151 152 153

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Jayme NJW 1972, 1618 et seq. See Jitta, La méthode du droit international privé (1890) p. 44, cited in Ferry (fn. 55), p. 11 note 16 fn. 1. Schulze (fn. 99), Art. 11 Rom I-VO note 17. Dicey/Morris/Collins (fn. 43), para. 32–129: The locus regit actum rule should be applied in a permissive sense in that the contract shall be treated as formally valid if it complies with the formalities prescribed by the law intended or by the law which governs the contract. Hence any problems arising out of the importance of the place where the declaration was dispatched (English law) or of the place where it was received (German and Austrian law) are not important; Winkler von Mohrenfels (fn. 148), Art. 11 Rome I note 66; Spellenberg, in: Münchener Kommentar BGB, vol. X (6th ed. 2015) Art. 11 EGBGB note 124.

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one should proceed if the place where the parties are present and the place where the contract is concluded do not coincide.154 Consequently, one might wonder which place should be decisive to determine the law or whether Art. 11(2) Rome I applies altogether. The difference is considerable, as Art. 11(2) Rome I offers more reference rules. The relevance of the lex loci implies that the parties actually act in the country where they are 63 present. This means that their presence is required when declaring the offer and declaring the acceptance of that offer. It may be that the persons wrongly assumed to be present in the same country while con- 64 cluding the contract. In such case the instant place of presence is decisive and Art. 11(2) Rome I will apply.155 The application of Art. 11(1) Rome I does not require that the agent(s) act and conclude the 65 contract where they are supposed to do so according to their mandate. The provision merely deals with the instant presence in one and the same country. b) Lex causae The parties can choose the law governing the substance matter. This influences the law 66 governing the form of the contractual obligation indirectly. Art. 11(1) Rome I states that the formal requirements of a contract are governed by the law which governs it in substance (as one alternative). The parties can also deliberately opt for a specific country in which they conclude their contract. This leads to the result that (as a second alternative) the formal requirements could be governed by the law of the country where the contract is concluded. Art. 11(1) Rome I does not offer a third alternative. Voluntary dépeçage according to Art. 3(1)sent. 3 Rome I is limited to the choice of the law for 67 a part of the contract, and therefore is an issue-oriented rule, but does not imply the possibility of choosing parts of the applicable law. Some authors argue that issues of form are not part of a contract, but are, instead, requirements for the substantive validity of the contract.156 In addition, Art. 3(2)sent. 2 Rome I confirms that any change in the law made after the conclusion of the contract shall not prejudice the formal validity of that contract under Art. 11 Rome I. This would mean that the law governing the substance matter and the law governing the formal validity should be treated as a whole, and thus a direct choice of the law governing the formal validity would not be permitted. This opinion seems to be shared by some (German) scholars.157 However, others take the view that the parties can very well choose the law governing the formal validity of a contract separately. They consider matters of form as severable partial question under Art. 3(1)sent. 3 Rome I.158 Whether form re154 155

156 157

158

Winkler v. Mohrenfels (fn. 148), Art. 11 Rom I-VO, notes 65 et seq. See Winkler v. Mohrenfels (fn. 148), Art. 11 Rome I note 84; Winkler v. Mohrenfels (fn. 93), Art. 11 EGBGB note 186. Winkler v. Mohrenfels (fn.148), Art. 11 Rome I-VO note 101. Winkler v. Mohrenfels (fn. 148), Art. 11 Rom I-VO note 101; Reithmann, in: Martiny/Reithmann (eds.), Internationales Vertragsrecht (8th ed. 2015), p. 448 note 5.212. E.g. Thorn, in: Palandt, Art. 3 Rom I-VO, note 10; Magnus (fn. 139), Art. 3 Rom I-VO note 109; Spellenberg, in: Münchener Kommentar BGB, vol. X (6th ed. 2015) Art. 11 Rom I-VO, note 66; Bälz IPRax 2005, 44, 46; OLG Hamm NJW-RR 1996, 1144.

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quirements are regarded as a part of a contract should be read in the context of Rome I and independently from domestic law. Although severability ought not to be encouraged in the interest of foreseeability, the Regulation does not forbid it. And this seems to apply to form and substance as well. Art. 3(1) sent. 3 Rome I mentions verbatim that the parties can select the law applicable to the whole or “to part only of the contract”. The term “part” is also used in the German (“Teil”), the French (“une partie”),159 the Spanish (“una parte”), and the Italian (“una parte”) version to name just a few examples. The Dutch version refers to “een onderdeel” which stands for “part” too. What constitutes a “part” of the contract is subject to autonomous interpretation.160 The interpretation of the wording “part” was also discussed regarding the Rome Convention which has an identical clause in this regard as Rome I (both Art. 3(1) sent. 3). Neither source expressly authorizes the parties to split up their contractual obligation (dépeçage).161 Therefore, it is generally acknowledged that the contractual obligation can be split and for each part the law can be chosen. A clause according to which dépeçage depends on objective separability might have been helpful in the regard.162 I.a. Lagarde postulates that the splitting-up must be coherent (“cohérent”).163 Such choice must make sense and should not lead to contradictory results. 68 As Rome I considers the lex causae and the lex loci as equivalent alternatives, the question

can be put the other way around by asking whether parties can exclude the lex loci by choosing the law governing their contract. It seems that party autonomy allows such a choice in case of a milder lex loci. If it is stricter, the lex causae would govern the formal validity anyway, without prejudice to Art. 11(4) Rome I. Whether the choice of the lex causae implies the contractual exclusion of the lex loci is questionable and very much depends on the construction of the contract. If the parties choose the law of a country that should govern their contract, this choice implies the formal requirements, but it does not necessarily imply the contractual exclusion of the lex loci. In case that the parties do not meet the formal requirements of the law chosen to govern their contract, but fulfill the formal requirements under the lex loci, some authors suggest that an implicit contractual exclusion of the latter should not be supposed.164 This seems correct. 69 Contrariwise, a contract which fulfills the formal requirements will remain formally valid,

even if the parties later on choose a law under which the formal requirements are not fulfilled. Art. 3(2) sent. 2 Rome I expressly provides so. Further, the parties can choose a law whose formal requirements are milder than the law that previously governed their contract and thereby remedy their invalid contract ex tunc.165 159

160 161

162 163 164 165

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Mayer/Heuzé (fn. 56), p. 530 note 748, for example, suggest to construe “partie” as “un sous-ensemble de droits et d’obligations logiquement détachable du contrat”. The parties would not be allowed to consider e.g. limitation of contractual responsibility as a separable part, because this would “ruin” the authority of the law. I.a. Reithmann (fn.157), p. 447 note 5.208. See i.a. Ekelmans, in: Mélanges Van der Elst, Vol. I (1986), p. 243, 247; Audit/d’Avout, Droit International Privé (7th ed. 2013) p. 812 note 906; and further references in Mankowski, in: FS Ullrich Spellenberg (2010), p. 260, 262 et seq. See also e.g. Mayer/Heuzé (fn. 56), p. 530 note 749. Lagarde 80 RCDIP (1991), 287, 302. Winkler v. Mohrenfels (fn. 148), Art. 11 Rom I-VO note 105; Spellenberg IPRax 1990, 295, 297. Magnus (fn. 139), Art. 3 Rom I-VO note 126 with further references.

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If the parties have chosen the law of a specific country to govern their contract, the form 70 requirements as well as any means to cure violations of form are governed by the law determined according to Art. 11 Rome I, because Art. 3(5) Rome I explicitly refers to the reference rule for form requirements.166 This means that a valid choice of law agreement remains valid, even if the main contract governed by the (chosen) law is formally invalid.167 c) Lex loci Lacking a choice of law agreement the applicable law is determined objectively according to 71 the statutory rules of attachment provided for in Art. 11(1) Rome I, i.e. the law that governs the contract or the lex loci. The lex loci can only apply if that law provides for contracts like the one at stake. Such 72 contract does not need to be literally corresponding to the lex causae, it is sufficient for the purpose of formal validity if the contract pursuant to the law of the place where it is concluded functionally corresponds to what the parties agreed upon. This means that the core features of the specific contract must be the same. Once the formal validity under the lex loci can be affirmed, it is of no relevance whether there is equivalence with the formal requirements set up by the lex causae.168 This means that milder form requirements under the lex loci suffice, even in case that the lex causae mandates stricter forms. If the lex loci does not provide for the contract at stake (so-called “Formenleere”), that law is 73 of no avail.169 In such case the lex causae applies. As both the lex loci and the lex causae are equal alternatives for the purpose of formal validity 74 of the contract it is of no importance that the contracting parties deliberately conclude the contract in a country whose form requirements are milder, and therefore usually cheaper. The drafters of the Rome Convention and of Rome I were absolutely aware of such “form shopping” and both wished to realize the principle of favor negotii.170 The Explanatory Report to the Rome Convention expressly states that “if the act is valid to one of these two laws, that is enough to prevent defects of form under the other from affording grounds for nullity”.171 Parties can contractually agree upon the use of a certain form requirement, such as in 75 writing, or set up by a notary. This is usually done in view of later amendments of the contract. If they do not comply with such requirement, the applicable law decides on the consequences of violations of form. Hence, any amendments regarding the applicable law require the form agreed upon.172 166 167

168 169 170

171 172

Magnus (fn. 139), Art. 3 Rom I-VO notes 166, 179. OLG München IPRax 1990, 320 (note Spellenberg, 295 et seq.); Martiny (fn. 149), Art. 3 Rom I-VO note 111; Magnus (fn. 139), Art. 3 Rom I-VO note 179. Reithmann (fn. 157), p. 451 note 5.223. See BGH NZG 2005, 41, 42. See e.g. the concerns uttered by i.a. Bischoff, in: Nomos Kommentar, BGB Rom-Verordnungen zum Internationalen Privatrecht, Bd. 6 (2014) Art. 11 Rom I note 5 at p. 214 with further references; Downes/ Heiss IPRax 1999, 137. Giuliano/Lagarde (fn. 43), p. 30. Magnus (fn. 139), Art. 3 Rom I-VO note 122.

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2. Distance contracts (Art. 11(2) Rome I) a) General remarks 76 The provision deals with the presence of persons or their agents who are at the time of the

conclusion of the contract in different countries. 77 Just as for Art. 11(1) Rome I the mere presence of the persons or their agents in different

countries suffices. Art. 11(1) and Art. 11(2) Rome I must be read in context though. This means that the persons who conclude the contract are supposed to be present in different countries, or their agents who actually act are present in different countries.173 Some authors are of the opinion that Art. 11(2) Rome I must be construed differently, in that it would suffice if the parties are in different countries whereby their agents who conclude the contract are present in the same country.174 Such interpretation would definitely widen the ambit of the provision. However, this was not the intention of the drafters, who merely wished to improve and clarify the texting and to incorporate the specific rules for contracts concluded by an agent in both Art. 11(1) and Art. 11(2) Rome I.175 78 If it cannot be ascertained whether the persons/agents were actually present in different

countries at the time of conclusion of the contract, Art. 11(1) Rome I cannot be applied, because this provision requires the presence in the same country, which is uncertain in such a situation as well. Art. 11(2) Rome I offers a further alternative reference rule, in that the law of the country where either of the parties had his habitual residence while concluding the contract is relevant. The second alternative (presence of either of the parties or their agents) avoids the discussion on where the contract was actually concluded. The third alternative (habitual residence of the parties) was introduced i.a. to overcome any difficulties, if electronic devices are used and the place where this happens may bear no significance at all or may not even be known. Hence, if it is unclear whether the persons/agents were in different countries at the material time, Art. 11(2) Rome I applies. 79 Distance contracts will be considered formally valid, if they satisfy the formal requirements

of either the lex causae, or the law of the country where the persons or their agents were present at the material time, or the law where either of the parties had his habitual residence at the time of the conclusion of the contract. The connecting factors should enhance the chances of formal validity of distance contracts. 80 The law governing the substance matter is either the law chosen by the parties according to

Art. 3 Rome I (subjective attachment) or the law determined according to Art. 4–8 Rome I (objective attachment). 81 The law of the place where one of the contracting parties or their agent is present at the time

of the conclusion of the contract is determined objectively by the mere presence of the persons mentioned who conclude the contract. Distance contracts necessarily involve different places of presence. The question thus arises which of these laws shall determine the formal validity of the contract.176 During the elaboration of the Rome Convention the 173 174 175

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von Hein (fn. 89), Art. 11 Rom I-VO note 20; Magnus IPRax 2010, 27, 42. Reithmann (fn. 157), p. 451 et seq. note 5.227 et seq. COM (2005) 650 final, p. 8.

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splitting up of the law determining the validity of the contract was clearly rejected. Each legal system may provide for a variety of formal requirements, but a stage by stage approach did not seem advisable. The drafters rather preferred “to look for a law which would be applicable to the formal validity of the contract as a whole”.177 This makes sense also under the Regulation. If, therefore, the law of the country where a party is present, does not require a specific form 82 for e.g. a suretyship agreement, it will be considered formally valid, even if under the law governing the substance matter or the law where the party has his habitual residence e.g. a written form would be required.178 b) Habitual residence The additional connecting factor habitual residence179 was introduced after lively debate in 83 view of e-commerce contracts and has remained controversial ever since.180 The place where one of the contracting parties has his habitual residence at the time of the conclusion of the contract constitutes the third connecting factor. Habitual residence is defined in Art. 19 Rome I. However, the habitual residence of natural 84 persons who act outside their professional activities is not defined by Rome I. The country where their centre of life is situated is decisive.181 The wording is clear: What counts is the habitual residence of (only) one of the contracting 85 parties, and where the agents have their habitual residence is irrelevant, because, contrary to the foregoing sentence of Art. 11(2) Rome I on the presence of either party or their agent, the provision explicitly only wishes to consider the habitual residence of one of the contracting parties.182 However, this view is not generally shared.183 3. Unilateral acts (Art. 11(3) Rome I) The conflict rule on unilateral acts provides that the lex causae, the lex loci or the law of the 86 place where the person who did the unilateral act had his habitual residence is relevant. The unilateral act must be made with the intention of having legal effect and it must relate to 87 an existing or a contemplated contract. Therefore, one of the laws will apply that governs or would govern the contract in substance, or the law where the act was done, or the law where

176

177 178 179 180 181 182 183

This controversial issue is not new. Quite to the contrary, it has been discussed for decades by many experts, see e.g. Zweigert, in: FS Rabel I (1954), pp. 631 et seq. with many references. Giuliano/Lagarde (fn. 43), p. 31. von Hein (fn. 89), Art. 11 Rom I-VO note 21. Legally defined in Art. 19 Rome I. Cf. II. supra. See e.g. Magnus, in: Staudinger, Art. 19 Rom I-VO note 31 (with further references). E.g. Bischoff (fn. 170), Art. 11 Rom I note 29 with further references. See e.g. Reithmann (fn. 157), pp. 451 et seq. notes 5.227 et seq.; Audit/d’Avout (fn. 161), p. 836 note 932: “Ces différentes règles s’appliquent de la même manière lorsque le contrat est conclu par un représentant.”

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that person by whom it was done had his habitual residence at that time in order to see whether the act fulfills the form requirements provided for by any of these legal systems. 88 The lex loci regarding unilateral acts is the law of the country where the person did the act.

This means that the law of the country where that person was actually present while doing the act will apply, i.e. the place where the external manifestation of will (statement of intention) was made. 89 The relevance of the habitual residence of the person who did the act widens the possibilities

to remedy potential violations of formal requirements. It also reduces the importance of (domestic) formal requirements to some extent and at the same time eases the search for the applicable law.184 90 The distinction between contracts and unilateral acts must be clarified autonomously, ulti-

mately by the ECJ. At present, no decisions are available yet. For the purpose of Art. 11(3) Rome I it is necessary to distinguish between external manifestations of will that are substantial by nature and those that are procedural by nature. The provision only covers unilateral acts relating to substantive law, such as offer and acceptance, notice to pay, fixing of dead-lines, notice to terminate, and the like. Acts relating to procedural law are governed by the lex fori.185 91 The wording of Art. 11(3) Rome I in comparison to Art. 11(1) and (2) Rome I differs insofar

as it does neither mention the contracting parties nor their agent. It merely speaks of the person. Clearly, a person who manifests his will externally and accordingly gives a statement of intention that relates to a contract or a contemplated contract is at the core of this provision. It is to be asked whether the person also includes his representative. This question should be answered in the affirmative. Rome I deals with contractual obligations in civil and commercial matters. There seems to be no sound reason why a contract can be concluded by agents, but statements of intention should be limited personally to those persons who do unilateral acts intended to have legal effect relating to an existing or contemplated contract. Therefore, an agent can do a unilateral act as well as any other person in the sense just described. The relevant place to determine the law is the place where the agent did the act or where he had his habitual residence at the time when the act was done and accordingly the statement of intention was given.186 The relevance of the habitual residence of the agent under Art. 11(3) Rome I, contrary to Art. 11(2) Rome I that only relates to the habitual residence of the contracting parties, seems somewhat arbitrary and ivory-tower, but is a logical consequence of including agents in the meaning of the person.187

184

185 186

187

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The consideration of the habitual residence has been facing some criticism. See i.a. Martiny RIW 2009, 737, 741; Mankowski IHR 2008, 133, 149; Magnus/Mankowski 103 ZVglRWiss (2004), 131, 182, point 10.2. Reithmann (fn. 157), p. 453 note 5.236. See however Schulze (fn. 99), Art. 11 Rom I-VO note 27, who claims that the legislator deliberately excluded the agent. Similar: von Hein (fn. 89), Art. 11 Rom I-VO note 27.

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4. Consumer contracts (Art. 11(4) Rome I) a) Ambit of the provision Art. 11(4) Rome I is a special rule for consumer contracts. It applies exclusively under the 92 condition that the contract is one within the meaning of Art. 6 Rome I. In such case the formal validity of the contract is governed exclusively by the law of the country where the consumer has his habitual residence, and consequently, the rules of attachment laid down in Art. 11(1–3) Rome I do not apply. The provision is not new. Art. 9(5) of the Rome Convention was the same and it was justified “by the very close connection, in the context of consumer protection, between mandatory rules of form and rules of substance”.188 Some authors argue that many formal requirements for consumer contracts in order to protect the consumer and to put him on notice of what he is actually agreeing upon are of social importance which justifies that only the law of his habitual residence shall govern these issues.189 As already mentioned,190 it was not deemed advisable at the time to simply refer to Art. 7 93 Rome Convention (mandatory rules) because of the discretionary power of the court hearing the case. Indeed, this concern is still valid today, not so much because the interests of the consumers appear to be neglected, but rather because the strict framework in which the overriding mandatory provisions are supposed to be applied might be overstretched. Consumer protection law deals to a great part with the individual interests of consumer, less, however, with provisions that are “regarded as crucial by a country for safeguarding its public interests, such as political, social or economic organization” in the sense of Art. 9 Rome I. Within the meaning of Art. 11(4) Rome I the law of the country where the consumer has his 94 habitual residence applies to the formal validity of a consumer contract as such as well as to a choice of law agreement (Art. 3(5)), and to unilateral acts related to the consumer contract, because the reference rule relating to unilateral acts (Art. 11(3) Rome I) is expressly excluded by Art. 11(4) Rome I. The application of the law where the consumer has his habitual residence is mandatory 95 regarding the formal validity of the consumer contract and of choice of law agreements in consumer contracts.191 This also holds true in the case that the parties have chosen a different law which sets up requirements that reflect the interests of the consumer better than the law applicable in the country where he has his habitual residence. Understandably, the rule has been criticized accordingly by scholars from different countries.192 Some French scholars deplore that the rule imposes “brutalement” the law where the consumer has his habitual residence, although it may be to the detriment of the consumer and is not necessarily a “loi de police”.193 It has been argued by English authors that the law of the consumer’s habitual 188 189 190 191 192

193

Giuliano/Lagarde (fn. 43), p. 32. Binchy, Irish Conflicts of Law (1988) p. 561. Cf. II. supra. Art. 11(4) Rome I in connection with Art. 6 Rome I. In Germany by i.a. Magnus (fn. 139), Art. 6 Rom I-VO note 150; von Hein (fn. 89), Art. 11 Rom I-VO note 30. Mayer/Heuzé (fn. 56), p. 568 note 809.

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residence defines the minimum protection which is available but that it does not necessarily define the maximum.194 Therefore, whether the law of the consumer’s habitual residence or the chosen law applies would then depend on whose interests are at stake – those of the professional or those of the consumer.195 However, as already stated above,196 this notion has no basis in the wording of Art. 11 Rome I. 96 The law of the country where the consumer has his habitual residence at the time when the

contract is concluded governs the formal validity of that contract and of any choice of law agreement (Art. 3(5) Rome I referring to Art. 11 Rome I). As the Regulation does not require a specific form for choice of law agreements, such agreements regarding consumer contracts do not require a specific form either. National law which deviates from these EU-parameters would not be applied according to the doctrine of supremacy of EU-law.197 b) EU Directives relating to consumer transactions 97 The harmonization of European private law has long since been an extremely busy sphere of

activity in the context of consumer protection. A whole range of Directives have been enacted since approximately two decades. Some of them lay down conflict-of-law rules. They are not prejudiced by Rome I (Art. 23). 98 Art. 11(4) Rome I excludes any alternative attachment, but links this restriction to consumer

contracts as defined by Art. 6 Rome I. Other consumer-related contracts that do not fall within the ambit of Art. 6 Rome I will be attached according to Art. 3 Rome I or, lacking a choice of law agreement, according to the rules of objective attachment of Rome I. This implies that no protective clause such as a limitation of the choice of law in the very interest of consumers will apply. 99 Yet, EU Directives have been elaborated that provide for specific protection clauses in the

interest of consumers. It is typical for such Directives relating to consumer transactions to set up a complicated system of formalities (pre-contractual duties, such as information put down in writing and which becomes an integral part of the contract; the written form of the contract itself, form exigencies with regard to any amendment of the contract as well as its revocation). Sometimes this is accompanied by a liability for the statements made in the brochures (prospect liability). The alternative application of the lex loci to such “formalities” could imply that the lex loci does not impose comparable restrictions on the contracting parties. Usually, specific duties regarding information and written form must be fulfilled by the professional (trader), which means that he is at liberty whether to comply with the form requirements of the lex causae or (merely) with those of the lex loci. It has been criticized that such liberty would stimulate a favor offerentis instead of a favor negotii or even – as the case may be – a favor consumatoris.198 In addition, form requirements complement substantive issues in that e.g. the non-professional can examine what is actually offered to him and is able to compare this information with offers from other professionals (traders). Form requirements may also substitute the substance of the contract by the need for a notarial or judicial 194 195 196 197 198

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Dicey/Morris/Collins (fn. 43), para. 33–146 with further references. Dicey/Morris/Collins (fn. 43), para. 33–151. Cf. II. supra. Magnus (fn. 139), Art. 6 note 152. See Downes/Heiss IPRax 1999, 137, 139 et seq.

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recording,199 thus implying that form exigencies duly and adequately protect the non-professional. These arguments demonstrate that form and substance influence one another and are inter-related. Therefore, one might argue that the alternative attachment (lex loci) should not be available in cases like these.200 The Consumer Rights Directive201 contains a whole range of information duties owed by the 100 trader to the consumer202 as well as the right of withdrawal.203 The Directive expressly states that it is without prejudice to Rome I.204 In addition, when it comes to the protection of the consumer granted by the Directive, Recital (58) explicitly mandates the application of Rome I where the law applicable to the contract is that of a third country. This changes the modalities regarding the level of protection of the weaker party, because the Consumer Rights Directive has no third country clause as can be encountered in some other Directives on consumer related transactions, such as the Unfair Contract Terms Directive205 and the Consumer Sales Directive.206 Whereas the Doorstep Selling Directive only provided207 that the consumer may not waive 101 the rights conferred on him by the Directive, the Distance Selling Directive was texted more extensively regarding the binding nature of consumer rights. It not only explicitly stated that the consumer may not waive his rights conferred to him by the Directive, but also operated at the level of private international law in that the “Member States shall take the measures needed to ensure that the consumer does not lose the protection granted by this Directive by

199

200 201

202

203 204 205

206

207

Artt. 6–12 of the Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC, OJ 2008 L 133/66. Downes/Heiss IPRax 1999, 137, 139 et seq. Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council, OJ EU 2011 L 304/64. See e.g. Recitals (33) et seq.; Artt. 5, 6; 7 and 8 (specific form requirements) Directive 2011/83/EU on consumer protection. Recitals (37) et seq.; Artt. 9 et seq. Directive 2011/83/EU on consumer protection. Recital (10) Directive 2011/83/EU on consumer protection. Art. 6(2) Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993 L 95/29: “Member States shall take the necessary measures to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-Member country as the law applicable to the contract if the latter has a close connection with the territory of the Member States.” Directive 99/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, OJ 1999 L 171/12. Art. 7(2) provides a clause similar to Art. 6(2) of the Unfair Contract Terms Directive: “Member States shall take the necessary measures to ensure that consumers are not deprived of the protection afforded by this Directive as a result of opting for the law of a non-member State as the law applicable to the contract where the contract has a close connection with the territory of the Member States.” See Art. 6 Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises, OJ 1985 L 372/31, repealed by the Directive 2011/83/EU on consumer protection. But see also the Council Directive 90/314/CEE of 13 June 1990 on packages travel, packages holidays and packages tours, OJ 1990 L 158, Art. 5(3) and Art. 8.

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virtue of the choice of the law of a non-member country as the law applicable to the contract if the latter has close connection with the territory of one or more Member States.”208 102 It seems that third country clauses as the one just cited limit the consumer’s protection to

cases in which the consumer is resident within the EU and agrees with the other contracting party on the applicability of the law of a non-EU country. The Consumer Rights Directive simply refers to Rome I and omits an explicit third country clause. A consumer who is not residing in the EU and who seeks protection under the Consumer Protection Directive against a trader seated in the EU falls within the ambit of Art. 6(1)(a) or (b) Rome I, because the law agreed upon is that of his habitual residence which is less favorable to him, but no special protection is afforded if the conditions of Art. 6(1)(a) or (b) Rome I are not fulfilled (Art. 6(3) Rome I). 103 The formal requirements for consumer contracts falling within the scope of application of

Art. 6 Rome I are attached according to Art. 11(4) Rome I unless the parties have chosen the law of a third country, hence the law of the country where the consumer has his habitual residence as the law presumably more favorable to his interests shall apply. If he resides in the EU, the Consumer Rights Directive applies. If he resides in a third State and the distance contract falls within the scope of Art. 6 Rome I, the formal validity of such a contract will be determined according to the law of the country where the consumer has his habitual residence. Whereas in cases not covered by Art. 6 Rome I the rules of attachment summed up in Art. 11(2) Rome I come into play unless the parties have opted for the law of a third country. Summarizing, one may suppose that the concerns expressed above remain valid. 5. Contracts on real estate (Art. 11(5) Rome I) a) Scope of the provision 104 This special rule was also borrowed from the Rome Convention (Art. 9(6)) and slightly

amended. Instead of “a right in immovable property or a right to use immovable property” Art. 11(5) Rome I reads “a right in rem in immovable property or a tenancy of immovable property”. The formal validity of such contracts is to be determined by the law of the country where the property is situated subject to the conditions laid down in Art. 11(5)(a) and (b) Rome I.

105 The provision expressly states that the lex rei sitae shall apply to the requirements of form

“notwithstanding paragraphs 1 to 4”. This means that not only contracts but also unilateral acts relating to a contract the subject matter of which is a right in rem in immovable property or a tenancy of immovable property are governed by the law of the country where the property is situated.209

106 If, though, the lex rei sitae provides no mandatory rules, any other form requirements are

governed by the law applicable to the contract or by the lex loci (Art. 11(1) Rome I), and, regarding distance contracts in addition by the law of the country where either party has his habitual residence (Art. 11(2) Rome I).210 208

209

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Art. 12(2) Directive 97/7/EC of 20 May 1997 on the protection of consumers in respect of distance contracts, OJ 1997 L 144/19, repealed by the Directive 2011/83/EU on consumer protection. von Hein (fn. 89), Art. 11 Rom-VO note 33.

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b) Synchronization of applicable laws The legislator achieves a synchronization between the law applicable to the formal validity of 107 the contract on real estate on the one hand and the law applicable to the substance of such a contract on the other. Lacking a choice of law agreement, the contract relating to a right in rem in immovable property or to a tenancy of immovable property shall be governed by the law of the country where the property is situated (Art. 4(1)(c) Rome I). This applies to the form of the contract and the contract on real estate, but the transfer of 108 property is not covered by Rome I.211 Courts have been struggling with this issue. Some German courts for example have been applying Art. 311b(1) sent. 2 BGB per analogiam, when parties submitted the sales contract on a real estate in Spain to German law and did not fulfill the German form requirement of Art. 311b(1) sent. 1 BGB. It was deemed of no importance whether the transfer of property was registered in the (Spanish) “Registro de la Propriedad”, because such registration lacks constitutive effect and cannot be compared with the registration of property transfer in a German register of real estate (“Grundbuch”).212 Other courts decided the opposite: Art. 311b(1) sent. 2 BGB could not be applied per analogiam to cure the violation of form, because only the lex rei sitae governs the issue. In casu the parties agreed co-ownership by fractional shares and property of an apartment which was planned to be constructed. Spanish law required the legal transformation of the co-ownership into ownership of the apartment which had not taken place. The courts concluded that a contract that is not yet entirely performed cannot be cured according to Art. 331b(1) sent. 2 BGB.213 c) The “if-clause” As in the context of consumer contracts, the Rome Convention abstained from merely 109 referring to the mandatory rules, the reason being that their application lies within the discretionary power of the court hearing the case. The same idea guided the wording of Art. 9(6) Rome Convention, and also Art. 11(5) Rome I. Indeed, it should be avoided that a formally invalid contract under the mandatory law of the place where the real estate is situated (lex rei sitae) cannot be performed in that country.214 Form requirements of contracts on real estate in the sense of Art. 11(5) Rome I are governed 110 by the law of the country where the property is situated, if two conditions are fulfilled: (a) such form requirements are imposed irrespective of the country where the contract is concluded and irrespective of the law governing the contract; and (b) those requirements cannot be derogated from by agreement. The wording is obviously such that overriding mandatory provisions of the lex rei sitae will govern the formal validity of the contractual obligation. Whether mandatory provisions qualify as overriding ones must be assessed by the forum in accordance with the definition of overriding mandatory rules in Art. 9 Rome I.

210 211

212 213 214

Magnus (fn. 86), Art. 4 note 180. As to the distinction of a contractual obligation on the one hand and the contract by which a contractual title is transferred, see e.g. van Vliet, Transfer of movables in German, French, English, and Dutch Law (2000) pp. 23 et seq., 31 et seq. BGH NJW 1979, 1773, 1774, quashing the decision of the court of appeal of Cologne OLGZ 1977, 201. OLG Düsseldorf NJW 1981, 529, 530. von Hein (fn. 89), Art. 11 Rom I-VO note 31.

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111 Countries that have set up overriding mandatory rules relating to the form requirements of a

contractual obligation on a property in the sense of Art. 11(5) Rome I clearly intervene in the contractual freedom of the parties and at the same time protect State interests on the contractual level. Such contracts must fulfill the form requirements of the country where the property is situated. Legal systems address this issue in various ways. Swiss law for example, basically states that the lex rei sitae governs contracts regarding real estate and permits the choice of law.215 However, it requires – as a matter of public policy216 – the application of Swiss law to form requirements regarding a contract on real estate located in Switzerland, even if the parties have chosen another law applicable to their contract.217 If, therefore, a person concludes a sales contract on a real estate located in Switzerland, Swiss form requirements must be met. It seems controversial whether a notarial recording relating to real estate in Switzerland and executed by a notary from another canton or by a foreign notary would suffice the Swiss form requirements.218 If the real estate is located in another country, the lex rei sitae will apply, unless that law permits the application of another law219 – whereas a real estate located in Germany can be sold (and bought) under the law of another state without fulfilling the German form requirement of a notarial deed, because the relevant provision lacks overriding mandatory nature.220 Contrariwise, if the parties chose German law regarding the sale of a real estate located in another country, the German form requirement for such a sales contract must be met.221 6. Selected controversial issues 112 The transfer of shares is a contractual obligation, the form requirements of which need to be

determined according to the relevant conflict rules. Such transfers fall within the ambit of Art. 11 Rome I.222 Under German law for example, the contract with which the shares are transferred requires a notarial deed.223 Whereas since the 2008 reform of the Swiss Code of Obligations (OR) such transfer only needs to be in writing;224 the former requirement of a notarial recording was abolished.225 Almost simultaneously, the German Act on private limited-liability companies (GmbHG) was amended.226 The Act upholds the requirement 215 216

217 218

219 220 221

222 223 224

225

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Art. 119(1) and (2) Swiss IPRG. See Botschaft des Bundesrates zum Bundesgesetz über das internationale Privatrecht (IPR-Gesetz) vom 10.11.1982, BBl 1983 I 263, 411, note 282.24. Art. 119(3)(sent. 2) Swiss IPRG. Some authors affirm it would, e.g. Bonomi, in: Commentaire romand. Loi sur le droit international privé (LDIP)/Convention de Lugano (CL) (2011) Art. 119 IPRG note 11; others deny, e.g. Pannatier Kessler, in: Basler Kommentar. Internationales Privatrecht (3rd ed. 2013) Art. 119 IPRG note 26. Art. 119(3)(sent. 1) Swiss IPRG. § 311b(1)(sent. 1) BGB. This is not controversial. § 311b(1)(sent. 2) BGB provides the validation of such a contract under the condition of conveyance and recording in the Land Register. Magnus (fn. 86), Art. 4 Rom I-VO note 220. Art. 15(3) GmbHG (German Act on private limited-liability companies). Art. 785 OR states that the assignment of a capital contribution as well as an obligation to assign must be done in writing. Title Twenty-Eight: The Limited Liability Company was amended by No. I 2 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008

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of a notarial deed and requires that the list of shareholders be handed in by a notary. Up until very recently it was extremely controversial whether the recording by a foreign notary is in conformity with the German law and whether the authority of the notary to hand in the list is limited to German notaries.227 Problems arose if the country where the private limited company is registered, e.g. in Germany, is different from the country where the transfer of the shares is agreed upon, e.g. in Switzerland. The BGH228 very recently and explicitly held that the lex loci applies and that the formal competence of the registrar is limited to check whether the form requirements of German law are met.229 Unless the registration court may safely assume that the foreign notary is not on a par with a German notary, a manifest incorrectness of the list cannot be argued.

226

227

228

229

(AS 2007 4791 4839; BBl 2002 3148, 2004 3969), available at https://www.admin.ch/opc/de/federal-gazette/2004/3969.pdf.. See e.g. Müller-Chen IPRax 2008, 45, 45 et seq. The “Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen” (MoMiG) of 23. Oct. 2008 amended the German law on private limited companies noticeably. More specifically with § 40(2) GmbHG. A decision of the BGH dating from 1981 stated that the foreign recording requires equivalence with a German notarial recording, the notarial functions, and the fundamental procedural rules governing the recording, BGH NJW 1981, 1160; this decision was critically discussed i.a. by Geimer DNotZ 1981, 406 et seq. Reithmann NJW 2003, 385, 286 et seq., claimed with good reasons that the issue of equivalence of a foreign recording is not one of applying the lex loci, but one of interpretation of the substantive law (in casu: German law), and, hence, a matter of substitution; on the issue of equivalence and possible alternatives under EU-law see i.a. Stürner DNotZ 1995, 343, 351 et seq. Later decisions did not distinguish regarding the Swiss canton where the notary was seated, e.g. BGH NJW-RR 1989, 1259. Following the law reforms in Switzerland and Germany, i.a. the LG Frankfurt (on the basis of Art. 11 EGBGB) expressed serious doubts as to whether the recording by a Swiss notary could be regarded as valid, LG Frankfurt NJW 2010, 683, 684 note Pilger, and analysis i.a. by Schulze IPRax 2011, 365; Hermanns RNotZ 2011, 224. However, a decision of the Düsseldorf Court of Appeal confirmed the validity of a foreign recording, see OLG Düsseldorf NJW 2011, 1370. The Court distinguished between the duty of notification and the proceedings of recording on the other hand. The former can only be fulfilled by a German notary as messenger, the latter can be handled by a foreign notary (in casu: Swiss notary). Thus it decided the extremely controversial issue, whether a foreign notary is allowed to hand in the list enumerating the shareholders (see Zöllner/Noack, in: Baumbach/Hueck [20th ed. 2013] § 40 GmbHG note 69 with further references; further denied by Heilmeier, in: Beck’scher Online-Kommentar GmbHG [27th ed. 2016] § 40 GmbHG note 161 with further references) in the affirmative. Critically discussed i.a. by Kindler RIW 2011, 257. The equivalence of both notaries was not subject to doubt by the court, neither was the actual recording. See to the contrary a decision of the Court of Appeal of Munich, OLG München BeckRS 2013, 03186 (which was overruled by the BGH, cf. fn. 228 infra); see also i.a. Oetker, in: Henssler/Strohn (3rd ed. 2016) § 40 GmbHG note 24, and further references there, according to which a foreign notary lacked the right to hand in the list of shareholders. BGH NJW 2014, 2026 (on transfer of shares), referring to its decision dating from 1981 (on the amendment of the Articles of the limited). The recent decision was discussed i.a. by Hermanns RNotZ 2014, 229 (disapproving); Götze/Mörtel NZG 2014, 369 (approving); Kl J Müller NJW 2014, 1994 (critically). § 40 GmbHG: Only the managing director or the notary who assisted in the amendment of the list of shareholders shall hand in the amended list. Only if it is obviously clear that the foreign notary lacks such a right and can be compared with a third person who’s lacking competence is eye-catching, the registrar can refuse the list. A foreign notary who assisted in the amendment of the list is entitled to hand it in, if the recording is equivalent to a recording by a German notary and therefore is valid in Germany. The right to hand in such a list is an annex to the right of recording, see BGH NJW 2011, 2026, 2027 et seq.

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113 The matter is of utmost interest from various aspects: It suffices if the form requirements of

the lex loci are met (Art. 11(1) Rome I). German law imposes legal notarial fees, whereas fees in Switzerland can be agreed upon and are usually lower. Further, if shares relating to a German company can be transferred in another country under observance of the lex loci, this might well be of interest to foreign investors. With the recent BGH-decision the die is cast.230 114 Yet, it might be advisable to consider this jurisprudence in the context of Art. 11(2) Rome I.

For distance contracts this provision also allows the application of the law where one of the parties/agents is present at the time of the conclusion of the contract and the state of the habitual residence of one of the parties as coequal alternatives. It is called into question whether the far-reaching “form generosity” is appropriate in the context of share transfers.231 115 Although the forum may usually be called upon to decide on cases where parties avoid

compliance with domestic form requirements (e.g. recording of the sale of real estate or transfer of shares by a foreign authority), it can also be the other way around in that e.g. parties in the home country agree upon the transfer of property situated in another country or the transfer of shares concerning a company seated elsewhere. If the parties agreed upon a foreign law, they basically need to meet the form requirements of that law and whether this form corresponds to the ones set up where the property is situated or the company is seated is up to that law to decide. Yet, as the lex loci is regarded as co-equivalent, form requirements may be much less strict than under the lex causae and will, by principle, suffice. VII. Remedies 116 Formal requirements vary, of course, from country to country. English law, for example,

knows very few formal requirements. They are limited to contracts for the creation, sale or transfer of an interest in land, and to contracts of guarantee.232 However, this does not seem to be typical for the European legal landscape. In other legal systems, such as Austria, Germany, Switzerland a.o. the formal validity of contracts depends on compliance with the written form, the need for signatures or compliance with provisions on notarization or registration. As has already been mentioned,233 formalities and substance may be interrelated and the form requirements may produce substantive effects. All then depends on the qualification of the requirements. 117 Rome I does not regulate what is supposed to happen if a contractual obligation is formally

invalid under the applicable laws. In such cases the underlying policy of Art. 11 Rome I appears to justify the application of the milder law. This is the law whose legal consequences

230

231

232 233

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And all authors who have been arguing along these lines were confirmed by the BGH, among them Mankowski NZG 2010, 201, 203; M Müller RIW 2010, 591, 597 et seq., for further references see BGH NJW 2014, 2026, 2027. See the legitimate doubts expressed by Magnus (fn. 86), Art. 4 Rome I VO note 225 (with further references). Rogerson, Collier’s Conflict of Laws (4th ed. 2013) p. 319 note 144. Cf. supra note 43.

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of breach of formal requirements are less far-reaching (e.g. the law that provides for a remedy). Clearly, this is not an issue of private international law, but one of substantive law. Due to the favor negotii-maxim formal validity of the contractual obligation is firmly pro- 118 moted.234 It suffices if the formal requirements are fulfilled under either one of the applicable laws. None has priority.235 If, however, the contract is formally valid under none of the applicable legal systems, it follows from the general principle and the spirit of the conflict rule on formal validity that the law shall be applied which provides for the milder sanction. Hence, if both legal systems have a limitation period for bringing an action for annulment on the ground of a formal defect, the shorter and therefore more favorable period to the validity of the act should be preferred.236 The consequences of nullity must therefore be compared. Partial nullity is more favorable than total nullity. The same holds true for any possibility to remedy the formal defect.237 VIII. Overriding mandatory provisions One of the crucial questions that needs to be answered is whether Art. 11(4) (consumer 119 contracts) and (5) (contracts on real estate) Rome I leave room for the application of Art. 9 Rome I (“overriding mandatory provisions”). One issue is, therefore, whether the conflict rules on formal validity should be considered as regulating mandatory form requirements exhaustingly. If the answer is in the affirmative, there clearly is no margin of appreciation regarding the attachment of the formal validity of consumer contracts, because the law of the country where the consumer has his habitual residence must be applied (Art. 11(4) in connection with Art. 6 Rome I). There further is no margin of appreciation regarding the attachment of the formal validity of contracts on real estate, as long as the conditions of Art. 11(5) Rome I for applying the lex rei sitae are met. However, Art. 9 Rome I offers room for discretion by the court. If, therefore, recourse is 120 possible to Art. 9 Rome I, more formal requirements could be taken into account, depending on the discretionary power of the forum. Art. 9(2) Rome I, stating that “nothing in this Regulation shall restrict the application of the overriding mandatory provisions of the law of the forum”, could serve as an argument in favor of widening Art. 11(4) and (5) Rome I. However, such an interpretation does not seem adequate. The said paragraphs not only already reflect considerations that relate to overriding mandatory provisions of the lex fori, as the legislative history clearly shows.238 Art. 11(4) Rome I pursues the same purpose as does Art. 6(1) Rome I, as, by principle, the law of the country where the consumer habitually resides shall govern the contract. As to Art. 11(5) Rome I there seems to be hardly a case in which Art. 9(1) Rome I would offer further opportunities to restrict the favor negotii. 234

235 236 237 238

Under Art. 11(1) Rome I the lex causae or the lex loci; under Art. 11(2) Rome I the lex causae, the lex loci or the lex situs of the parties, i.e. place of habitual residence; under Art. 11(3) Rome I the lex causae, the lex loci or the lex situs; under Art. 11(4) Rome I, however, only the lex situs of the consumer, and under Art. 11(5) Rome I the lex rei sitae in connection with the lex causae under the conditions as prescribed there. Giuliano/Lagarde (fn. 43), p. 30. Giuliano/Lagarde (fn. 43), p. 30; Audit/d’Avout (fn. 161), p. 836 note 932. See e.g. Winkler v. Mohrenfels (fn. 93), Art. 11 EGBGB note 206. Cf. II. supra.

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121 Art. 11(4) Rome I demands the application of the law of the country where the consumer has

his habitual residence in all cases that fall within the ambit of Art. 6 Rome I. The formal validity of cases which are not consumer cases in the strict sense of the word must be considered under Art. 11(1–3) Rome I. 122 A further question is whether Art. 11 Rome I excludes the possibility to recur to Art. 9

Rome I with regard to the formal validity of individual employment contracts (Art. 8 Rome I). This issue was, of course, discussed under the Rome Convention.239 Contrary to the conflict rule on consumer contracts, the conflict rule applicable to individual employment contracts provides for rebuttable presumptions. The coordination of the rule on formal validity with the law governing the substance of the employment contract would have implied that at the time the contract was concluded the law governing the formal validity could not have been determined due to the rebuttable presumptions. The Explanatory Report noted that “[…] thanks to Article 7, it is to be expected that the mandatory rules regarding formal validity laid down by the law of the country where the work is to be carried out will frequently be found to apply.”240 The argument advanced on lacking foreseeability of the applicable law to the formal validity of individual employment contracts has been duly criticized from the very beginning.241 It is indeed not convincing that the formal validity of consumer contracts should be subject to stricter conflict rules on formal validity, whereas the formal validity of individual employment contracts is governed by the definitely less strict rules regarding the formal validity as laid down in Art. 11(1–3) Rome I. 123 The parties can, within the limits of Art. 8 Rome I, exclude the relevance of either the lex

causae or the lex loci. Only if the law governing the substance of the individual employment contract is applicable with regard to the form requirements the standard set up by Art. 8 Rome I (minimum protection by non-derogable provisions that would apply in the absence of choice) is relevant. In such case the form requirements under the chosen law need to be compared with those under the objectively determined law, and the standard more favorable to the employee will prevail. What exactly is more favorable depends on the employee’s claim.242 The contractual exclusion of a law governing the form of an employment contract which would be detrimental to the employee’s position is of no avail. Such choice must be considered ineffective.243 124 If a rule on formal validity is part of the contract in the guise of a substantive provision, the

law determined by the statutory reference rules decides on the validity. As form requirements in the context of employment law e.g. regarding the contractual details of employment, the termination of the contract, the dismissal of the employee etc, which usually aim at the protection of employees, it is suggested to qualify them as provisions of substantive nature of mandatory character, rather than as rules affecting formal validity to which Art. 11 (1–3) Rome I would apply. More specifically, a written statement of particulars of employ-

239 240 241

242 243

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Giuliano/Lagarde (fn. 43), p. 32. Giuliano/Lagarde (fn. 43), p. 32. E.g. Magnus, in: Staudinger, Art. 8 Rom I-VO notes 179 et seq.; Magnus, in: Staudinger, Art. 30 EGBGB note 182. Magnus (fn. 241), Art. 8 Rome I-VO note 179. Magnus (fn. 241), Art. 8 Rome I-VO note 181.

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ment given by the employer to the employee244 can be regarded as a substantive rule of mandatory nature.245 In addition, in cross-border employment contracts, subject to alternative rules on form, the 125 more favorable rule for the employee should apply. It is argued in this context that where the principle of favor negotii and the protection of employees are at stake the latter should be given priority.246 A unilateral act in the context of individual employment contracts can be e.g. a notice of 126 termination of the contract. According to Art. 11(3) Rome I the place where the act was done determines the applicable law. This place could be anywhere and entirely at random. Therefore, it has, with very good reason, been suggested to require a restrictive interpretation of this reference rule, in that the place where the act was done will only suffice provided that place coincides with the place of work, the habitual residence of the employee or the seat of the employer.247 Indeed, it should be born in mind, that individual employment contracts enjoy a specific protection, which is by and large reflected in a vast amount of overriding mandatory rules. But not every provision qualifies accordingly. In the context of notice of termination of the contract, and also instructions issued by the employer to the employee, the need to remind oneself of the tenuous position employees are in, deserves particular attention. The limitation of party autonomy imposed by Art. 8(1) Rome I to the choice of any law, provided such choice does not deprive the employee of the protection afforded to him by non-derogable provisions under the law applicable in the absence of such choice, may fall short of necessary protection. Swiss law, for example, not only limits the choice by principle to the law of the state in which the employee has his ordinary residence, or in which the employer has his business establishment, domicile, or ordinary residence,248 but mirrors the need for protection also in the reference rule on formal validity. Art. 124(3) Swiss IPRG expressly states that if the law governing the contract stipulates the observance of a specific form for the protection of a party, formal validity shall exclusively be determined by that law unless it permits the application of another law. There seems to be consensus on the fact that the provision only aims at overriding mandatory rules.249 To the extent that mandatory rules at least overwhelmingly wish to protect public interests, 127 they should be considered as “overriding mandatory rules” (Art. 9(1) Rome I). However, countries may regard formal requirements of an individual employment contract as a way to balance the individual interests of both the employee and the employer. Such requirements would therefore not qualify for the purpose of Art. 9 Rome I.250 Lacking any lacunae, the renunciation of a special conflict rule on the formal validity of individual employment contracts implies that Art. 11(1–3) Rome I must be interpreted in the light of the better

244

245 246 247 248 249 250

E.g. s. 1 Employment Rights Act 1996. Such particulars relate to i.a. begin and duration of the contract, remuneration, holidays etc (see s. 1(3) and (4) Employment Rights Act 1996). Dicey/Morris/Collins (fn. 43), paras 33–269, 33–282. Magnus (fn. 241), Art. 8 Rom I-VO notes 181 et seq. Magnus, (fn. 241), Art. 8 Rome I-VO note 186. See Art. 121(3) Swiss IPRG. Schnyder/Doss (fn. 124), Art. 124 IPRG note 10. Magnus (fn. 241), Art. 8 Rom I-VO note 182.

Bea Verschraegen

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law-approach as laid down in Art. 8(1) sentence 2 Rome I.251 Other authors, however, claim that Art. 8 and Art. 11 Rome I do not give room for such an interpretation.252 IX. Public policy and evasion of the law 128 The alternative attachment of form requirements implies that both the lex causae and the lex

loci are coequal. Hence, if parties avoid stricter form requirements this does not necessarily amount to evasion of the law. Quite to the contrary: Rome I (as did the Rome Convention) allows the parties to opt for the less strict law that will apply to the form of the contractual obligation. This is not necessarily a matter of public policy,253 which aims at the final substantive result while applying the law to which the conflict rule refers.254 129 Such evaluation must be read in the context of Art. 11(4) and (5) Rome I, that expressly

provide for a special attachment in the interest of the consumer (4), i.e. application of the law of the country where the consumer has his habitual residence, and of contractual obligations regarding immovable property (disclosure) (5), i.e. application of the lex rei sitae under the conditions laid down in (a) and (b). 130 If, therefore, parties avoid the application of the lex loci, this does not necessarily amount to

evasion of the law.255 Swiss doctrine, for example, argues that in case the parties wish to circumvent the stricter form requirements this should only be relevant if the applicable law does not offer a device against abusive manipulation, because one cannot forbid what the law allows.256 131 In clear-cut cases of evasion of the law the last resort is the application of the public policy-

clause257 which must, of course, only be applied in exceptional cases. A successful reference to this clause will prevent the application of the lex loci.

251 252

253

254 255

256 257

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Magnus (fn. 241), Art. 8 Rom I-VO note 183. Winkler v. Mohrenfels (fn. 148), Art. 11 Rom I-VO note 124 regarding the notice of termination of the individual employment contract. But he suggests the application of the good faith-principle (§ 242 BGB) in case the employer cannot advance a plausible reason for preferring the lex loci, in which case the notice of termination under that law may not be effective. In a more general fashion von Hein (fn. 89), Art. 11 Rom I-VO note 37. Whether form requirements may be an issue of public policy will very much depend on the context. Regarding agency this has not really been the case. See e.g. Zweigert 24 RabelsZ (1959), 334, 336: confirming this regarding German private international law. Winkler von Mohrenfels (fn. 148), Art. 11 Rom I-VO note 21, 104. This does not really come as a surprise. Already older German decisions were very reluctant to affirm that “avoidance” of a specific legal system by preferring the lex loci would amount to fraus legis. See e.g. Kropholler 140 ZHR (1976), 394, 396 et seq. See Schnyder/Doss (fn. 124), Art. 124 IPRG note 6. Art. 21 Rome I.

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Article 12

Article 12: Scope of the law applicable 1. The law applicable to a contract by virtue of this Regulation shall govern in particular: (a) interpretation; (b) performance; (c) within the limits of the powers conferred on the court by its procedural law, the consequences of a total or partial breach of obligations, including the assessment of damages in so far as it is governed by rules of law; (d) the various ways of extinguishing obligations, and prescription and limitation of actions; (e) the consequences of nullity of the contract. 2. In relation to the manner of performance and the steps to be taken in the event of defective performance, regard shall be had to the law of the country in which performance takes place.

Bibliography Ahrens, Wer haftet statt der zusammengebrochenen Abschreibungsgesellschaft? – Zur Sachwalterhaftung im Kollisionsrecht, IPRax 1986, 355 Alberts, Der Einfluß von Währungsschwankungen auf Zahlungsansprüche nach deutschem und englischem Recht, 1986 Aue, Mängelgewährleistung im UN-Kaufrecht, 1989 Baetge, Anknüpfung der Rechtsfolgen bei fehlender Geschäftsfähigkeit, IPRax 1996, 185 Beig, Grenze und Zusammenspiel zwischen Vertrag und Delikt, in Beig u.a. (Hrsg.), Rom II-VO. Neues Kollisionsrecht für außervertragliche Schuldverhältnisse, 2008, S. 37 Berger, Der Zinsanspruch im internationalen Wirtschaftsrecht, RabelsZ 61 (1997), 313 Berger, Vertragsstrafen und Schadenspauschalierungen im Internationalen Wirtschaftsvertragsrecht, RIW 1999, 401 Bernstein, Kollisionsrechtliche Fragen der culpa in contrahendo, RabelsZ 41 (1977), 281 Birk, Schadensersatz und sonstige Restitutionsformen im Internationalen Privatrecht, 1969 Black, Foreign currency claims in the conflict of laws, 2009 Böckstiegel, Der Durchgriff auf den Staat bei Verträgen im internationalen Wirtschaftsverkehr, in Völkerrecht – Recht der Internationalen Organisationen – Weltwirtschaftsrecht, FS Seidl-Hohenveldern, 1988, S. 17 Böckstiegel, Vertragsklauseln über nicht zu vertretende Risiken im internationalen Wirtschaftsverkehr, RIW 1984, 1

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Braun, Vertragliche Geldwertsicherung im grenzüberschreitenden Wirtschaftsverkehr, 1982 Brunner, Force majeure and hardship under general contract principles, 2009 Buciek, Beweislast und Anscheinsbeweis im internationalen Recht, 1984 Busse, Internationales Bereicherungsrecht, 1998 Clausius, Vertragskontinuität und Anpassungsbedarf, NJW 1998, 3148 Conrads, Verjährung im englischen Recht, 1996 Degener, Kollisionsrechtliche Anknüpfung der Geschäftsführung ohne Auftrag, des Bereicherungsrechts und der culpa in contrahendo, RIW 1983, 825 Degener, Kollisionsrechtliche Probleme zum Quasikontrakt, 1984 Dutta, Das Statut der Haftung aus Vertrag mit Schutzwirkung für Dritte, IPRax 2009, 293 Fauvarque-Cosson, La préscription extinctive en droit international privé, Travaux du Comité français dr. int. priv. 2002–2004, 235 Ferreri, Le juge national et l’interprétation des contrats internationaux, Rev. int. dr. comp. 2001, 29 G. Fischer, Culpa in contrahendo im europäischen internationalen Privatrecht, FS Kühne, 2010, S. 689 G. Fischer, Culpa in contrahendo im Internationalen Privatrecht, JZ 1991, 168 N. Fischer, Die Unmöglichkeit der Leistung im internationalen Kauf- und Vertragsrecht, 2001 Frank, Unterbrechung der Verjährung durch Auslandsklage, IPRax, 1983, 108 Franzina, La responsabilità precontrattuale nello spazio giudiziario europeo, Riv. dir. int. 2003, 714

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Article 12 Grothe, Der Verzugszins bei Fremdwährungsforderungen nach griechischem und deutschem Recht, IPRax 2002, 119 Grothe, Fremdwährungsverbindlichkeiten, 1999 Gruber, Auslegungsprobleme bei fremdsprachigen Verträgen unter deutschem Recht, DZWiR 1997, 353 Gruber, Die kollisionsrechtliche Anknüpfung der Prozesszinsen, DZWiR 1996, 169 Gruber, Die kollisionsrechtliche Anknüpfung der Verzugszinsen, MDR 1994, 759 Grundmann, Deutscher Anlegerschutz in internationalen Sachverhalten, RabelsZ 54 (1990), 283 Grunsky, Anwendbares Recht und gesetzlicher Zinssatz, FS Merz, 1992, S. 147 Gruschinske, Das europäische Kollisionsrecht der Aufrechnung unter besonderer Berücksichtigung des Insolvenzfalles, 2008 Habscheid, Beweislast und Beweismaß, FS Baumgärtel, 1990, S. 105 Hage-Chahine, Les conflits dans l’espace et dans le temps en matière de prescription, 1977 Harries, Die Rechtsscheinshaftung für fehlerhafte Rechtsgutachten bei internationalen Verträgen, FS Zweigert, 1981, S. 451 H. Horn, Internationales Vertragsrecht, 1999 von Hoffmann, Inländische Sachnormen mit zwingendem internationalem Anwendungsbereich, IPRax 1989, 261 von Hoffmann, Aufrechnung und Zurückbehaltungsrecht bei Fremdwährungsforderung, IPRax 1981, 155 von Hoffmann, Staatsunternehmen im IPR, BerGesVR 25 (1984), 35 Hutter, Die Haftung des Verkäufers für Nichtlieferung bzw. Lieferung vertragswidriger Ware nach dem Wiener UNCITRAL-Übereinkommen über internationale Warenkaufverträge vom 11 April 1980, 1988 Kahn, L’ interprétation des contrats internationaux, J. D.I 108 (1981), 5 Kindler, Gesetzliche Zinsansprüche im Zivil- und Handelsrecht, 1996 Koch, Streitverkündung und Drittklage im amerikanisch-deutschen Prozess, ZVglRWiss 85 (1986), 11 Königer, Die Bestimmung der gesetzlichen Zinshöhe nach dem deutschen Internationalen Privatrecht, 1997

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Rome I Regulation Kreuzer, Zur Anknüpfung der Sachwalterhaftung, IPRax 1988, 16 Kurt, Culpa in contrahendo im europäischen Kollisionrecht der vertragslichen und außervertraglichen Schuldverhältnisse, 2009 Lagarde, The Scope of Applicable Law in the E. E. C. Convention, in North (Hrsg.), Contract Conflicts, 1982, S. 49 Lando, The EC Draft Convention on the law applicable to contractual and non-contractual obligations, RabelsZ 38 (1974), 6 Le Goff, Die Vertragsstrafe in internationalen Verträgen zur Errichtung von Industrieanlagen, 2005 Linke, Die Bedeutung ausländischer Verfahrensakte im deutschen Verfahrensrecht, FS Nagel, 1987, S. 209 Looschelders, Anpassung und Substitution bei der Verjährungsunterbrechung durch unzulässige Auslandsklage, IPRax 1998, 296 S. Lorenz, “RGZ 106, 82 ff. revisited”: Zur Lückenfüllungsproblematik beim ordre public in “Ja/NeinKonflikten”, IPRax 1999, 429 W. Lorenz, Der Bereicherungsausgleich im deutschen IPR und in rechtsvergleichender Sicht, FS Zweigert, 1981, S. 199 Lüttringhaus, Das internationale Privatrecht der culpa in contrahendo nach den EG-Verordnungen “Rom-I” und “Rom-II”, RIW 2008, 193 Maier-Reimer, Fremdwährungsverbindlichkeiten, NJW 1985, 2049 Mann, Staatsunternehmen in internationalen Handelsbeziehungen, RIW 1987, 186 Mann-Kurth, Haftungsgrenzen und Zinsansprüche in internationalen Übereinkommen, RIW 1988, 251 Mülbert, Ausländische Eingriffsnormen als Datum, IPRax 1986, 140 Nickl, Die Qualifikation der culpa in contrahendo im internationalen Privatrecht, 1992 Nolting, Hoheitliche Eingriffe als Force Majeure bei internationalen Wirtschaftsverträgen mit Staatsunternehmen?, RIW 1988, 511 Otte, “Verfolgung ohne Ende” – ausländische Verjährungshemmung vor deutschen Gerichten, IPRax 1993, 209 Patrzek, Die vertragsakzessorische Anknüpfung im Internationalen Privatrecht dargestellt anhand des Deliktsrechts, des Bereicherungsrechts und der culpa in contrahendo, Diss. Göttingen 1992

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Chapter II: Uniform Rules Piehl, Bestechungsgelder im internationalen Wirtschaftsverkehr, 1991 Plaßmeier, Ungerechtfertigte Bereicherung im Internationalen Privatrecht und aus rechtsvergleichender Sicht, 1996 Plate, Force Majeure und Hardship in grenzüberschreitenden Langzeitverträgen, 2005 Pleyer-Wallach, Erfüllungszeitpunkt und Gefahrtragung bei grenzüberschreitenden Überweisungen nach deutschem und englischem Recht, RIW 1988, 172 Reder, Die Eigenhaftung vertragsfremder Dritter im IPR, 1989 Reinhuber, Grundbegriffe und internationaler Anwendungsbereich von Währungsrecht, 1995 Remien, Die Währung von Schaden und Schadensersatz, RabelsZ 62 (1998), 245 Schack, Der Erfüllungsort im deutschen, ausländischen und internationalen Privat- und Zivilprozeßrecht, 1985 Schack, Wirkungsstatut und Unterbrechung der Verjährung im Internationalen Privatrecht durch Klageerhebung, RIW 1981, 301 Scheffler, Culpa in contrahendo und Mängelgewährleistung bei deutsch-schweizerischen Werkverträgen, IPRax 1995, 20 Schlechtriem, Aufrechnung durch den Käufer wegen Nachbesserungsaufwand – deutsches Vertragsstatut und UN-Kaufrecht, IPRax 1996, 256 Schmitz, Zinsrecht. Zum Recht der Zinsen in Deutschland und in der Europäischen Union, 1994 Schnyder, IPR der Leistungsstörungen, in: Koller (Hrsg.), Leistungsstörungen, 2008, S. 101 Schwimann, Zur internationalprivatrechtlichen Behandlung von Schuldgeschäft und Schulderlaß, ÖNotZ 108 (1976), 114 Spahl, Die positive Forderungsverletzung und der Vertrag mit Schutzwirkung für Dritte im internationalen Privatrecht und internationalen Zivilprozessrecht, 2001 I. II. III. IV.

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Interpretation (Art. 12(1)(a)) . . . . . . . . . . . . . . . . 8 Performance (Art. 12(1)( b)) . . . . . . . . . . . . . . 17 The consequences of breach, including the assessment of damages in so far as it is governed by rules of law (Art. 12(1)(c)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Franco Ferrari

Spickhoff, Verjährungsunterbrechung durch ausländische Beweissicherungsverfahren, IPRax 2001, 37 Spickhoff, Gerichtsstand des Sachzusammenhangs und Qualifikation von Anspruchsgrundlagen, ZZP 109 (1996), 493 Stoll, Internationalprivatrechtliche Fragen bei der landesrechtlichen Ergänzung des Einheitlichen Kaufrechts, FS Ferid, 1988, S. 495 Stoll, Rechtliche Inhaltskontrolle bei internationalen Handelsgeschäften, FS Kegel, 1987, S. 623 Taupitz, Unterbrechung der Verjährung durch Auslandsklage aus Sicht des österreichischen und des deutschen Rechts, IPRax 1996, 140 Taupitz, Verjährungsunterbrechung im Inland durch unfreiwillige Beteiligung am fremden Rechtsstreit im Ausland, ZZP 102 (1989), 288 Teske, Die Revisibilität der Auslegung von ausländischen AGB, EuZW 1991, 149 Triebel, Auslegung von Rückversicherungsverträgen in englischer Sprache bei Geltung deutschen Rechts, FS Winter, 2007, S. 619 Triebel/Balthasar, Auslegung englischer Vertragstexte unter deutschem Vertragsstatut – Fallstricke des Art. 32 I Nr. 1 EGBGB, NJW 2004, 2189 van Venrooy, Die Anknüpfung der Kaufmannseigenschaft im deutschen IPR, 1985 von Hein, Die culpa in contrahendo im europäischen Privatrecht: Wechselwirkungen zwischen IPR und Sachrecht, GPR 2007, 54 Vorpeil, Aufrechnung bei währungsverschiedenen Forderungen, RIW 1993, 529 Wandt, Die Geschäftsführung ohne Auftrag im Internationalen Privatrecht, 1989 Wessels, Zinsrecht in Deutschland und England, 1992 Wieling, Wegfall der Geschäftsgrundlage bei Revolutionen?, JuS 1986, 272.

V.

The various ways of extinguishing obligations, and prescription and limitation of actions (Art. 12(1)(d)) . . . . . . VI. The consequences of nullity of the contract (Art. 12(1)(e)) . . . . . . . . . . . . . . . . . . . . . VII. The manner of performance (Abs. 2) . . . . VIII. Specific issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25 34 37 46

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I. Overview 1 Art. 12 Rome I can be traced back to Art. 10 Rome Convention. However, Art. 12 Rome I is

not identical to Art. 10 Rome Convention;1 it differs in various respects from its predecessor.2 On the one hand, Art. 12 Rome I refers to the fact that the law applicable governs the “consequences of a total or partial breach of obligations;” while the law applicable pursuant to Art. 10 Rome Convention governs the “consequences of breach”. This textual discrepancy does not compare to a change in substance. Rather, the change was intended to bring the English language version in line with other language versions of the Rome Convention, such as the French, German, and Italian versions. These other versions of the Rome Convention expressly refer to the “consequences of a total or partial breach of obligations”.3 2 Furthermore, while Art. 12 Rome I determines the scope of “the law applicable to a contract

by virtue of this Regulation”, Art. 10 Rome Convention merely lists the issues governed by “the law applicable to a contract by virtue of Articles 3 to 6 and 12 of this Convention.” The fact that Art. 12 Rome I does not clearly identify the relevant choice of law rules, “may have the effect of exacerbating difficult issues of delimitation between the scope of application of overriding mandatory rules and the applicable law.”4 3 Art. 12 Rome I is an expression of the drafters’ attempt to subject contracts as much as

possible to one and the same law.5 In other words, to prevent potential problems arising out of the application of different laws,6 the drafters of the Rome I Regulation intended the contract to be governed by one and the same law “from cradle to grave”.7 This is evidenced by several factors. First, the fact that the list of issues subject to the lex causae contained in para. 1 is not an exhaustive one.8 Second, Art. 10 Rome I is based upon the same reasoning,9 1

2

3 4 5

6

7 8

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For an analysis of the differences between Art. 12 Rome I and Art. 10 Rome Convention, see Plender/ Wilderspin, The European Private International Law of Obligations (3rd ed. 2009) paras. 14–008 et seq. Contra, without any justification, Calliess/Schulze Article 12 Rome I para. 10: “The wording of Article 12 is identical with Article 10 of the Rome Convention.” See also Calliess/Schulze, para. 13; see also Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 12 Rom I-VO para. 2 (referring, however, to the German version of Art. 12 Rome I, which, in effect, has not changed). See Plender/Wilderspin (fn. 1) para. 14–010. Plender/Wilderspin (fn. 1) para. 14–011. Calliess/Schulze Article 12 Rome I para. 1; Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 1; jurisPK-BGB/Geiben Rom I-VO para. 1; Nk-BGB/Leible Art. 12 Rom I para. 2; Palandt/Thorn Art. 12 Rom I para. 1; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I para. 5; Rauscher/Freitag, EuZPR/ EuIPR (2011), Art. 12 Rom I-VO para. 1; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 2; see also, albeit in respect of a German rule mirroring Art. 10 Rome Convention, Looschelders Art. 32 EGBGB para. 2; MünchKommBGB/Spellenberg (4th ed.) Art. 31 para. 1; compare also, in respect of Art. 10 Rome Convention, Czernich/Heiss/Czernich Art. 10 EVÜ para. 2. Nk-BGB/Leible Art. 12 Rom I para. 3; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 21; compare also, albeit in respect of a German rule mirroring Art. 10 Rome Convention, Bamberger/Roth/Spickhoff Art. 32 EGBGB (2nd ed.) para. 1; Soergel/von Hoffmann Art. 32 EGBGB para. 1; Staudinger/Magnus (2002) Art. 32 EGBGB para. 21. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 3. Calliess/Schulze Article 12 Rome I para. 3; Erman/Hohloch (13th ed.) Art. 12 Rom I-VO paras. 1 and 5; jurisPK-BGB/Geiben Art. 12 Rom I-VO para. 7; Leandro Nuove leggi civ. comm. 2009, 817, 818; Münch-

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Article 12

as well as Art. 18(1) Rome I, which, under certain conditions, subjects even presumptions of law and the determination of the burden of proof to the law applicable to the contract. From the foregoing, it follows that issues not listed in para. 1, such as the currency to be used 4 for payment purposes,10 should also be subject to the lex causae,11 provided that those issues are not (preliminary) issues of a different kind and subject to specific conflict rules, such as the issue of capacity,12 agency, etc.13 It must, however, be kept in mind that some of those issues may be subject to uniform substantive rules recourse to which prevails over resort to conflict of laws rules.14 It is worth pointing out that under Rome I, unlike under the Rome Convention,15 dépeçage 5 of the law applicable absent a choice by the parties is not admissible,16 even in exceptional cases. This also promotes the application of a single law to the contract as a whole. From what has been said in the previous paragraphs, it follows that one should deviate17 6 from the principle pursuant to which the contract should be subject as much as possible to

9

10 11 12 13

14

15 16

17

KommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 3; Nk-BGB/Leible Art. 12 Rom I para. 2; Palandt/Thorn Art. 12 Rom I-VO para. 4; Plender/Wilderspin (fn. 1) para. 14–012; PWW/MörsdorfSchulte/Brödermann/Wegen Art. 12 Rom I-VO para. 5; Reithmann/Martiny/Martiny (7th ed.) para. 311; Staudinger/Magnus (2011) Art. 12 Rom I-VO paras. 2 and 21; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 2; Bamberger/ Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 3; Looschelders Art. 32 EGBGB para. 2; see also, in relation to Art. 10 Rome Convention, Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 32; Czernich/Heiss/ Czernich Art. 10 EVÜ para. 5; H Horn p. 138. See Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 10 Rom I-VO para. 2. See, for this example, Staudinger/Magnus (2011) Art. 12 Rome I-VO para. 109. MünchKommBGB/Spellenberg (4th ed.) Art. 32 EGBGB para. 2. Nk-BGB/Leible Art. 12 Rom I para. 4; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 11. Plender/Wilderspin (fn. 1) para. 14–004 fn. 7; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 11; see also, in respect of Art. 10 Rome Convention, Czernich/Heiss/Czernich Art. 10 EVÜ para. 7. See Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 9; for case law on why resort to uniform substantive law is to be preferred over recourse to conflict rules, see Tribunale di Forlì, 16.2.2009, CISGonline 1780; Court of First Instance of Athens, docket 4505/2009 (no date indicated), CISG-online 2228; Tribunale di Forlì, 11.12.2008, CISG-online 1729 (with wrong date indicated); Tribunale di Rovereto, 21.9.2007, CISG-online 1590; Tribunale di Padova, 31.3.2004, CISG-online 823; Tribunale di Padova, 25.2.2004, CISG-online 819; Tribunale di Rimini, 26.11.2002, CISG-online 737; Tribunale di Vigevano, 12.7.2000, CISG-online 493; Tribunale di Pavia, 29.12.1999, CISG-online 678. Baratta, Nuove Leggi civ. comm. (1995), 953, 955. See also PWW/Brödermann/Wegen Art. 4 Rom I-VO para. 6; Ferrari RabelsZ 73 (2009) 750, 769; Calliess/Gebauer, (2011) Article 4 Rome I para. 8; Staudinger/Magnus (2011) Art. 4 Rom I-VO paras. 10 and 96; Magnus, Ferrari/Leible: Rome I Regulation (2009), p. 31; Nk-BGB/Leible Art. 12 Rom I para. 3; Rauscher/Thorn, EuZPR/EuIPR (2011), Art. 4 Rom I-VO para. 21; Palandt/Thorn, Art. 4 Rom I-VO para. 1; Villani, in: Boschiero (ed.), Roma I (2009), p. 164; but see Leandro, Nuove Leggi civ. comm. (2009), 637, 668; Mankowski IHR 2010, 89. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 1.

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one and the same law only in exceptional cases.18 One such exceptional case is provided for in the Rome I Regulation itself. Under certain conditions laid out in Art. 10(2) Rome I, a law other than the lex causae may become relevant. In effect, according to that provision, in order for a party to establish that it did not consent to a contract, he may rely upon the law of the country of his habitual residence, if it appears from the circumstances that it would not be reasonable to determine the effect of his conduct in accordance with the lex causae.19 7 Furthermore, Art. 12 Rome I itself provides an exception to the principle pursuant to which

the contract as a whole should be subject as much as possible to a single law.20 To avoid conflicts between the lex causae and the law of the place of performance,21 Art. 12(2) Rome I states that “[i]n relation to the manner of performance and the steps to be taken in the event of defective performance, regard shall be had to the law of the country in which performance takes place”. This shows that there are a few exceptions to the principle that the contract as a whole should be subject to a single law, but these remain the exception.22 II. Interpretation (Art. 12(1)(a)) 8 Pursuant to Art. 12(1)(a), the law designated via the Regulation’s conflict rules applies to

interpretation. Thus, the lex causae and its interpretive canons23 apply to determine the meaning of a statement or conduct of a party.24 To the extent, however, that the interpretation is aimed at deciding whether a statement or conduct is evidence of a consent leading to the conclusion of the contract, it, too, is governed by the law applicable to the contract, but not pursuant to Art. 12(1)(a), but rather pursuant to Art. 10.25 This is important insofar as Art. 10(2) allows a party claiming that it did not consent to a contract, to rely upon the law of the country in which it has his habitual residence, if it appears from the circumstances that it would not be reasonable to determine the effect of its conduct in accordance with the lex contractus.26 9 However, interpretation goes beyond simply “determining the meaning of ambiguous or

incomplete expressions of the parties”.27 For example, the process of determining whether a legally relevant statement or conduct has even occurred also amounts to an issue of interpretation and is therefore governed by the lex contractus.28 18 19

20

21

22

23 24 25 26

27

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MünchKommBGB/Spellenberg (5th ed.) RnRom I-VO para. 5. Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 10 Rom I-VO paras. 16 et seq. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I para. 4; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 3. Calliess/Schulze (2011) Article 12 Rome I para. 2; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 26. See Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I para. 2. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 6; Nk-BGB/Leible Art. 12 Rom I para. 7. Leandro Nuove leggi civ. comm. 2009, 817, 820. Nk-BGB/Leible Art. 12 Rom I para. 7. Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 10 Rom I paras. 16 et seq. Plender/Wilderspin (fn. 1) para. 14–019; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 24.

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It must be noted that Art. 12(1)(a) subjecting interpretation to the lex contractus does not 10 mean that parties are not allowed to agree on a different law to govern contract interpretation.29 At times, courts read into the choice of a given law for interpretation purposes an implicit choice of law for the contract as a whole.30 In the author’s opinion, this is not necessarily so. Art. 3(1) Rome I allows the parties to select the law applicable to the whole or part of the contract. Thus, absent other indicators pointing to an implicit choice of law for the contract as a whole, a choice of law made solely in respect of interpretation should not lead to the application of the law chosen to the contract as a whole, and this despite the aforementioned principle underlying Rome I that the contract as a whole should be subject as much as possible to a single law. The law applicable to interpretation governs not only the interpretation of the contract as a 11 whole, but also the various unilateral statements leading up to the contract and those connected to it31 (such as notice of default, notice of termination, etc.). It is important to distinguish between the interpretation of the main contract, and the 12 interpretation of the choice of law agreement. While the main contract is subject to the law applicable to the contract (absent a law specifically designated to apply to interpretation issues),32 that law only applies to the interpretation of the choice of law agreement if the controversial issue is not that of whether a choice has been made at all. To answer this question, resort is to be had to the lex fori.33 The issue of whether the construction of contracts is admissible and, if so, how it is to be 13

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For this statement see also, although in respect of a German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 6. Nk-BGB/Leible Art. 12 Rom I para. 9; Plender/Wilderspin (fn. 1) para. 14–025; Reithmann/Martiny/ Martiny (7th ed.) para. 308; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 25; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 8; Staudinger/Magnus (2002) Art. 32 EGBGB para. 25. LG München IPRax 1984, 318; see also Nk-BGB/Leible Art. 12 Rom I para. 9; Plender/Wilderspin (fn. 1) para. 14–025; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 25. Calliess/Schulze Article 12 Rome I para. 4; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 7; Nk-BGB/Leible Art. 12 Rom I para. 8; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 26; see also Staudinger/Magnus (2002) Art. 32 EGBGB para. 26 (in respect of the German provision mirroring Art. 10 Rome Convention); as regards the Rome Convention, see Czernich/Heiss/Czernich Art. 10 EVÜ para. 13. See also, although in respect of the German provision mirroring Art. 10 Rome Convention); as regards the Rome Convention, Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 4; MünchKommBGB/ Spellenberg (4th ed.) Art. 32 EGBGB para. 10. Reithmann/Martiny/Martiny (7th ed.) para. 307; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 28; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/ Leible Art. 32 EGBGB para. 11; MünchKommBGB/Spellenberg (4th ed.) Art. 32 EGBGB para. 8; Looschelders Art. 32 EGBGB para. 8; compare also, in respect of Art. 10 Rome Convention, Czernich/Heiss/ Czernich Art. 10 EVÜ para. 10; for a partially different view, see Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 4: advocating the application of the lex fori to all issues relating to the interpretation of the choice of law agreement.

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effected,34 amounts to an issue of interpretation and, therefore, is also governed by the law applicable to the contract.35 14 Recourse to terms characteristic of a given law different from that applicable pursuant to

the Regulation’s rules requires courts to take into consideration the meaning attributed to them under the law from which they are derived,36 provided that the parties did not agree to attribute a different meaning to those terms and expressions.37 15 Furthermore, when parties refer to terms commonly used in international commerce “these

terms ought to be interpreted in accordance with standard international practice.”38 However, one has to wonder whether this has always to be the case.39 For example, there are those instances when the parties make use of the ICC Incoterms. The ICC Incoterms do not constitute rules of law.40 Rather, they “provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade”.41 A recent U.S. court decision held that reference to clauses that are also ICC Incoterms (such as CIF, FOB, etc.) indicates the parties’ intention to have the ICC rules of interpretation applied, even when there is no express reference to the ICC Incoterms.42 However, in the author’s opinion, that U.S. view cannot be shared,43 since in some legal systems the trade terms have a meaning different

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MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 17. Compare jurisPK-BGB/Geiben Art. 12 Rom I-VO para. 9; Leandro Nuove leggi civ. comm. 2009, 817, 820; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 12; Nk-BGB/Leible Art. 12 Rom I para. 10; Looschelders Art. 32 EGBGB para. 6 (in respect of the German provision mirroring Art. 10 Rome Convention). JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 9; Nk-BGB/Leible Art. 12 Rom I para. 11; Palandt/Thorn Art. 12 Rom I-VO para. 4; Plender/Wilderspin (fn. 1) para. 14–026; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 9; Calliess/Schulze, (2011) Article 12 Rome I para. 6; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 30; see also, albeit in relation to the German equivalent of Art. 10 Rome Convention, Erman/Hohloch Art. 32 EGBGB para. 6; Soergel/von Hoffmann Art. 32 EGBGB para. 12; Staudinger/Magnus (2002) Art. 32 EGBGB para. 30; partially different Gruber DZWiR 1997, 353, 357 f; contra also Triebel NJW 2004, 2189. Nk-BGB/Leible Art. 12 Rom I para. 11; Reithmann/Martiny/Martiny (6th ed.) para. 254, with reference to OLG München, 22.9.1993, TranspR 1993, 433, and OLG Frankfurt, 10.1.2001, IPRspr. 2001 no. 23. Plender/Wilderspin (fn. 1) para. 14–022; for similar statements, see also Ferrari, in: Ferrari/Kieninger/ Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 10, and Staudinger/Magnus (2002) Art. 32 EGBGB para. 31 (albeit in respect of a German rule that mirrors Art. 10 Rome Convention). Agreeing with the suggestion mentioned in the text, Staudinger/Magnus (2002) Art. 32 EGBGB para. 31 (albeit in relation to a rule mirroring Art. 10 Rome Convention). Herber/Czerwenka Art. 9 CISG para. 16; Rudolph Art. 9 CISG para. 6. St. Paul Guardian Insurance Co. u. a./Neuromed Medical Systems & Support u. a., 2002 U. S. Dist. Lexis 5096 (S.D. N. Y. 2002). St. Paul Guardian Insurance Co. u. a./Neuromed Medical Systems & Support u. a., previous note: “Incoterms definitions should be applied to the contract despite the lack of an explicit Incoterms reference in the contract”; for a similar reasoning, see Corte d’Appello Genova, 24.3.1995 – Nr. 211, Unilex. See also, albeit in relation to the CISG, Achilles Art. 9 CISG para. 14; contra Bianca/Bonell/Bonell Art. 9 para. 3.5.

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from that attributed to them by the ICC.44 On the other hand, if the parties refer to an ICC Incoterm, then the ICC understanding of the Incoterm will be relevant.45 Where the law applicable is a foreign law, courts do have to apply the foreign rules of 16 interpretation and canons ex officio.46 III. Performance (Art. 12(1)( b)) Pursuant to the Giuliano/Lagarde Report, which can be relied upon to interpret a given 17 provision of the Rome I Regulation where that provision mirrors one contained in the Rome Convention, as does Art. 12(1)(b) Rome I for instance, the concept of “performance” embraces “the totality of the conditions, resulting from the law or from the contract, in accordance with which the act is essential for the fulfilment of an obligation must be performed.”47 From this it follows, among others, that the law identified by means of the provisions of the Rome I Regulation does not only govern the main obligations, but also ancillary obligations imposed by the law or contract,48 such as: confidentiality obligations,49 the obligation to cooperate with opposing party50 and to keep opposing party informed of changes regarding elements that may impact opposing party’s performance (such as a change of address, bank details, etc.). To the extent that an issue qualifies as one relating to “the manner of performance” and, 18 therefore, falls under the sphere of application of Art. 12(2) Rome I, regard is to be had to the law of the country in which performance takes place. Unfortunately, the Rome I Regulation, like its predecessor, does not set forth any criterion on the basis of which to draw a distinction between “performance” and “manner of performance”.51 In the author’s opinion, the 44

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See Gilette Va J. Int’l L. 39 (1999), 706, 736: “Current versions of Article 2 [UCC] assign specific meanings to terms used in transactions involving contracts of carriage, such as FOB and FAS, and assign legal consequences to the use of those terms. Those definitions, however, deviate from developed international practices as promulgated by the ICC.” (notes omitted). Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 6; Nk-BGB/Leible Art. 12 Rom I para. 11; Staudinger/ Magnus (2011) Art. 12 Rom I-VO para. 31. See also Nk-BGB/Leible Art. 12 Rom I para. 13; Reithmann/Martiny/Martiny (7th ed.) para. 308; in case law, see BGH NJW-RR 1990, 248; BGH NJW 1987, 591. Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 32; see also Calliess/Schulze Article 12 Rome I para. 24; Leandro Nuove leggi civ. comm. 2009, 817, 822; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 50; Nk-BGB/Leible Art. 12 Rom I para. 14; Plender/Wilderspin (fn. 1), para. 14–029; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 13; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 33. See also MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 50; Nk-BGB/Leible Art. 12 Rom I para. 14; Plender/Wilderspin (fn. 1) para. 14–030; Staudinger/Magnus (2011) Art. 12 Rom I-VO paras. 33 and 40; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 13; Looschelders Art. 32 EGBGB para. 9; MünchKommBGB/ Spellenberg (4th ed.) Art. 32 EGBGB para. 22; Soergel/von Hoffmann Art. 32 EGBGB para. 24; Staudinger/ Magnus (2002) Art. 32 EGBGB para. 32. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 62. Nk-BGB/Leible Art. 12 Rom I para. 14. See Plender/Wilderspin (fn. 1) para. 14–033.

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distinction is not to be drawn in accordance with the lex fori, as some commentators52 – as well as the Giuliano/Lagarde Report – suggest.53 Rather, one has to determine what qualifies as an issue of “performance” rather than one of “manner of performance” on an autonomous basis,54 despite the difficulties this may raise. There appears to be agreement, however, that in respect of “matters normally falling within the description of ‘manner of performance’, it would seem that one might in any event mention the rules governing public holidays, the manner in which goods are to be examined, and the steps to be taken if they are refused.”55 From this one can gather, for instance, that while the issue of time of performance falls under the sphere of application of Art. 12(1)(b)56 and is governed by the law applicable to the contract,57 the issue of whether a given day is a holiday may be left to the law of the place of performance, as it relates to the “manner of performance”.58 However, whether holidays have any impact on the time of performance is to be decided on the basis of the law applicable to the contract.59 The time of performance is just one of the issues governed by the law applicable to the contract.60 Also governed by that law are issues such as: the type of contract dealt with,61 who is creditor and who is debtor,62 whether performance by a third party frees the debtor,63 whether the contract impacts on third parties,64 whether a party is liable for the failure of a 52

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For commentators suggesting to resort to the lex fori to draw the distinction referred to in the text, see Plender/Wilderspin (fn. 1) para. 14–033, where the authors also. See Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 33: “What is meant, however, by ‘manner of performance’ of an obligation? It does not seem that any precise and uniform meaning is given to this concept in the various laws and in the differing views of learned writers. The Group did not for its part wish to give a strict definition of this concept. It will consequently be for the lex fori to determine what is meant by ‘manner of performance’”. See Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 10 Rom I-VO para. 29; see also, although in relation to the German provision mirroring Art. 10 Rome Convention, Staudinger/Magnus (2002) Art. 32 EGBGB para. 80. Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 33. Plender/Wilderspin (fn. 1) para. 14–030; Reithmann/Martiny/Martiny (7th ed.) para. 347; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 14; Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 5. Nk-BGB/Leible Art. 12 Rom I para. 15; Palandt/Thorn Art. 12 Rom I-VO para. 5; PWW/MörsdorfSchulte/Brödermann/Wegen Art. 12 Rom I-VO para. 23; Staudinger/Magnus (2011) Art. 12 Rome I-VO para. 35. See, e.g., Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 35 and 84. Staudinger/Magnus (2011) Art. 12 para. 35. Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 35. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 10; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 55; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 14; in case law, see OLG Düsseldorf, 14.1.2003, VersR 2003, 1324–1325. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 63; Plender/Wilderspin (fn. 1) para. 14– 031; Reithmann/Martiny/Martiny (7th ed.) para. 317; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 3737. Leandro Nuove leggi civ. comm. 2009, 817, 822; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 64; Palandt/Thorn Art. 12 Rom I-VO para. 5; Plender/Wilderspin (fn. 1) para. 14– 031; see also, in respect of the Rome Convention, Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 32.

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third person,65 whether multiple creditors or debtors hold their rights and obligations jointly,66 the nature of the obligation owed,67 whether partial performance is admissible,68 where the performance is to be effected,69 the instances regarding which place of performance is relevant,70 when risks pass,71 the extent to which the parties have to act in good faith,72 whether trade usage is to be taken into account,73 and the admissibility and validity of limitation of liability clauses.74

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JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 10; Palandt/Thorn Art. 12 Rom I-VO para. 5; PWW/ Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 16; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 37. Calliess/Schulze Article 12 Rome I para. 22; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO paras. 57 and 64; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 15; Staudinger/ Magnus (2011) Art. 12 Rom I-VO para. 38; see also, albeit in respect of a provision mirroring Art. 10 Rome Convention, Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 5; Soergel/von Hoffmann Art. 32 EGBGB para. 35. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 7; Nk-BGB/Leible Art. 12 Rom I para. 15; see also, albeit in respect of the German provision mirroring Art. 10 Rome Convention, MünchKommBGB/Spellenberg (4th ed.) Art. 32 EGBGB para. 22; Staudinger/Magnus (2002) Art. 32 EGBGB para. 37; Stoll, FS Kegel, 1987, S. 623, 646. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 10; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 58; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 16; Reithmann/Martiny/Martiny (7th ed.) para. 311; see also, although in respect of the German provision mirroring Art. 10 Rome Convention, Soergel/von Hoffmann Art. 32 EGBGB para. 30; in case law, see OLG Düsseldorf, 14.1.2003, VersR 2003, 1324–1325; OLG München, 22.1.1997, RIW 1997, 507. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 51; Palandt/Thorn Art. 12 Rom I-VO para. 5; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 18; see also Looschelders Art. 32 EGBGB para. 10 (in respect of the German provision mirroring Art. 10 Rome Convention); see, in respect of the Rome Convention, Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 32. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 10; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 69; Palandt/Thorn Art. 12 Rom I-VO para. 5; Plender/Wilderspin (fn. 1) para. 14– 030; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 23; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 35; see also, although in respect of the German provision mirroring Art. 10 Rome Convention, Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 5; Looschelders Art. 32 EGBGB para. 10; Soergel/von Hoffmann Art. 32 EGBGB para. 25; von Bar IPR II para. 541; in respect of the Rome Convention, see H Horn p. 139. MünchKommBGB/Spellenberg (4th ed.) Art. 32 EGBGB para. 30, citing to BGH NJW 1981, 1905; BGH IPRax 1981, 93; OLG Hamburg IPRspr. 1976 Nr. 125 b; OLG RIW 1979, 204; OLG Frankfurt IPRspr. 1979 Nr. 161; OLG Stuttgart RIW 1982, 591. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 7; jurisPK-BGB/Geiben Art. 12 Rom I-VO para. 10; Nk-BGB/Leible Art. 12 Rom I para. 15; Palandt/Thorn Art. 12 Rom I-VO para. 5; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 36; compare also, albeit in respect of the German provision mirroring Art. 10 Rome Convention, Looschelders Art. 32 EGBGB para. 10. Palandt/Thorn Art. 12 Rom I-VO para. 5; Plender/Wilderspin (fn. 1) para. 14–30; PWW/MörsdorfSchulte/Brödermann/Wegen Art. 12 Rom I-VO para. 16; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 40. PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 14; accord, although in respect of the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 13;

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IV. The consequences of breach, including the assessment of damages in so far as it is governed by rules of law (Art. 12(1)(c)) 19 1. Conditions and Consequences of Breach. Art. 12(1)(c) makes it clear that the conse-

quences of a breach of contract, including the assessment of damages, may also be governed by the lex contractus. The autonomous75 concept of “breach” covers “any deviation of the obligation performed from the obligation owed’”.76 Thus, non-performance77 is governed as much by the law applicable to the contract as late performance,78 partial performance,79 and any performance not in conformity with the contract80 (such as the delivery of non-conforming goods).81 20 Pursuant to Art. 12(1)(c), the consequences of any kind of breach of contract82 are subject

to the lex contractus, including: whether a party is entitled to avoid the contract,83 whether avoidance occurs ex lege or not;84 whether a right to price reduction exists,85 whether one can withdraw from the contract,86 whether one is entitled to damages,87 how withdrawal and

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Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 5; Soergel/von Hoffmann Art. 32 EGBGB para. 30; Staudinger/Magnus (2002) Art. 32 EGBGB para. 40. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 57; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 20. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 4; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 6. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 77; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 33; see also, although in respect of the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 17; Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 6; Looschelders Art. 32 EGBGB para. 14. See BGH IPRax 1984, 91. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 9; Reithmann/Martiny/Martiny (7th ed.) paras. 321 and 325; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 45; see also, in respect of the German provision mirroring Art. 10 Rome Convention, Erman/Hohloch Art. 32 EGBGB para. 9; in case law, see OLG Frankfurt RIW 1994, 780; Köln RIW 1993, 414, 415; OLG Köln RIW 1996, 778, 779. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 77; Palandt/Thorn Art. 12 Rom I-VO para. 7. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 77; NK-BGB/Leible Art. 12 Rom I para. 19. BGH NJW 1996, 3001. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 10; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 50; see also Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 7, citing to BGH NJW 1993, 2808. See NK-BGB/Leible Art. 12 Rom I para. 21; Plender/Wilderspin (fn. 1) para. 14–036; compare also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 19; Looschelders Art. 32 EGBGB para. 15; Staudinger/Magnus (2002) Art. 32 EGBGB para. 50. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 10; in case law, see OLG Celle RIW 1988, 137, 139. Ferrari in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 15; NK-BGB/Leible Art. 12 Rom I para. 21; see also von Bar IPR II para. 546. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 14; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 81; NK-BGB/Leible Art. 12 Rom I para. 21; PWW/Mörsdorf-Schulte/Brödermann/We-

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damages relate to each other,88 on what grounds a party can be exonerated from liability,89 whether penalty clauses are valid90 and what effects they have,91 whether – and at what rate92 – a creditor is entitled to interest on sums in arrears,93 the remedies available to a performance creditor in a case of anticipatory breach.94 Also the issue of whether the performance debtor is entitled to refuse performance is subject to the lex contractus.95 Therefore, the exceptio inadimpleti contractus96 is also subject to the lex contractus as are the effects of the exceptio doli and the prohibition to venire contra factum proprium.97 However, the issue of whether the performance debtor is entitled to withhold performance

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97

gen Art. 12 Rom I-VO para. 36; see also, although in respect of the German provision mirroring Art. 10 Rome Convention Soergel/von Hoffmann Art. 32 EGBGB para. 37. PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 37; in case law, see BGH, 26.7.2004, NJW-RR 2005, 206, 208. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 81. Calliess/Schulze Article 12 Rome I para. 23; Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 7; NK-BGB/Leible Art. 12 Rom I para. 21; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 54. Calliess/Schulze Article 12 Rome I para. 15; Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 12; jurisPK-BGB/Geiben Art. 12 Rom I-VO para. 14; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 88; NK-BGB/Leible Art. 12 Rom I para. 22; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 20; Reithmann/Martiny/Martiny (7th ed.) para. 339; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 53. Ferrari in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 15; see also, although in respect of the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 20; Berger RIW 1999, 401, 402; Looschelders Art. 32 EGBGB para. 16; Soergel/von Hoffmann Art. 32 EGBGB para. 39; Staudinger/Magnus (2002) Art. 32 EGBGB para. 53. Ferrari in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 15; jurisPK-BGB/Geiben Art. 12 Rom I-VO para. 14; Palandt/Thorn Art. 12 Rom I-VO para. 7; Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 12 Rom I-VO para. 24; compare also Faust RabelsZ 68 (2004), 511, 521 ff; Grothe IPRax 2002, 119, 120 ff; Soergel/von Hoffmann Art. 32 EGBGB para. 36; Staudinger/Magnus (2002) Art. 32 EGBGB para. 57; in case law, see OLG Rostock IPRax 2000, 231; contra Berger RabelsZ 61 (1997), 311, 326: lex monetae; Kaye p. 305: lex fori. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 12; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 51; NK-BGB/Leible Art. 12 Rom I para. 23; Plender/Wilderspin (fn. 1) para. 14–037; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 37; Reithmann/Martiny/Martiny (7th ed.) para. 335; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 57; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 21; Soergel/von Hoffmann Art. 32 EGBGB para. 36; contra Berger RabelsZ 61 (1997), 313, 326 ff; Grunsky, FS Merz, 1992, S. 147, 152: application of the lex monetae. Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 51. Calliess/Schulze Article 12 Rome I para. 23; see also, although in relation to the German provision mirroring Art. 10 Rome Convention, Erman/Hohloch Art. 32 EGBGB para. 9; Staudinger/Magnus (2002) Art. 32 EGBGB para. 58. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 14; NK-BGB/Leible Art. 12 Rom I para. 21; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 35; Reithmann/Martiny/Martiny (7th ed.) para. 337; compare also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 7. Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 58.

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until performance by opposing party is subject to the law applicable to the performance by the opposing party.98 21 Despite the wording of the provision,99 the lex contractus is not limited to the consequences

of a breach of contract. The prerequisites for a claim for breach of contract are subject to the lex contractus as well.100 Thus, the lex contractus applies to the following issues as well: “when is there a breach of contract, can non-performance be cured, should an additional period for performance be allowed and should there be a notice fixing this period’”.101 Furthermore, the lex contractus also applies to the issue of whether a breach is sanctionable only when the breaching party is at fault,102 what consequences the damaged party’s fault may have,103 what the conditions are for a party being in default,104 for example, if putting the performance debtor on notice is required,105 whether default occurs automatically, as it does under the CISG,106 when the time for payment passes. The effect of an exclusion of liability is also governed by the lex contractus.107 22 2. Assessment of damages. The lex contractus also governs the assessment of damages.108

Thus, it is the lex contractus that applies to determine the existence of liability caps, in addition to the issue of whether non-pecuniary losses are to be compensated.109 98 99

100 101 102

103

104

105

106

107

108

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Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 58. Calliess/Schulze Art. 12 Rome I para. 25; NK-BGB/Leible Art. 12 Rom I para. 18; Plender/Wilderspin (fn. 1) para. 14–037; Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 12 Rom I-VO para. 20; Staudinger/ Magnus (2011) Art. 12 Rom I-VO para. 44. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 9. Plender/Wilderspin (fn. 1) para. 14–037. NK-BGB/Leible Art. 12 Rom I para. 20; Palandt/Thorn Art. 12 Rom I-VO para. 7; PWW/MörsdorfSchulte/Brödermann/Wegen Art. 12 Rom I-VO para. 32; Reithmann/Martiny/Martiny (7th ed.) para. 326; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 46. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 13; see also, in respect of the German provision mirroring Art. 10 Rome Convention, Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 7; OLG Düsseldorf IPRspr. 1970 Nr. 15; von Bar IPR II para. 546. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 13; NK-BGB/Leible Art. 12 Rom I para. 20; Palandt/Thorn Art. 12 Rom I-VO para. 7; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 45; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 18; Erman/Hohloch Art. 32 EGBGB para. 9; Soergel/von Hoffmann Art. 32 EGBGB para. 36; Staudinger/Magnus (2002) Art. 32 EGBGB para. 45. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 13; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 78; NK-BGB/Leible Art. 12 Rom I para. 20; Reithmann/Martiny/Martiny (7th ed.) para. 325. In case law relating to the CISG, see Trib. Padova, 31.3.2004, CISG-online Nr. 823; Trib. Padova, 25.2. 2004, CISG-online Nr. 819. Bamberger/Roth/Spickhoff (3rd ed.) Art. 12 Rom I-VO para. 7; NK-BGB/Leible Art. 12 Rom I para. 20; Reithmann/Martiny/Martiny (7th ed. ) para. 321. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 11; jurisPK-BGB/Geiben Art. 12 Rom I-VO para. 14; Palandt/Thorn Art. 12 Rom I-VO para. 7; Plender/Wilderspin (fn. 1) paras. 14–03614–043 et seq.; Reithmann/Martiny/Martiny (7th ed.) para. 331; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 22; Looschelders Art. 32 EGBGB para. 16.

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Regarding the assessment of damages, it is important to note that Art. 12(1)(c) makes the lex 23 contractus applicable also to it, provided, however, that it is governed by rules of law.110 This means that questions of fact relevant for the purpose of assessing damages will be heard by the court in conformity with its own procedural rules.111 Art. 12(1)(c) does not expressly address the issue of aggravated damages.112 However, this 24 does not mean that the lex contractus will not apply to determine whether aggravated damages are due. In effect, if the lex contractus “would grant a claim for aggravated damages, that claim should be recognised and enforced by the forum, including the formula for assessing such damages if such formula exists […], even if the lex fori would not award aggravated damages in the circumstances and even, it is thought, if the lex fori does not recognise the principle of aggravated damages.”113 However, what has just been said is subject to the public policy exception of Art. 21 Rome I.114 V. The various ways of extinguishing obligations, and prescription and limitation of actions (Art. 12(1)(d)) Art. 12(1)(d) states that the various ways of extinguishing obligations are also governed by 25 the lex contractus. Since Art. 12(1)(d) does not limit the ways of extinguishing obligations covered by the lex contractus, the lex contractus applies to all ways of extinguishing obligations.115 One of these ways is the one referred to in Art. 12(1)(b), namely performance of the obligation; this means that the lex causae also governs the issue of whether performance is made with the intent of extinguishing the obligation.116 Similarly, the effects of a refusal by the creditor to accept anything tendered to the creditor by way of performance is governed by the lex contractus, which also governs the effects of the death of a party to the contract on the extinguishment of an obligation.117 Among the ways of extinguishing an obligation118 one generally lists termination (unilateral, 26

109

110 111 112 113 114

115

116

117 118

Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 56; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 22. NK-BGB/Leible Art. 12 Rom I para. 24. Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 33. NK-BGB/Leible Art. 12 Rom I para. 25. Plender/Wilderspin (fn. 1) para. 14–045. See MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 87; Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 12 Rome I-VO para. 22; compare also F Bydlinski AcP 204 (2004), 343 ff. PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 38; compare also Bamberger/ Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 9. For this statement, see Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 59; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 28; Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 9. NK-BGB/Leible Art. 12 Rom I para. 27; von Bar IPR II para. 547. See also the list of ways of extinguishing obligations in Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 60; Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 9; Looschelders Art. 32 EGBGB para. 18; Staudinger/Magnus (2002) Art. 32 EGBGB para. 60.

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bilateral, or judicial),119 renunciation,120 condonation or remission,121 mutual dissent, confusion or merger of rights, fulfillment of a resolutory condition. Absent a (valid) choice of law, these ways of extinguishing an obligation are subject to the law applicable to the obligation that is to be extinguished.122 Other ways of extinguishing an obligation – also subject to the aforementioned law – are the cancellation of the contract123 as well as the exercise of a right to withdrawal.124 27 Among the ways of extinguishing an obligation subject to the lex contractus are also all

prestations in lieu of performance,125 such as dation in payment and consignation.126 Thus, the lex contractus applies, for instance, to the issue of whether and under what conditions consignation frees the obligor.127 28 Although extinctive novation also leads to the extinguishment of obligations, it is governed

by the law applicable to the novation agreement itself.128 This could be the law applicable to the contract out of which the extinguished obligations arise, although a different law may govern the novation. 29 Art. 12(1)(d) extends the scope of the lex contractus also to cases where the passing of time

forecloses legal action, such as prescription.129 At the same time, Art. 12(1)(d) clarifies that 119

120 121

122

123

124

125 126

127

128 129

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MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 101; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 38. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 17; NK-BGB/Leible Art. 12 Rom I para. 27. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 101; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 38; Reithmann/Martiny/Martiny (7th ed.) para. 371; Staudinger/ Magnus (2011) Art. 12 Rom I-VO para. 74; in case law, see OLG Hamm RIW 1999, 621. See, albeit in relation to the German provision mirroring Art. 10 Rome Convention, MünchKommBGB/ Spellenberg (4th ed.) Art. 32 EGBGB para. 83; Erman/Hohloch Art. 32 EGBGB para. 13; in case law, see BGH NJW-RR 2002, 1359, 1361. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 17; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 105; NK-BGB/Leible Art. 12 Rom I para. 28; Palandt/Thorn Art. 12 Rom I-VO para. 8; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 38; Reithmann/Martiny/Martiny (7th ed.) para. 346; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 28; von Hoffmann IPRax 1989, 261, 270; BGH FamRZ 1997, 547, 548; OLG Hamburg GRUR Int. 1998, 431, 436. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 17; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 105; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 75. NK-BGB/Leible Art. 12 Rom I para. 28; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 60. See jurisPK-BGB/Geiben Art. 12 Rom I-VO para. 18; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 38; Reithmann/Martiny/Martiny (7th ed.) paras. 346 and 370. Staudinger/Magnus (2011) Art. 12 Rome I-VO para. 62; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 28; Soergel/ von Hoffmann Art. 32 EGBGB para. 41; von Bar IPR II para. 547; compare also Czernich/Heiss/Czernich Art. 10 EVÜ para. 36 (in relation to Art. 10 Rome Convention). See NK-BGB/Leible Art. 12 Rom I para. 29; contra Plender/Wilderspin (fn. 1) para. 14–049. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO paras. 106 et seq.; Palandt/Thorn Art. 12 Rom I-VO para. 8; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 40; Reithmann/Martiny/Martiny (7th ed.) para. 372.

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prescription and other ways of time-bar are to be treated as substantive rather than procedural issues.130 Thus, regardless of whether the applicable law qualifies the issue as procedural,131 under the Rome I Regulation, it is not possible to qualify prescription (or other ways of time-bar) as procedural, as some Common Law jurisdictions tend to do.132 The lex contractus also extends to determine when the statute of limitations starts and runs 30 out.133 Where the statute of limitations is very short, Art. 21 Rome I may be relevant.134 Nevertheless, a mere discrepancy between the statute of limitations of the lex contractus and that of the lex fori is insufficient to trigger the application of Art. 21 Rome I. In order to trigger the application of that provision, the statute of limitations provided by the lex causae must be so short as to effectively prevent a party from exercising its rights.135 On the contrary, a very long statute of limitations does not trigger the application of Art. 21 Rome I.136 The lex contractus also applies to the interruption and suspension of prescription137 and to 31

130

131

132

133

134 135

136 137

NK-BGB/Leible Art. 12 Rom I para. 31; Plender/Wilderspin (fn. 1) para. 14–051; PWW/Mörsdorf-Schulte/ Brödermann/Wegen Art. 12 Rom I-VO para. 42; Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 12 Rome I-VO para. 27; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 34; Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 11; Looschelders Art. 32 EGBGB para. 24; Reithmann/Martiny/Martiny (6th ed.) para. para. 316; in case law, see OLG Brandenburg, 29.11.2000, IPRspr. 2000 Nr. 28. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 14; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 42; Reithmann/Martiny/Martiny (7th ed.) para. 372; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 71; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 34. It has been noted that even prior to the Rome Convention, the Foreign Limitations Act 1984 “provided, subject to the possibility of derogation based on public policy, that the limitation rules of the lex causae should apply to actions in England’”, Plender/Wilderspin (fn. 1) para. 14–051; see also MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 112 fn. 260. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 14; jurisPK-BGB/Geiben Art. 12 Rom I-VO para. 19; NK-BGB/Leible Art. 12 Rom I para. 32; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 68; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Looschelders Art. 32 EGBGB para. 22; Soergel/von Hoffmann Art. 32 EGBGB para. 42; in case law, see OLG Köln RIW 1992, 1021, 1024. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 115. See, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Bamberger/Roth/ Spickhoff (2nd ed.) Art. 32 EGBGB para. 13, citing to BGH IPRspr. 1956/1957 Nr. 4; LG Saarbrücken IPRspr. 1960/1961 Nr. 38; AG Traunstein IPRspr. 1973 Nr. 13. Contra Reithmann/Martiny/Martiny (6th ed.) para. 316. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 124; NK-BGB/Leible Art. 12 Rom I para. 32; Palandt/Thorn Art. 12 Rom I-VO para. 8; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 43; Reithmann/Martiny/Martiny (7th ed.) para. 373; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 35; Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 12; Otte IPRax 1993, 209; in case law, see OLG Oldenburg RIW 1996, 66, 67.

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the determination of the effects on prescription of the initiation of court proceedings in a country other than that of the lex contractus.138 32 It is common knowledge that prescription does not constitute a matter governed by the

CISG.139 As such, resort is generally had to the aforementioned rules (of private international law) to determine whether the statute of limitations relating to claims arising out of a contract governed by the CISG has run out. This, however, is true only to the extent that the UNCITRAL Convention on the Limitation Period in the International Sale of Goods is not in force in the forum state and does not apply.140 33 Furthermore, the lex contractus governs estoppel.141

VI. The consequences of nullity of the contract (Art. 12(1)(e)) 34 Art. 12(1)(e) Rome I corresponds to Art. 10(1)(5) Rome Convention, but, unlike its Rome

Convention counterpart, cannot be subject to a reservation not to apply it.142 Art. 12(1)(e) Rome I clarifies that the consequences of nullity of the contract are also subject to the lex contractus. For the purpose of the provision at hand, it is irrelevant whether the nullity has ex nunc or ex tunc effects,143 and whether the nullity exists ab initio or is a consequence of supervening events (such as supervening impossibility, etc.).144 For the purpose of the application of Art. 12(1)(e) the reasons leading to the nullity of a contract are also irrelevant;145 what is required is that there was a contract, albeit one that was void ab initio.146 35 The reasons leading to the nullity of the contract are also generally subject to the lex

contractus, but this by virtue of Art. 10(1), rather than Art. 12(1)(e).147 At times, however, they may be governed by a different law, namely when the nullity is due to a reason for which 138

139

140 141

142 143

144 145

146

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Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 23. Achilles Art. 4 CISG para. 14; Bamberger/Roth/Saenger (3rd ed.) Art. 4 CISG para. 29; Esslinger ALI-ABA (1999), 69, 73; Ferrari Forum International 1997, 89, 91; Mather J. L. & Com. 20 (2001), 155, 161; Piltz NJW 2000, 553, 556; Posch/Terlitza IHR 2001, 47, 49; in case law, see OLG Zweibrücken IHR 2002, 67, 69; OGH IHR 2002, 77, 79; OGH IHR 2001, 42 ff; Trib. Vigevano IHR 2001, 72, 76; OGH ZfRV 2000, 77; OGH ZfRV 1996, 76. See also Staudinger/Magnus (2011) Art. 12 Rome I-VO para. 72. Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 25; von Bar IPR II para. 548; see also MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO 107. See Plender/Wilderspin (fn. 1) para. 14–009. See Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 15 (in respect of the German provision mirroring Art. 10 Rome Convention). MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 167. Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 78; see also, in respect of the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 39; Looschelders Art. 32 EGBGB para. 26. See Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 77; see also Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 15; MünchKommBGB/Spellenberg (4th ed.) Art. 32 EGBGB para. 128; in respect of Art. 10 Rome Convention, see Czernich/Heiss/Czernich Art. 10 EVÜ para. 38.

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a special conflict of laws rules exist, as in respect of capacity, form requirements; for this line of cases, the Rome I Regulation does not provide a rule on the basis of which to determine which law applies to the consequences of nullity. Where, however, the nullity is due to a lack of capacity, the lex contractus should be resorted to for determining the consequences of the nullity148 (although this view has been criticized by some commentators).149 Conversely, the consequences of the lack of form requirements are to be governed by the law applicable pursuant to Art. 11 Rome I,150 which, given the favor negotii principle underlying Art. 11 Rome I, makes applicable the law providing for the more mitigated consequences.151 The lex contractus also applies to restitutionary claims,152 at least to those arising from the 36 nullity of the contract, as in case of mistaken payment,153 and this even if those claims are otherwise qualified as non-contractual.154 VII. The manner of performance (Abs. 2) Pursuant to Art. 12(2), in determining both the manner of performance and the steps to be 37 taken in the event of defective performance, “regard shall be had to the law of the country in which performance takes place”. The wording makes it rather clear that the relevant place of performance is not the one agreed upon, but the one where performance is de facto (to be) effected.155

147

148

149

150 151

152

153

154

155

Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 78; see also AnwK-BGB/Leible Art. 32 EGBGB para. 39. See Calliess/Schulze Article 12 Rome I para. 32; Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 26; jurisPK-BGB/Geiben Art. 12 Rom I-VO para. 22. See Baetge IPRax 1996, 185, 187; Reithmann/Martiny/Hausmann (6th ed.) para. 2844; von Bar IPR II para. 43. Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 12. NK-BGB/Leible Art. 12 Rom I para. 37; see also, in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 41; Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 16; Erman/Hohloch Art. 11 EGBGB para. 10; MünchKommBGB/Spellenberg (4th ed.) Art. 32 EGBGB para. 131. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 15; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 46; NK-BGB/Leible Art. 12 Rom I para. 36; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Looschelders Art. 32 EGBGB para. 26; contra Plender/Wilderspin (fn. 1) para. 14–055. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 22; Reithmann/Martiny/Martiny (7th ed.) para. 456; see also von Bar IPR II para. 549; in case law, see OLG München, 15.7.2004, NJW-RR 2004, 1442, 1443; contra, in relation to Art. 10 Rome Convention, Czernich/Heiss/Czernich Art. 10 EVÜ para. 39. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 15; Palandt/Thorn Art. 12 Rom I-VO para. 9; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Erman/Hohloch Art. 32 EGBGB para. 15; von Bar IPR II para. 730. Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 28; jurisPK-BGB/Geiben Rom I-VO para. 24; MünchKommBGB/Spellenberg (5th ed.) Rom I-VO para. 175; Reithmann/Martiny/Martiny (7th ed.) para. 360; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 82; see also, albeit in relation to the German provision mirroring Art. 10 Rome Con-

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38 Art. 12(2) defines neither the “manner of performance”156 nor the “the steps to be taken in

the event of defective performance”. However, this does not allow one to resort to domestic concepts or understandings;157 rather, those expressions have to be interpreted in a uniform158 and autonomous manner.159 This allows one to state that all measures that are indispensable to the performance of the contract160 and do not relate to the substance of the contractual obligations,161 relate to “the manner of performance”. This includes, for example, the way in which the goods are to be examined,162 the notice to be given in case of delivery of non-conforming goods,163 the measure to be taken in case of rejection of the goods164 (such as those relating to their preservation),165 whether a given day is a public holiday and, if so, what effects this may have,166 and the effects of laws on maximum working hours167 and laws on business opening hours.168 39 Obstacles to performance arising from price or currency regulations do not relate to the

“manner of performance”.169 This does not mean that these regulations have to be disregarded entirely, as they may become relevant pursuant to Art. 9 Rome I.170

156 157

158 159 160

161 162

163

164 165

166

167

168

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vention, Bamberger/Roth/Spickhoff Art. 32 EGBGB para. 17; Erman/Hohloch Art. 32 EGBGB para. 8; Looschelders Art. 32 EGBGB para. 11; von Bar IPR II para. 540. Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 80. Leandro Nuove leggi civ. comm. 2009, 817, 822; MünchKommBGB/Spellenberg (5th ed.) Rom I-VO para. 176; Reithmann/Martiny/Martiny (7th ed.) para. 360; contra Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 33: “It will consequently be for the lex fori to determine what is meant by manner of performance.” See also Plender/Wilderspin (fn. 1) para. 14–033. Reithmann/Martiny/Martiny (7th ed.) para. 360. Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 80. See MünchKommBGB/Spellenberg (4th ed.) Art. 32 EGBGB para. 138; Reithmann/Martiny/Martiny (6th ed.) para. 304. Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 81. PWW/Mörsdorf-Schulte/Brödermann/Wegen Rom I-VO para. 27; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Bamberger/Roth/Spickhoff Art. 32 EGBGB para. 17. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 26; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 182; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Looschelders Art. 32 EGBGB para. 12; Staudinger/Magnus (2002) Art. 32 EGBGB para. 88. Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 89. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 26; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 182; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 27; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Erman/Hohloch Art. 32 EGBGB para. 8. Leandro Nuove leggi civ. comm. 2009, 817, 823; Staudinger/Magnus (2011) Art. 12 Rome I-VO para. 84; see also, although in respect of Art. 10 Rome Convention, Lagarde Rev. crit dr. int. priv. (1991), 287, 333. Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 84; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 43. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 25; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 178; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 27; Reithmann/Martiny/Martiny (7th ed.) para. 361; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 17; Looschelders Art. 32 EGBGB para. 12. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 179; NK-BGB/Leible Art. 12 Rom I

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Article 12

Furthermore, the need to put a defaulting debtor on notice and the exceptio inadimpleti 40 contractus171 are not to be treated as issues of “manner of performance”; thus, generally the lex contractus is applicable to them.172 Pursuant to Art. 12(2), “regard shall be had to the law of law of the country in which 41 performance takes place.” Art. 12(2) does not clarify, however, what it means that “regard shall be had”. Art. 12(2) does not state that the aforementioned law is to be applied, but merely that regard should be had to it; some commentators assert that that law is to be applied in lieu of the proper law of the contract.173 In the author’s opinion,174 the preferable view is that the proper law of the contract remains generally applicable.175 The wording of the provision at hand makes this rather clear: Art. 12(2) merely requires that regard be had to the law of the country where performance takes place,176 rather than requiring that the law be applied. As such, it is within the court’s discretion to decide the extent to which the rules of the proper law of the contract have to be modified, in relation to the manner of performance and the steps to be taken in the event of defective performance.177 This may lead the

170

171

172

173

174

175

176

177

para. 40; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 85; compare also Reithmann/Martiny/ Martiny (6th ed.) para. 305 (in respect of the German provision mirroring Art. 10 Rome Convention). Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 85; in accord, although in respect of the German provision mirroring Art. 10 Rome Convention, Erman/Hohloch Art. 32 EGBGB para. 8; MünchKommBGB/Spellenberg (4th ed.) Art. 32 EGBGB para. 140. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 14; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 35; Reithmann/Martiny/Martiny (7th ed.) para. 337; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Bamberger/Roth/Spickhoff Art. 32 EGBGB para. 7. Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 31; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 183; Reithmann/ Martiny/Martiny (7th ed.) para. 361. Staudinger/Magnus (2011) Art. 12 Rom I-VO paras. 92 et seq.; undecided: PWW/Mörsdorf-Schulte/ Brödermann/Wegen Art. 12 Rom I-VO para. 29. Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 32. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 8; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 26; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 18. Reithmann/Martiny/Martiny (7th ed.) para. 362; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Looschelders Art. 32 EGBGB para. 13; Morse Yb. Europ. L. 2 (1982), 107, 153 (zum EVÜ); contra, in respect of the Rome Convention, Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 33, stating that “[t]his means that the court may consider whether such law has any relevance to the manner in which the contract should be performed and has a discretion whether to apply it in whole or in part so as to do justice between the parties.” (emphasis added by the author). Calliess/Schulze Art. 12 Rome I para. 35; NK-BGB/Leible Art. 12 Rom I para. 41; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 45; Erman/Hohloch Art. 32 EGBGB para. 8; contra Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 93.

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courts to completely disregard the law of the country of the performance, even if its rule were to differ from those of the lex causae.178 44 The parties are free to agree that the manner of performance and the steps to be taken in

the event of defective performance be governed by a law other than the proper law of the contract.179 Such agreement does, however, not automatically amount to an exclusion of Art. 12(2); rather, it is on the basis of the rules on interpretation of contracts of the proper law of the contract that one has to determine whether the parties intended to exclude Art. 12 (2). The same applies mutatis mutandis in respect of a choice made in relation to the contract as a whole.180 45 Finally, it is worth pointing out that in respect of contracts for the international sale of goods

governed by the CISG, the CISG prevails over the law applicable pursuant to Art. 12(2),181 as the CISG contains rules on “the manner of performance and the steps to be taken in the event of defective performance”.182 VIII. Specific issues 46 Since the list of matters governed by the lex contractus contained in Art. 12 is not exhaus-

tive,183 as can easily be gathered from the text of Art. 12 itself, there are many more matters that are subject to the lex contractus. There is a dispute, however, as to what matters not expressly listed really are subject to the lex contractus. For example, prior to the coming into force of both the Rome I and Rome II Regulations, the culpa in contrahendo was considered by some commentators as being governed by the proper law of the contract;184 on the other hand, other commentators distinguished between the interests impacted upon by the given behavior to qualify the culpa in contrahendo as either a contract or tort matter. Today, this 178

179

180 181

182

183

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Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 32. See, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 46; MünchKommBGB/Spellenberg (4th ed.) Art. 32 EGBGB para. 148; Reithmann/ Martiny/Martiny (6th ed.) para. 307. NK-BGB/Leible Art. 12 Rom I para. 42; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 98. See PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 3; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 9. Accord Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 34; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 189. Calliess/Schulze Article 12 Rome I para. 3; jurisPK-BGB/Geiben Art. 12 Rom I-VO para. 7; Leandro Nuove leggi civ. comm. 2009, 817, 818; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 3; Nk-BGB/Leible Art. 12 Rom I para. 2; Palandt/Thorn Art. 12 Rom I-VO para. 4; Plender/Wilderspin (fn. 1) para. 14–012; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 5; Reithmann/ Martiny/Martiny (7th ed.) para. 311; Staudinger/Magnus (2011) Art. 12 Rom I-VO paras. 2 and 21; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, AnwK-BGB/Leible Art. 32 EGBGB para. 2; Bamberger/Roth/Spickhoff (2nd ed.) Art. 32 EGBGB para. 3; Looschelders Art. 32 EGBGB para. 2; see also, in relation to Art. 10 Rome Convention, Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 32; Czernich/Heiss/Czernich Art. 10 EVÜ para. 5; H Horn p. 138. See, e.g., Degener S. 260 ff; Looschelders Art. 32 EGBGB para. 29; in case law, see BGH, 26.7.2004, NJW-RR 2005, 206, 208; LG Braunschweig IPRax 2002, 213, 215.

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Chapter II: Uniform Rules

Article 12

dispute is moot,185 given that the culpa in contrahendo is governed by Art. 12 Rome II186 and excluded from the sphere of application of Rome I pursuant to its Art. 1(2)(i). Of course, for Art. 12 Rome II to apply, it is necessary that that Regulation’s applicability is triggered.187 If Rome II’s applicability were not triggered, then one would be in the same position as prior to its coming into force. Art. 12 Rome I does not list currency issues among the matters governed by the proper law 47 of the contract. Thus, Art. 12 does not provide an answer as to which law determines the currency in which payments have to occur.188 Nor does Art. 12 provide a specific answer to which law applies to the question of whether payment can occur in a currency other than that of the contract.189 These two issues have to be kept distinguished from one another,190 although they ultimately are both subject to proper law of the contract, either because the issue is directly governed by the proper law of the contract (the first question),191 or because the issue (the second one) is so closely linked to the other one that it should be subject to the same law.192 The matters referred to in the previous paragraph are to be kept distinguished from the 48 matters relating to the lex valutae, i.e., the law of the country in which the currency is legal tender.193 The lex valutae governs issues such as that of what amounts to legal tender and what effects payment has if effected in a given currency;194 the lex valutae also governs issues relating to a change of legal tender,195 such as the date at which the new currency becomes legal tender and the exchange rate.196 Similarly, the lex valutae also applies to determine the effects of currency appreciation and depreciation.197 Still, the consequences that a change of 185 186

187 188 189 190

191

192

193 194 195 196 197

JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 6; NK-BGB/Leible Art. 12 Rom I para. 26. For papers in the issue, see Lagarde, La culpa in contrahendo à la croisée des règlements communautaires, in: FS Pocar, 2009, p. 583; Lüttringhaus, Das internationale Privatrecht der culpa in contrahendo nach den EG-Verodnungen “Rom I” und “Rom II”, RIW 2008, 193; Thoma, Culpa in contrahendo in the Rome II Regulation, Revue héll. droit international 2008, 669; Volders, Culpa in contrahendo in the Conflict of Laws: A Commentary on Art. 12 of the Rome II Regulation, Yb of Private International Law 2007, 127. See MünchKommBGB/Martiny (5th ed.) Art. 1 Rom I-VO para. 71. Erman/Hohloch (13th ed.) Art. 12 Rom I-VO para. 16. See Palandt/Thorn Art. 12 Rom I-VO para. 6. See Staudinger/Magnus (2011) Art. 12 Rom I-VO paras. 102 et seq.; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, MünchKommBGB/Martiny (4th ed.) Nach Art. 34 Anh. I para. 3; Soergel/von Hoffmann Art. 34 para. 112. JurisPK-BGB/Geiben Art. 12 Rom I-VO para. 10; MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 52; Reithmann/Martiny/Martiny (7th ed.) para. 316; see also, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Erman/Hohloch Art. 32 EGBGB para. 19; Remien RabelsZ 53 (1989), 245, 248; in case law, see OLG Hamm FamRZ 1991, 1319, 1321. See, albeit in relation to the German provision mirroring Art. 10 Rome Convention, Bamberger/Roth/ Spickhoff (2nd ed.) Art. 32 EGBGB para. 25; Staudinger/Magnus (2002) Art. 32 EGBGB para. 133. MünchKommBGB/Spellenberg (5th ed.) Art. 12 Rom I-VO para. 52. MünchKommBGB/Martiny (4th ed.) Nach Art. 34 Anh. I para. 4. MünchKommBGB/Martiny (4th ed.) Nach Art. 34 Anh. I para. 48. Vischer/Huber/Oser para. 967 S. 447. Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 116.

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legal tender in a given country may have on a contract will be governed by the proper law of the contract, as will the effects on a contract of appreciation and depreciation.198 Article 13: Incapacity In a contract concluded between persons who are in the same country, a natural person who would have capacity under the law of that country may invoke his incapacity resulting from the law of another country, only if the other party to the contract was aware of that incapacity at the time of the conclusion of the contract or was not aware thereof as a result of negligence. I. II. III.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Conditions for the applicability of Art. 13 5 Some open issues on the conditions for the application of Art. 13 1. Natural persons and corporate entities 8 2. The law governing the capacity v. lex loci actus . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

IV. V.

3. The presence of the parties in the same State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4. Good faith v. protection of the incapable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Onus probandi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Unilateral contracts . . . . . . . . . . . . . . . . . . . . . . . . . 25

I. Introduction 1 According to Art. 1 (2) (a) and (f), the issues of legal capacity1 of natural persons and

corporate entities, as a matter of principle,2 do not fall within the scope of application of the Rome I Regulation. Whilst this is true for companies, since the aforementioned letter (f) writes that “questions governed by the law of companies and other bodies, corporate or unincorporated, such as the creation, by registration or otherwise, legal capacity, internal organisation or winding-up of companies and other bodies, corporate or unincorporated, and the personal liability of officers and members as such for the obligations of the company or body”, this is not always true for natural persons: Art. 1 (2) (a) explicitly rules for the applicability of Art. 13, according to which – in some circumstances – it is possible for an individual to rely upon the legal incapacity recognized by a law which is not the law of the place of the country in which the parties concluded the contract. 198 1

2

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Soergel/von Hoffmann para. 18; Vischer/Huber/Oser para. 968, S. 447. For a first study on the issue of legal capacity, see Badiali, in: Scritti degli allievi in memoria di Giuseppe Barile (1995), p. 4; Baruffi, (1995) Nuove Leggi Civ. Comm., 1096; Cafari Panico, (1995) Nuove Leggi Civ. Comm, 1085; Capotorti, Rec. des Cours (1963-III), p. 153; Luzzatto, Stati giuridici e diritti assoluti nel diritto internazionale privato (1965); Stone, EU Private International Law (2010) p. 328; Rauscher, Internationales Privatrecht (4th ed. 2012), p. 147 and Kropholler, Internationales Privatrecht (6th ed. 2006), p. 317. On the reasons of such exclusion, and in particular on the consideration that issues related to the legal capacity, due to their wider implication, are not suited for a Regulation contained in an instrument specifically (and only) devoted to contracts, see Mosconi, in: Scuola di Notariato A. Anselmi (ed.), La Convenzione di Roma sulla legge applicabile alle obbligazioni contrattuali (1983), p. 191, 192 and Marongiu Buonaiuti, in: Salerno/Franzina (eds.), Regolamento CE n. 593/2008 del Parlamento europeo e del Consiglio del 17 giugno 2008 sulla legge applicabile alle obbligazioni contrattuali (“Roma I”), in: (2009) Nuove Leggi Civ. Comm., 831.

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Chapter II: Uniform Rules

Article 13

The provision at hand is consistent with its predecessor, Art. 113 of the 1980 Rome Con- 2 vention on the law applicable to contractual obligations,4 which already excluded the issue of legal capacity5 from the scope of application of the uniform rules without providing for an ad hoc conflict of laws rule, nor by making the lex contractus applicable to such questions.6 The only exception to such principle is provided for the case in which the contract is concluded between two (or more) parties who are in the same country, and one of these invokes his/her incapacity resulting from the law of another country to the extent that his/her counterparty was aware, or should have been, of such condition.7 Following the above, it is clear that the only provision of the Rome I Regulation somehow 3 devoted to the issue of legal capacity of natural persons, having a narrow and well-defined scope of application that is exceptional in nature, is, rather than a conflict-of-laws rule itself, a limit to the scope of those domestic provisions8 specifically dedicated to the matters of legal capacity.9 In particular, Art. 13 limits the possibility to invoke the incapacity on grounds of the law applicable through the pertinent domestic conflict-of-laws rules where such incapacity is not also recognized by the lex loci actus. Such limitation is aimed at the protection of the counterparty (and in general terms of international trade and commerce)10 acting in good faith, thus being the lack of such element a condition to invoke the incapacity.11 The reasons for the introduction of a similar rule are exemplified by a (everything but 4 recent) French case and are deeply connected with the protection of commercial transactions and subjects acting in good faith: in the Lizardi12 case dealt with by the French Cour de cassation, the buyer, party to a series of international sales contracts, resulted incapable according to his personal law, the subject being a minor. On the contrary, according to the law of the place of the performance, the subject was considered to be capable, being at least apparently overage, thus perfectly able to conclude a contract. Even though reaffirming the principle that personal capacities were to be determined by the national law of the party to the contract, the French Supreme Court concluded that it was not possible to completely 3

4

5

6 7 8

9 10 11 12

Cf. ex multis Schulze, in Ferrari/Kieninger/Mankowski/Otte/Saenger/Schulze/Staudinger, Internationales Vertragsrecht (2012), p. 307. 80/934/EEC: Convention on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980, OJ 1980 L 266/1. Mosconi (fn. 2), p. 191, writing about the “renunciative” approach followed by the Rome Convention on the issue of legal capacity. Mosconi, p. 200. Schulze (fn. 3), p. 306; Stone (fn. 1), p. 328. Confirming that Art. 13 is not a conflict-of-laws rule per se, Schulze (fn. 3), p. 306, noting that, in the German system, due to the joint reading of Art. 13 of the Rome I Regulation and Art. 7 EGBGB, the law applicable to legal capacity of natural persons is the nationality law. Cf. also, Stone (fn. 1), p. 328 and Mosconi (fn. 2), p. 195. Clearly in these terms, Marongiu Buonaiuti (fn. 2), 831. Cf., Mosconi (fn. 2), p. 195 and Schulze (fn. 3), p. 306. On which see infra, III.4. Cassation, Req. 13 January 1861, Lizardi v. Chaise, in Dalloz Périodique, S. 1861.1.19305. Cf., Capotorti, Rec. des Cours (1963-III), p. 158; Marongiu Buonaiuti (fn. 2), 831; Lando, in: Lando/von Hoffmann/Siehr (eds.), European Private International Law of Obligations (1975), p. 125, 152; Stone (fn. 1), p. 328 and Struycken, Rec. des Cours (2004, t. 311), 13, 301.

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ignore both the principle of good faith in contractual transactions and certainty of law in those circumstances in which contracts were deemed to be valid under one law, and invalid under the law governing the legal capacity of one of the parties. II. Conditions for the applicability of Art. 13 5 Art. 13 refers to issues related to the capacity of natural persons; preliminary, it is necessary

to define what “capacity” means. Traditional theories recognize that “legal capacity” is the capacity of an individual to have rights and obligations (Rechtsfähigkeit in German, or capacità giuridica, in Italian); moreover, legal capacity can also refer to the “capacity to act” (Handlungsfähigkeit, in German and capacità di agire, in Italian), which not everybody has. If ever since the abolition of slavery all people are entitled to have rights and duties, not all people are at the same time authorized to fully exercise their rights: e.g., children and mentally ill need in almost every jurisdiction representatives to exercise rights and duties on their behalf.13 The notion that seems relevant under Art. 13 of the Rome I Regulation is the one referring to the possibility of individuals to enter a contract and to freely determine their contractual relationships.

6 Moreover, another notion of legal capacity seems relevant to determine the scope of appli-

cation of Art. 13 of the Rome I Regulation: legal capacity can also refer to special conditions requested for the conclusion of a particular contract. Some of these kind of special capacities needed to conclude a binding contract are explicitly excluded from the scope of application of the Regulation: for example, according to Art. 1 the question whether an agent is able to bind a principal, or an organ to bind a company or other body corporate or unincorporated, in relation to a third party does not fall within the scope of application of the Rome I Regulation.14 7 Once a question of legal capacity falls within the scope of application of Art. 13 of the Rome I

Regulation, it has to be highlighted that the provision at hand sets different conditions that must necessarily recur. In particular: i) the contract has to be concluded by natural persons, or at least between parties one of which is a natural person that can take advantage of Art. 13; ii) the result of assessment on the legal capacity of such natural person has to be different from the conclusion in light of the law of the place where the contract was concluded by the parties; iii) the contract has to be concluded by parties which were in the same country at the time they concluded the contract; iv) the counterparty of the individual invoking his/her incapacity wasn’t in good faith on the conditions of legal capacity.

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Cf. Kelsen, Pure Theory of Law (translated by Knight 1967), p. 158; Schulze (fn. 3), p. 308. Rome I Regulation, Art. 1 (2) (g), on which see Cassation, 8 December 1998, in RCDIP (1998), 284, stating that the extension of the powers of agents to bind the corporation has to be governed by the lex societatis.

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Chapter II: Uniform Rules

Article 13

III. Some open issues on the conditions for the application of Art. 13 1. Natural persons and corporate entities Following the explicit wording of the provision at hand, the derogation contained in Art. 13 8 of the Rome I Regulation is only applicable in so far as it is applied to natural persons.15 As it was already mentioned, the problem of the legal capacity of corporations does exist, and in particular it covers the problem of the legitimacy of agents and organs to conclude a contract for and in the name of a company (a matter that, according to Art. 1 (2) (g), does not fall within the scope of application of the Rome I Regulation). In this sense, it should be recalled that, usually, corporate registers are normally public and accessible, being thus relatively easy to collect the necessary information about the powers of the corporate’s representative.16 The application of Art. 13 of the Rome Regulation only to natural persons could still lead to 9 some problems in those circumstances where a contract is concluded by a natural person and a corporate entity:17 in this scenario, how should the requirement of two persons being in the same state be interpreted: Regarding companies, should the place of their seat be relevant? If so, which one of the notions of seats of legal entities should come into play: the statutory seat, the real seat or the administrative seat? If the place of the seat should not be of any relevance, should the place of the representative of the company be taken into consideration for the application of Art. 13 of the Rome I Regulation? The provision at hand is not conclusive, but in the legal scholarship it is widely accepted that the expression “who are in the same country” should be interpreted in a non-formalistic way, thus accepting that what should be of relevance is not the place of the seat of a company, but rather the place where the representative of the company was at the time of the conclusion of the contract. 2. The law governing the capacity v. lex loci actus The second condition to apply Art. 13 of the Rome I Regulation is that the legal capacity of 10 the natural person is differently treated by the law identified under the pertinent domestic conflict-of-laws rule and the law governing the capacity at the time of the conclusion of the contract, for example in the case where the contract is deemed to be valid according to the lex loci actus even in lack of an authorization to conclude the contract that is mandatory under the law governing the capacity. Furthermore, the possible connecting factors usually employed to determine the law appli- 11 cable to assess the legal capacity are nationality, habitual residence and domicile. Historically speaking, personal statuses fall within the concept of what Mancini described as diritto privato necessario (“necessary private law”), i.e. a field of private law where parties should not be granted the possibility to derogate from the law of their nationality, the legal order that with the individual bears the most significant connection.18 Ever since Mancini elabo15 16

17 18

Marongiu Buonaiuti (fn. 2), 836. Cr. Ancel, Lequette, Les grands arrêts de la jurisprudence française de droit international privé (5th ed. 2006), 46; Muir-Watt, in: Études offerts à Jacques Ghestin (2001), 694. Marongiu Buonaiuti (fn. 2), 836. Mancini, Della nazionalità come fondamento del diritto delle genti (1851); Mancini, Riv. dir. int. (1959),

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rated his notion, the phenomena of globalization and European integration challenged the idea that in all cases nationality expresses a genuine link between the legal order and the individual; thus, in different areas of “necessary private law” domestic legislators also started to recognize the value of other connecting factors, in particular of habitual residence and domicile. Nonetheless, legislators, whilst accepting mobile connecting criteria, were not willing to adopt criteria which could have been expressive of a non-significant connection between the individual and a territory and its legal order. Thus, in personal matters the two connecting criteria that are mostly employed – and in concurrence one with the other – are nationality and habitual residence,19 being the domicile20 expressive of a less significant connection. Of course this is true for civil law countries, but not for common law countries, whose “domicile” expresses a rather tight connection of the individual to a given territory, being more like the continental citizenship than to the continental domicile. Notwithstanding this tendency, it should also be noted that some States21 still favour the nationality as a connecting factor when it comes to legal capacity, showing that this matter still represents the pièce de résistance of private international law to new theories on connecting factors. 12 Since Art. 13 of the Rome I Regulation does not identify which one of these connecting

factors has to be understood as lex causae, it seems possible in theory to create a false connection so as to forge22 the hypothesis of legal incapacity envisage by Art. 13 itself. 13 It seems also possible that, with the Rome I Regulation not including any autonomous

criteria to determine the lex causae, domestic legislations can take into consideration the renvoi, with the result that the identification of the law governing the issue of the legal capacity becomes even more muddled. Moreover: does the law governing the legal capacity of natural persons only encompass statutory provisions or does it also encompass judicial and administrative decisions delivered in the State whose law is applicable? In particular, this last issue seems to be pathologic of private international law: with reference to the case of legal capacity, whilst there is no doubt that a domestic court will have to recognize the incapacity provided for by the foreign law, should it also recognize the incapacity not resulting from the law, but from a foreign court decision? From the existence of rules on recognition and enforcement of foreign decisions and administrative orders it could be argued that conflict of laws rules call only for the application of the foreign law, and not directly and automatically to all the rules, rights and obligations in force in the foreign system. Whilst in general terms this idea should be followed, it seems possible to give a certain answer only on a case-by-case approach, being possible that the relevant conflict of laws rules call – explicitly or implicitly23 – for the application of the “foreign legal order” rather than of the simple “foreign law”.24

19

20 21

22 23

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367 and Jayme, Pasquale Stanislao Mancini. Il diritto internazionale privato tra Risorgimento e attività forense (1988), p. 17 ff. Cf. in the German system, Artt. 13 ff. EGBGB on family law and, in the Italian system, Artt. 20 ff. of the law on private international law (no. 218/1995). Contra, the Swiss system of private and procedural law privileging the criterion of domicile in all matters. Cf. in the German system, Art. 7 (1) EGBGB and in the Italian system, Art. 20 of the law on private international law (no. 218/1995). Marongiu Buonaiuti (fn. 2), 837. This is for example the case for the Italian system of private international law, whose Art. 27, after providing that the conditions for the conclusion of marriage are governed by the national law of each

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3. The presence of the parties in the same State In order to determine whether or not two parties are in the same State (and not necessarily in 14 “the same place”),25 two preliminary issues must be kept in mind: in the first place, the relevant moment when the contract is concluded and, in the second, the element of the presence of the parties in the same State (which might not be the place where the contract is concluded). Whilst the first of the two elements is juridical in nature, and thus has to be determined 15 according to the lex causae, different considerations have to be made with regard to the second issue, this being an element factual in nature strictly inter-related with the element of the conclusion of the contract in its juridical sense.26 The provision could also at first raise the question on whether or not it seems realistic that 16 parties conclude a contract not being in each other’s presence. To answer the question, a classical scheme to conclude contracts can be recalled, where two parties “A” and “B” physically in each other’s presence conclude an agreement. Why should such contract undergo a different regime – as for what falls within the scope of application of Art. 13 of the Rome I Regulation – than other contracts similarly concluded, but for the fact that one party temporarily travels abroad (even if not only) to send from a different State the acceptance of the proposal, perhaps via e-mail? In practice, in such a scenario there are no big differences between those accepting a contract via mail from his/her own State or from abroad. A too strict and unjustified interpretation of the element of the “presence in the same 17 country” could clearly lead to a misapplication of Art. 13 and to an unjustified different treatment since, due to the new technologies, the parties themselves could not be aware of the place in which their counterparty is. Similar problems arise with regard to online contracts, where a discussion on the “presence 18 of the parties” seems even more difficult, even if the ECJ already had the chance to offer some indications for online contracts (concluded by consumers). Ruling on the applicability of the Brussels I Regulation,27 the Court of Justice stated in different occasions that online contracts

24

25 26

27

individual, specifies that the free marital status acquired with an Italian court decision which is res judicata shall not be negatively affected. The provision at hand does not explicitly admit that the renvoi to the foreign law is a renvoi to the legal order as a whole, but this is implied in the fact that the same provision re-affirms the principle of prevalence of domestic decision over foreign decisions, a principle which is usually respected at the time of the recognition of the foreign decision. Cf., Marongiu Buonaiuti (fn. 2), 838; Picone, t. 197 Rec. des Cours (986), 229, 264 ff. and Queirolo, in: Preite/Gazzanti Pugliese di Cotrone (eds.), Atti notarili. Diritto comunitario e internazionale. Vol. I, Diritto internazionale privato (2011), p. 749, 760 ff. Mosconi (fn. 2), p. 195. Other than the wording of the same provision in the Rome Convention, see Rechtbank Arnehm 24 November 2010 191960, available at http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RB ARN:2010:BO7637. Council Regulation No 44/2001/EC of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ 2001 L 12/1.

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concluded by contractually weaker parties do entirely fall within the scope of application of the EU legal framework on international jurisdiction.28 This said, it should be reminded that in the framework of the Brussels I Regulation the issue of the place where the contract was concluded was not a subject of investigation, the issue being rather whether or not an activity of the professional had been directed with any means to the Member State of the domicile of the consumer (as the fact that one party directs his/her activity to the State of his/her counterparty is of no relevance to the Rome I Regulation)29. Hence, in the framework of the Rome I Regulation a classification based upon where one party to the contract is at the time the contract is concluded seems misleading: regardless of their localization, it still remains that the parties (the users) act within a single virtual reality. 19 Given the difficulties connected with online contracts and in order to foster certainty of the

law, it seems advisable to offer a restrictive interpretation of Art. 13 of the Rome I Regulation, as to make it inapplicable anytime the parties conclude their contract online.30 20 On the contrary, Art. 13 of the Rome I Regulation seems applicable if the parties are “pre-

sent” in the same State, even in those cases where the parties find themselves in such State only for the purpose of concluding the contract.31 4. Good faith v. protection of the incapable 21 Art. 13 of the Rome I Regulation bears no difference in respect to Art. 11 of the Rome

Convention, also with regard to the possibility of one party to invoke a law which is not the one of the place where the contract is concluded “only if the other party to the contract was aware of this incapacity at the time of the conclusion of the contract or was not aware thereof as a result of negligence”.32 22 The provision at hand, as it was also noted in the Giuliano/Lagarde Report, tries to find the

balance between two different and opposed interests: on the one side, the interest of the incapable not to be bound by a contract which falls outside the category of acts that can legitimately be concluded, and, on the other side, the interest of the counterparty acting in 28

29 30

31 32

746

See Lokman Emrek v. Vlado Sabranovic (Case C-218/12) [2013]; Mühlleitner v. Yusufi (Case C-190/11) [2012], not yet published. On which see Marongiu Buonaiuti (fn. 2), 838. Arguing that Art. 12 EGBGB (identical to Art. 13 of the Rome Regulation, cf. Rauscher (fn. 1), p. 151) should not be applied to Distanzverträge, see Rauscher (fn. 1), p. 150. A different solution was adopted in Italy; in the overruled rules contained in the preliminary act to the civil code (preleggi), Art. 17 stated that “Lo stato e la capacità delle persone e i rapporti di famiglia sono regolati dalla legge dello Stato al quale esse appartengono. Tuttavia uno straniero, se compie nella Repubblica un atto per il quale sia incapace secondo la sua legge nazionale, è considerato capace se per tale atto secondo la legge italiana sia capace il cittadino, salvo che si tratti di rapporti di famiglia, di successioni per causa di morte, di donazioni, ovvero di atti di disposizione di immobili situati all’estero”. The provision, as drafted, was applicable also to Distanzverträge. Schulze (fn. 3), p. 308. The difference in wording between the provision in the Rome Convention and in the Rome I Regulation has to be considered not as a substantial change, but rather as a terminological improvement: on this see Kropholler (fn. 1), p. 319 and Marongiu Buonaiuti (fn. 2), 834.

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good faith to save the contract concluded with a party which was capable according to the law of the place where the contract was concluded. The need to protect the party acting in good faith, and thus to protect international trade and 23 commerce,33 even though within the limits posed by Art. 13 of the Rome I Regulation, shows a favour validitatis34 – understandable in the light of the fact that business men are not required to know the law of their counterparties, and thus the elements of legal capacities in foreign systems35 – which overrides the interest to protect the incapable; this is also clear from the circumstance that such override of interests lies in a presumption even in those cases where the subject was not aware of the incapacity, unless the unawareness stems from negligence. In this sense, according to the German Bundesgerichtshof,36 a negligent unawareness excludes good faith, thus enabling the incapable party to rely on the law of another country than the one where the contract has been concluded.37 IV. Onus probandi Following the wording of Art. 13 of the Rome I Regulation, and in particular the expression 24 “may invoke”, there is little doubt that the incapable is allowed, but not obliged, to make use of such defence: it lies in the interested party the discretionary decision whether or not to challenge the contract.38 If this is true, by necessary application of fundamental principles of procedural law, it is also true that onus probandi ei incumbit qui agit, non qui negat; in other terms, the incapable not only will have to prove the incapability, but also the fact that the counterparty was aware of such condition, or was not aware thereof as a result of negligence.39 V. Unilateral contracts Art. 13 of the Rome Regulation is applicable for any contractual obligation; bearing in mind 25 that such notion has to be autonomously interpreted,40 regardless of any qualification of unilateral contracts at the domestic level, the provision at hand is applicable anytime there is an obligation freely assumed by one party towards another,41 even in lack of a signed con33

34 35 36 37 38 39 40

41

With reference to the English system, noting that in international trade and commerce incapacitating rules “are viewed as a tiresome nuisance”, see Stone (fn. 1), p. 329. Cf., Mosconi (fn. 2), p. 197. Similarly, Schulze (fn. 3), p. 309. EGBGB (Art. 12), based upon Art. 11 of the Rome Convention. BGH, 23.4.1998 – III ZR 194/96, NJW (1998) 2452. Cf., Kropholler (fn. 1), p. 319. In similar terms, Rauscher (fn. 1), p. 151 and Mosconi (fn. 2), p. 198. Schulze (fn. 3), p. 307; on Art. 12 EGBGB, cf. Kropholler (fn. 1), p. 320, arguing that the wording of this provision, referring to “contractual obligations” is due the translation of the Rome Convention, but not able to limit the application of the Art. to einseitige Rechtsgeschäfte, and Rauscher (fn. 1), p. 150, arguing that unilateral contracts are contracts nonetheless. Interpreting provisions on international jurisdiction, see Jakob Handte & Co. GmbH v. Traitements mécano-chimiques des surfaces SA (TMCS), (Case C-26/91) [1992] ECR I-3967 and Fonderie Officine Meccaniche Tacconi SpA v. Heinrich Wagner Sinto Maschinenfabrik GmbH (HWS), (Case C-334/00) [2002] ECR I-7357. In general, on the duty to coordinate the Brussels Convention/Regulation and the

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Article 14

Rome I Regulation

tract, also for unilateral promises, which have already been classified by the ECJ as “contracts” falling within the scope of application of Art. 5 (3) of the Brussels Convention on international jurisdiction in civil matters.42 Article 14: Voluntary assignment and contractual subrogation 1. The relationship between assignor and assignee under a voluntary assignment or contractual subrogation of a claim against another person (the debtor) shall be governed by the law that applies to the contract between the assignor and assignee under this Regulation. 2. The law governing the assigned or subrogated claim shall determine its assignability, the relationship between the assignee and the debtor, the conditions under which the assignment or subrogation can be invoked against the debtor and whether the debtor’s obligations have been discharged. 3. The concept of assignment in this Article includes outright transfers of claims, transfers of claims by way of security and pledges or other security rights over claims.

Bibliography Frank Bauer, Die Forderungsabtretung im IPR (2008) Bazinas, UNCITRAL’s Contribution to the Unification of Receivables Financing Law: the United Nations Convention on the Assignment of Receivables in International Trade, 2002 Unif. L. Rev. 49 Berends, Cessie, subrogatie, hoofdelijke aansprakelijkheid, verrekening en financiële overeenkomsten in Rome I, WPNR 6824 (2009), 1038 Bode, Die Wirksamkeit einer Forderungsübertragung gegenüber Dritten vor dem Hintergrund der internationalen Forderungsfinanzierung (2007) Bridge, The proprietary aspects of assignment and choice of law, (2009) 125 LQR 671 British Institute for International and Comparative Law, Study on the question of effectiveness of an assignment or subrogation of a claim against third parties and the priority of the assigned or subrogated claim over a right of another person (2012) Cashin Ritaine, Les règles applicables aux transferts internationaux de créance à l’aune du nouveau Règlement Rome I et du droit conventionnel, in: Cashin/Bonomi (eds.), Le nouveau règlement européen

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Rome I relative à la loi applicable aux obligations contractuelles (2008), p. 177 Eidenmüller, Die Dogmatik der Zession vor dem Hintergrund der internationalen Entwicklung, AcP 204 (2004), 457 Einsele, Das Internationale Privatrecht der Forderungszession und der Schuldnerschutz, ZvglRWiss 90 (1991), 1 Einsele, Die Forderungsabtretung nach der Rom I-Verordnung, RabelsZ 74 (2010), 91 Fentiman, Assignment and Rome I: towards a principled solution, (2010) 4 L. & Fin. Mkts. Rev. 405 Fentiman, Trading Debts Across Borders: A European Solution?, 17 Ind. J. Glob. Leg. Stud. 245 (2010) Flessner, Privatautonomie und Interessen im internationalen Privatrecht – am Beispiel der Forderungsabtretung, in: FS Claus-Wilhelm Canaris, vol. II (2007), p. 545 Flessner, Die internationale Forderungsabtretung nach der Verordnung Rom I, IPRax 2009, 35 Flessner, Rechtswahlfreiheit auf Probe – Zur Überprüfung von Art. 14 der Rom I-Verordnung, in: FS Gunther Kühne (2009), p. 703

Rome I Regulation, see ex multis, Carruthers, in: Queirolo/Benedetti/Carpaneto (eds.), La tutela dei soggetti deboli tra diritto internazionale, dell’Unione europea e diritto interno (2012), p. 15. Petra Engler v. Janus Versand GmbH, (Case C-27/02) [2005] ECR I-481.

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Chapter II: Uniform Rules Flessner, Between Arts. 14 and 27 of Rome I: How to interpret a European Regulation on Conflict of Laws?, in: Westrik/van der Weide (eds.), Party Autonomy in International Property Law (2011), p. 207 Flessner/Verhagen, Assignment in European Private International Law (2006) Garcimartín, Assignment of claims in the Rome I Regulation, in: Ferrari/Leible (eds.), Rome I Regulation (2009), 217 Garcimartín/Heredia, A. D. C. 2003, 969 van der Grinten, Art. 14 Rome I: A Political Perspective, in: Westrik/van der Weide (eds.), Party Autonomy in International Property Law (2011), p. 145 Hartley, Choice of law regarding the voluntary assignment of contractual obligations under the Rome I Regulation, (2011) 60 ICLQ 29 Heine, Das Kollisionsrecht der Forderungsabtretung (2012) Kieninger, Das Statut der Forderungsabtretung im Verhältnis zu Dritten, RabelsZ 62 (1998), 678 Kieninger, General Principles on the Law Applicable to the Assignment of Receivables in Europe, in: Basedow/Baum/Nishitani (eds.), Japanese and European Private International Law in Comparative Perspective (2008), p. 153 Kieninger, Die Vereinheitlichung des Kollisionsrechts der Abtretung, in: Basedow/Remien/Wenckstern (eds.), Europäisches Kreditsicherungsrecht (2010), p. 147 Kieninger, Das auf die Forderungsabtretung anzuwendende Recht im Licht der BIICL-Studie, IPRax 2012, 289 Kieninger/Elisabeth Schütze, Die Forderungsabtretung im Internationalen Privatrecht: Bringt die “Rom I-Verordnung” ein “Ende der Geschichte”?, IPRax 2005, 200 Kieninger/Sigman, The Rome-I Proposed Regulation and the Assignment of Receivables, EuLF 2006, I-1 Krupski, Cross-border receivables financing at the crossroads of legal traditions, capital markets, uniform law and modernity, Euredia 2006, 177 Lagarde, Le nouveau droit international privé des contrats après l’entrée en vigueur de la Convention de Rome du 19 juin 1980, RCDIP 80 (1991), 287 Lagarde, Retour sur la loi applicable à l’opposabilité des transferts conventionnel de créances, in: Mèlanges Jacques Bèguin (2005), p. 415

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Article 14 Leandro, La disciplina della opponibilità della cessione del credito nel proposta di regolamento Roma I, RDIPP 2006, 675 Leible/Michael Müller, Die Anknüpfung der Drittwirkung von Forderungsabtretungen in der Rom I-Verordnung, IPRax 2012, 491 Mäsch, Abtretung und Legalzession im Europäischen Kollisionsrecht, in: Leible (ed.), Das Grünbuch zum Internationalen Vertragsrecht (2004), p. 193 Mankowski, Zessionsgrundstatut vs. Recht des Zedentensitzes – Ergänzende Überlegungen zur Anknüpfung der Drittwirkung von Zessionen, IPRax 2012, 298 Marius E. Mann/Alexander Nagel, Zession und Drittwirkung im internationalen Kreditsicherungsgeschäft, WM 2011, 1499 Møllmann, Security assignment of debts and the conflict of laws, [2011] LMCLQ 262 Moshinsky, The assignment of debts in the conflict of laws, (1992) 108 L. Q. Rev. 591 Pardoel, Les conflits des lois en matière de cession de créances (1997) Perkins, A question of priorities: choice of law and proprietary aspects of the assignment of debts, (2008) 2 L. & Fin. Mkts. Rev. 238 Perkins, Proprietary issues arising from the assignment of debts: a new rule?, [2010] JIBFL 333 Requejo Isidro, La cession de créditos en el comercio internacional (2002) Rudolf, Einheitsrecht für internationale Forderungsabtretungen (2006) Rudolf, Drittwirkung einer internationalen Forderungsbetretung und die Rom I-VO, in: FS Willibald Posch zum 65. Geburtstag (Wien 2011), p. 637 Schwarcz, Towards a Centralized Perfection System for Cross-Border Receivables Financing, 20 U. Penn. J. Int’l. Econ. L. 455 (1999) Selke, Die Untauglichkeit einer parteiautonomen Festlegung des Zessionsstatuts bei Prioritätskonflikten, WM 2012, 1467 Sinay-Cytermann, Les conflits de lois concernant l’opposabilité des transferts de créance, RCDIP 81 (1992), 35 Stadler, Der Streit um das Zessionsstatut – eine endlose Geschichte?, IPRax 2000, 104 Steffens, The New Rule on the Assignment of Rights in Rome I: The Solution to All Our Proprietary Problems?, ERPL 2006, 543

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Article 14 T. H. D. Struycken, The proprietary aspects of international assignment of debts and the Rome Convention, Art. 12, [1998] LMCLQ 345 Verhagen/van Dongen, Cross-border assignments under Rome I, (2010) 6 JPrIL 1 I. II.

III. IV.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Scope of application . . . . . . . . . . . . . . . . . . . . . . . . 5 1. Relationships to other international instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2. Scope of material application . . . . . . . . . . . 8 a) Contractual assignments . . . . . . . . . . . . . . . . 9 b) Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Relationship between assignor and assignee, (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Relationships with the assigned debtor, (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Rome I Regulation de Visser, The law governing the voluntary assignment of claims under the Rome I Regulation, NIPR 2011, 461 Walsh, Receivables Financing and the Conflict of Laws, 106 Dickinson L. Rev. 159 (2001). V. VI.

Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Effectiveness against third parties 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 2. Policy choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 a) The law of the contract of assignment 43 b) The law of the habitual residence of the assignor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 c) The law of the assigned claim . . . . . . . . . . 49 d) The law of the habitual residence of the debtor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 3. The BIICL Proposal . . . . . . . . . . . . . . . . . . . . . 54

I. Introduction 1 Art. 14 Rome I deals with the assignment of claims and contractual subrogation. Claims are

assets of economic value with certain features: they are easy to transfer, self-liquidating and an excellent short-term source of cash. This explains why assignments of claims are a common tool for obtaining finance,1 and are a key element in many financing operations such as asset-backed lending, factoring, invoice discounting, project finance and securitization.2 What’s more, with the financial crisis, the market of distressed debt has increased, since the transfer of non-performing claims provides an effective means of restructuring the balance-sheet of failing institutions. The building block of all of these transactions is an assignment of claims. 2 From a legal standpoint, an assignment of claims involves a triangular relationship between

the assignor (original creditor), the assignee (new creditor) and the assigned debtor. In addition, the effectiveness of the assignment is important for third parties, e.g. other assignees of the same claim (typically, in cases of double or subsequent assignments), general creditors of the assignor and, in particular, attaching creditors and the assignor’s insolvency administrator. The key question in this scenario is whether the first assignee can assert entitlement over the claim vis à vis the assignor, the assigned debtor and any third party. 3 Art. 14 Rome I takes this scheme as a starting point and differentiates between three cate-

gories of persons: (i) the parties to the contract of assignment, i.e. the assignor and the 1

2

750

See Flessner/Verhagen, Assignment in European Private International Law (2006) pp. 4–7; Krupski, Euredia 2006, 177 (177–178); Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 1; or Schwarcz, 20 U. Penn. J. Int’l. Econ. L. 455, 456–458 (1999) with further references. See, on the concerns raised by Art. 14 to the securitization market, EFMLG, Legal Obstacles to CrossBorder Securitizations in the EU (2007) pp. 55–58 www.efmlg.org/documents.htm; Perkins, (2008) 2 L. & Fin. Mkts. Rev. 238–243.

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assignee; (ii) the assigned debtor; and (iii) third parties. The law applicable to the validity and effectiveness of the assignment must be analysed with regard to the relationship in which the question arises: (i) Paragraph 1 deals with the question of whether and under what conditions the assignment is valid and effective as between the assignor and the assignee. (ii)Paragraph 2 deals with the question of whether and under what conditions the assignment is effective as against the debtor, i.e. if it can be invoked by the assignee against the assigned debtor (in French: opposabilité au débiteur). Conversely, Art. 14 does not deal with the effectiveness of the assignment of claims as against third parties, i.e competing claimants such as an attaching creditor of the assignor, the insolvency administrator or a subsequent assignee (in French: opposabilité aux tiers). This issue is left outside the scope of the Regulation. Note, however, that Art. 14 Rome I is not a true conflict-of-laws rule since it does not 4 determine the national law applicable to any of those relationships. It is more simply a rule of delimitation between two laws and its purpose is to clarify the scope of application of the law governing the relationship between the assignor and the assignee, on the one hand, and the scope of application of the law governing the assigned claim, on the other hand, when these do not coincide.3 II. Scope of application With regard to the scope of application of Art. 14 Rome I, two questions deserve particular 5 attention. The first concerns the Article’s relationship to existing international conventions, and the second concerns its scope of material application. 1. Relationships to other international instruments The Rome I Regulation has a universal scope of application (Art. 2). It applies whether the 6 laws it refers to are the laws of a Member State or not. This instrument, therefore, replaces autonomous conflict-of-laws rules on the same matter. The Regulation, however, does not prejudice the application of international conventions to which one or more Member States are parties at the time this Regulation was adopted and which lay down conflict-of-laws rules relating to contractual obligations (Art. 25. 1 Rome I). Thus, for example, the 2001 UNCITRAL Convention on the assignment of receivables in international trade contains an autonomous section establishing a uniform set of conflict-of-laws rules on this issue.4 This instrument is not in force, though if the EU were to accede to it, it would take priority over the Rome I Regulation. It belongs to the EU to make this decision, not to the Member States.5

3

4

5

Garcimartín, in: Ferrari/Leible (eds.), Rome I Regulation (2009), p. 217, 218; Plender/Wilderspin para. 13– 002. See Chapter V, United Nations Convention on the Assignment of Receivables in International Trade, 2001, United Nations Resolution A/Res/56/81 Annex, at www.uncitral.org. See Frank Bauer in: Calliess, Art. 14 notes 5–6 (arguing that the competence to access belongs to the EU, not to the Member States, even with regard to question of the law applicable to the effectiveness of the assignment against third parties).

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7 Though it may not seem clear from the text of Art. 25 Rome I, uniform (material) law

conventions also prevail over the Rome I Regulation. Therefore, when a uniform law convention declares itself applicable to an assignment contract, it will apply irrespective of the law designated by the Regulation, unless the convention states otherwise. So, for example, the 1988 UNIDROIT Convention on International Factoring defines its scope of application in Art. 2 and declares itself applicable whenever the receivables assigned pursuant to a factoring contract arise from a contract of sale of goods between a supplier and a debtor whose places of business are in different States and: (a) those States and the State in which the factor has its place of business are Contracting States; or (b) both the contract of sale of goods and the factoring contract are governed by the law of a Contracting State.6 If the first additional condition is met (ie letter (a)), the Convention will directly apply and will therefore govern the rights and obligations between the parties. If not, the Rome I Regulation will determine whether the second condition holds (ie letter (b)). 2. Scope of material application 8 Two elements define the scope of material application of Art. 14 Rome I: (i) an agreement,

and (ii) a transfer of claim. a) Contractual assignments 9 Art. 14 applies to assignments, i.e. changes in the creditor’s position by agreement. This

provision has to be read together with Art. 15 Rome I. With regard to the issue of the substitution of creditors, the 1980 Rome Convention contained two rules, one dealing with “voluntary assignment” (Art. 12) and the other dealing with “subrogation” (Art. 13). According to the Explanatory Report, both rules applied to the substitution of one creditor for another but the former included any assignment of a right based on a contract, while the latter included any assignment of a right “by operation of law” following a payment made by one person other than the original debtor.7 10 The Rome I Regulation attempts to clarify this difference and avoid any problems of char-

acterization. To these effects, the new text lays down a single provision expressly dealing with both voluntary assignment and contractual subrogation, i.e. a transfer by agreement between the parties directly or by subrogation (Art. 14). The intention of this approach is to encompass both those legal systems where the voluntary change of the position of the creditor takes place by assignment and those where it takes place by substitution (ie subrogation conventionnelle), since both fulfil an equivalent economic function.8 A different

6

7 8

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UNIDROIT Convention on International Factoring, Ottawa 28 May 1988, at www.unidroit.org. See, with further references, Frank Bauer, in: Calliess Art. 14 note 4; Cashin Ritaine, in: Cashin/Bonomi (eds.), Le nouveau règlement européen Rome I relative à la loi applicable aux obligations contractuelles (2008), p. 177, 181–186; Martiny, in: Münchener Kommentar zum BGB Art. 14 note 6; Requejo, La cesión de créditos en el comercio internacional (2002) pp. 81–84. Report Giuliano/Lagarde, Art. 13 Rome Convention note 1; Plender/Wilderspin para. 13–014. Frank Bauer in: Calliess, Art. 14 note 9; Flessner, IPRax 2009, 35, 37; Garcimartín (fn. 3), p. 219, 221; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 14 note 3; Leible/Michael Müller, IPRax 2012, 491, 492; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 11.

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provision only deals with legal or statutory subrogation, i.e. a transfer by operation of law (Art. 15).9 Art. 14 Rome I applies to all kinds of voluntary assignments, including those carried out in 11 complex transactions such as factoring or securitization. It also applies to gifts and voluntary assignments where the parties must agree on the assignment even if the obligation to assign has a non-contractual origin, e.g. when it derives from a gestio negotiorum or takes place in the framework of a trust or a contribution in kind to a company in the context of a capital increase.10 It does not apply, however, to non-consensual assignments such as the attachment or expropriation of a claim. Furthermore, the new text expressly clarifies its application to assignments by way of col- 12 lateral. According to paragraph (3) of Art. 14 Rome I, the concept of “assignment” includes not only outright transfers of claims, i.e. the transfer of full property in the claim (pro soluto and pro solvendo), but also transfers of claims by way of security as well as pledges or other security rights over claims. This clarification is also helpful to prevent, from a conflict-of-law perspective, problems of characterization from arising. Art. 14 Rome I applies to contracts whose object is the outright assignment of claims, the assignment by way of collateral, fiduciary transfers or pledges.11 Likewise (though the rule is not explicit on this point), it applies to the contractual aspects of the constitution of other proprietary rights, such as usufructs. Nevertheless, since effects vis-à-vis third parties are excluded from the scope of application of this provision (infra), this clarification only relates to contractual obligations (i) between the parties to the collateral agreement (e.g. pledgor and pledgee), and (ii) vis-àvis the debtor of a claim that has been pledged (debitor debitoris).12 b) Claims Art. 14 Rome I applies to voluntary assignment or contractual subrogation of claims; how- 13 ever, as the concept of claim (derecho/crédito, créance, Forderung) is not defined in the text or in the recitals of the Regulation,13 there are doubts concerning the nature of the claims covered by this provision. Certainly, paragraph (1) applies to contractual assignment of claims irrespective of the 14 9

10

11

12

13

See, on the difference between contractual subrogation and subrogation by operation of law, Frank Bauer, in: Calliess, Art. 14 note 9; Hartley, (2011) 60 ICLQ 29, 32–33; or Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 11. Frank Bauer, in: Calliess, Art. 14 10–11(in this case, the reference to the law of the contract must be read, unless otherwise agreed by the parties, as referring to the law that applies to the overall relationship between the assignor and assignee); see also Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/ G. Schulze/A. Staudinger, Art. 14 note 2; Plender/Wilderspin para. 13–021. Frank Bauer, in: Calliess, Art. 14 note 14; Flessner, IPRax 2009, 35, 37; Kieninger, in: Ferrari/Kieninger/ Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 14 note 2; Garcimartín (fn. 3), p. 219, 221; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO notes 2, 37. Therefore, the consequences of the “re-characterization” of an assignment as regards its “proprietary aspects” (ie when an outright assignment is re-characterized as a pledge) are governed by the law applicable to the effectiveness of the assignment against third parties (infra). Note that the English version of Article 13 Rome Convention referred to “right”, whilst the Regulation uses the term “claims”. In French, German or Spanish, the text is identical in both instruments.

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nature of the claim (i. e. public or private, contractual or non-contractual). The contract which is title or causa of an assignment is always subject to the Regulation. The real problem arises in relation to paragraph (2) of Art. 14 Rome I. As this paragraph is of normative significance, since it delimits the scope of application of the law governing the assigned claim, it is legitimate to ask ourselves what claims it covers.14 Note that this question would gain much importance if Art. 14 Rome I determined the effectiveness of the assignment of claims vis à vis third parties. 15 It is clear that the concept of “claims” in paragraph (2) of Art. 14 Rome I includes claims of

contractual origin that fall within the material scope of application of the Regulation according to Art. 1, irrespective of the object of the claim, be it to receive a sum of money, deliver goods or render a service, for example. Although the most common scenario is the assignment of pecuniary claims, and the wording of paragraph (2) reflects this assumption, the term is broad enough to include all personal claims derived from a contractual obligation regardless of their nature.15 16 There are reasons to believe that the provision encompasses non-contractual claims subject

to the Rome II Regulation, since this instrument does not contain any rule on this issue. To avoid any loopholes between the two texts (see Recital (7)), it seems reasonable to expand (2) to both contractual and non-contractual claims. Hence, (2) complements Art. 15 lit. e) Rome II Regulation.16 This provisions only refers to the “question whether a right to claim damages or a remedy may be transferred, including by inheritance”. If the application of (2) to non-contractual obligations is accepted, it means that the law applicable to the (assigned) non-contractual obligation would govern not only its transferability (Art. 15 lit. e Rome II Regulation) but all of the issues enumerated in (2) as well. 17 It does not seem reasonable, however, to further expand the scope of application of the term,

in particular to claims that fall outside the scope of application of EU instruments, such as public claims (tax refund claims, for example). Art. 14 determines the law applicable to the contract which is the title of assignment of those claims and to the issues governed by that law as lex contractus (by virtue of (1)), but may not interfere with the scope of application of the law which governs the assigned claim when this claim is excluded from the Regulations. Accordingly, (2) does not impose any obligation on Member States to subsume the issues therein listed under the law which governs the assigned claim, when this claim is excluded

14

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As to the Rome Convention, the Explanatory Report seems to assume that Article 12 (2) does not only apply to claims arising from a contract (see Giuliano/Lagarde Art. 12: “Notwithstanding the provisions of paragraph 2, the matters which it covers, with the sole exception of assignability, are governed, as regards relations between assignor and debtor if a contract exists between them, by the law which governs their contract in so far as the said matters are dealt with in that contract”; (not underlined in the original); see, summarizing the different opinions among legal scholars, Requejo (fn. 6), p. 93; Frank Bauer pp. 100–101. Doehner, in: Nomos Kommentar BGB, Art. 14 Rom I-VO note 6; Leible/Michael Müller, IPRax 2012, 491, 492. Frank Bauer p. 103; Frank Bauer, in: Calliess, Art. 14 note 16; Garcimartín, EuLF 2007, I-77, I-90; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 14 note 5; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 15; Plender/Wilderspin para. 13– 020.

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from the Regulations. With greater reason, Rome I could not have ruled on the law applicable to the effectiveness vis à vis third parties of an assignment of these claims (infra). III. Relationship between assignor and assignee, (1) (1) does not determine which law governs the mutual rights and obligations between the 18 assignor and the assignee, but merely clarifies that the same law that applies to the contract which is title or causa of the assignment also governs the relationships between those parties with regard to the assignment itself. The main function of this provision is to clarify the scope of that law vis à vis the scope of the law which governs the assigned claim as called in operation by (2). The law applicable to the contract between the assignor and the assignee must be deter- 19 mined pursuant to the conflict-of-laws rules of the Regulation (Arts. 3 et seq.).17 If the parties have chosen a law under Art. 3, this law will apply. Otherwise, the law must be determined according to the criteria of Arts. 4–8. In this case, the identification of the applicable law will depend on the nature of the contract which is the title of the assignment.18 If the contract is a simple sale of a claim, the law applicable is the law of the country where the seller (i.e. the assignor), as the party required to effect the characteristic performance of the contract, has his habitual residence by virtue of Art. 4 (2). If the assignment is pro solvendo or pro soluto in exchange for a transfer of goods or a provision of services, the law applicable is the law of the country where the seller or the provider of services (i.e. the assignees) has his habitual residence. If the contract is a factoring, the law applicable is the law of the country where the assignee (the so-called “factor”) has his habitual residence as this party is the one in charge of the characteristic obligation of the contract.19 In a securitization, the assignment of the originator to the SPV is governed by the law of the country of habitual residence of the originator. The escape clause in Art. 4 (3), however, may lead to another law. Likewise, the form of the contract of assignment must be determined in accordance with the 20 alternative connections laid down in Art. 11.20 The concept of “relationship between assignor and assignee” includes all of the rights and 21 obligations between these parties stemming from the contract which functions as title or causa of the assignment. These include: (a) the validity of the contract; (b) the interpretation and construction of the contract (e.g. whether it is an assignment or a mere promise to assign; whether the parties intend an outright transfer or a pledge); (c) the representations of the assignor as regards, for example, the right to assign the claim, the defences of the debtor or the ability to pay; (d) who is obliged to notify the assignment to the debtor; or (e) the

17 18

19 20

See, however, supra fn 10. See, analyzing the different types of contracts, Frank Bauer in: Calliess, Art. 14 note 20; Flessner, IPRax 2009, 35; Hartley, (2011) 60 ICLQ 29, 39; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 14 note 6; Leible/Michael Müller, IPRax 2012, 491, 492; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 19; Requejo (fn. 6), pp. 175–185. Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 14 note 6. Althammer/Kühle, in Ferrari, Art. 14 note 18; Frank Bauer in: Calliess, Art. 14 note 22; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 44.

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distribution of the fruits of the claim, e.g. when the assignor has demanded payment if he is obliged to hand the proceeds over to the assignee.21 22 The law applicable to the relationship between the assignor and the assignee also governs the

contractual consequences if the assignment is not effective (either vis à vis the debtor under (2) or third parties). If, for example, the assignor agrees to transfer a claim even though it is subject to a non-assignability clause (pacto de non cedendo), the contractual consequences as between the assignor and the assignee are determined by the law applicable to contract of assignment. 23 In certain jurisdictions, there is a difference between the underlying contract, which is the

title or causa of the assignment (obligatorischer Vertrag), and the agreement on transfer itself or deed of assignment (dinglicher Vertrag). This is usually explained under the concept of the Trennungsprinzip.22 The deed of assignment (dinglicher Vertrag), in principle, does not create any obligations between the parties (the obligations derive from the underlying contract); it only reflects their mutual consent, of the assignor to transfer his rights over the claim and of the assignee to acquire those rights, i.e. their consent to transfer the “proprietary rights” over the claim. Recital (38) includes this aspect within the scope of (1), but only as regards the relationships between assignor and assignee, i.e. inter partes. According to this Recital: “in the context of voluntary assignment, the term relationship should make it clear that Article 14 (1) also applies to the property aspects of an assignment, as between assignor and assignee, in legal orders where such aspects are treated separately from the aspects under the law of obligations.”23 24 Though Recital (38) is rather confusing,24 its intention is to clarify that the law referred to (1)

determines (i) the question of whether a deed of assignment, independently from or together with the underlying contract, is required to transfer the proprietary rights over the claim, and if so, (ii) the law applicable to that agreement.25 21

22

23

24

25

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With further detail, Frank Bauer, in: Calliess, Art. 14 notes 17–18; Hartley, (2011) 60 ICLQ 29, 40–41; Requejo (fn. 6), pp. 169–170. In addition, there is a further difference between those legal systems which follows a “principle of abstraction”, i.e. the agreement to assign is independent of the underlying contract; and those legal systems where the agreement is directly linked to the underlying contract, i.e. any defect in the underlying contract automatically affects the agreement to assign. The Rome I Regulation seeks to be neutral on this point. As between assignor and assignee, those issues are governed by the law designated under Article 14 (1) Rome I. The Recital goes on to clarify that the term “relationship” in Article 14 is limited to those aspects which are directly relevant to the voluntary assignment or the subrogation. Naturally, it does not include “any relationship that may exist between assignor and assignee”. Garcimartín (fn. 3), p. 219, 226; Hartley, (2011) 60 ICLQ 29, 33. Note that the difference between “proprietary aspects between the parties”, on the one hand, and “against third parties”, on the other, is difficult to understand from a functional perspective. Althammer/Kühle, in: Ferrari, Art. 14 note 2; Doehner, in: Nomos Kommentar BGB, Art. 14 note 9–13; Flessner, IPRax 2009, 35, 37–38; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/ A. Staudinger, Art. 14 note 6–7; Leible/Michael Müller, IPRax 2012, 491, 492; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 17; Plender/Wilderspin para. 13–023.

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In practice, however, the question is not very relevant. From the genesis of the Regulation, it 25 is quite clear that (1) only deals with the relationships between the assignor and the assignee, and does not deal with the effectiveness of an assignment against third parties (conditions d’opposabilité aux tiers). Art. 27 (2), the so-called review clause, is proof of this. The concept of “third parties” in this review clause includes any third parties, typically a second assignee, general creditors of the assignor or even the insolvency administrator of the assignor (infra). This implies that (1) exclusively applies to the (proprietary) effectiveness of the transfer between the assignor and the assignee. Accordingly, the practical consequences of Recital (38) are limited to those situations where the proprietary effectiveness of the transfer arises only between those two parties, and in particular when this question is relevant to determining the moment at which the assignee becomes entitled to the fruits and incomes deriving from the claim or the transmission of the risk with respect to the claim.26 In any event, Recital (38) should not be interpreted as preventing the parties from making a 26 dépeçage and choosing for the dinglicher Vertrag a different law from the law applicable to the underlying contract.27 IV. Relationships with the assigned debtor, (2) Paragraph (2) of Art. 14 Rome I deals with the effects of the assignment of a claim over the 27 debtor of the claim (opposabilité au débiteur). The Regulation only modifies the text of the Rome Convention to adapt it to the new title of Art. 14, i.e. “voluntary assignment and contractual subrogation”. The purpose of this provision is to protect the debtor of a claim by enumerating a set of 28 particular issues that, in the case of assignment, remains governed by the law applicable to the claim.28 An assignment is, in principle, res inter alios acta from the point of the debtor, and therefore an assignment cannot oblige the debtor to do something different from what he was obliged to do, in particular, in relation to his defences and the payment terms.29 (2) is based on this principle and lays down a sort of “hold harmless clause” from a conflict-of-law standpoint. An assignment cannot change the substance of the obligation and, accordingly, the legal position of the debtor as determined by the law governing that obligation. The law governing the assigned or subrogated claim is determined according to the conflict- 29 of-laws rules applicable to the claim. For contractual claims, it is the law governing the

26 27

28

29

See also Frank Bauer in: Calliess, Art. 14 note18. See, on this possibility, Althammer/Kühle, in: Ferrari, Art. 14 note 2; Frank Bauer, in: Calliess, Art. 14 note 21; Doehner, in: Nomos Kommentar BGB, Art. 14 note 14; Flessner/Verhagen (fn. 2), pp. 11–12; Flessner, IPRax 2009, 35, 38; Requejo (fn. 6), p. 174. Althammer/Kühle, in: Ferrari, Art. 14 note 4; Frank Bauer in: Calliess, Art. 14 note 23; Doehner, in: Nomos Kommentar BGB, Art. 14 note 16; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 14 note 8; Lagarde, RCDIP 80 (1991), 287, 335; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 22; Moshinsky, (1992) 108 L.Q. Rev. 591, 618; Plender/ Wilderspin para. 13–025; Requejo (fn. 6), pp. 103–156; Stadler, IPRax 2000, 104, 106. Note, however, that certain legal systems foresee exceptions to this rule at the level of substantive law: an assignment may imply a modification of the place of payment, for example, see Frank Bauer p. 283.

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contract from which the claim derives pursuant to Arts. 3–8. For non-contractual claims, it is the law applicable to the tort pursuant to the Rome II Regulation (supra).30 30 Paragraph (2) Art. 14 Rome I is not exhaustive, but lists four issues. The law applicable to the

assigned claim determines, in particular: (a) the assignability of the claim; (b) the relationship between the assignee and the debtor; (c) the conditions under which the assignment can be invoked against the debtor; and (d) whether the debtor’s obligations have been discharged. 31 The term “assignability” can be understood as a contractual issue and as a proprietary

issue.31 In its contractual sense, the term refers to the possibility of changing the person of the creditor vis à vis the debtor. The question is whether or not the person entitled to claim the fulfillment of the obligation can change. If and under what conditions this is possible is dealt with in Art. 14 (2) Rome I. In its proprietary sense, the term refers to the possibility of transferring the claim from the patrimony of one person (the original creditor) to the patrimony of another (the assignee). This does not necessarily mean a change of the person entitled to claim payment, since the original assignor may remain formally entitled against the debtor to collect the debt (as a constructive trustee or as an undisclosed agent acting for the assignee, for example). It is not clear whether this second aspect is governed by the law designated by Art. 14 (2). In principle, it seems reasonable to conclude that it should not: the question as to who eventually is the owner of the proceeds of the claim does not affect the position of the debtor.32 32 The limitation to the assignability of a claim can be either by contract or ex lege. If it is by

contract, the limitation derives from an agreement between the debtor and the assignor (eg anti-assignment clauses or pacto de non cedendo). These clauses reflect the interest of the debtor in limiting the nature and identity of the parties (creditors) with whom he stands in a relationship of indebtedness. This interest is common in financial markets, for example.33 The law governing the assigned claim governs the validity and effectiveness of this clause vis à vis the debtor.34 This law also governs the consequences of a violation of the non-assignability clause against him: e.g. the assignment cannot be invoked against the debtor and therefore he may not receive a binding direction under the contract to pay or perform in favour of third parties, or the assignment can be invoked against the debtor but the assignor may incur liability for breach of contract. Conversely, the consequences of the non-assignability clause as between the assignor and the assignee is subject to paragraph (1) of Art. 14 Rome I, e.g. whether the contract is invalid or not, or whether the assignor is obliged to demand payment on behalf of the assignee and hand the proceeds over to him. Finally, the consequences of a non-assignability clause vis à vis third parties (ie the proprietary consequences of a non-assignability clause) fall outside the scope of the Regulation.35 30

31 32 33 34

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Frank Bauer, in: Calliess, Art. 14 notes 39–40; Doehner, in: Nomos Kommentar BGB, Art. 14 note 16; Garcimartín (fn. 3), p. 219, 228. See, with further references, Frank Bauer in: Calliess, Art. 14 note 24. Frank Bauer, in: Calliess, Art. 14 note 24–27; Garcimartín (fn. 3), p. 219, 229. Perkins (2008) 2 L. & Fin. Mkts. Rev. 238, 240. Althammer/Kühle, in: Ferrari, Art. 14 note 5; Frank Bauer, in: Calliess, Art. 14 note 29; Bonomi, YBPIL 5 (2003), 53, 94; Flessner, IPRax 2009, 35, 42; Garcimartín (fn. 3), p. 219, 229; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 24.

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It is debatable whether legal limitations aimed at the protection of a creditor (e.g. restriction 33 to assign salary claims or alimony) are subject to the law governing the assigned claim.36 There might be reasons to exclude such rules from (2) since they do not exactly fit the rationale of that provision, namely the protection of the legal position of the debtor from a conflict-of-law perspective. The opposite view seems preferable, though. The law governing the claim determines its legal attributes, for both the debtor and the creditor. Hence, for example, if the law governing the claim is the lex loci laboris, this is the law that must govern the assignability of the claim of the worker (creditor), since it is the legal framework under which the protection of the worker is placed and assures the application of the law most closely connected to the issue. In any event, some of the statutory limitations on assignability could be characterized as overriding mandatory law and delimit their own scope of application regardless of the general conflict-of-laws rules of the Regulation.37 It is likewise debatable whether the term “assignability” in (2) includes statutory limitations 34 on (i) assignability of future claims, (ii) global assignments, or (iii) assignments for certain purposes, such as an assignment by way of collateral. In this case, however, there is reason to believe that it does not.38 In general, limits to the assignability of a claim which are not linked to the attributes or content of the claim should not fall under (2), as they are neither related to the material attributes of the claim, nor to the personal condition of the debtor and/or the creditor (worker, consumer, alimony creditor). They are therefore “endogenous” to the debt and not relevant to the protection of the debtor or the creditor. They concern the assignor and the assignee, and third parties (creditors of the assignor or insolvency administrators). The limitations of the assignment of future claims, for example, are not related to the material attributes of the claims as such, but are primarily related to the time when the assignment took place as a condition for its opposability to third parties. Once the claim materializes, the debtor is obliged under the term of the claim, and the assignment will be valid and effective vis à vis the debtor if it satisfies the conditions of the law applicable to the assigned claim. The time when the assignment took place mainly concerns the assignor, the assignee and third parties, and thus is not an issue subject to (2).39 35

36

37

38

39

Frank Bauer p. 282; Garcimartín (fn. 3), p. 219, 230–231; Flessner, IPRax 2009, 35, 42. However, Hartley, (2011) 60 ICLQ 29, 37–38. See, on this issue, Explanatory Note on the UNCITRAL Convention on assignment of receivables in international trade, www.uncitral.org, p. 44. Excluding those claims from the provision Frank Bauer in: Calliess, Art. 14 note 30; Flessner, IPRax 2009, 35, 42. See, however, BIICL, Study on the question of effectiveness of an assignment or subrogation of a claim against third parties and the priority of the assigned or subrogated claim over a right of another person (2011), 380; Garcimartín (fn. 3), p. 219, 229; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 25; Hartley, (2011) 60 ICLQ 29, 37. Frank Bauer, in: Calliess, Art. 14 note 31; Flessner, IPRax 2009, 35, 42; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 26. Frank Bauer in: Calliess, Art. 14 note 32–33; Doehner, in: Nomos Kommentar BGB, Art. 14 note 17; Flessner/Verhagen (fn. 2), p. 46; Flessner, IPRax 2009, 35, 42; Garcimartín (fn. 3), p. 219, 231; Kieninger, in: Basedow/Baum/Nishitani (eds.), Japanese and European Private International Law in Comparative Perspective (2008), p. 153, 155; Kieninger/Sigman, EuLF 2006, I-1, I-8 et seq. As has been said, “Why should it matter to the debtor whether the claim on which he is liable was assigned before or after the claim arose?”, Kieninger/Sigman, EuLF 2006, I-1, I-9. The same holds for bulk assignments or transfer by way of securities: “Why should they matter to the debtor?”.

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35 Together with its assignability, the law applicable to the assigned claim also governs: (i) the

conditions of the notification of the assignment to be effective against the debtor: language, form, place and time of the notification; (ii) the obligations of the debtor when he receives several notifications or payment instructions and, in general, the question of to whom the debtor must or may pay in order to discharge the obligation;40 (iii) the protection of the debtor if, for example, he enters into an agreement with an apparent creditor to modify the claim by novation;41 (iv) the right of the debtor to request adequate proof of the assignment when the assignee gives notification without the cooperation of the assignor or the ways of discharging his obligation by payment to a public deposit fund, for example; (v) the regime of defences of the debtor, in particular if and under what circumstances the debtor may setoff vis à vis the assignee;42 (vi) the conditions under which the debtor is required to pay, including issues such as whether the assignee is entitled to bring a direct claim against the debtor or whether the assignor has to be joined to the proceedings brought by the assignee;43 and (vii) the right of redemption of contentious claims (retrait litigieux, see Art. 1699 French Civil Code or Art. 1535 Spanish Civil Code).44 V. Guarantees 36 The same scheme applies to the accessory guarantees to a principal obligation. The question

of whether and under what conditions the intention of the assignor and the assignee is to transfer the personal guarantee together with the main obligation is subject to the law applicable under Art. 14 (1) Rome I. However, the question of whether and under what conditions the assignment of the main obligation and the assignment of the personal guarantee can be invoked against the guarantor is subject to the law applicable to the guarantee (as relevant claim for the application of Art. 14 (2) Rome I). Let’s assume that A has a claim against B with a guarantee provided for by C. The claim is governed by Spanish Law, but the guarantee is subject to Portuguese Law. A transfers the claim to a French Bank, D. The question of whether the intention of A (assignor) and D (assignee) was to transfer the claim together with the guarantee is subject to the Law governing the contract of assignment (Art. 14 (1) Rome I). If the answer is positive, the question of whether this assignment of the guarantee can be invoked against C is subject to Portuguese Law.

40

41 42

43

44

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It is debatable whether “the conditions under which the assignment can be invoked against the debtor” includes all conditions on the validity and transfer of the claim or only those rules related to the protection of the debtor; see, summarizing the different views, Frank Bauer in: Calliess, Art. 14 note 36. In principle, this will be determined by the law referred to in (2). If according to the law applicable to the assigned debt, the debtor may also invoke exceptions related to the validity of the assignment, e.g. lack of capacity of the assignee, the law applicable to these issues will be determined by the corresponding conflict-of-laws rules see Hartley, (2011) 60 ICLQ 29, 36. Frank Bauer, in: Calliess, Art. 14 note 38. Althammer/Kühle, in: Ferrari, Art. 14 note 6; Garcimartín (fn. 3), p. 219, 232; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 27. Insofar as this requirement is compatible with the lex fori, it seems reasonable to apply the law governing the assigned claim since it determines who are entitled to claim payment. Frank Bauer, in: Calliess, Art. 14 note 34; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 28.

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When the claim is secured by a security right on movable or immovable property, the 37 effectiveness of the transfer of this security right is usually determined by the lex rei sitae. VI. Effectiveness against third parties 1. Introduction Art. 14 Rome I does not determine which law governs the “proprietary aspects” (opposabilité 38 aux tiers) of the assignment, i.e. which law determines the requirements that must be satisfied to transfer the claim from the patrimony of the assignor to the patrimony of the assignee with effects against third parties, e.g. a valid contract or a valid contract plus a special agreement to transfer, notice or registration.45 If these requirements are met, the assignee will be able to oppose his rights over the claim (a) against the competing creditors of the assignor, (b) against the assignor’s insolvency administrator, and even (c) against prior or subsequent assignees in cases of double assignment.46 The importance of these questions is repeatedly stressed by practitioners and legal scholars.47 39 There is a general consensus among them for the need to ensure legal certainty, especially when the assignment functions as collateral to obtain finance. If assignees provide finance to the assignor and take a claim (or claims) as collateral, they need to be sure that their security rights over the claim can be invoked against other creditors of the assignor, the assignor’s insolvency administrator and also against other potential assignees. Legal uncertainty could have a high cost in such transactions. In spite of this, neither the 1980 Rome Convention nor the Rome I Regulation contains a 40 conflict-of-laws rule dealing with the effectiveness of an assignment against third parties. With regard to the Convention, legal scholars and national courts expressed different opinions on this issue48: (a) some considered that the issue was resolved by the Convention in paragraph (1) of Art. 12; (b) other considered that the issue was resolved by the Convention, but in paragraph (2) of Art. 12; (c) and finally, a third group considered that the issue was not resolved by the Convention, and left to the conflict rules of each Contracting State. This third interpretation won out over the two other.49

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If the law applicable to the third party effectiveness requires a valid contract, the validity of the contract shall be, as a preliminary question, governed by the law designated by (1). This question is sometimes referred to as “proprietary effects of the assignment”, however the term “effectiveness against third parties” seems preferable since it is more neutral and facilitates a functional approach to the problems, instead of a conceptual or dogmatic approach, see Frank Bauer in: Calliess, Art. 14 note 19; Garcimartín (fn. 3), p. 219, 225; Hartley, (2011) 60 ICLQ 29, 47–51; or Kieninger (fn. 38), p. 153, 156. See, inter alia and with further references, Flessner/Verhagen (fn. 2), p. 7; Garcimartín/Heredia, A. D. C. 2003, 969, 980–988; Kieninger (fn. 38), p. 153, 158. See i.a. Frank Bauer, in: Calliess, Art. 14 note 42; Kieninger, RabelsZ 62 (1998), 678, 689; Moshinsky, (1992) 108 L. Q. Rev. 591, 615; T.H.D. Struycken, [1998] LMCLQ 345, 350. See Kieninger, RabelsZ 62 (1998), 678.

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41 The Rome I Regulation has not changed that conclusion.50 The genesis of the instrument

and the wording of Art. 27 (2) Rome I clearly show that this issue was left outside the scope of the Regulation51 and Recital 38 cannot be raised against it. As we have seen, this Recital only refers to the “proprietary effects” – should they exist – between the assignor and the assignee, and does not provide any solution against third parties, including general creditors of the assignor and the assignee. The Review Clause laid down in Art. 27. 2 distinguishes between (i) “the question of the effectiveness of an assignment or subrogation of a claim against third parties”, and (ii) “the priority of an assigned or subrogated claim over a right of another person” precisely to make it clear that the Regulation has not adopted a position on this issue. Under the current text, therefore, neither a conflict between the assignee and the creditors or the insolvency administrator of the assignor, nor a conflict between two or more assignees of the same claim fall within the scope of the Regulation; both aspects are left to the conflict-of-laws rule (or rules) of each Member State. The same applies to the so-called “recharacterization risk”, i.e. the re-characterization of an outright transfer as a security interest. 2. Policy choices 42 The Review Clause imposes an obligation on the Commission to present a report and, if

appropriate, a proposal to meet that lacuna (Art. 27 (2)). Traditionally, four options have been suggested to solve the problem of the law applicable to the effectiveness vis à vis third parties of an assignment of claims52: (i) the application of the law governing the contract between the assignor and the assignee; (ii) the application of the law of the country where the assignor has his habitual residence; (iii) the application of the law governing the assigned claim; and (iv), the application of the law of the country where the assignee has his habitual residence. Legal scholars have thoroughly analysed the advantages and disadvantages of each of these options.53 a) The law of the contract of assignment 43 The first option is the application of the law governing the contract of assignment. Accord-

ingly, the law that applies to the contract between the assignor and the assignee, which is the title or causa of the assignment, not only governs the mutual rights and obligations between the parties, including the “proprietary effects” (Recital 38), but would also determine the effectiveness of the assignment against third parties. This is the solution adopted, for example, by the Hoge Raad (arguing the application of Art. 12 (1) of the 1980 Rome Convention to this issue).54

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See i.a. Frank Bauer in: Calliess, Art. 14 notes 19, 42; Einsele, RabelsZ 64 (2010), 91; Garcimartín (fn. 3), p. 219, 234–235; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 14 note 11; Lagarde, in: Mèlanges Jacques Bèguin (2005), p. 415, 418–419; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 16; Perkins (2008) 2 L. & Fin. Mkts. Rev. 238, 242. See, however, Althammer/Kühle, in: Ferrari, Art. 14 note 9; Flessner, IPRax 2009, 35, 38–39. For the genetic argument, see Garcimartín (fn. 3), p. 219, 235; Perkins, (2008) 2 L. & Fin. Mkts. Rev. 238, 239–242. See Green Paper, COM (2009) 175 final p. 40. See also, incorporating a comparative-law analysis, BIICL (fn. 36), pp. 168–373. See summarizing the different views, Heine, Das Kollisionsrecht der Forderungsabtretung (2012).

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Article 14

The main advantages of this solution are the following.55 (i) It promotes party autonomy, 44 since it allows the parties (assignor and assignee) to choose the law that offers the friendliest approach to their transaction. For instance, when the parties seek to constitute a particular type of security interest, they can choose a legal system that recognizes it and offers an adequate regime; or, when they seek to assign a pool of claims governed by different laws, they may subject all the assignments to one law that accepts these types of transactions. (ii) It establishes the same solution for two situations that are partially equivalent, contractual assignments and statutory subrogation (Art. 15 Rome I). Lastly (iii), it may lead to the application of the same law to two closely interconnected aspects, the contract underlying the assignment and the assignment itself, and thus prevent problems of characterization and adaptation from arising. This solution does, however, present three important disadvantages.56 (i) It is not consistent 45 with those laws which require some kind of publicity to make the assignment -or the security interest- effective against third parties. By choosing a foreign law, parties can easily avoid that requirement. (ii) It does not offer an adequate solution to the conflict between two or more assignees of the same claim. If the assignments are governed by different laws and these laws offer different solutions to the priority issue, the conflict would be unsolvable, unless an addition material rule were included. This drawback is particularly relevant for creditors who constitute a security interest over the claim, since they have no objective means of verifying whether their interest is subject to a right with a superior ranking or not.57 (iii) Thirdly, this solution does not function well for certain types of claims such as claims over bank accounts and claims deriving from financial contracts. There seems to be consensus on the idea that for these types of assets the most adequate solution is the application of the law governing the assigned claim (infra C). b) The law of the habitual residence of the assignor The second option is the application of the law of the country where the assignor has his 46 habitual residence. This solution has been adopted by the 2001 UNCITRAL Convention on the assignment of receivables in international trade (Art. 22), the Commission’s Proposal on the Rome I Regulation (Art. 13, COM (2005) 650 final) and the Belgian Act of Private International Law (Art. 87 (3)). It has also been supported by an important number of legal scholars.58 54

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Hoge Raad Ned. Jur. 1998 Nr. 585; see BIICL (fn. 36), p. 385; Flessner/Verhagen (fn. 2), pp. 8–9, with further references. See Althammer/Kühle, in: Ferrari, Art. 14 notes 10–11; Frank Bauer in: Calliess, Art. 14 note 50; BIICL (fn. 36), pp. 41–42, 385–386; Flessner/Verhagen (fn. 2) pp. 21–22, 41; Garcimartín/Heredia, (fn 48) 980– 990; Leible/Michael Müller, IPRax 2012, 491, 497. See Frank Bauer in: Calliess, Art. 14 note 51; BIICL (fn. 36), pp. 42, 387; Kieninger (fn. 38), p. 153, 159; Hartley, (2011) 60 ICLQ 29, 51; Leible/Michael Müller, IPRax 2012, 491, 497. A partial solution would be to set out a meta-rule to solve the conflict, e.g. giving priority to the first in time assignment see Flessner/Verhagen (fn. 2), 32; Verhagen/van Dongen, (2010) 6 JPrIL 1, 17–19; Selke, WM 2012, 1467 (the latter summarizing all the suggested alternatives to resolve this issue, e.g. Flessner, Verhagen, Einsele or Mann/Nagel, and concluding that none of them is satisfactory). See, with further references, Frank Bauer, in: Callies, Art. 14 note 55; Bonomi, YBPIL 5 (2003), 53, 95; Kieninger/Sigman, EuLF 2006, I-1; Lagarde, RCDIP 95 (2006), 331, 344; Requejo (fn. 7), pp. 223–240; T.H.D. Struycken, [1998] LMCLQ 345, 357; Walsh, 106 Dickinson L. Rev. 159, 171 (2001).

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47 The main advantages of this solution can be summarized as follows.59 (i) It is based on a

unique and objective factor, which provides an efficient manner to inform third parties about the assignment and, therefore, grants certainty to creditors that seek to constitute a security interest over the claims of their debtors. (ii) Secondly, this solution is particularly adequate for future and bulk assignments, since only one system of law applies to the assignment of a pool of credits governed by different laws. (iii) Thirdly, this rule entails that the law governing the effectiveness of the assignment will coincide with the law governing the insolvency proceedings of the assignor. The main concern of an assignee or collateral taker is likely to be the recognition of his rights over the assigned claim in case of insolvency of the assignor, i.e. that the ownership of the assignee or his security interest over the claim will be respected by the insolvency administrator and, consequently, the claim will not be included free of charge in the insolvency estate. The application of the same law to both the insolvency proceedings and the third-party effectiveness of the assignment facilitates the legal analysis and prevents problems of characterization and adaptation from arising. This argument, however, is somehow relative in the EU since according to Art. 5 of the Insolvency Regulation (Art. 8 in the Recast), an assignee or a collateral taker is not affected by the opening of insolvency proceedings if the Centre of Main Interest of the assignor is located in a Member State and the assigned debtor is located in a different Member State (see Art. 5 and Art. 2 (g) (3), Art. 8 and 2 (g) in the Recast infra VII).60 48 There are also a number of arguments that have been invoked against this approach.61 (i)

With regard to the connecting factor, three counter-arguments have been put forward. On the one hand, the connecting factor is not always easy to ascertain. There are legal entities where it is not easy to identify the location of their habitual residence, for example ecompanies, unincorporated associations, companies with double-headquarters or SPVs. On the other hand, the connecting factor is movable. This introduces a risk for assignees and collateral takers. In principle, once an assignment has been perfected, nothing impedes the assignor from moving to another country and granting a second assignment there, which may prevail over the former (and even without a second assignment, the question arises of whether and under what conditions the original assignment is to be recognized in the new jurisdiction). And, finally, its application also raises problems where there are two or more joint assignors established in different countries. (ii) Secondly, like the first option, the 59

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See ia Frank Bauer in: Calliess, Art. 14 note 55–56; Bazinas, Unif. L. Rev. (2002), 60 passim; BIICL (fn. 36), p. 44, 394–396; Hartley (2011) 60 ICLQ 29, 53–54; Kieninger (fn 39) 156–167; Kieninger, in: Ferrari/ Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 14 note 12; Leible/Michael Müller, IPRax 2012, 491, 498; Mankowski, IPRax 2012, 298; Martiny, in: Münchener Kommentar zum BGB Art. 14 Rom I-VO note 35. See also, UNCITRAL Legislative Guide on Secured Transactions, pp. 399–401, at www.uncitral.org. On the compatibility of this solution with the TFEU, Mankowski, IPRax 2012, 298, 303, with further references. See, Virgos/Garcimartín, The EU Insolvency Regulation. Law and Practice (2004) pp. 91–108; Flessner/ Verhagen (fn. 2), p. 60; with further detail, Mankowski, IPRax 2012, 298, 300–301. As regards the application of Article 13 Insolvency Regulation (actions to set aside), the law referred to in that provision would be the law applicable to the effectiveness of the assignment against third parties, including, if it is a condition for that effectiveness, the law governing the contract between the assignor and the assignee. Frank Bauer p. 289; BIICL (fn. 36) 44, 396–398; Garcimartín (fn. 3), p. 219, 242–243; Hartley, (2011) 60 ICLQ 29, 54–55; Leible/Michael Müller, IPRax 2012, 491, 499; Martiny (fn. 2) Art. 14 note 35; Perkins (2008) 2 L. & Fin. Mkts. Rev. 238, 238; Plender/Wilderspin para. 13–010.

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Chapter II: Uniform Rules

Article 14

law-of-the-assignor approach does not function well with regard to claims arising from bank accounts or financial contracts (infra C). In fact, it is quite telling that the UNCITRAL Convention excludes these claims from its scope of application (Art. 4 (1)).62 (iii) Thirdly, this solution results in an increase of the transaction costs for assignees and collateral takers, insofar as it adds a third law to the menu of applicable laws. There are many transactions where the assignee or the collateral takers need certainty that the assignment is valid and effective, i.e. can be invoked vis à vis the assignor, the assigned debtor, and any third party. With regard to the assignor, a due diligence on the law governing the contract of assignment must be undertaken. With regard to the assigned debtor, a due diligence on the law governing the assigned claim must be undertaken. The law-of-the-assignor approach may thus require a third due diligence on a different law.63 c) The law of the assigned claim The third option is the application of the law governing the assigned claim. It entails that the 49 same law that governs the opposability of the assignment against the debtor also determines its effectiveness vis à vis third parties. This is the solution applied by the German Bundesgerichtshof,64 by the English Courts,65 arguing, under the Rome Convention, the application of its Art. 12 (2), by Art. 17 Spanish Royal Decree 5/2005 and by Art. 23 Japanese Act on Private International Law. The arguments usually invoked in favour of this approach can be summarized as follows.66 50 (i) It guarantees legal certainty since the connecting factor is “unique and immutable”. The law applicable to the effectiveness and priority of an assignment does not change even if (a) the assignor moves his habitual residence, (b) the assignor has transferred the same claim to two different assignees, or (c) there have been subsequent assignments (assignor to assignee 1, and assignee 1 to assignee 2). (ii) It reduces the transaction costs since the same law determines both the effectiveness against the debtor and the effectiveness against third parties. Assignees do not need to check an additional law and do not need to guess whether a legal limitation on assignability is to be characterized as debtor-protection oriented or as third-parties-protection oriented. Accordingly, it prevents problems of characterization and adaptation from arising. (iii) It is a particularly appropriate solution for claims arising from bank accounts and financial instruments, where it is customary to conduct due diligence on each receivable to be assigned and its effectiveness vis à vis the debtor. With regard to bank accounts in particular, it is usually pointed out that banks should be able to charge over their own indebtedness vis à vis their clients, irrespective of the latter’s habitual residence. The main disadvantages of this solution are twofold. (i) With regard to the connecting 51 factor, it has been argued that there may be cases in which it is difficult to identify the 62 63 64 65

66

See, however, Mankowski, IPRax 2012, 304–306. See, however, Mankowski, IPRax 2012, 298, 302–303. See, BGH IPRax 2000, 128; Frank Bauer in: Calliess, Art. 14 note 25. Raffeisen Zentralbank Österreich AG v. Five Star General Trading LLC [2001] 3 All ER 257 (C.A.) (according to the dominant view on this ruling). Frank Bauer in: Calliess, Art. 14 note 52; BIICL (fn. 36), pp. 43, 390–391; Doehner, in: Nomos Kommentar zum BGB, Art. 14 note 23, 24; Garcimartín (fn. 3), p. 219, 244; Hartley (2011) 60 ICLQ 29, 53–54; Flessner/Verhagen (fn. 2) p. 47; Leible/Michael Müller, IPRax 2012, 491, 496; Plender/Wilderspin, para. 13–043.

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Rome I Regulation

law applicable to the assigned claim (for example, when the original contract does not contain any choice of law clause); and that it does not work for future and bulk assignments.67 This latter point is particularly relevant because these operations require the assignment of a pool of claims which do not have an applicable law yet (future claims) or which may be governed by different laws (bulk assignments). In this case, assignees must perfect their acquisitions according to several laws. This may be particularly cumbersome for the factoring or the invoice discounting sector. (ii) Furthermore, in cases of insolvency of the assignor, the solution may give rise to characterization and adaptation problems between the law applicable to the effectiveness against third parties of a transfer of claims or a security interest and the lex fori concursus (at least outside the scope of application of the EU Insolvency Regulation). (iii) Finally, it is also argued that the effectiveness against third parties of an assignment is not related to the protection of the assigned debtor and, therefore, that the law governing the assigned claim is not an appropriate connecting factor for this issue. From the debtor’s standpoint, the key point is who is entitled to claim payment, and not whether the claim appertains to the patrimony of one person (the assignor) or another (the assignee).68 Both aspects are different, and therefore the law applicable to the former should not have any bearing on the law applicable to the latter. d) The law of the habitual residence of the debtor 52 The fourth option is the application of the Law of the country where the assigned debtor has

his habitual residence. This option was historically followed by certain authors and courts in France,69 and could find support in Art. 2 (g) III of the Insolvency Regulation which defines that “a Member State in which assets are situated shall mean, in the case of:…-claims, the Member State within the territory of which the third party required to meet them has the centre of main interests” (see Art. 2 (g) (viii) in the Recast). It could be argued that the constitution of property rights over a claim must be governed by the lex rei sitae principle, and claims are considered to be located where the debtor of those claims (debitor cessus) has his habitual residence or centre of main interest. 53 This option has barely had any influence. While it is clear that the sense and purpose of

Art. 2 (g) III of the Regulation is not to solve any conflict of laws problems,70 the habitualresidence-of-the-debtor approach presents all the disadvantages of the law-of-the-assigned claim approach and none of its advantages. Nowadays, neither legal scholars nor practitioners advocate this solution.71

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Frank Bauer, in: Calliess, Art. 14 note 53; BIICL (fn. 36), pp. 43, 391–392; Hartley (2011) 60 ICLQ 29, 53, 56; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 14 note 12; Leible/Michael Müller, IPRax 2012, 491, 496–497. Frank Bauer pp. 131–198; Flessner, IPRax 2009, 35, 40. See, for example, the references in Pardoel, Les conflits des lois en matière de cession de créance (1997) p. 191; Sinay-Cytermann, RCDIP 81 (1992), 35, 42. See Virgos/Garcimartín (fn. 60), p. 164. See Frank Bauer in: Calliess, Art. 14 note 54; BIICL (fn. 36) 384; Garcimartín (fn. 3), p. 219, 245; Leible/ Michael Müller, IPRax 2012, 491, 499. Note, however, that the law of the country where the assigned debtor has his habitual residence may have certain relevance when the assignee seeks to enforce the claim against the assigned debtor. The enforcing measures that can be adopted against the assigned debtor are governed by that law.

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Chapter II: Uniform Rules

Article 15

3. The BIICL Proposal In 2010, the BIICL (British Institute of International and Comparative Law) was engaged by 54 the European Commission to draft a study on the effectiveness against third parties of the assignment of claims. In its study, the BIICL has formulated three possible solutions, and made suggestions for the amendment of Recital (38) and for the insertion of new recitals.72 The first solution it proposes is the application of the law chosen by the assignor and the assignee, but with restrictions as regards the laws that the parties can choose, which would have to be either the law governing the assigned claim or the law of the assignor’s habitual residence; otherwise, the law governing the assigned claim applies.73 The second solution it proposes is the application of the law governing the assigned claim, but with an optional exception for factoring.74 Finally, the third solution proposes the application of the law of the assignor’s habitual residence, but with an optional exception for claims under financial contracts.75 The European Commission has not yet expressed a preference for any of these options. Article 15: Legal subrogation Where a person (the creditor) has a contractual claim against another (the debtor) and a third person has a duty to satisfy the creditor, or has in fact satisfied the creditor in discharge of that duty, the law which governs the third person’s duty to satisfy the creditor shall determine whether and to what extent the third person is entitled to exercise against the debtor the rights which the creditor had against the debtor under the law governing their relationship.

Bibliography Berends, Cessie, subrogatie, hoofdelijke aansprakelijkheid, verrekening en financiële overeenkomsten in Rome I, WPNR 6824 (2009), 1038 Einsele, Das Internationale Privatrecht der Forderungszession und der Schuldnerschutz, ZvglRWiss 90 (1991), 1 Lagarde, Le nouveau droit international privé des contrats après l’entrée en vigueur de la Conven-

tion de Rome du 19 juin 1980, RCDIP 80 (1991), 287 Mäsch, Abtretung und Legalzession im Europäischen Kollisionsrecht, in: Leible (ed.), Das Grünbuch zum Internationalen Vertragsrecht (2004), p. 193 Mari, La subrogación en el Reglamento (CE) n° 864/2007: aspectos prácticos, AEDIPr 2007, 267.

I. Introduction The purpose of Art. 15 Rome I is to delimit the respective scopes of application between the 1 law governing the third party’s duty to pay and the law governing the creditor’s claim to reimbursement in case of legal subrogation This provision has remained practically un72 73 74 75

BIICL (fn. 36), pp. 404–415; see, for a critical analysis, Kieninger, IPRax 2012, 289; Selke, WM 2012, 1467. BIICL (fn. 36), p. 408. BIICL (fn. 36), p. 411. BIICL (fn. 36), p. 414.

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changed with regard to its predecessor (Art. 13 of the 1980 Rome Convention), with only minor adjustments introduced to make it parallel to the text of the Rome II Regulation, namely the latter’s Art. 19. II. Scope 2 Art. 15 Rome I applies to the legal assignment (cession legis) or subrogation of contractual

claims derived from a statutory rule. It presupposes a change in the position of the creditor not based on a voluntary assignment, as envisaged by Art. 14 Rome I, but on a transfer by operation of law following a payment made by a third party, ie. a person other than the original debtor, for example when guarantor pays instead of the main debtor.1 3 Art. 15 Rome I applies not only when the duty to pay is based on a relationship between the

third party and the creditor (a duty vis à vis the creditor), but also when the relationship is between the third party and the debtor (e.g. a mandate of payment) or both.2 The subrogation of a third party collateral provider, such as when a third party provides a mortgage over his own assets to secure a debt of the main obligor, also falls within the scope of this provision.3 4 In addition, Art. 15 Rome I applies to the legal subrogation of contractual claims by social

security authorities or other public funds.4 Note, however, that since the provision only applies when the main obligation falls within the scope of application of Rome I – ie when the claim in which the third party is to be subrogated is of a contractual nature –, the practical importance of these types of cases will be marginal.5 5 Legal subrogation on non-contractual claims, i.e. when the debt to be paid has its origin in

tort, is subject to Art. 19 Rome II, which contains a parallel provision.6 6 Art. 15 Rome I does not apply to multi-party liability. These situations, i.e. when the obli-

gation to pay by the debtor is as main obligor, fall within the scope of Art. 16 Rome I.7 And it

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Althammer/Kühle, in: Ferrari, Art. 14 note 1. Althammer/Kühle, in: Ferrari, Art. 15 note 6; Doehner, in: Nomos Kommentar BGB Art. 15 note 4; Martiny, in: Münchener Kommentar BGB, Art. 15 note 4; Kieninger, in: Ferrari/Kieninger/Mankowski/ Otte/Saenger/G. Schulze/A. Staudinger, Art. 15 note 2. Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 15 note 4. Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 15 note 2; Martiny, in: Münchener Kommentar BGB, Art. 15 note 6. Therefore, the subrogation envisaged by Art. 85 (1) Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems, OJ 2004 L 200/1, will not concur with Art. 15, since that former provision usually applies to the subrogation of non-contractual claims. The same holds in the case of maintenance payments, since maintenance obligations based on family law are excluded from the scope of application of the Rome I Regulation by virtue of Art. 1 (2) (b). Althammer/Kühle, in: Ferrari, Art. 15 note 5; Report Giuliano/Lagarde, Art. 13 Rome Convention note 1 in fine; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 15 note 2.

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Chapter II: Uniform Rules

Article 15

does not apply when the payment is not based on legal duty to pay either, e.g. in a negotiorum gestio case.8 III. Content Art. 15 Rome I presupposes that the law applicable to the claim between the original creditor 7 and the debtor, on the one hand, and the law applicable to the obligation of payment by a third party, on the other, do not coincide. In this context, the provision sets out that the statutory subrogation, i.e. whether and under what circumstances the third party has a right to claim from the original debtor, is not governed by the former, but by the latter, i.e. by the law governing the duty to pay by the third party, e.g. the law governing the contract of mandate, guarantee or the credit default insurance. The law designated by Art. 15 Rome I determines whether and to what extent, i.e. in full or 8 only to a limited amount, the third party has a subrogation right.9 Naturally, Art. 15 Rome I only envisages a change of creditor, in which case the law applicable to the claim towards the debtor, which is to be determined in accordance with Art. 3 et seq. Rome I, must remain the same before and after subrogation.10 The legal position of the debtor should not be affected and therefore the law applicable to the original claim continues to govern, among other things, defenses such as the limitation period, set-off rights, notification, or any ceiling on the amount of money to be claimed.11 The same law would apply to the prevalence of antiassignment clauses or provisions vis à vis the subrogation right.12 In general, though Art. 15 Rome I, unlike Art. 14 and 16 Rome I, does not contain any rule on debtors’ protection, the most coherent interpretation would be to extend the principle underpinning Art. 14 (2) Rome I to Art. 15 Rome I, especially with regard to the material rules aimed at the protection of the debtor.13

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Althammer/Kühle, in: Ferrari, Art. 15 note 7; Doehner, in: Nomos Kommentar BGB Art. 15 note 6; Martiny, in: Münchener Kommentar BGB, Art. 15 note 6. Althammer/Kühle, in: Ferrari, Art. 15 note 6; Report Giuliano/Lagarde, Art. 13 Rome Convention note 2 III; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 15 note 4; Rödl, in: Calliess, Art. 15 note 3. Report Giuliano/Lagarde, Art. 13 Rome Convention note II; Rödl, in: Calliess, Art. 15 note 7. Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 15 note 6; Rödl, in: Calliess, Art. 15 note 7. Althammer/Kühle, in: Ferrari, Art. 15 note 3; Doehner, in: Nomos Kommentar BGB Art. 15 note 9; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 15 note 6; Lagarde RCDIP 80 (1991), 287, 336; Martiny, in: Münchener Kommentar zum BGB, Art. 15 note 8. Doehner, in: Nomos Kommentar BGB Art. 15 note 9; Einsele, ZvglRWiss (1991), 1, 19 et seq.; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 15 note 7; Rödl, in: Calliess Art. 15 note 9. See on this issue Mari, AEDIPr 2007, 267, 273–276; Max Planck Institute for Comparative and International Private Law, Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), 93.

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Article 16: Multiple liability If a creditor has a claim against several debtors who are liable for the same claim, and one of the debtors has already satisfied the claim in whole or in part, the law governing the debtor’s obligation towards the creditor also governs the debtor’s right to claim recourse from the other debtors. The other debtors may rely on the defences they had against the creditor to the extent allowed by the law governing their obligations towards the creditor.

I.

II.

Introductory remarks 1. Art. 16: A general overview . . . . . . . . . . . . . 1 2. Recourse between debtors in the 1980 Rome Convention . . . . . . . . . . . . . . . . . . . . . . . 4 The conflict-of-laws rule (Art. 16, first period) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1. The payor’s law principle . . . . . . . . . . . . . . . 9 2. Art. 16 of the Rome I Regulation and non-contractual obligations . . . . . . . . . . . . 12 3. The notion of “same claim” . . . . . . . . . . . . 13

III. IV.

4. “Multiple liability” as a matter of substantive domestic law . . . . . . . . . . . . . . . . 15 5. Art. 16, first period, and “multiple creditors” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 6. Art. 16, first period, and “false debtors” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 A rule for the protection of secondary debtors (Art. 16, second period) . . . . . . . . . . 22 The Closest Connection . . . . . . . . . . . . . . . . . . . . 27

I. Introductory remarks 1. Art. 16: A general overview 1 Art. 16 of the Rome I Regulation deals with the question of which law should govern the

rights of one debtor (the payor), who wholly or partially satisfies the claim of the creditor, towards the other debtors (secondary debtors). In particular, especially in those circumstances where co-debtors are indeed jointly liable, or – better yet, to use the wording of the regulation – subject to a “multiple liability” regime, but on different legal grounds, the question on which law should govern the recourse rights arises: on the one hand, secondary debtors could argue that this law should be the one governing their obligation towards the (original) creditor, whilst, on the other, the payor could argue that such law should be the one governing his/her obligation towards the (original) creditor. 2 In an effort to possibly encourage co-debtors to satisfy the claims of creditors, the Regulation

follows the “payers law principle”, according to which the right the solvens has towards secondary debtors, and, in particular, the requirements of the action in contribution, the interest rates and the fulfilment of the obligation are governed by the payor’s law.

3 Still, recourse between debtors and the application of the payor’s law to the claims the solvens

has against secondary debtors, could worsen the position of the latter;1 the EU law-maker found a balance between the different interests at stake, namely providing secondary debtors with the possibility to rely on all defences they had against the creditor to the extent allowed by the law governing their obligations towards the creditor: this should avoid that secondary

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On which see infra, III.

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debtors are called to reimburse the solvens for obligations they not longer had towards the creditor. 2. Recourse between debtors in the 1980 Rome Convention Firstly, one must notice the differences between Art. 16 of the Rome I Regulation and its 4 predecessor: Art. 13 of the 1980 Rome Convention on contractual obligations.2 The issue of recourse between “multiple liable” debtors only acquired structural autonomy with the Rome I Regulation, since in the 1980 Rome Convention the issue of the law applicable to rights the solvens has against co-debtors were addressed by a paragraph of Art. 13, devoted to subrogation, which extended the operability of the conflict-of-laws rule from the latter to the former. Thus, nowadays there is a specific provision in case of legal subrogation,3 where the payor, 5 even though obliged by law to satisfy the contractual right of the creditor, is not debtor himself (Art. 15), and a provision where the payor is originally one of the debtors (Art. 16).4 Both the provisions lay down rules to determine the applicable law to the action in recourse.5 II. The conflict-of-laws rule (Art. 16, first period) Where a creditor has a claim against several debtors liable for the same claim, and one of the 6 debtors has already satisfied the claim in whole or in part, the law governing the debtor’s obligation towards the creditor also governs the debtor’s right to claim recourse from the other debtors. Thus, according to Art. 16, first period, of the Rome I Regulation, the law regulating the relationship between the creditor and the solvens shall also be the law applicable to determine the right of said solvens to recover the sum that another jointly and several responsible should have paid. Such payment by one party, acquiring the right to act in recourse, could both be the result: i) of the debtors will, having an agreement between them to make only one pay the whole sum to the creditor, and then to reimburse the payor; ii) of the conduct of the solvens, which sua sponte decides to pay; or iii) of the will of the creditor, suing the financially stronger debtor to ensure the success of the judicial action. Such law will assess the recourse rights the solvens has towards other co-debtors, and in 7 particular the requirements and conditions of the recourse between debtors (and whether or not the solvens has or does not have to take action against each co-debtor only for the limited share of the latter), interest rates, limitations and prescription,6 and fulfilment of the obligation.7 The payor’s law will thus not be the one determining the existence of the debt the 2

3 4 5

6

7

80/934/EEC: Convention on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980, OJ 1980 L 266/1. Conflict-of-laws rules for contractual subrogation are contained in Art. 14 of the Rome I Regulation. Cf. mutatis mutandis, Dornis, J. of Priv. Int. Law 4 (2008), 237, 243. Cf. Report on the Convention on the law applicable to contractual obligations by Mario Giuliano, Professor, University of Milan, and Paul Lagarde, Professor, University of Paris I, OJ 1980 C 282/1, Art. 13. Having Art. 12 (1) (d) followed the idea, already developed in some jurisdictions, that prescriptions and limitation are a matter of substantive law (cf. Gestri, RDIPP (1988), 53, 57). Already with regard to Art. 13 (2) of the 1980 Rome Convention, Grasso, in: Bianca/Giardina (eds.),

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secondary debtor had with the original creditor, nor the existence of the joint responsibility of the co-debtors, this elements being governed by the law applicable to the single obligation between the original creditor and the secondary debtor.8 8 Obviously, also the lex fori will be applied, this being the law governing all the procedural

powers, actions and procedural prescriptions of the solvens.9 Moreover, it could also be argued that the lex fori will still be applied for substantive limitations and prescriptions in those cases where limitations and prescriptions as regulated by the lex contractus are as short as to make an effective exercise of the rights impossible, thus being against the public order of the seized jurisdiction.10 1. The payor’s law principle 9 No matter what the reasons that led one debtor to pay are, nor which law is applicable to the

single obligations of the other co-debtors,11 the solvens will benefit of the “payer’s law principle”.12 Such principle has been both contested and welcomed.13 Generally speaking, for such praises and critiques one could also look up to Art. 20 of Rome II Regulation14 which entails a provision on recourse between debtors that is similar to Art. 16 of the Rome I Regulation. Such similarity is determined by the fact that Art. 13 of the 1980 Rome Convention was the reference provision for Art. 20 of the Rome II Regulation;15 with Art. 13 of the 1980 Rome Convention being also the drafting reference for Art. 16 of the Rome I Regulation, it seems normal that the two rules are similar. Nonetheless, even though the two provisions adopt the “payer’s law principle”, the reasons underlying this choice are slightly different, all giving the possibility to analyse in broader terms why such principle has been welcomed by some, and contested by others.

10 In the field of non-contractual obligations, on the one hand, it has been argued that such

principle was a necessary incentive to make one debtor pay, in order to foster the interest of

8 9 10

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13 14

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Convenzione sulla legge applicabile alle obbligazioni contrattuali (Roma, 19 giugno 1980), in: (1995) Nuove Leggi Civ. Comm., 1070, 1071 and, with regard to Art. 33 EGBGB III 2, introduced by the Gesetz vom 25.7.1986 zur Neuregelung des Internationalen Privatrechts, BGBl. 1986, I, 1142, see Martiny, Mehrpersonenverhältnisse und Rückgriffsansprüche im Unterhaltsrecht Deutschlands, Österreichs, der Schweiz, Frankreichs, Englands und der Vereinigten Staaten von Amerika, Band II (2000), p. 904. Infra, III. Gestri (fn. 6), 57. Ferrari, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/Schulze/Staudinger, Internationales Vertragsrecht (2012), p. 292, 301. Cf. Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/Schulze/Staudinger, Internationales Vertragsrecht (2012), p. 319, 320; Leandro, in: Salerno/Franzina (eds.), Regolamento CE n. 593/2008 del Parlamento europeo e del Consiglio del 17 giugno 2008 sulla legge applicabile alle obbligazioni contrattuali (“Roma I”), in: (2009) Nuove Leggi Civ. Comm., 866, 871. In the case law, interpreting Art. 33 III 2 EGBGB, see the German BGH, Urteil v. 26.9.2007, XII ZR 90/05, in: NJW 2007, 3564. Max Planck Institute for Comparative and International Private Law, RabelsZ 71 (2007), 225, 329. Regulation No 864/2007/EC of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II), OJ 2007 L 199/40. Cf., Hamburg Group for Private International Law, RabelsZ 67 (2003), 1, 47.

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the damaged party to redress; on the other hand, some scholars argued that such incentive will not depend on a pre-evaluation of the law applicable to the action in recourse and – economically speaking – a run of payors is unlikely, at least.16 In contractual matters, if the “payer’s law principle” is also understood as an incentive for one 11 co-debtor to pay, the rule should be criticized as well, since – just as in non-contractual matters – the privilege to apply the payor’s law to the action in recourse does not seem an effective incentive. In this sense, one must keep in mind that co-debtors can always rely upon the defences they could have invoked against the original creditor;17 given this possibility, in a scenario where the solvens does not know whether there are such defences, the mere applicability of the payor’s law to the action in recourse does not balance the uncertainty of the success of the action itself. Nonetheless, the principle at hand should not be criticized if one rethinks the ratio underlying this choice: in lack of such provision, solvens would have to face the application of different laws in one single action for recourse, namely, as many laws as the laws that regulated the single debts of multiple responsible with the original creditor. It is clear that such scenario would lead to great uncertainty and, moreover, would bear the application of a law that does not necessarily have a significant connection with the claim of the payor. This would be contrary to one of the goals of the Rome I Regulation, which is, amongst others, to foster legal certainty18 and the application of a law that presumptively has (in most cases)19 a significant connection with the payor’s right;20 in this sense, the “payer’s law principle” seems to be the most suited to assure certainty of the law, by providing one single applicable law to all claims of the payor, and seems to be the one that has a significant connection with the action for recourse: thus, so conceived, the “payer’s law principle” seems to be acceptable in the framework of the Rome I Regulation. 2. Art. 16 of the Rome I Regulation and non-contractual obligations Art. 13 of the 1980 Rome Convention expressly states that the creditor has a “contractual 12 claim”, whilst Art. 16 of the Rome I Regulation generally refers to a “claim” towards multiple debtors.21 This change in wording should not be read as making Art. 16 of the Rome I Regulation also applicable in cases where the creditor has contractual claims over one party, and non-contractual, or pre-contractual,22 claims towards another debtor. Whilst it is un16

17 18 19 20

21 22

See Bach, in: Huber (ed.), Rome II Regulation: Pocket Commentary (2011), p. 389, 395; Dornis (fn. 4), 237, 252–3. See Rome I Regulation, Art. 16, second period. See Rome I Regulation, Art. 16, Recital 16. See infra, IV. Rome I Regulation, Recital 16, 20 and 21; see Art. 4. It should be noted that the Regulation speaks of most significant connection of the law with the contract, assuming that the case brought before a court is between the parties of a contract. Coherently, the Rome II Regulation speaks about the most significant connection of the applicable law to a tort (recital 14). In case of recourse between co-debtors, the lack of a direct contract between the debtors themselves, together with the contractual nature of the claim, should induce to talk about most significant connection of the applicable law with the payor’s right. On the other hand, Art. 15 of the Rome I Regulation still makes reference to “contractual claims”. As known, regardless domestic conceptualizations, the ECJ ruled that pre-contractual liability falls within the scope of application of rules of private and procedural international law drafted for non-contractual obligations (Fonderie Officine Meccaniche Tacconi SpA v. Heinrich Wagner Sinto Maschinenfabrik GmbH

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disputed that EU provisions are sometimes extensively interpreted, it cannot be argued that such an interpretation can operate in such a way to “attract” and “mingle” different categories of private international law. Acts on contractual obligations, if not otherwise provided by the legislator itself, cannot extend their scope of application to non-contractual obligations. Moreover, against such possible interpretation it should be kept in mind the material scope of application23 of the Rome I Regulation, which goes against any other different solution;24 in addition, the existence of a provision in the Rome II Regulation which is similar to Art. 16 of the Rome I Regulation,25 confirms the fact that the latter does not find application for non-contractual liabilities.26 3. The notion of “same claim” 13 According to its wording, Art. 16 of the Rome I Regulation has to be applied in all such

circumstances where a creditor has a claim against several debtors who are liable for the same claim (and one of them has already paid the creditor). Such wording could raise the question whether or not the expression “same claim” should be narrowly constructed as to mean that all debtors should have an obligation arising out of the same legal ground, or rather has to be understood as to encompass situations where debtors have contractual obligations towards a creditor that do not arise out of the same contract. 14 Scholars argue that the terminology of the Regulation is open to extensive interpretation,

and thus the applicability of Art. 16 does not necessarily require that multiple debtors must be liable on the same legal ground (as long as the different responsibilities are contractual in nature).27 Such conclusion has indeed to be upheld for different reasons: i) in the first place, the different languages of the Regulation make reference to the claim, rather than on the

23

24 25

26

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(HWS), (Case C-334/00) [2002] ERC I-7357). The principle elaborated with regard to rules of procedural international law, is valid as well when applying both rules of contractual and non-contractual private international law, this, in light of the duty to coordinate these instruments, on which see ex multis, Carruthers, in: Queirolo/Benedetti/Carpaneto (eds.), La tutela dei soggetti deboli tra diritto internazionale, dell’Unione europea e diritto interno (2012), p. 15. On the applicability of Art. 33 III 2 of the EGBGB, incorporating within the German system Art. 13 (2) of the 1980 Rome Convention, von Bar, RabelsZ 53 (1989), 462, 483. Cf. Rome I Regulation, Art. 1. Rome II Regulation, Art. 20: “If a creditor has a claim against several debtors who are liable for the same claim, and one of the debtors has already satisfied the claim in whole or in part, the question of that debtor’s right to demand compensation from the other debtors shall be governed by the law applicable to that debtor’s non-contractual obligation towards the creditor”, on which see Bach (fn. 16), p. 389. Already arguing that, at the time, neither the Rome II Proposal and the Rome Convention applied to situations in which both contractual obligations and non-contractual obligations were involved (excluding though the need to create a specific rule, given that the different conflict-of-laws rules identical), see, Hamburg Group for Private International Law (fn. 15), 50; Max Planck Institute for Comparative and International Private Law (fn. 13), 329. Cf. also Stone, EU Private International Law (2010) p. 337 and Bach (fn. 16), p. 392. Cf. also Freitag, in: Rauscher (ed.), Europäisches Zivilprozess- und Kollisionsrecht (2011), p. 538, 550. See Max Planck Institute for Comparative and International Private Law (fn. 13), 330; Grasso (fn. 7), 1072; Leandro (fn. 11), 871 and Morse, in: Beale (ed.), Chitty on Contracts, Vol. I, General Principles (2008), p. 2165, 2247. With reference to Art. 20 of the Rome II Regulation, Bach (fn. 16), p. 393. Also in the

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legal ground of the liability;28 if the EU law-maker would have wanted to limit the applicability of Art. 16, it would have drafted the provision as to make it clear that multiple debtors should be liable for the same claim on the same ground; ii) a narrow interpretation of the wording “same claim” would reduce the applicability of Art. 16 in all those cases where debtors are liable on different legal grounds, such as in those cases where professionals jointly work for the client, but on the basis of different contracts (manufactures, contractors, lawyers,29 etc …); iii) such interpretation seems more consistent with comparative and supra-national principles.30 Indeed, it must be recalled that the Draft Common Frame of Reference, when dealing with the issue of multiple debtors and recourse between solidary debtors, states that “the fact that debtors are not liable on the same legal grounds does not prevent solidarity”.31 4. “Multiple liability” as a matter of substantive domestic law As already noted by some scholars,32 some linguistic versions of the heading to Art. 16 of the 15 Rome I Regulation could lead to some confusion: the term “multiple liability”33 could in fact, at first, suggest that the provision at hand deals with scenarios where one single debtor

28

29 30

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33

same terms, with reference to Art. 33 III 2 EGBGB, Brückner, Unterhaltsregreß im internationalen Privat- und Verfahrensrecht (1994), p. 31. The Italian version reads “qualora un creditore vanti un credito nei confronti di vari debitori che sono responsabili in solido”; the German “eine Forderung gegen mehrere für dieselbe Forderung haftende Schuldner”, and the English “a claim against several debtors who are liable for the same claim”. For this example see Leandro (fn. 11), 872. On the joint liability of professionals working together for the same client on the basis of different contracts, see the German BGH, Urt. v. 17.5.1965, VII ZR 108/63; in the Italian system, with regard to Art. 2055 civil code, see Cass. Civ. Sez. Un., 15 July 2009, n. 16503, in Giust. civ., 2010, 3, I, 631, writing in general terms to sustain that different and autonomous conducts, also contractual and non-contractual, can give raise to joint and several liability: “[…] per il sorgere della responsabilità solidale dei danneggianti l’art. 2055 c.c., comma 1, richiede solo che il fatto dannoso sia imputabile a più persone, ancorché le condotte lesive siano tra loro autonome e pure se diversi siano i titoli di responsabilità di ciascuna di tali persone, anche nel caso in cui sia configurabili titoli di responsabilità contrattuale e extracontrattuale, atteso che l’unicità del fatto dannoso considerata dalla norma suddetta deve essere riferita unicamente al danneggiato e non va intesa come identità delle norme giuridiche da essi violate […]”. In the legal literature cf. Meier, in: Antoniolli/Fiorentini (eds.), A Factual Assessment of the Draft Common Frame of Reference (2011), p. 97, 104. On the possible use of the DCFR as an instrument tool of interpretation in the context of the Rome I Regulation, see Zoll, in: Huber (ed.), Rome II Regulation: Pocket Commentary (2011), p. 17. Draft Common Frame of Reference, III – 4:103 (2), and the rules on the recourse between solidary debtors, 4:107. Cf. Kieninger (fn. 11), p. 319, and Max Planck Institute for Comparative and International Private Law (fn. 13), 329. More clear are other linguistic versions of the Rome I Regulation: the Italian version reads “obbligazioni solidali”, enshrining the concept of joint and several liability between co-debtors, and, similarly, the French version reads “pluralité de débiteurs”. On the contrary, the German (reading “mehrfache Haftung”) and the Spanish (reading “responsabilidad múltiple”) are more in line with the English wording of the Regulation; nonetheless, at a first reading of Art. 16, it becomes clear that “multiple liability” should be interpreted as “multiple debtors”.

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undergoes different regimes of liability towards the creditor. On the contrary, Art. 16 of the Rome I Regulation deals with the different hypothesis where a single creditor has multiple debtors as counterparties, whose responsibilities are all connected to the claim of the creditor himself; it is in this sense that term “multiple liability” should be understood, the aim of the provision not being to coordinate the problem of the different laws applicable to different responsibilities of the same person, but, rather, to lay down a conflict-of-laws rule to identify the law applicable to the recourse between debtors, once one has satisfied the “common debt” of all of them towards the creditor. 16 The concept of “multiple liability”, or – better yet – multiple liable persons, is not defined by

the Rome I Regulation, nor by the ECJ in relation to this act:34 this means that the solidarity of the obligation, or, to use the wording of the Regulation, when debtors are “liable for the same claim”, is a matter of domestic law. 17 The question thus becomes whether the existence of a “multiple liability” (i.e., joint and

several liability) has to be solved first in light of the different laws applicable to the different obligations between the (original) creditor and the secondary debtors, or whether it is for the law of the solvens to determine the existence of such an element.35 18 As it is possible that the different obligations could be governed by different laws, it could

well be that the debtor “A” is not considered jointly and several liable with the debtor “B”, while “B” is considered – by the substantive law regulating his/her obligation – jointly and several liable with “A”. Scholars have already criticized such scenario for the excessive intricacy;36 moreover, if the focus of Art. 16 of the Rome I Regulation is on the action for recourse, the relevant fact for the applicability of the provision should be addressed by the payor’s law, regardless of the circumstance that each debtor is considered jointly and several liable by his/her own personal law.37 5. Art. 16, first period, and “multiple creditors”

19 Art. 16 is very clear in this sense: by reading “if a creditor has a claim against several debtors

who are liable for the same claim”, the provision shall not find application in cases where a debtor, who has obligations towards multiple creditors, pays the whole to just one creditor. In other terms, Art. 16 of the Rome I Regulation does not find application in scenarios of recourses between creditors. 34 35

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Cf. Leandro (fn. 11), 870. Leandro (fn. 11), 871, arguing that the existence of the solidarity should be assessed by the law of the solvens, given that such solution is accepted by Art. 17 of the Rome I Regulation that, even though setting rules for the set-off, deals substantially with a recourse between debtors “l’accertamento del vincolo lato sensu di solidarietà non è oggetto della disposizione: poiché tuttavia l’effetto del vincolo preso in considerazione dall’art. 17 è la costituzione di un diritto di regresso, e poiché questo è sottoposto alla legge che regola l’obbligo del solvens è da ritenere che tale legge stabilisce se e in quale misura sussistano tutti i presupposti del regresso ivi compresa l’esistenza di un vincolo di solidarietà. […]”. Max Planck Institute for Comparative and International Private Law (fn. 13), 330 and Villani, La Convenzione di Roma sulla legge applicabile ai contratti (2000), p. 222. See the proposal in Max Planck Institute for Comparative and International Private Law (fn. 13), 328 and ff.

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6. Art. 16, first period, and “false debtors” The applicability of Art. 16 of the Rome I Regulation has also to be excluded in all those cases 20 where the payor erroneously fulfils an obligation s/he didn’t had. Whilst some criticized the unclear wording of the Rome I Proposal,38 with regard to Art. 16 of the Rome I Regulation, it should be noted that the phrase “if a creditor has a claim against several debtors” could already exclude the applicability of Art. 16 in scenarios where the payment is sine titulo, i.e. where no obligation has to be found. Moreover, in this sense, it could be recalled that domestic jurisdictions,39 by assuming that erroneous obligations are not obligations, impose a duty of restitution on the receiving party. Similar in this sense, the DCFR, III – 1:102: Definitions, by writing that “an obligation is a duty to perform which one party to a legal relationship, the debtor, owes to another part, the creditor”, sustains the idea that in lack of a (contractual or legal) duty to fulfil the obligation, the payor is not a debtor. If this idea is followed, Art. 16 of the Rome I Regulation, resting upon the notions of creditors and debtors, should not be applied when payors fall outside the definition of debtor. Supporting this position, also Art. 10 of the Rome II Regulation, according to which “[i]f a non-contractual obligation arising out of unjust enrichment, including payment of amounts wrongly received, concerns a relationship existing between the parties, such as one arising out of a contract or a tort/delict, that is closely connected with that unjust enrichment, it shall be governed by the law that governs that relationship”. III. A rule for the protection of secondary debtors (Art. 16, second period) As it was previously argued, problems on the protection of secondary debtors arise in 21 different scenarios, namely i) where co-debtors are “multiple liable” according to the different laws applicable to the original relationships, but according to terms that are different 38

39

Max Planck Institute for Comparative and International Private Law, 330, trying to argue that Art. 15 on multiple liability in the Rome I Proposal was not clear enough on this point, being necessary a change in wording to assure the application of the provision only in those circumstances where the debtor fulfils his own obligation. Like Italy, see Artt. 2033 and 2036 of the civil code; similarly, differently taking into account the element of mistake, in the Netherlands, Dutch civil code, Art. 6:203 (according to which “1. A person who, without any legal basis, has delivered an asset to another person, is entitled to claim it back from the recipient as an undue performance. 2. Where the undue performance relates to the payment of money, the debt-claim towards the recipient exists of the right to demand the refund of an equal sum of money. 3. A person who, without any legal basis, has carried out another performance than the delivery of an asset or the payment of money, is towards the recipient entitled to demand that this performance is made undone.”); the French civil code, Art. 1235 (according to which “Any payment supposes a debt: what has been paid without being owed is subject to restitution. Restitution is not allowed with respect to natural obligations which were voluntarily discharged”) and the German BGB, where undue payment falls within the Section of Unjust enrichment (Art. 812, according to which “(1) A person who obtains something as a result of the performance of another person or otherwise at his expense without legal grounds for doing so is under a duty to make restitution to him. This duty also exists if the legal grounds later lapse or if the result intended to be achieved by those efforts in accordance with the contents of the legal transaction does not occur. (2) Performance also includes the acknowledgement of the existence or non-existence of an obligation.”). On undue payment and unjustified enrichment, see ex multis C. von Bar, S. Swann (eds.), PEL Unjustified Enrichment (2010).

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from those set by the payor’s law; ii) in those cases where second debtors had – according to their laws – defences against the original creditor they shall not invoke against the payor and, iii) in cases of prescription of the obligation according to their personal law, but not according to the payor’s law. In particular, with regard to the first case, since the recourse rights the solvens has towards secondary debtors are determined by the payor’s law, what if the single secondary debtor, according to his law, has a privilege to a limited share of responsibility or a privilege to be the last paying debtor, that is though not given by the payor’s law? And with regard to the second problem, what if the secondary debtor is a spouse of the original creditor that, according to his/her personal law, has a right to suspend payment that cannot be invoked against the payor? 22 In general terms, the problem is that recourse between debtors could worsen the original

position of the secondary debtor;40 such issue, that – in spite of any provision in the Rome II Regulation41 – was acknowledged by the Commission in its Proposal,42 has been solved with the introduction of a rule according to which secondary debtors have the right to rely on the defences they had against the original creditor to the extent allowed by the law governing their own obligations towards the original creditor. Thus, secondary debtors shall rely on the defences they had against the original creditor, and, moreover, on the defences they have with specific regard to their relationship with the payor.43

23 One question remains: what if the law of the obligation changes, introducing defences that

were not foreseen at the time the contract between the original creditor and the secondary debtor was concluded? The use of the past tense (“the other debtors may rely on the defences they had”) could induce to think that new defences shall not be invoked by secondary debtors; nonetheless, the use of the present participle (“to the extent allowed by the law governing their obligation”) seems to point towards the solution that secondary debtors can only rely upon such new defences if, according to such law, the new defences are applicable to old obligations. IV. The closest connection 24 With regard to the possibility to apply to the recourse between debtors another law that is

manifestly more connected, because co-debtors are bound by other contracts or by company law relationships, part of the literature, interpreting domestic provisions transposing Art. 13 (2) of the 1980 Rome Convention into their domestic system,44 argues that recourse between debtors should be regulated by such law. In principle, such solution seems consistent with 40 41

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Clearly in this sense, Kieninger (fn. 11), p. 320. Cf., Rome II Regulation, Art. 20, on which, for a comparison with Art. 16 (2) of the Rome I Regulation, Bach (fn. 16), p. 398. Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I) COM (2005) 650 final, Art. 15, according to which “were a creditor has a claim upon several debtors who are jointly liable and one of those debtors has in fact satisfied the creditor, the law of the obligation of this debtor towards the creditor governs the right of this debtor to claim against the other debtors. Where the law applicable to a debtor’s obligation to the creditor provides for rules to protect him against actions to ascertain his liability, he may also rely on them against other debtors”. Leandro (fn. 11), 872.

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the rules of procedural international law, who also favour a closer connection, to subsume the jurisdiction of connected claims within the jurisdiction of the prorogated court.45 Nonetheless, it must be kept in mind that, as seen, the “payer’s law principle” already is a 25 presumptive declination of the closest connection principle. As a matter of fact, in most cases, the law of the payor will be the one having the most significant connection with the action in recourse. Cases in which other elements could express the closest connection to another law, because of particular relationships between the multiple liable parties, even though being everything but rare, should be conceived as an exception to the general scenario. And it is in these last scenarios that the question arises whether the payor’s law, already expressing a significant connection between the law and the action in recourse, can be derogated from by a general closest connection clause. Even in spite of the importance of the application of the law that has a close connection with the action,46 one must also remember that the objective of legal certainty imposes foreseeable conflict-of-laws rules.47 Whilst the application of a closest connection clause also within the framework of Art. 16 of the Rome I Regulation seems reasonable to exceptionally avoid the application of the payor’s law in those circumstances in which this criterion does not express a genuine closest connection, it does not seem possible to predict whether or not the ECJ will interpret said Article entailing an implied closest connection clause.48 The ECJ could consider that the certainty of the law and the foreseeability of the applicable law, which was not expressively tempered by the EU law-maker through a closest connection clause, could outweigh the necessity to read Art. 16 as imposing an obligation upon judges to apply the law which is effectively mostly connected to the action; after all – the ECJ could argue that if the parties wish to apply such law to the recourse between debtors, they can choose it according to Art. 3 of the Rome I Regulation.

44

45

46

47 48

Cf. on Art. 33 III 2 EGBGB, Kropholler, Internationales Privatrecht (1990), p. 415. See also Kieninger (fn. 11), p. 320 and Freitag (fn. 28), p. 552. See Kongress Agentur Hagen GmbH v. Zeehaghe BV, (Case C-365/88) [1990] ECR I-1845, on which Muir Watt, in: Magnus/Mankowski (eds.), Brussels I Regulation (2012), p. 294, 317 and I. Queirolo (fn. 24), p. 292 ff. See for example, Art. 4 (3), in case of lack of choice of law; Art. 5 on carriage of goods and passengers and Art. 7 (2), on large risks insurance contracts. The principle is though not absolute: according to Art. 3 of the Rome I Regulation, parties can choose any law, even when this has no significant connection with the contract; moreover, a closest connection clause is not enshrined in Art. 6 on consumer contracts and in Art. 7 (3) on mass risks insurance contracts. See Rome I Regulation, Recital 16. The ECJ could to certain extent make reference to the Rome II Regulation, Recital 14 (according to which “the requirement of legal certainty and the need to do justice in individual cases are essential elements of an area of justice. This Regulation provides for the connecting factors which are the most appropriate to achieve these objectives. Therefore, this Regulation provides for a general rule but also for specific rules and, in certain provisions, for an ‘escape clause’ which allows a departure from these rules where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with another country. This set of rules thus creates a flexible framework of conflict-of-laws rules. Equally, it enables the court seised to treat individual cases in an appropriate manner”), to argue that the closest connection clause can only be invoked when is expressively contained “in certain provisions”.

Ilaria Queirolo

779

Article 17

Rome I Regulation

Article 17: Set-off Where the right to set-off is not agreed by the parties, set-off shall be governed by the law applicable to the claim against which the right to set-off is asserted.

Bibliography Jud, Die Aufrechnung im internationalen Privatrecht, IPRax 2005, 104 Lagarde, Le nouveau droit international privé des contrats après l’entrée en vigeur de la Convention de Rome du 19 juin 1980, Rev.crt dr int priv 1991, 334 Leible/Lehmann, Die Verordnung über das auf vertragliche Schuldverhältnisse anzuwendende Recht (‘Rom I’), RIW 2008, 542

Mankowski, Die Rom I-Verordnung – Änderungen im europäischen IPR für Schuldverträge, IHR 2008, 151 Peters, Verrekening in het IPR, NIPR 2007, 1 Pfeiffer, Neues Internationales Vertragsrecht – Zur Rom I-Verordnung, EuZW 2008, 629 Zimmermann, Die Aufrechnung. Eine rechtsvergleichende Skizze zum Europäischen Vertragsrecht, FS Medicus (1999), 707.

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Scope of application . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Set-off in or out the context of court proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Renvoi and ordre public . . . . . . . . . . . . . . . . . . . 17 Unilateral set-off 1. In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

2. Set-off and international conventions . 21 3. Determining the applicable law . . . . . . . . 23 VI. Scope of the applicable law . . . . . . . . . . . . . . . . 26 VII. Set-off in court proceedings . . . . . . . . . . . . . . . 46 VIII. Set-off in commercial arbitration . . . . . . . . . 53 IX. Set-off contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 X. Set-off and insolvency . . . . . . . . . . . . . . . . . . . . . . 57

I. II. III. IV. V.

I. General 1 Article 17 determines the law applicable to the set-off of claims that are governed by dif-

ferent legal systems in the event that parties have made no agreement about such. The applicable law to contractual set-off is governed by the general conflict rules of the Rome I Regulation. 2 This Article was added at the occasion of the conversion from the Rome Convention to the

Rome I Regulation. The Rome Convention had no explicit conflict of laws rule on set-off. Set-off was widely seen as a way to extinguish contractual obligations referred to in Article 10 (1) (d) Rome Convention and it was therefore governed by the law applicable to these contractual obligations. However, that Article did not offer a solution for the case in which the rights to be set-off were not governed by the same law. In such cases, each Member State applied its own conflict of laws rule, and where the rules were different legal uncertainty was created.1 3 This incited the European Commission to query in the Green Paper on the conversion of the

Rome Convention whether an explicit provision indicating “what law applies to legal com1

780

Green paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation, COM (2002) 654 final.

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Chapter II: Uniform Rules

Article 17

pensation” should be included. A question which was generally answered affirmative and of which the Article 17 derived.2 A complicating factor in the formulation of a conflict of law rule was the fact that set-off was 4 regulated differently in the substantive law of the Member States. Although the legal concept of set-off or similar notions exist in all Member States, there are profound differences among them. In some Member States set-offs take place only after a declaration to that effect.3 Others grant set-off by law (legal set-off), for which no declaration is required.4 A third group of Member States regards set-off as a defense in court proceedings and as such effectuated by of a court decision.5 The term set-off as referred to in Article 17 must be interpreted autonomously in the context 5 of the Rome I Regulation.6 Article 17 covers all these types of set-off. However, the procedural aspects of set-off shall be governed by the lex fori. Article 17 submits set-off to the law applicable to the claim against which the right to set-off 6 is asserted, a solution that was adhered to in the law and literature in several Member States.7 The provision of Article 17 aims to offer protection to those who wish to make a claim but in doing so face a counterclaim. The party concerned will have to deal with an unexpected claim to set-off, while the other party has the choice between set-off or an independent claim. Therefore, the principal claimant may only have his claim set-off if this is possible according to the law applicable to his principal claim. The party entitled to the counterclaim must be expectant of this when the instrument of set-off is employed.8 An additional argument used for the conflicts of law rule of Article 17 is that set-off is often put forward for tactical procedural reasons in a procedure to assert an undisputed claim. A conflict of law rule should not encourage such way of conduct during proceedings.9 The existence and validity of the counterclaim must be determined with reference to the 7 applicable law to that claim. 2

3

4 5

6

7

8

9

The historical development of Article 17 is described by von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 4. For instance in Germany, the Netherlands, Austria and Greece. See Zimmermann, FS Medicus (1999), 707 et seq.; Jud, IPRax 2005, 104, 104.; Magnus, in: Ferrari/Leible (eds.), Ein neues Internationales Vertragsrecht für Europa (2007), p. 201, 210. For instance France and Italy. See Zimmermann, FS Medicus (1999), 707, 718; Jud, IPRax 2005, 104, 104. Dicey/Morris/Collins, The Conflict of Laws, (2012) paras. 7–031, 32–205; Rödl, in: Calliess, Art. 17 Rome I note 3. Bělohlávek, Rome Convention/Rome I Regulation, Commentary (2010) para. 17.23; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 6. See for instance for Germany, von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 3, and for the Netherlands, Peters, NIPR 2007, 1, 1; Strikwerda, Praktijkreeks IPR, De overeenkomst, (2015) note 261. In contrast to France, where the cumulation system was used, under which set-off is possible only if the law applicable to the principal claim and the law applicable to the counterclaim both allow set-off. Lagarde, Rev.crt dr int priv 1991, 334 et seq. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), p. 251, 256 et seq.; Thorn, in: Palandt (2013), Art. 17 Rom I-VO Rn 2; Martiny, in: Reithmann/Martiny, Internationales Vertragsrecht (2015), nr. 3.238. Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 2.

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Article 17

Rome I Regulation

II. Scope of application 8 Article 17 only applies when the principal claim and the counterclaim are governed by

different laws. If the claims are governed by the same law set-off the conditions and effects are ruled by such law.10 9 Contractual set-off is not governed by Article 17 but by the general conflict rules of the

Regulation. 10 The issue of set-off of claims is governed by the Rome I Regulation, but in the Rome II

Regulation such a Regulation is lacking. The question arises whether Article 17 refers only to the set-off of two contractual claims or also to the set-off of a contractual and a noncontractual claim.11 The same question arises with regard to the set-off of claims that are excluded from the material scope of the Rome I Regulation. 11 It is argued that Article 17 only governs the law applicable to the set-off as a unilateral act,12

regardless of whether the nature of the principal claim or the counterclaim is contractual.13 An argument in favor of this view is often endorsed with reference to Article 6 of the Insolvency Regulation which does not differentiate according to the legal nature of the claims. It is also argued that the underlying principle of Article 17, that is the protection of the debtor of the principal claim, relates to a general legal notion which justifies a broad interpretation.14 In any case, an analogy would be appropriate.15 12 In view of the material scope of the Rome I Regulation, this idea is not necessarily convin-

cing.16 It could also be argued that it is more apt to regard Article 17 as a special application of Article 12 (1) (d), and as such Article 17 relates only to the extinguishment of the principal contractual claim by means of set-off. The counterclaim may naturally emanate from any private law source.17 I note that there is no objection to the application of the principle of Article 17 on the set-off of a non-contractual principal claim against another counterclaim.18 However, such a set-off is not based on the Rome I Regulation. 10 11

12 13

14 15

16 17

18

782

Althammer/Makris, in: Ferrari, 459, 462. Regarding this problem already Magnus, in: Ferrari/Leible, Ein neues Internationales Vertragsrecht für Europa (2007), 208. von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 7. Magnus, in: Ferrari/Leible, Ein neues Internationales Vertragsrecht für Europa (2007), p. 208; Hellner, in: Ferrari/Leible, Rome I Regulation (2009), p. 251, 256; Thorn, in: Palandt (2013), Art. 17 Rom I-VO Rn 1. Althammer/Makris, in: Ferrari/Leible, Rome I Regulation (2014), 459, 463. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 265; Leible/Lehmann, RIW 2008, 528, 542; Kieninger, in: Ferrari/Kieninger/Mankowski u.a., Internationales Vertragsrecht (2011), Art. 17 note 2; von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 7; see also OGH 21.5.2014–3 Ob42/14v, ZfRV-LS 2014/44. See in this regard also Althammer/Makris, in: Ferrari/Leible, Rome I Regulation (2014), 459, 462. Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 15, also argues that it is possible to set off of a contractual principal claim with a non-contractual claim. Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 15, who defends the analogous application of the rule in the context of the set-off of two non-contractual claims in relation to Article 15 (h) Rome II Regulation.

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Article 17

If a principal claim is governed by the CISG, which is generally assumed not to contain rules 13 on set-off, one will have to establish the applicable law according to the general conflict rules of the Regulation. 14

Set-off in case of bankruptcy is governed by Article 6 of the Insolvency Regulation. III. Set-off in or out the context of court proceedings

Article 17 governs the substantive aspects of set-off both in and out the context of court 15 proceedings.19 Set-off as a procedural act is governed by the lex fori.20 Whether set-off is admissible and the effect of the set-off is governed by the law applicable according to Article 17. The claim in question brought before the court is to be regarded as the principal claim.21 Given the substantive nature of Article 17, this provision does not determine whether the court has jurisdiction in respect of the counterclaim.22 The question whether an extrajudicial appeal for set-off is possible, is governed by the lex 16 fori.23 IV. Renvoi and ordre public The prohibition of renvoi as incorporated in Article 20 of the Rome I Regulation obviously 17 applies to the applicable law to set-off as designated by Article 17. This is a substantive law reference. Neither does a different procedural qualification of set-off, as in the Common Law countries, imply a referral.24 The question is whether the doctrine of public policy will ever be applied in the context of 18 set-off of claims. Even if an applicable legal system would prohibit any form of set-off, such a prohibition will probably fail to touch on the fundamental values of the Member States.25

19

20

21

22 23

24

25

Magnus, in: Ferrari/Leible, Ein neues Internationales Vertragsrecht für Europa (2007), 211; Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 12 and 14; von Hein, in: Rauscher EuZPR/EuIPR (2016), Art. 17 note 9. Magnus, in: Ferrari/Leible, Ein neues Internationales Vertragsrecht für Europa (2007), 208; von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 9. Mankowski, IHR 2008, 133, 151; Pfeiffer, EuZW 2008, 622, 629; von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 9. See in this respect also ECJ (Case C -341/93 Danvaern) [1995] ECR I-02053. Magnus, in: Ferrari/Leible, Ein neues Internationales Vertragsrecht für Europa (2007), 213; Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 258; von Hein, in: Rauscher EuZPR/EuIPR (2011), Art. 17 note 9. Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 14; Martiny, in: Reithmann/Martiny, Internationales Vertragsrecht (2015), nr. 3.241; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 16. Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 17, considers possibilities to apply the public policy exception in Germany under such circumstances.

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Article 17

Rome I Regulation

V. Unilateral set-off 1. In General 19 Article 17 appoints the applicable law to the terms of set-off. The law applied subsequently

specifies whether a unilateral declaration is sufficient for set-off, set-off is established by law and if it should be achieved within or outside a judicial procedure. 19a The existence and validity of the counterclaim must be determined by reference to the

applicable law to such claim. The applicable law is therefore determined independently of Article 17, and by reference to the applicable choice of law rules. 20 Article 17 only applies when the principal claim and the counterclaim are governed by

different laws. If the claims are governed by the same law the conditions and effects of set-off are governed by such law. 2. Set-off and international conventions 21 Pursuant to Article 25, international conventions take precedence over the rules of the

Rome I Regulation. 22 In this respect, the CISG plays a particularly important role. However, the CISG does not

regulate the set-off of non-contractual claims26 with contractual claims governed by the CISG. Nor does it regulate the set-off of two claims governed by the CISG.27 This means that the law applicable to the claims will have to be determined according to the general conflict of law rules of the Rome I Regulation28 and the law applicable to the set-off must thereafter be determined on the basis of Article 17. However, there is a strongly supported view that the CISG covers those cases of set-off where both the claim and the counterclaim is governed by the CISG.29 3. Determining the applicable law 23 If the parties have designated the law applicable to the set-off that law will apply.30 But if no

choice of law is made, then according to Article 17 of the Regulation the law governing the 26

27

28

29

30

784

Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 8; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 19. Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 8; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 19. See the diverging opinions mentioned by Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 20. von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 8. BGH 14 May 2014 (VIII ZR 266/13), IHR 2014, 136. See, e.g., LG Stuttgart 29 October 2009, CISG-online no. 2017; OLG München 19 October 2006, CISGonline no. 1394; KG Schaffhausen 20 October 2003, CISG-online no. 957; Djordjevic, in: Kröll/Mistelis/ Perales Viscasillas, CISG Commentary (2011) Art. 4 note 41; Magnus, in: Staudinger (2013), Art. 4 CISG note 47 (both with further references). Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 260; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 21.

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Chapter II: Uniform Rules

Article 17

principal claim will determine under what conditions and with what consequences the setoff will take place. The principal claim is the claim against which set-off is claimed. In the case of court 24 proceedings the principal claim is the claim which is submitted to the judge. So what must be considered in the case of a set-off by law which applies by operation of law? In general also in such case a claim is made against which a counterclaim is set-off, the former claim being the principal claim even if the counterclaim was supposed to have been set-off by operation of law.31 If the CISG does not apply, the law applicable to the principal claim must be determined 25 according to the conflict of law rules of the Regulation. This means that parties can choose the applicable law (Article 3), but the limitations specified in Articles 5 to 8 Rome I may be relevant (viz. contracts of carriage, consumer contracts, insurance contracts, individual employment contracts). In the absence of a choice of law the applicable law follows from Articles 4 to 8 Rome I. VI. Scope of the applicable law The law applicable to set-off governs all questions related to the set-off itself but does not 26 encompass the contents of the counterclaim. The law applicable to the principal claim determines the eligibility, the conditions and the 27 effect of the set-off, including:32 1) The permissibility of the set-off; whether set-off is prohibited and whether a prohibition can 28 be lifted or agreed on.33 The creditor of the principal claim cannot invoke a prohibition of a set-off that exists 29 according to the applicable law to the counterclaim.34 All this means that an exclusive choice of forum clause may actually imply a prohibition of set-off.35 Under certain circumstances a prohibition of set-off can emerge as a mandatory rule of the 30 lex fori through Article 9 of the Rome I Regulation. Such situations may come to light when the law of the forum contains a prohibition on socio-political grounds, i.e. in respect of wage or maintenance.36 The same may apply if on such grounds a claim by law cannot be attached.37 31

32 33

34 35 36

Mankowski, IHR 2008, 133, 151; Pfeiffer, EuZW 2008, 622, 629; Martiny, in: Reithmann/Martiny, Internationales Vertragsrecht (2015), nr. 3.241; von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 11; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 23. Derived from Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 25 e.v. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 258; Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 17. Magnus, in: Ferrari/Leible, Ein neues Internationales Vertragsrecht für Europa (2007), 212. Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 27. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 258; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 27.

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Article 17

Rome I Regulation

31 2) Whether set-off happens by operation of law or if a certain given valid performance is

necessary.38 32 3) Whether, and if so, in what form reciprocity and/or the same character of the claim is

required for set-off.39 33 For example, whether two claims should have the character of a monetary claim and whe-

ther they must be in the same currency.40 34 4) Whether a coherence between the principal claim and the counterclaim is necessary.41 35 5) Whether the counterclaim should be due and payable. 36 The chargeability extent to which the counterclaim is payable shall be governed by the law

applicable to the counterclaim.42 37 6) Whether the counterclaim should be a liquid asset. 38 That is, whether the amount of the counterclaim must be established, whether its determin-

ability is sufficient, or whether the amount should have been legally determined.43 39 7) Whether set-off with a time barred counterclaim is possible after the lapse of the limitation

period.

37

38

39

40

41

42

43

786

Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 258; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 27. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 259; Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 15; Thorn, in: Palandt (2013), Art. 17 Rom I-VO Rn 2; Martiny, in: Reithmann/Martiny, Internationales Vertragsrecht (2015), nr. 3.241; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 28. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 259; Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 19; Thorn, in: Palandt (2013), Art. 17 Rom I-VO Rn 2; von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 16; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 28. See with regard to valuation problems in particular Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 21 et seq.; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 36. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 259; Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 19; Thorn, in: Palandt (2013), Art. 17 Rom I-VO Rn 2; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 30. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 259; Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 20; Thorn, in: Palandt (2013), Art. 17 Rom I-VO Rn 2; von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 16; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 31. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 259; Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 20; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 32.

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Article 17

The limitation period is governed by the law that governs the counterclaim.44

40

8) Whether other objections or reasons to the counterclaim may be pleaded.

41

Whether such objections or reasons exist should also be determined by the law that governs 42 the counterclaim or by a specific statute which, under circumstances, may be applicable.45 43

9) What legal effects the set-off has.46

In particular with regard to the determination of the moment that the claim was paid. This 44 may be important because of the payment of interest and, in case there are several principal claims, with regard to the order in which they are set-off.47 The law applicable to the principal claim ascertains the effects for both the principal claim and the counterclaim in this respect.48 If, according to the law applicable to the set-off, the effect occurs at the time of issuing the 45 set-off statement, but such a statement is not required (as in the case with set-off by operation of law) under the law governing the counterclaim, then the decisive moment is that when the party invoking the set-off has communicated this to the party holding the principal claim.49 VII. Set-off in court proceedings Article 17 governs the substantive aspects of settlement, also in the context of judicial 46 proceedings.50 Settlement as a procedural step is, by contrast, governed by the lex fori.51 The claim in question brought before the court constitutes the principal claim.52 Given 44

45

46

47 48

49 50

51

52

Magnus, in: Ferrari/Leible, Ein neues Internationales Vertragsrecht für Europa (2007), p. 201, 212; Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 259; Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 16; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 33. Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 15; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 34. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 259; Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 15; Thorn, in: Palandt (2013), Art. 17 Rom I-VO Rn 2; Martiny, in: Reithmann/Martiny, Internationales Vertragsrecht (2015), nr. 3.241; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 31. Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 15. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 259; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 35. Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 35. Magnus, in: Ferrari/Leible, Ein neues Internationales Vertragsrecht für Europa (2007), 211; von Hein, in: Rauscher EuZPR/EuIPR (2016), Art. 17 note 9. See also BGH 14 May 2014 (VIII ZR 266/13), IHR 2014, 136. Magnus, in: Ferrari/Leible, Ein neues Internationales Vertragsrecht für Europa (2007), 208; von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 9. Mankowski, IHR 2008, 133, 151; Pfeiffer, EuZW 2008, 622, 629; von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 9;

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Article 17

Rome I Regulation

the substantive nature of Article 17, it does not touch on the question whether or not the court has jurisdiction in respect of the counterclaim.53 47 The lex fori governs the following issues:54 48 1) Whether, how and until when an appeal to set-off is possible during the procedure. This

includes the question how this should be done, to what extent the content of the counterclaim should be explained, and whether or not set-off can only be a secondary step in the procedure. 49 2) Whether the, with regard to the principal claim, competent court also needs to be inter-

nationally competent in respect of the counterclaim.55 50 Jurisdiction in respect of the set-off of the counterclaim can be accepted without prejudice

when the counterclaim is final and the related court decision ought to be recognized.56 The same is arguable in the event that the counterclaim is not contested or is recognized.57 In other cases, the judge will only be competent with regard to the counterclaim if he has international jurisdiction.58 51 3) Whether foreign ongoing proceedings concerning the counterclaim hinder the set-off pro-

ceedings. 52 4) What legal force a decision on set-off has.

VIII. Set-off in commercial arbitration 53 In the context of commercial arbitration set-off may only take place if the arbitrators are also

competent in respect of the counterclaim. This competence must ensue from the arbitration agreement concluded by the parties. It is believed that this authority exists if it is not contradicted, as well as when the counterclaim is legally determined or legally undisputed.59 IX. Set-off contracts 54 Article 17 does not apply to contractually agreed set-off.60 Parties may determine the mutual

set-off of claims in advance by means of an agreement designated for this purpose. Such agreements are especially used in banking, for example in the case of a current account. Netting and clearing are also common forms of contractual set-off in banking and finance. 53 54 55 56 57

58 59

60

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See in this respect ECJ (Case C -341/93 Danvaern) [1995] ECR I-2053. Derived from Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 39 et seq. See on this issue also Rödl, in: Calliess: Rome Regulations (2015), Art. 17 Rome I note 3. Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 45. Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/2008 Art. 17 Rom I-VO note 39; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 45. Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 46. Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 46. Hausmann, in: Reithmann/Martiny, Internationales Vertragsrecht (2015), note 8.404 has a differing opinion. As already mentioned in the Green Paper on the conversion of the Rome Convention of 1980, 50.

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The law applicable to the contractually agreed set-off should be established according to the 55 conflict of law rules of the Regulation. This means that parties can choose the applicable law (Article 3), but the limitations specified in Articles 5 to 8 Rome I may be relevant (viz. contracts of carriage, consumer contracts, insurance contracts, individual employment contracts). A partial choice of law regarding the set-off is allowed (Article 3 paragraph 1, third sentence). In the absence of a choice of law the applicable law follows from Articles 4 to 8 Rome I. If the set-off agreement is related to another principal agreement, it is arguable that the 56 former contract is governed by the same law as is applicable to the principal agreement.61 This is especially relevant in the context of financial services provided by banks.62 If the setoff agreement is not connected to any other agreement or legal relationship, and not subject to Articles 5 to 8, the law most closely connected with the contract must be determined on the basis of Article 4 paragraph 4 since a characteristic performance as defined in accordance with paragraph 2 will generally not exist.63 X. Set-off and insolvency The EU Insolvency Regulation (nr. 1346, etc.) applies to set-off in the context of a bank- 57 ruptcy which is opened in an EU Member State. The lex loci concursus determines the applicable law to the insolvency (Article 4 (1) Ins. Regulation). This law also determines the conditions under which set-off may be invoked (Article (2) (d) Ins. Regulation). It is unclear whether this only concerns the formal conditions or also the material conditions for set-off.64 If a settlement based on the insolvency statute proves to be impossible, a debtor may still appeal to set-off if such relief is allowed under the law that governs the principal claim (Article 6 Ins. Regulation). In this case the principal claim constitutes the claim of the bankrupt towards the other party. The latter’s rights to which he is entitled under the law applicable to the principal claim should not be reduced because of the bankruptcy. Article 18: Burden of proof 1. The law governing a contractual obligation under this Regulation shall apply to the extent that, in matters of contractual obligations, it contains rules which raise presumptions of law or determine the burden of proof. 2. A contract or an act intended to have legal effect may be proved by any mode of proof recognised

61

62

63

64

Leible/Lehmann, RIW 2008, 528, 542; Spellenberg, in: Münchener Kommentar (2015), VO (EG) 593/ 2008 Art. 17 Rom I-VO note 104; Thorn, in: Palandt (2013), Art. 17 Rom I-VO Rn 1; Martiny, in: Reithmann/Martiny (2015), para. 3.240; von Hein, in: Rauscher, EuZPR/EuIPR (2016), Art. 17 note 14; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 54. Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 261 et seq.; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 54. Leible/Lehmann, RIW 2008, 528, 542; Hellner, in: Ferrari/Leible, Rome I Regulation (2009), 263; Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 54; Spickhoff, Beck’scher Onlinekommentar BGB (2013), VO (EG) 593/2008 Art. 17 note 8. Magnus, in: Staudinger (2011), Art. 17 Rom I-VO note 56.

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by the law of the forum or by any of the laws referred to in Article 11 under which that contract or act is formally valid, provided that such mode of proof can be administered by the forum.

Bibliography Thole, Anscheinsbeweis und Beweisvereitelung im harmonisierten Europäischen Kollisionsrecht – ein

I. II.

General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Presumptions of law and burden of proof (para. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Prüfstein für die Abgrenzung zwischen lex causae und lex fori, IPRax 2010, 285.

III. IV.

Presumptions and burden of proof and uniform contract law conventions . . . . . . . . 10 Modes of proof (para. 2) . . . . . . . . . . . . . . . . . . . 14

I. General remarks 1 The provision at hand can be traced back to Art. 14 Rome Convention,1 from which,

however, it differs slightly. The (slight) modification of the text of the provision at hand vis-à-vis that of Art. 14 Rome Convention does, however, not compare to a change in substance, which is why case law applying the predecessor provision can be resorted to in interpreting the provision at hand.2 Some of the changes introduced were only intended to bring the text in line with the provision being part of a Regulation rather than a Convention. The change that cannot be justified on the foregoing ground, namely that of the words “in the law of contract” to “in matters of contractual obligations”, does not compare to a change in substance either,3 as can be derived from the fact that the text of some of the other official language versions has not been altered. This means, among others, that case law rendered in application of Art. 14 Rome Convention can be relied upon to interpret the provision at hand.4 2 Like Articles 105 and 12 Rome I,6 Art. 18 Rome I is, at least as regards its para. 1, an 1

2

3 4

5

6

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Schulze, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 18 Rom I-VO para. 2. MünchKommBGB/Spellenberg (5th ed.) Art. 18 Rom I-VO para. 1; Nk-BGB/Doehner Art. 18 Rom I para. 3; Staudinger/Magnus (2011) Art. 18 Rom I-VO para. 6; Palandt/Thorn Art. 18 Rom I-VO para. 2. Accord Caliess/Klöhn, Rome Regulations (2011), Art. 18 Rome I para. 3. Palandt/Thorn Art. 18 Rom I para. 2; PWW/Brödermann/Wegen Art. 18 Rom I-VO para. 5; Schulze, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 18 Rom I-VO para. 2. Caliess/Schulze, Rome Regulations (2011), Art. 10 Rome I para. 1; Ferrari, in: Ferrari/Kieninger/Mankowski et al. (eds.), Internationales Vertragsrecht (2nd ed. 2012), Art. 10 Rom I-VO para. 2; Spellenberg, MünchKommBGB (5th ed. 2010), Art. 10 Rome I para. 6; Staudinger/Hausmann Art. 10 Rome I paras. 6 and 12. See Ferrari, in: Ferrari/Kieninger/Mankowski et al. (eds.), Internationales Vertragsrecht (2nd ed. 2012), Art. 12 Rom I-VO para. 1; Calliess/Schulze, Rome Regulations (2011), Article 12 Rome I para. 1; jurisPK-BGB/Geiben para. 1; Nk-BGB/Leible Art. 12 Rom I para. 2; Palandt/Thorn Art. 12 Rom I-VO para. 1; PWW/Mörsdorf-Schulte/Brödermann/Wegen Art. 12 Rom I-VO para. 5; Rauscher/Freitag, EuZPR/

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expression of the drafters’ attempt to make sure that as many contract issues as possible are subject to one and the same law. In effect, pursuant to para. 1, the reach of the lex contractus – but the same is true also mutatis mutandis for the law applicable pursuant to the Rome II Regulation7 – is, under certain conditions, extended to rules that raise presumptions and determine the burden of proof.8 This rationale is different from the one underlying Art. 18(2) Rome I. In effect, Art. 18(2) Rome I is clearly aimed at making it easier to prove matters relating to international contracts.9 This can easily be derived from the fact that Art. 18(2) Rome I provides for the application in the alternative of the law of the forum or of the law which determines the formal validity of the act under Art. 11 Rome I.10 In so providing, the provision also tries to make sure that, subject to certain restrictions, the existence of limitations as to the possibility to use certain means of evidence does not prevent a contract from being proven.11 It is worth mentioning that the two paras. of Article 18 do not only differ as regards their 3 respective rationale, but also as regards their nature. While para. 1 of the provision to be commented on here simply clarifies the reach of the lex contractus, as does, for instance, para. 1 of Art. 12 Rome I, para. 2 constitutes a proper private international law rule. Art. 18 is not the only Rome I Regulation provision addressing issues relating to proof. Art. 1 4 (3) Rome I Regulation states that the “Regulation shall not apply to evidence and procedure, without prejudice to Article 18.”12 From the text of the provision cited, it can be derived that, generally, the Regulation, not unlike the Rome Convention, is not concerned with issues of evidence. Rather, issues of “evidence should be subject to the law of the forum on questions not decided by the [Regulation], such as […] the evidential value of legal acts.”13 And it is “in order that there should be no doubt as to the freedom retained by the States regarding questions of evidence not decided”14 by the Regulation, that Art. 1(3) Rome Regulation, like its Rome Convention counterpart, Art. 1(2)(h), “excludes evidence and procedure from the scope of the [Regulation] expressly without prejudice to Article [18].”15 As for the reasons behind the drafters’ decision not to subject the evidence related rules to the lex fori, but rather to the lex contractus, they can be best summarized by citing the Report Giuliano/Lagarde: “Presumptions of law, relieving the party in whose favour they

7 8 9

10 11

12 13 14 15

EuIPR (2011), Art. 12 Rom I-VO para. 1; Staudinger/Magnus (2011) Art. 12 Rom I-VO para. 2; see also, albeit in respect of the German rule mirroring Art. 10 Rome Convention, Looschelders Art. 32 EGBGB para. 2; MünchKommBGB/Spellenberg (4th ed.) Art. 31 para. 1; compare also, in respect of Art. 10 Rome Convention, Czernich/Heiss/Czernich Art. 10 EVÜ para. 2. See Art. 22(1) Rome II Regulation; see Erman/Hohloch (13th ed.) Art. 18 Rom I-VO para. 1. Nk-BGB/Doehner Art. 18 Rom I para. 1. Schulze, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 18 Rom I-VO para. 1; see also, in respect of Art. 14 Rome Convention, Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36: “liberal solution favouring proof of the act”. See Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36 (in respect of Art. 14 Rome Convention). Schulze, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 18 Rom I-VO para. 1. See also Bamberger/Roth/Spickhoff (3rd ed.) Art. 18 Rom I-VO para. 1. Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36. Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36. Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36.

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operate from the necessity of producing any evidence, are really rules of substance which in the law of contract contribute to making clear the obligations of the parties and therefore cannot be separated from the law which governs the contract […]. The same observation applies to rules determining the burden of proof.”16 II. Presumptions of law and burden of proof (para. 1) 5 As regards the presumptions of law, they should be defined broadly17 as deductions which

the law expressly directs to be made from particular established facts.18 6 Given the German language version of the Rome I Regulation, which refers to “statutory

presumptions” (gesetzliche Vermutungen) rather than “presumptions of law”, it is worthwhile to point out that Art. 18(1) Rome I applies to presumptions irrespective of whether they originate from statutes or case law.19 Similarly, the distinction between rebuttable and irrebuttable presumptions is irrelevant insofar as Art. 18(1) governs both types of presumptions.20 What is relevant, however, it that the presumptions of law relate to “matters of contractual obligations”.21 “Thus, the rules raising presumptions […] are subjected to the applicable law only to the extent that those rules form part of the law of contract.”22 This requirement is in line with the general exclusion of evidence and procedure from the scope of the Rome I Regulation (Art. 1(3)), which is to leave the determination of the law applicable to those issues as much as possible to the forum State,23 since the requirement restricts24 the scope of the exception the Art. 1(3) exclusion suffers.

16

17 18

19

20

21

22 23

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Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36; see also Caliess/Klöhn, Rome Regulations (2011), Art. 18 Rome I para. 2; Erman/Hohloch (13th ed.) Art. 18 Rom I-VO para. 3; Nk-BGB/Doehner Art. 18 Rom I para. 1. Nk-BGB/Doehner Art. 18 Rom I para. 7; PWW/Brödermann/Wegen Art. 18 Rom I-VO para. 2. See also Bamberger/Roth/Spickhoff (3rd ed.) Art. 18 Rom I-VO para. 2; Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36. See Bamberger/Roth/Spickhoff (3rd ed.) Art. 18 Rom I-VO para. 2; Caliess/Klöhn, Rome Regulations (2011), Art. 18 Rome I para. 8; Nk-BGB/Doehner Art. 18 Rom I para. 7; Palandt/Thorn Art. 18 Rom I-VO para. 3; PWW/Brödermann/Wegen Art. 18 Rom I-VO para. 2; Staudinger/Magnus (2011) Art. 18 Rom I-VO para. 17; see also Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (1st ed. 2007), Art. 32 EGBGB para. 40 note 184 (in respect of the German provision mirroring Art. 14 Rome Convention). Bamberger/Roth/Spickhoff (3rd ed.) Art. 18 Rom I-VO para. 2; MünchKommBGB/Spellenberg (5th ed.) Art. 18 Rom I-VO para. 20; Nk-BGB/Doehner Art. 18 Rom I para. 8; Reithmann/Martiny/Martiny (7th ed.) para. 341. Bamberger/Roth/Spickhoff (3rd ed.) Art. 18 Rom I-VO para. 2; Erman/Hohloch (13th ed.) Art. 18 Rom I-VO para. 4; Nk-BGB/Doehner Art. 18 Rom I para. 7; Palandt/Thorn Art. 18 Rom I-VO para. 3; PWW/Brödermann/Wegen Art. 18 Rom I-VO para. 4; Staudinger/Magnus (2011) Art. 18 Rom I-VO para. 16. Plender/Wilderspin, The European Private International Law of Obligations (3rd ed. 2009), para. 14–079. See, although in respect of the Rome Convention, Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36: “In order that there should be no doubt as to the freedom retained by the States regarding questions of evidence not decided by the Convention, Article I (2) (h) excludes evidence and procedure from the scope of the Convention expressly without prejudice to Article 14.”

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It has been suggested that whether a presumptions relates to “matters of contractual ob- 7 ligations” is to be determined on the basis of the applicable law.25 This assertion cannot be shared. The provision at hand and the expression referred to are to be interpreted autonomously.26 Given the reason for subjecting presumptions of law to the lex contractus,27 it is here 8 suggested that legal fictions in matters of contractual obligations, although different from presumptions of law in that they are propositions resting in whole or in part on factual premises known not to be true at the time of the fiction’s invocation, but which the law treats as true, also be subject to the lex contractus,28 for two main reasons: because they have legal effects similar to those of irrebuttable presumptions and because they, too, “are really rules of substance which in the law of contract contribute to making clear the obligations of the parties and therefore cannot be separated from the law which governs the contract.”29 Pursuant to Art. 14(1) Rome I Convention, the rules determining the burden of proof, in 9 matters of contractual obligations, also have to be derived from the law applicable. The reasons for this are the same as those behind the extension of the scope of the law applicable to include presumptions of law, as pointed out by the Report Giuliano/Lagarde in respect of Art. 18(1) Rome I’s predecessor: they “are really rules of substance which in the law of contract contribute to making clear the obligations of the parties and therefore cannot be separated from the law which governs the contract.”30 This means that rules relating to the burden of proof in matters of contractual obligations are to be qualified as substantive rather than procedural, and this even if the applicable law qualifies them as procedural.31 This is true, however, only to the extent that the rules determining the burden of proof “are in effect rules of substance. This is not always the case. Some legal systems recognize rules relating to the burden of proof sometimes as presumptions of law which clearly are part of procedural law and which it would be wrong to subject to the law of the contract.”32 This is the case, for example, “with the rule whereby the claim of a party who appears is deemed to be substantiated if the other party fails to appear, or the rule making silence on the part of a party to an action with regard to facts alleged by the other party equivalent to an admission of those

24

25 26 27 28

29

30

31

32

See, in respect of the Rome Convention, Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36: “restriction”. Plender/Wilderspin (fn. 14) para. 14–079. Nk-BGB/Doehner Art. 18 Rom I para. 4; PWW/Brödermann/Wegen Art. 18 Rom I-VO para. 1. See para. 2. See Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (1st ed. 2007), Art. 32 EGBGB para. 41 (in respect of the German provision mirroring Art. 14 Rome Convention). For this line of reasoning, see Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (1st ed. 2007), Art. 32 EGBGB para. 41 (in respect of the German provision mirroring Art. 14 Rome Convention). Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36; see also Bamberger/Roth/Spickhoff (3rd ed.) Art. 18 Rom I-VO para. 3; Rauscher/von Hein, EuZPR/EuIPR (2011), Art. 18 Rom I-VO para. 7. Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (1st ed. 2007), Art. 32 EGBGB para. 42 (in respect of the German provision mirroring Art. 14 Rome Convention). Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36.

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facts.”33 This is also the case in respect of the standard of proof, i.e., the degree of proof required to establish a case, which is left to the lex fori. III. Presumptions and burden of proof and uniform contract law conventions 10 Where resort to uniform contract law conventions prevails over resort to the rules set forth

in the Rome I Regulation, the presumptions and the rules determining the burden of proof referred to in Art. 18(1) Rome I have to give way to the rules contained in the applicable uniform contract law convention, to the extent that this convention contains at all rules relating to or impacting on presumptions or burden of proof. 11 By way of example, it may suffice to refer to the CISG, which not only sets forth some

presumptions, but also allocates the burden of proof. 12 As regards presumptions, it is worth mentioning at least a few. Art. 14(2) CISG, for instance,

sets forth the (rebuttable) presumption that a proposal not addressed to one or more specific persons merely amounts to an invitation to make an offer.34 Furthermore, Art. 19(3) CISG contains a (rebuttable) presumption35 pursuant to which a reply to an offer which purports to be an acceptance but contains additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to the other or the settlement of disputes, is considered to alter the terms of the offer materially and, therefore, does not constitute an acceptance, but rather a rejection of the original offer and, at the same time, a counter-offer.36 13 As regards the burden of proof under CISG, there is a dispute.37 According to some scho-

lars38 and courts,39 the matter is not at all governed by the CISG and is, therefore, left to the 33 34

35

36

37

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Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36. See Peleggi, Offer and Acceptance, in: Antoniolli/Veneziano (eds.), Principles of European Contract Law and Italian Law. A Commentary (2005), p. 110, 111. See Achilles, Art. 19 CISG para. 2; Brunner, Kommentar CISG (2004), Art. 19 para. 3; Díez-Picazo, in: Díez-Picazo (ed.), Comentario (1998), p. 191; Staudinger/Magnus (2013) Art. 19 CISG para. 16; Jametti Greiner, Der Vertragsabschluss, in: Hoyer/Posch (eds), Das Einheitliche Wiener Kaufrecht (1992), p. 43, 52; OGH, 20.3.1997, CISG-Online 269; contra Herber/Czerwenka, Kommentar (1991), Art. 19 CISG para. 11; Ludwig, Der Vertragsabschluß nach UN-Kaufrecht im Spannungsverhältnis von Common Law und Civil Law, dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands (1994), p. 333; MünchKommBGB/Gruber (5th ed.) Art. 19 CISG para. 7; Reinhart, Kommentar (1991), Art. 19 CISG para. 6; Bamberger/Roth/Saenger (3rd ed.) Art. 19 para. 5; Witz/Salger/Lorenz, Art. 19 CISG para. 9; Primer tribunal colegiado en materia civil del primer circuito, 10.3.2005, CISG Spain Online. Kröll/Mistelis/Perales Viscasillas/Ferrari (2011) Art. 19 CISG para. 9; Piltz, Internationales Kaufrecht (2010) Art. 19 para. 3–98; Schlechtriem/Schwenzer/Schroeter Commentary on the International Sales Law (3rd ed.) Art. 19 CISG para. 20. For papers on the burden of proof under the CISG, see, e.g., Antweiler, Beweislastverteilung im UN-Kaufrecht. Insbesondere bei Vertragsveletzungen des Verkäufers (1995); Henninger, Die Frage der Beweislast im Rahmen des UN-Kaufrechts (1995); Imberg, Die Verteilung der Beweislast beim Gefahrübergang nach UN-Kaufrecht (1997); Jung, Die Beweislastverteilung im UN-Kaufrecht insbesondere bei Vertragsabschluß, bei Vertragsverletzungen des Käufers, bei allgemeinen Bestimmungen sowie bei gemeinsamen Bestimmungen über Verkäufer- und Käuferpflichten (1996); Müller, Ausgewählte Fragen der

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applicable domestic law. In the author’s opinion, the foregoing view has, however, to be rejected.40 The matter of burden of proof is one governed by, albeit not explicitly settled in, the CISG,41 thus imposing upon the interpreter the need to settle the matter from within the CISG itself, namely through resort to a general principle, as required by Art. 791) CISG. According to both case law and legal writing, two general principles can be derived from Art. 79(1) CISG42 and, at least according to one court, Art. 2(a) CISG: the principle pursuant to which the party which wants to derive beneficial consequences from a legal provision has to prove the existence of the factual prerequisites of the provision,43 in other words, ei incumbit probatio qui dicit, non qui negat,44 and that according to which the party claiming an exception has to prove the factual prerequisites of that exception.45 According to one

38

39

40 41

42

43

44

45

Beweislastverteilung im UN-Kaufrecht im Lichte der aktuellen Rechtsprechung (2005); Reimers-Zocher, Beweislastfragen im Haager und Wiener Kaufrecht (1995). Bianca/Bonell/Khoo, Commentary on the International Sales Law (1987) Art. 2 para. 3.2.; Flechtner, 13 VJ (2009), 91, 102 ff; Schwenzer/Müller-Chen Kommentar zum Einheitlichen UN-Kaufrecht. CISG (6th ed.) Art. 46, para. 22; U. Huber, RabelsZ 43 (1979), 413, 479 f; Reinhart, UN-Kaufrecht (1991) Art. 36 para. 2; Rosett, 45 Ohio St. L. J. (1984), 265, 281; Ryffel, Die Schadesersatzhaftung des Verkäufers nach dem Wiener Übereinkommen über internationale Warenkaufverträge (1992) p. 59. See ICC, 9926/2007, CISG-online 1850; Serbian Chamber of Commerce, Arbitral Award of 21.2.2005, CISG-online 2038; Cour de Justice de Genève, 15.11.2002, CISG-online 853; Helsinki Court of Appeals, 26.10.2000, CISG-online 748; ICC, 6653/1993, CISG-online 71 = J. D. I. 1993, 1040, 1044. See Ferrari, IPRax 354 (2001); Ferrari, Rev. CISG 1 (2000); Ferrari, Int’l Bus. L. J. 665 (2000). Accord Aue, Mängelgewährleistung im UN-Kaufrecht unter besonderer Berücksichtigung stillschweigender Zusicherungen, 1989, p. 100 et seq.; Jung (fn. 28) at 40; Magnus, in: Ferrari (ed.), Quo Vadis CISG? 211, 216 ff; Magnus, ZEuP (202), 523, 530; Mohs, IHR (2004), 219, 219; Reimers-Zocher (fn. 28) at 148; in case law, see Tribunal Cantonal du Valais, 28.1.2009, available on the Internet at http://cisgw3.law.pace.ed u/cases/090128s1.html; KG Nidwalden, 23.5.2005, IHR (2005), 253; Tribunal Cantonal du Valais, 27.5. 2005 available on the Internet at http://cisgw3.law.pace.edu/cases/050527s1.html; BG, 7.7.2004, IHR (2004), 252; Appelationshof Bern, 11.2.2004, IHR (2006), 149; BGH, 9.1.2002, IHR (2002), 16; Tribunale di Vigevano, 12.7.2000, available on the Internet at http://cisgw3.law.pace.edu/cases/000712i3.html; Tribunale di Pavia, 29.12.1999, available on the Internet at http://cisgw3.law.pace.edu/cases/991229i3.html; HG Kanton Zürich, 10.2.1999, available on the Internet at http://cisgw3.law.pace.edu/cases/990210s1.ht ml; HG Kanton Zürich, 26.4.1995, http://cisgw3.law.pace.edu/cases/950426s1.html; HG Kanton Zürich, 9.9.1993, available on the Internet at http://cisgw3.law.pace.edu/cases/930909s1.html. See Tribunale di Vigevano, 12.7.2000, available on the Internet at http://cisgw3.law.pace.edu/cases/00071 2i3.html; BGH, 9.1.2002, IHR (2002), 16; Tribunale di Pavia, 29.12.1999, available on the Internet at http:/ /cisgw3.law.pace.edu/cases/991229i3.html. For references to this general principle in case law, see OGH, 14.2.2012, IHR (2012), 193, 196; Tribunal Cantonal du Valais, 28.1.2009, available on the Internet at http://cisgw3.law.pace.edu/cases/090128s1.htm l; Tribunal Cantonal du Valais, 27.4.2007, available on the Internet at http://cisgw3.law.pace.edu/cases/07 0427s1.html; BG, 13.11.2003, IHR (2004), 215; Bundesgerichtshof, 9.1.2002, IHR (2002), 16; Tribunale di Vigevano, 12.7.2000, available on the Internet at http://cisgw3.law.pace.edu/cases/000712i3.html; LG Frankfurt, 6.7.1994, available on the Internet at http://www.jura.uni-freiburg.de/ipr1/cisg/; OLG Innsbruck, 1.7.1994, available on the Internet at http://cisgw3.law.pace.edu/cases/940701a3.html. See Schwenzer/Ferrari, Kommentar zum Einheitlichen UN-Kaufrecht. CISG (6th ed. 2013), Art. 4, para. 50; Graffi, Eu. L. F. (2000/2001), 240, 244; Jung, (fn. 28) at 44; Magnus, ZEuP (1995) 202, 207; Müller, supra note 28, at 36. See Tribunal Cantonal du Valais, Switzerland, 28.1.2009, available on the Internet at http://cisgw3.law.pac

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court, this means, e.g., that “a party who claims that the Convention does not apply because the transaction is not international must prove the lack of internationality, and a party who claims that the Convention does not apply because its applicability has been excluded as provided in Art. 6 must prove the existence of the agreement to exclude. There is no doubt that a party who seeks damages for breach by the other party must prove the breach, the damage and the causal nexus between the two, and it has to show that the damages are recoverable under Article 74 of the Convention […]. Concerning the question of the lack of conformity of the goods in the instant case, the aforementioned general principle yields a result similar to the outcome under Italian and German law – that it is the buyer’s responsibility to prove the existence of a lack of conformity.”46 IV. Modes of proof (para. 2) 14 While para. 1 of Article 18 “merely” clarifies the scope of the law applicable pursuant to the

rules of the Regulation, para. 2 constitutes a private international law rule proper,47 to the extent that it identifies the law the modes of proof of which are admissible to prove the contract (or an act intended to have legal effect). 15 Pursuant to the provision at hand, parties can always, irrespective of the lex causae, prove

the contract (or act) by the modes admissible under the lex fori.48 This is unsurprising, as this is in line with the traditional view that issues relating to the modes of proof are procedural in nature and, therefore, should be settled in accordance with the lex fori.49 16 The provision at hand does, however, extend the admissible modes of proof to modes other

than those admissible under the lex fori,50 as does its Rome II counterpart, Art. 22(2),51 since it also allows the contract (or act) to be proved by any mode admissible under the laws referred to in Article 11 under which that contract (or act) is formally valid, provided that such modes of proof can be administered by the forum. This latter requirement restricts the

46

47

48

49

50

51

796

e.edu/cases/090128s1.html; BG, 13.11.2003, IHR (2004), 215; Tribunale di Vigevano, 12.7.2000, available on the Internet at http://cisgw3.law.pace.edu/cases/000712i3.html. Tribunale di Vigevano, 12.7.2000, available on the Internet at http://cisgw3.law.pace.edu/cases/000712i3. html. Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (1st ed. 2007), Art. 32 EGBGB para. 46 (albeit in respect of the German rule mirroring Art. 14(2) Rome Convention). Bamberger/Roth/Spickhoff (3rd ed.) Art. 18 Rom I-VO para. 5; Caliess/Klöhn, Rome Regulations (2011), Art. 18 Rome I para. 13; MünchKommBGB/Spellenberg (5th ed. 2010), Art. 18 Rom I-VO para. 28; Palandt/Thorn Art. 18 Rom I-VO 4; PWW/Brödermann/Wegen Art. 18 Rom I-VO para. 8; Staudinger/Magnus (2011) Art. 18 Rom I-VO para. 28; see also Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (1st ed. 2007), Art. 32 EGBGB para. 46 (albeit in respect of the German rule mirroring Art. 14(2) Rome Convention). Caliess/Klöhn, Rome Regulations (2011), Art. 18 Rome I para. 13; Erman/Hohloch (13th ed.) Art. 18 Rom I-VO para. 5; Nk-BGB/Doehner Art. 18 Rom I para. 11; Schulze, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 18 Rom I-VO para. 7; see also, although in respect of the Rome Convention, Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36. See Caliess/Klöhn, Rome Regulations (2011), Art. 18 Rome I para. 13; Erman/Hohloch (13th ed.) Art. 18 Rom I-VO para. 5. Nk-BGB/Doehner Art. 18 Rom I para. 11.

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Chapter II: Uniform Rules

Article 18

ultimately admissible modes of proof on the basis of a practicability test.52 In effect, for the restriction to apply, it is not necessary that resort to a given foreign mode of proof contrasts with the public policy of the forum.53 Rather, for a court to disallow foreign modes of proof it is sufficient that it cannot be administered, for instance, because it is unknown,54 such as affidavits, witness testimony of a party in the proceedings,55 etc.56 This restriction, which gives courts a margin of discretion,57 is necessary for the purpose of “reconciling the requirements of the law of the forum with the desire to respect the legitimate expectations of the parties at the time of concluding their act.”58 As regards, however, the case of rights subject to registration in a public register, it is suggested that the authority charged with keeping that register can, owing to that provision, only recognize the modes of proof provided for by its own law.59 The practicability restriction is, however, not the only restriction to the alternative use of 17 modes of proof other than those of the lex fori. Article 18(2) extends the modes of proof admissible only to those of “the laws referred to in Article 11 under which the contract or act is formally valid”,60 thus excluding from the array of admissible modes those modes that lead to the contract being invalid from a formal point of view.61 As regards the laws the modes of which may become relevant, they are quite numerous and 18 depend on whether agents are involved in the conclusion of the contract and on whether what has to be proved is a contract or a unilateral act.62 In particular, the modes admissible are, apart from those of the lex fori, those of the lex causae, the law of the country where the contract was concluded, the law of either of the countries where either of the parties or their agent is present at the time of conclusion of the contract, the law of the country of habitual residence of either party at the time of conclusion of the contract, the law of the country where the unilateral act intended to have legal effect relating to an existing or contemplated contract was done, the law of the country where the person by whom it was done had his habitual residence at that time, in relation to consumer contracts governed by Article 6 52

53 54 55

56 57 58 59

60

61

62

Plender/Wilderspin (fn. 14) para. 14–080; see also, in respect of the Rome Convention, Report Giuliano/ Lagarde, O.J. 1980 No. C 282/1, 36. Plender/Wilderspin (fn. 14) para. 14–080. Caliess/Klöhn, Rome Regulations (2011), Art. 18 Rome I para. 17. See Caliess/Klöhn, Rome Regulations (2011), Art. 18 Rome I para. 17; Schulze, in: Ferrari/Kieninger/ Mankowski et al., Internationales Vertragsrecht (2nd ed. 2012), Art. 18 Rom I-VO para. 8; Staudinger/ Magnus (2011) Art. 18 Rom I-VO para. 28. For these examples, see, e.g., Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 37. Plender/Wilderspin (fn. 14) para. 14–080. Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36. Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36; see also Bamberger/Roth/Spickhoff (3rd ed.) Art. 18 Rom I-VO para. 6. See Bamberger/Roth/Spickhoff (3rd ed.) Art. 18 Rom I-VO para. 5; see also Report Giuliano/Lagarde, O.J. 1980 No. C 282/1, 36. Caliess/Klöhn, Rome Regulations (2011), Art. 18 Rome I para. 16; Nk-BGB/Doehner Art. 18 Rom I para. 11; Staudinger/Magnus (2011) Art. 18 Rom I-VO para. 28; see also, although in respect of the German provision mirroring Art. 14 Rome Convention, Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (1st ed. 2007), Art. 32 EGBGB para. 47. See also Nk-BGB/Doehner Art. 18 Rom I para. 11.

Franco Ferrari

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Rome I Regulation the law of the country where the consumer has his habitual residence, and, under certain circumstances, in relation to contracts the subject matter of which is a right in rem in immovable property or a tenancy of immovable property, the lex rei sitae.63 19 While the provision at hand does extend the admissible modes of proof, it does not address

the relationship between the various modes.64 Thus, it is within the discretion of the court whether to give more weight to one mode or the other, when deciding whether a contract (or an act) is proved. 20 It is worth pointing out that the CISG also sets forth a rule concerning modes of proof.

Pursuant to Art. 11 CISG, a contract governed by the CISG “may be proved by any means, including witnesses”.65 This substantive provision, resort to which prevails over resort to Art. 18(2) Rome I,66 also allows courts to override domestic rules that otherwise limit the parties’ ability to prove the existence of a contract,67 irrespective of whether the domestic law qualifies them as substantive or procedural. That is why it has been asserted that Art. 11 CISG, which lays down the principle of freedom from form requirements, has a procedural aspect to it.68 By establishing the foregoing principle also for evidentiary purposes, the drafters of the CISG wanted to make sure that parties are freed from having to comply with domestic requirements concerning the means to be used in proving the existence of a contract governed by the CISG.69 Consequently, domestic rules requiring a contract to be evidenced by a writing in order to be enforceable (such as Section 2–201 UCC (United States), Article 1341 of the French Civil Code, Article 2721 of the Italian Civil Code, etc., all of which exclude oral testimony in cases where the value of the contract is higher than a certain amount) are superseded,70 as are the rules preventing parties to a written contract from presenting extrinsic evidence that discloses an ambiguity and clarifies it or adds to the written terms of the contract that appears to be whole (parol evidence rule).71 63 64

65

66 67 68 69

70

71

798

See also Caliess/Klöhn, Rome Regulations (2011), Art. 18 Rome I para. 15. See, although in respect of the German provision mirroring Art. 14 Rome Convention, Ferrari, in: Ferrari/Kieninger/Mankowski et al., Internationales Vertragsrecht (1st ed. 2007), Art. 32 EGBGB para. 50. For a detailed analysis of Art. 11 CISG, see, e.g., Ferrari, The Formal Validity of Contracts for the International Sale of Goods Governed by the CISG – An Overview of Case Law, Rev. dr. aff. int. 2004, 85. See Staudinger/Magnus (2011) Art. 18 Rom I-VO para. 32. Staudinger/Magnus (2011) Art. 18 Rom I-VO para. 32. Witz/Salger/Lorenz Art. 11–12 CISG para. 2. Ferrari, in: Ferrari et als. (eds.), The Draft UNCITRAL Digest and Beyond (2004), p. 206, 211; Schlechtriem/Schwenzer/Schmidt-Kessel, Kommentar zum Einheitlichen UN-Kaufrecht. CISG (6th ed.) Art. 11 CISG para. 12. See also Achilles, Art. 11 CISG para. 2; Bonell, UN-Kaufrecht und das Kaufrecht des Uniform Commercial Code im Vergleich, RabelsZ (1994) 35; Kabik, Through the Looking Glass: International Trade in the “Wonderland” of the United Nations Convention on Contracts for the International Sale of Goods, 9 Int’l Tax & Bus. Law. 418 (1992); Schlechtriem/Witz, Contrats de vente internationale de marchandises, 2008, para. 108; Staudinger/Magnus (2013) Art. 11 CISG para. 11. For cases stating that Art. 11 CISG overrides the parol evidence rule, see, e.g., ECEM European Chemical Marketing B.V. v. The Purolite Company, U.S. District Court, Eastern District of Pennsylvania, 29.1.2010, CISG-online Nr. 2090; Fercus v. Mario Palazzo et al., U.S. District Court, Southern District Court of New York, 8.8.2000, CISG-online Nr. 588; Mitchell Aircraft Spares Inc. v. European Aircraft Service A. B., U.S. District Court, Northern District of Illinois, Eastern Division, 27.10.1998, 1998 WL 754801 (N. D.

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Chapter III: Other Provisions

Article 19

Like Art. 18(2) Rome I,72 the CISG does not deal with the probative value of evidence 21 presented by the parties;73 in other words, the CISG does not establish a hierarchy of the probative value of different types of evidence.74 Thus, as was held correctly by courts, it is up to the court to determine, within the limits set by the procedural rules of the forum, how to evaluate that evidence.75 Consequently, a judge may well attribute more weight to a written document than to oral testimony.76 It is worth pointing out that, although not expressly stated, Art. 11 CISG does not really 22 allow for the employment of “any means” of proof.77 Limits similar to the ones mentioned in respect of Art. 18(2) Rome I also exist vis-à-vis Art. 11 CISG. This is why, for instance, in those countries where witness testimony by a party to the proceedings is not admissible, a contract cannot be proved by means of such testimony, even if the CISG applies to the contract.

Chapter III: Other Provisions Article 19: Habitual residence 1. For the purposes of this Regulation, the habitual residence of companies and other bodies, corporate or unincorporated, shall be the place of central administration. The habitual residence of a natural person acting in the course of his business activity shall be his principal place of business. 2. Where the contract is concluded in the course of the operations of a branch, agency or any other establishment, or if, under the contract, performance is the responsibility of such a branch, agency

72

73

74

75

76

77

Illinois); MCC – Marble Ceramic Center Inc. v. Ceramica Nuova D’Agostino S.p.A., U.S. Circuit Court of Appeals (11th Circuit), 29.6.1998, 1998 WL 343335 (11th Cir. (Fla.)); Calzaturificio Claudia s. n. c. v. Olivieri Footwear Ltd., U.S. District Court, Southern District of New York, 6.4.1998, 1998 WL 164824 (S. D. N. Y.); Filanto S.p.A. v. Chilewich International Corp., U.S. District Court, Southern District of New York, 14.4.1992, 789 F. Supp. 1229 (S.D.N.Y. 1992); contra Beijing Metals & Minerals Import/Export Corp. v. American Business Center Inc., U.S. Circuit Court of Appeals (5th Circuit), 15.6.1993, 993 F 2d 1178 (5th Cir. 1993). See Bamberger/Roth/Spickhoff (3rd ed.) Art. 18 Rom I-VO paras. 4 and 6; MünchKommBGB/Spellenberg (5th ed.) Art. 18 Rom I-VO para. 25; Nk-BGB/Doehner Art. 18 Rom I para. 12. Ferrari, in: Ferrari et als. (eds.), The Draft UNCITRAL Digest and Beyond (2004), p. 206, 212; Witz/ Salger/Lorenz Art. 11–12 CISG para. 9. Ferrari, in: Ferrari et als. (eds.), The Draft UNCITRAL Digest and Beyond (2004), p. 206, 212; Herber/ Czerwenka, Art. 11 CISG para. 7; Staudinger/Magnus (2013) Art. 11 CISG para. 17. In case law see, e.g., Rechtbank van Koophandel Kortrijk, 4.4.2001, published at http://www.law.kuleuven .ac.be/int/tradelaw/WK/2001–04-05.htm; LG Memmingen, 1.12.1993, published at http://www.jura.unifreiburg.de/ipr1/cisg/urteile/text/73.htm. Rechtbank van Koophandel Kortrijk, 4.4.2001, published at http://www.law.kuleuven.ac.be/int/tradelaw/ WK/2001–04-05.htm. Schwenzer/Schmidt-Kessel, Kommentar zum Einheitlichen UN-Kaufrecht. CISG (6th ed. 2013), Art. 11 CISG para. 12.

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or establishment, the place where the branch, agency or any other establishment is located shall be treated as the place of habitual residence. 3. For the purposes of determining the habitual residence, the relevant point in time shall be the time of the conclusion of the contract.

Bibliography Christiane Albers, Die Begriffe der Niederlassung und der Hauptniederlassung im Internationalen Privat- und Zivilverfahrensrecht (2010) Baetge, Der gewöhnliche Aufenthalt im internationalen Privatrecht (1994) Ballarino, Diritto internazionale privato (3rd ed. 1999) Batiffol/Lagarde, Droit international privé, Vol. II (8th ed. 1993) Beitzke, Kollisionsrecht von Gesellschaften und juristischen Personen, in: Lauterbach (ed.), Vorschläge und Gutachten zur Reform des deutschen und internationalen Personen- und Sachenrechts (1972), p. 94 Borrás, Explanatory Report on the Convention, drawn up on the basis of Art. K.3 of the Treaty on European Union, on Jurisdiction and the Recognition and Enforcement of Judgments in Matrimonial Matters (1998), OJ EC 1998 C 221/27 Calvo Caravaca/Carrascosa González, Derecho Internacional Privado, Vol. II (16th ed. 2016) Dicey/Morris/Collins, Dicey, Morris and Collins on the Conflict of Laws (15th ed. 2012) Fawcett/Carruthers/North, Cheshire, North & Fawcett Private International Law (14th ed. 2008) Ferrer Correia, Lições de Direito Internacional Privado (1973) Ferrer Correia, Lições de Direito Internacional Privado I (2000) Isabel de Magalhães Collaço, Direito Internacional Privado, Part II – Sistema de normas de conflitos portuguesas, T. I – Direito das pessoas. § 2.º Pessoas Colectivas (1971) Kegel, Was ist gewöhnlicher Aufenthalt?, in: FS Manfred Rehbinder (2002), p. 699 I. II.

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General purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Legislative history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Kegel/Schurig, Internationales Privatrecht (9th ed. 2004) Kropholler, Internationales Privatrecht (6th ed. 2006) Lima Pinheiro, O Direito aplicável às sociedades (1998), in: Lima Pinheiro, Estudos de Direito Internacional Privado, vol. I (2006), p. 11 Lima Pinheiro, Direito aplicável aos contratos celebrados através da internet, ROA 66 (2006), 131 Lima Pinheiro, Direito Internacional Privado, vol. I, Introdução e Direito de Conflitos. Parte Geral (3rd ed. 2014) Lima Pinheiro, Direito Internacional Privado, Vol. II, Direito de Conflitos. Parte Especial (4th ed. 2015) Lima Pinheiro, Direito Internacional Privado, Vol. III, Competência Internacional e Reconhecimento de Decisões Estrangeiras (2nd ed. 2012) Marques dos Santos, Algumas reflexões sobre a nacionalidade das sociedades em Direito Internacional Privado e em Direito Internacional Público (1985) Marques dos Santos, Direito Internacional Privado. Sumários (2nd ed. 1987) Mayer/Heuzé, Droit international privé (11th ed. 2014) Mosconi/Campiglio, Diritto internazionale private e processuale. Parte generale e obbligazioni (5th ed. 2010) Plender/Wilderspin, The European Private International Law of Obligations (4th ed. 2015) Rabel/Drobnig, The Conflict of Laws. A Comparative Study (2nd ed. 1960) Van Hecke, Les sociétés anonymes en droit international privé. Rapport provisoire, Ann. Inst. dr. int. 51 (1965), 226 Wiedemann, Gesellschaftsrecht, vol. I: Grundlagen (1980). III.

Habitual residence of natural persons not acting in the course of their business activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

August 2016

Article 19

Chapter III: Other Provisions IV. V.

Habitual residence of organisations . . . . . . 19 Habitual residence based upon the place of business or establishment . . . . . . . . . . . . . . 27

VI.

Moment of determination of the habitual residence . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

I. General purpose Most choice-of-law rules of the Regulation have as connecting factor the habitual residence 1 of one of the contracting parties. This occurs, in first place, with the general provision on the applicable law in the absence of choice (Art. 4), regarding most of the specified contract types (1) and unspecified or mixed contract types, provided that the characteristic performance of the contract can be determined (2). This connecting factor also plays a role in the special provisions concerning contracts of carriage (Art. 5), consumer contracts (Art. 6), insurance contracts (Art. 7) and individual employment contracts (Art. 8). Furthermore, it assumes an autonomous relevance in respect to the partial issues of consent (Art. 10 (2)) and formal validity (Art. 11 (2), (3) and (4)). Thus, the habitual residence is a central concept or, more precisely, a central expression, in 2 the Regulation, diverging from the preference given, in matters of jurisdiction, to the domicile of the defendant by the Brussels I and Brussels Ibis Regulations. The concept of habitual residence, normally relevant for choice-of-law, is mainly factual 3 and, therefore, easier to concretise than the concept of domicile. However, the price paid for the very broad use of this expression in Rome I Regulation is that it has not a unitary meaning. Legal organisations do not have a factual habitual residence and contracts concluded by persons acting in the course of independent economic activities are more connected with their place of business than with their factual habitual residence. Therefore, the EU legislator had to introduce in the Regulation a provision defining the habitual residence of corporate or unincorporated bodies and of natural persons acting in the course of business activities, giving to that expression legal-technical meanings quite different from the prevailing factual concept of habitual residence normally adopted in Private International Law. This concept will keep its relevance to other natural persons. The outcome is a plurality of concepts of habitual residence which raises doubts from the 4 point of view of legislative technique.1 In effect, this technique may mislead the less attentive lawyer. As a definition provision, Art. 19 complements the choice-of-law rules that use the expres- 5 sion “habitual residence” and, thus, it has not an autonomous legislative purpose.2 This expression is used in the context of the pursuance of the general aim of determining, in the absence of a choice by the parties, the applicability of a law which has a close connection with the contract or, at least, with one the contracting parties. A more precise analysis of the general purpose pursued may be found in the comments of each of the concerned choice-oflaw rules.

1 2

See also Mankowski, IPRax 2006, 101, 104. See also Recital (39).

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II. Legislative history 6 The expression “habitual residence” did not play a central role in the Rome Convention. The

law applicable in the absence of choice was the law of the country most closely connected with the contract (Art. 4 (1) and (5)). Art. 4 (2) “presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a body corporate or unincorporated, its central administration. However, if the contract is entered into in the course of that party’s trade or profession, that country shall be the country in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated”. Therefore, as far as the general provision was concerned, the habitual residence was only relevant regarding natural persons not acting in the course of an independent economic activity. Not surprisingly, the Convention did not provide a definition of habitual residence. 7 The Commission’s Proposal, reflecting the central role given to the habitual residence of one

the contracting parties, contained a provision assimilating the principal establishment (in the English version), the central administration (in the French version) or the main administration (in the German version) of organisations to the habitual residence (Art. 18 (1) cl. 1). Where the contract was concluded or performed by a subsidiary, a branch or other establishment, this establishment was assimilated to habitual residence (Art. 18 (1) cl. 2). Where the contract was concluded in the course of the business activity of a natural person, that natural person’s establishment was assimilated to habitual residence (Art. 18 (2)). 8 This provision raised some divergences, namely regarding the changing of the solution laid

down by Art. 4 (2) of Rome Convention. According to Lagarde, that provision was a welcome clarification of the Rome Convention.3 Mankowski remarked the suppression of the connection with the principal place of business (in the French and German versions), stressing that the place of business relevant for the external activity of the organization does not depend on the administration seat.4 The same line of reasoning can be found in the Max Planck Institute Comments,5 adding that in the hardly conceivable case of a divergence between the principal establishment and the central administration it appears that Art. 18 (1) cl. 2 would apply, and, therefore, the place of the establishment would be relevant. In any case, it was recommended to stick to the connecting factor “principal establishment”. 9 In Art. 19 of the Regulation, the EU legislator followed, essentially, the wording of the

Proposal in the French and German versions, which is to a certain extent in line with the wording of Art. 23 of Rome II Regulation. A paragraph concerning the moment relevant for the determination of the habitual residence has been added. 10 The place of the central administration of organisations, which in the Rome Convention was

relevant only in less frequent situations in which the organisation has not acted in the course 3 4 5

802

Lagarde, RCDIP 95 (2006), 331, 347. Compare Mankowski, IPRax 2006, 101, 104, 112. Max Planck Institute for Comparative and International Private Law, RabelsZ 71 (2007), 225, 335.

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Chapter III: Other Provisions

Article 19

of an economic activity, becomes the main objective connecting factor. Notwithstanding, cases of divergence between the central administration and the principal place of business require a differentiation of solutions and will be addressed below (V). III. Habitual residence of natural persons not acting in the course of their business activity Art. 19 does not provide a definition of the habitual residence of natural persons not acting 11 in the course of a business activity. Therefore, general criteria on the interpretation of the terms used in EU instruments shall be taken into account. The expression “habitual residence” shall be subjected to an autonomous interpretation, independent of the meaning conferred upon it by the legal system of a particular Member State, namely the forum Member State, in relation “to the context of the provision and the objective pursued by the legislation in question”6 and the conformity with “the fundamental rights protected by the Community legal order or with the other general principles of Community law”.7 As far as the context and the purpose of the provision do not point in a different direction, it 12 seems that the “habitual residence” of a person shall be interpreted in line with other EU Private International Law instruments, namely the Rome II, Rome III and Brussels IIbis Regulations. The relevant ECJ case law concerning these instruments is, however, very limited, and deals with the habitual residence of the child as the general head of jurisdiction in matters of parental responsibility, based upon a provision in a context and with a purpose to a large extent different from the context and purpose of the choice-of-law rules of the Rome I Regulation.8 In any case, the Report Borrás on the Convention that inspired the Brussels II Regulation offers some guidance when stating that the habitual residence should be understood as “the place where the person had established, on a fixed basis, his permanent or habitual centre of interests, with all the relevant facts being taken into account for the purpose of determining such residence”.9 The analysis of this connecting factor made by general Private International Law works is 13 also of interest,10 as well as its interpretation in the context of the Hague Conventions,11 but it shall be kept in mind that what is at stake is the determination of a close relationship with the 6 7 8

9

10

11

Cf. A¸(Case C-523/07) [2009] ECR I-2805 para. 34. Cf. Jasna Detiček v. Maurizio Sgueglia, (Case C-403/09) [2009] ECR I-12193 para. 34. See, namely, A¸(Case C-523/07) [2009] ECR I-2805 paras. 36–41, pointing out, at para. 36, that the ECJ case law concerning other areas of the EU law cannot be directly applied in this context. See further Thorn, in: Rauscher, Art. 19 note 14. Cf. Report Borrás, OJ EEC 1998 C 221/27 para. 32, invoking the ECJ case law. See further ECJ case law on other areas referred by Thorn, in: Rauscher, Art. 19 para. 13 fn. 64–65 and 67, and by Altenkirch, in: Ferrari, Art. 19 para. 14 fn. 18. See, namely, Kegel/Schurig, Internationales Privatrecht (9th ed. 2004), pp. 471–472; Kegel, in: FS Manfred Rehbinder (2002), p. 699–706; Dicey/Morris/Collins, Dicey, Morris and Collins on the Conflict of Laws (15th ed. 2012) paras. 6–146-6–152; Fawcett/Carruthers/North, Cheshire, North & Fawcett Private International Law (14th ed. 2008) pp. 185 et seq.; Kropholler, Internationales Privatrecht (6th ed. 2006), pp. 283 et seq.; Lima Pinheiro, Direito Internacional Privado, vol. I (3rd ed. 2014), pp. 511–513. See, namely, Magnus, in: Staudinger Kommentar, Art. 19 Rom I-VO note 7, including the taking into account of Conventions unifying substantive law; Belohlávek, paras. 19.4 et seq. See also the Council of

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contract instead of the law governing the personal status.12 It may be pointed out that the habitual residence in a given country may be temporary and, provided the contracting party has established the centre of his personal life there, it is irrelevant whether or not he intends to return to his country of origin.13 Also irrelevant is whether or not the contracting party has a residence permit for the country or is registered there for any legal purpose.14 14 This understanding applies also, in principle, to contracts concluded through the internet,15

but it shall be added that the party that states the location of its residence in one country cannot later invoke the falsehood or inaccuracy of the statement.16 15 Though uncommon, situations may arise in which the contracting party has a habitual

residence in two States, e.g. when it lives half of the year in each of these States. In such cases, and in accordance with the purpose of the choice-of-law provisions, the habitual residence in the State with which the relevant contracting party and the contract are most closely connected in a way recognisable by the other party shall be relevant, taking into account all the circumstances of each particular case.17 16 Thus, all links with the States concerned, either objective or subjective, may be taken into

account to determine the closest connection, namely the country of residence of the relevant party at the time of conclusion of the contract, the country of residence of the relevant party in which the contract shall be performed (if it shall be performed there), the time it spends in each of the countries concerned, the language normally used by it, its family and social relationships, and the location of its assets. 17 The relevance of these links shall depend on their cognoscibility by the other party. If the

closest connection is not recognisable by the other party, it could be appropriated, in given circumstances, to deem relevant the habitual residence that, albeit less significant, is more recognisable by the other party. 18 In the very rare case in which the relevant contracting party is without habitual residence,

the connecting factor cannot designate the law applicable to the contract, and, for that purpose, resort shall be made to the subsidiary connection, namely to Art. 4 (4) (law of the country with which the contract is most closely connected).

12 13 14

15

16 17

804

Europe’s Resolution (72) 1 On the Standardization of the Legal Concepts of “Domicile” and of “Residence”, nos. 7–11. Cf. Martiny, in: MünchKomm, Art. 19 Rom I-VO note 12. See also Garcimartín Alférez, EuLF 2008, I-61 para. 45; Magnus, IPRax 2010, 27, 35. See namely Article 4 (2) of the Belgian Code of Private International Law, and Lima Pinheiro, Direito Internacional Privado, vol. I (3rd ed. 2014), p. 513. See Martiny, in: MünchKomm, Art. 19 note 8; Magnus, in: Staudinger Kommentar, Art. 19 Rom I-VO note 9. See Lima Pinheiro, ROA 66 (2006), 131, 146. See further Belohlávek, paras. 19.118–19.120. For a convergent view, see Belohlávek, para. 19.115.

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Chapter III: Other Provisions

Article 19

IV. Habitual residence of organisations The habitual residence of organisations, regardless of having legal personality, is deemed to 19 be the place of central administration, Art. 19 (1) cl. 1. The English version, when mentioning “companies and other bodies, corporate or unin- 20 corporated”, corresponding also to the Portuguese version “sociedades e outras entidades dotadas ou não de personalidade jurídica” is clearer than other linguistic versions, such as the French and German, which refer to “companies, association or legal persons” (société, association ou personne morale; Gesellschaften, Vereinen und juristischen Personen). The main commentators agree that all external organisations involved in contracting, regardless of their legal personality, are included.18 The expression “place of central administration” shall be interpreted according to the ge- 21 neral criteria stated above (III). As far as the context and the purpose of the provision do not point in a different direction, it shall be interpreted in line with other EU Private International Law instruments, namely Arts. 23 (1) Rome II Regulation; 60 (1) Brussels I Regulation; Art. 63 (1) Brussels Ibis Regulation. The expression “central administration” is also used in Art. 54 (1) TFEU, in the context of the right of establishment. In the lack of ECJ case law regarding these instruments, the best understanding regarding 22 this connecting factor generally adopted by authors and case law in the Member States’ Private International Law shall be the starting point. According to the most common understanding, the seat of the administration is located at 23 the place where the direction organs normally form their will, i.e., the place where the administrators meet and the general assemblies take place.19 In cases where the organs meet in different countries, the superior and final centre of decision (main place of administration)20 is, in principle, relevant. In order to take into account the position of subsidiaries subordinated to the administration of the parent corporation, however, it shall be accepted that the administration of the subsidiary is seated in the place where fundamental direction decisions are converted in acts of daily management.21 18

19

20

21

See Martiny, in: MünchKomm, Art. 19 Rom I-VO note 4; Thorn, in: Rauscher, Art. 19 note 8; Baetge, in: Calliess, Art. 19 note 9. In the same sense, regarding Rome II Regulation, Dickinson, The Rome II Regulation (2008) para. 3.53. Cf. Rabel/Drobnig, The Conflict of Laws. A Comparative Study (2nd ed. 1960) p. 41; Batiffol/Lagarde, Droit international privé, Vol. I (8th ed. 1993) pp. 335, 339; Isabel de Magalhães Collaço, Direito Internacional Privado, Part II – Sistema de normas de conflitos portuguesas, T. I – Direito das pessoas. § 2.º Pessoas Colectivas (1971) p. 40; Ferrer Correia, Lições de Direito Internacional Privado (1973) pp. 111 et seq.; Ferrer Correia, Lições de Direito Internacional Privado I (2000), p. 86 (regarding the nationality of legal persons); Ballarino, Diritto internazionale privato (3rd ed. 1999) p. 363; Marques dos Santos, Algumas reflexões sobre a nacionalidade das sociedades em Direito Internacional Privado e em Direito Internacional Público (1985) pp. 65–66 (regarding the attribution of nationality). Cf. Batiffol/Lagarde, Droit international privé, Vol. I (8th ed. 1993) para. 194 fn. 6. For a convergent view, Marques dos Santos, Direito Internacional Privado. Sumários (2nd ed. 1987) p. 126. See Article 5 of the Institut de Droit International Resolution on Companies in Private International Law (Warsaw 1965); van Hecke, Les sociétés anonymes en droit international privé. Rapport provisoire, Ann.

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Rome I Regulation

24 The meaning of the expression “central place of administration”, used in most linguistic

versions of the Regulation, is practically equivalent to this concept of main place of administration, but insofar as it stresses the contraposition between central and local administrations, it can be argued that in spite of the preference given to the expression “central place of administration” in relation to the expression “principal place of business” it is assumed that the organisation has the principal establishment in the country of the central administration and that secondary establishments are seen as corresponding to “local administrations”. 25 This is enforced by the following considerations: what persons dealing with the organisation

normally know is the place of the establishment and the registered seat (“statutory seat”). A seat of administration in a country different from the place of establishment and from the registered seat is normally unrecognisable by those persons. Where the organisation has establishments in different countries, and it is not clear that the contract is concluded or performed by a certain establishment, the applicable law has to be based upon a connecting factor clearly determinable and cognoscible by the other contracting party and interested third parties. Therefore, the place of the central administration is relevant insofar as the contract is not clearly connected with an establishment located in another country and the main establishment is located in the same country. If the main establishment is not located in the country of the central administration, the place of the central administration can then only be relevant insofar as interested persons know or should know the location of the central administration. As a rule, persons that are not members or holders of organs of an organisation can only know the location of the central administration when it coincides with the registered seat.22 26 Thus, one is led to the conclusion that a central administration located in a country where

the main establishment is not located, which does not correspond to the registered seat, and which is not recognisable, due to special circumstances, by persons dealing with the organisation, is irrelevant. Where this is the case, and the contract is not clearly connected with one of the establishments of the organisation, it seems unavoidable that the organisation shall be deemed as habitual resident in the place of the registered seat. As a last resort, the “statutory seat” can take precedence over the “seat of the central administration”. V. Habitual residence based upon the place of business or establishment 27 The habitual residence of a natural person acting in the course of his business activity shall

be his principal place of business (Art. 19 (1) cl. 2). 28 The ratio legis of this provision seems clear: where a natural person carries out an indepen-

dent economic activity, the contract concluded in the course of this activity is connected

22

806

Inst. dr. int. 51 (1965), 226, 234; Beitzke, in: Lauterbach (ed.), Vorschläge und Gutachten zur Reform des deutschen und internationalen Personen- und Sachenrechts (1972), p. 94, 115; Wiedemann, Gesellschaftsrecht, vol. I: Grundlagen (1980) p. 800; Kegel/Schurig, Internationales Privatrecht (9th ed. 2004), p. 576; Lima Pinheiro, Direito Internacional Privado, vol. II (4th ed. 2015) p. 157. See further Lima Pinheiro, O Direito aplicável às sociedades (1998), in: Lima Pinheiro, Estudos de Direito Internacional Privado, vol. I (2006), p. 11, 4 et seq., 73 et seq., 88; Lima Pinheiro, Direito Internacional Privado, vol. II (4th ed. 2015) pp. 162 et seq., 176–177.

August 2016

Chapter III: Other Provisions

Article 19

with the country where the activity is carried, which cannot coincide with the country where the person has his personal centre of life. It is also this place which is more recognisable by the other contracting party, as well as by third parties. Where a natural person carries out an independent economic activity in different countries, and the contract is not clearly connected with one of his establishments, resort shall be made to the principal place of business. While no 2 refers to “establishment”, paragraph 2 of no 1 refers to “place of business”. The 29 same occurs in Art. 23 of Rome II Regulation, but in this case it is clear from the systemization of the provision that the reference to “establishment” concerns organisations ((1) § 2) and the reference to “place of business” concerns natural persons (2). Differently, it is not clear if Art. 19 (2) of Rome I Regulation deals only with organisations or also with natural persons. More generally, it can be asked whether “place of business” has the same meaning as “establishment”. The European instruments seem to use the both terms as synonyms. Brussels I and Ibis 30 Regulations refer apparently indiscriminately to “establishment” (e.g. Articles 5(5) and 7 (5) and to “place of business” (Articles 60 (1) and 63 (1)).23 French and German versions of these Regulations, as well as of Art. 19 of Rome I and of Art. 23 of Rome II Regulations, use only the term “establishment” (établissement, Niederlassung). According to the ECJ case law regarding Art. 5 (5) Brussels Convention, the concept of 31 establishment “implies a place of business which has the appearance of permanency, such as the extension of a parent body, has a management and is materially equipped to negotiate business with third parties so that the latter, although knowing that there will, if necessary, be a legal link with the parent body, the head office of which is abroad, do not have to deal directly with such parent body but may transact business at the place of business constituting the extension”.24 It shall be remarked that the French text of the ruling refers to “centre of operations” (centre d’opérations) instead of “place of business”. Another element to be taken into account is that the expression “person acting in the course 32 of his business activity” corresponds, in the French and German versions, to the expression “person acting in the exercise of a professional activity” (personne physique agissant dans l’exercice de son activité professionnelle; Person, die im Rahmen der Ausübung ihrer beruflichen Tätigkeit handelt). Thus, it seems clear that the natural persons at stake are not only persons exploring an enterprise (i.e., a unity of economic action), but any person, that by acting in the course of an independent economic activity, cannot be considered a consumer in the sense of Art. 6 of the Rome I Regulation. In light of the above mentioned ratio, the provision shall apply to natural persons that carry 33 23

24

In this sense, Mankowski, in: Magnus/Mankowski, Brussels I Regulation (2nd ed. 2012) Art. 5 Brussels I Regulation note 278; Mankowski, in: Magnus/Mankowski, Brussels Ibis Regulation (2016) Art. 7 note 430. For a different view, see Vlas, in: Magnus/Mankowski, Brussels I Regulation (2nd ed. 2012) Art. 60 Brussels I Regulation note 6. Somafer SA v. Saar-Ferngas AG, (Case 33/78) [1978] ECR 2183, 2193, para. 12. See, with further development, Mankowski, in: Magnus/Mankowski, Brussels I Regulation (2nd ed. 2012) Art. 5 Brussels I Regulation notes 273 et seq.; Mankowski, in: Magnus/Mankowski, Brussels Ibis Regulation (2016) Art. 7 notes 425 et seq.

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out an independent economic activity without exploring any economic organisation and, therefore, it is advocated that in the context of this provision the place of business means any place where an independent economic activity is carried out in a manner that appears externally as permanent. 34 In the same vein, employees are naturally excluded.25 Their contracts are normally con-

nected with their personal life and, even if this is not the case, they do not have a place of business on which the other contracting party can rely. 35 Persons carrying out such independent economic activity in more than one country will

have their principal place of business in the country where this activity is most important, taking into account the volume of the transactions and the dimension of the human and material resources employed, in a way externally recognizable. 36 In the case, however, in which the natural person explores an enterprise and has establish-

ments in different countries, it will make sense to apply Art. 19 (2),26 with the consequence that where the contract is concluded in the course of the operations of a secondary establishment or shall be performed by this establishment the person will be deemed as habitual resident in the country where this establishment is located rather than in his principal place of business. It shall be remarked, in connection therewith, that also the special jurisdiction based upon the establishment (Articles 5 (5) of Brussels I Regulation and 7 (5) of Brussels Ibis regulation) applies to natural persons.27 37 Regarding legal organisations, the place of establishment is in first place relevant, under

Art. 19 (2), where the contract is connected with a secondary establishment. But, as previously remarked (IV), the organisation may have its main establishment in a country which is not the country where the central administration is located. Thus, it is sustained that, by the above mentioned reasons, where the contract is connected with a main establishment located outside the country of the central administration, the situation shall fall under the same provision, with the consequence that the organisation is deemed to be habitual resident in the place of the main establishment.28 25

26

27

28

808

See also Magnus, in: Staudinger Kommentar, Art. 19 Rom I-VO notes 16 and 30; Baetge, in: Calliess, Art. 19 note 20, and, regarding Rome II Regulation, the Commission’s Proposal, COM (2003) 427 final, p. 27; and Junker, in: MünchKomm Art. 23 Rome II-VO note 20. For the contrary view, Thorn, in: Rauscher, Art. 19 Rom I-VO note 10. See also Magnus, in: Staudinger Kommentar, Art. 19 Rom I-VO note 21; Baetge, in: Calliess, Art. 19 Rome I notes 19, 23–24. Compare Martiny, in: MünchKomm, Art. 19 note 11. See, for instance, Mankowski, in: Magnus/Mankowski, Brussels I Regulation (2nd ed. 2012), Art. 5 Brussels I Regulation notes 277–278, and in: Magnus/Mankowski, Art. 7 Brussels Ibis Regulation, notes 429– 439. See also Max Planck Institute for Comparative and International Private Law, RabelsZ 71 (2007), 225, 335; Lima Pinheiro, ROA 68 (2008), 575, 610–611 (= in: Estudos de Direito Internacional Privado, vol. II (2009), p. 401, 434); Mankowski, IHR 2008, 133, 139–140. Compare, in the sense that Article 19 (2) comprises only secondary establishments, Garcimartín Alférez, EuLF 2008, 61 para. 46; Pierre Mayer/ Heuzé, Droit international privé (10th ed. 2010) para. 727; Mosconi/Campiglio, Diritto internazionale private e processuale. Parte generale e obbligazioni (5th ed. 2010) p. 402; Thorn, in: Rauscher, Art. 19 notes 16–18; Baetge, in: Calliess, Art. 19 Rome I notes 8, 14.

August 2016

Chapter III: Other Provisions

Article 19

In conclusion, in what concerns legal organisations, Art. 19 shall be understood in the light 38 of the normal coincidence between the seat of the central administration and the location of the main establishment, and special problems, to be addressed through interpretation and even teleological reduction, arise when they diverge. Since the establishment and the registered seat are more important points of reference for contracting parties, as well as for third parties, than central administration, it is sound to take the establishment as the starting point and to rely on the registered seat when the contract is not clearly connected with one of the establishments of the organisation and those parties are not, and should not be, aware of the seat of the central administration. De lege ferenda, the solution could even be simplified by avoiding the place of central administration as connecting factor. Considering the similarity between Art. 19 (2), on the one hand, and Articles 5 (5) of 39 Brussels I Regulation and 7 (5) of Brussels Ibis Regulation, on the other hand, regarding the connection between the operations of the establishment and the contract, resort can be made to the case law and literature concerning these last provisions to interpret the first one.29 Nevertheless, it shall be stressed that Art. 19 (2) is wider to the extent that it includes the contracts that albeit not concluded in the course of the operations of the local establishment shall be performed by it. The double criterion for the connection of the contract with the establishment can raise 40 difficulties where the contract is concluded in the course of the operations of an establishment and shall be performed by another establishment.30 In this situation, it seems that the establishment with which the contract is most closely connected shall be relevant,31 taking into account all the circumstances of the particular case, and that, in case of doubt, preference shall be given to the establishment involved in the conclusion of the contract, a solution that can favour a convergence between the forum (i.e., the country whose courts have jurisdiction) and the ius (i.e., the applicable law). In particular, distributors and commercial agents under distributorships32 and agency con- 41 tracts33 are not, in principle, establishments of the supplier or principal, because they are not under their direction and control nor, in the case of the agent, there is necessarily effective participation in the negotiating and conclusion of the transactions. On the contrary, a subsidiary, although being a legally independent corporation, may under 42 special circumstances be considered an “establishment” of the parent corporation. Decisive, in this respect, is the way in which the two corporations behave in their business relation29

30 31

32

33

See, namely, Lima Pinheiro, Direito Internacional Privado, Vol. III (2nd ed. 2012) pp. 123–125, and Mankowski, in: Magnus/Mankowski, Brussels I Regulation (2nd ed. 2012), Art. 5 Brussels I Regulation notes 296–301, and in: Magnus/Mankowski, Art. 7 Brussels Ibis Regulation notes 446–453. As remarked by Altenkirch, in: Ferrari, Art. 19 note 12. One of the methodologies suggested by Plender/Wilderspin, The European Private International Law of Obligations (4th ed. 2015) para. 7–070. Cf. ETS A. De Bloos, S.P.R.L. v. Société en Commandite par Actions Bouyertce, (Case 14/76) [1976] ECR 1498, paras. 20 et seq. Compare Mankowski, in: Magnus/Mankowski, Brussels I Regulation (2nd ed. 2012), Art. 5 para. 279, and in: Magnus/Mankowski, Art. 7 Brussels Ibis Regulation note 446. Cf. Blanckaert & Willems PVBA v. Luise Trost Blanckaert & Willems (Case 139/80) [1981] ECR 819, paras 12–13.

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Rome I Regulation

ships and present themselves towards third parties in their commercial dealings.34 Thus, a subsidiary that took part in the negotiations and in the conclusion of the contract, that was also responsible during the performance of the contract for ensuring that the deliveries contracted for were made and that invoices were paid, and that addressed correspondence to the other party seeming to indicate that it was acting as an extension of the parent corporation was held to be an establishment of this corporation.35 43 Here again, some remarks shall be made regarding contracts concluded through the inter-

net, insofar as the national legislation transposing the Directive 2000/31/EC on Electronic Commerce does not prevail over the choice of law rules of the Regulation (see Art. 23).36 The party that states the location of his principal place of business or of his establishment in one country cannot later invoke the falsehood or inaccuracy of his statement. In the absence of this statement, the location of the principal place of business or of the establishment may be inferred from a geographical indication contained in the domain name.37 If this indication is also absent, and that location is not otherwise cognoscible with reasonable diligence by the other party, a distinction shall be drawn between natural persons acting in the course of a business activity and legal organisations. Regarding natural persons, the principal place of business cannot designate the law applicable to the contract and, therefore, it seems that, for this purpose, resort shall be made to the subsidiary connection, namely Art. 4 (4) (law of the country with which the contract is most closely connected). Regarding organisations, Art. 19 (1) shall apply if the place of central administration or, in a subsidiary way, the place of the registered seat are cognoscible with reasonable diligence. Often this will not be the case, and, for determining the law applicable to the contract, the same resort shall be made to the subsidiary connection. VI. Moment of determination of the habitual residence 44 According to Art. 19 (3), for the purposes of determining the habitual residence, the relevant

point in time shall be the time of the conclusion of the contract. This solution was already contained in Art. 4 (2) of the Rome Convention. Therefore, the change of habitual residence after the conclusion of the contract doesn’t have repercussions on the applicable law. This promotes the stability of the law governing the contract and prevents the manipulation of the connecting factor by the relevant party.38

34 35 36

37

38

810

Cf. SAR Schotte GmbH v. Parfums Rothschild SARL, (Case 218/86) [1987] ECR 4905, 4920 para. 16. Cf. SAR Schotte GmbH v. Parfums Rothschild SARL, (Case 218/86) [1987] ECR 4905, 4920 para. 14. On the limitations resulting from this Directive to the application of the Regulation, see eDate Advertising GmbH v. X, (Cases C-509/09 and C-161/10) [2011] ECR I-10269. These limitations do not apply to parties which are not acting in the course of their business, in virtue of Article 3 (3) and Annex of the Directive concerning consumer contracts. Regarding the determination of the place of the establishment in the contracts concluded through the internet, see, with more development and references Lima Pinheiro, ROA 66 (2006), 131, 145 et seq. See also Altenkirch, in: Ferrari, Art. 19 note 15.

August 2016

Article 20

Chapter III: Other Provisions

Article 20: Exclusion of renvoi The application of the law of any country specified by this Regulation means the application of the rules of law in force in that country other than ist rules of private international law, unless provided otherwise in this Regulation.

Bibliography Baratta, Il collegamento più stretto nel diritto internazionale privato dei contratti (1991) Briggs, In Praise and Defence of Renvoi, ICLQ 1998, 877 Carrascosa González, La ley aplicable a los contratos internacionales: el Reglamento Roma I (2009) Chen, Rück- und Weiterverweisung (Renvoi) in staatsvertraglichen Kollisionsnormen (2004) Davì, Le renvoi en droit international priveì contemporain, Rec. Cours (2010, vol. 352), 9 Davì, Ancora sulle finalità (e sui due diversi modelli) del rinvio nel diritto internazionale privato contemporaneo, Riv. dir. int. 2014, 1032 Derruppé, Plaidoyer pour le renvoi, Trav. du Comité français 1964–1966, 181 Goessl, Preliminary Questions in EU Private International Law, Journal of Private Int. Law 2012, 56 Hughes, The Insolubility of Renvoi and its Consequences, Journal of Private Int. Law 2010, 195. Kassir, Le renvoi en droit international priveì: technique de dialogue entre les cultures juridiques, Rec. Cours (2015, vol. 377), 9 Kropholler, Der Renvoi im vereinheitlichten Kollisionsrecht in: Gottwald et al., FS für Dieter Henrich (2000), 393 Lagarde, Le principe de proximiteì dans le droit international priveì contemporain, Rec. Cours (1986, vol. 196) Lagarde/Tenenbaum, De la Convention de Rome au reÌglement Rome I, Rev. crit. dr. int. priv. 1991, 727 Migliorino, La questione del rinvio e le soluzioni accolte nelle convenzioni internazionali, RDIPP 1996, 499

Ortiz Vidal, Ley aplicable a los contratos internacionales y eficiencia conflictual (2014) Picone, Les meìthodes de coordination entre ordres juridiques en droit international priveì, Rec. Cours (1999, vol. 276), 9 Piroddi, I contratti di assicurazione tra mercato interno e diritto internazionale privato in: Boschiero, La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), 287 Rödl, Article 20 Rome I in: Calliess, Rome Regulations – Commentary (2nd ed. 2015), 391 Romano, Le dilemme du renvoi en droit international privé (2015) Siehr, Zum Vorentwurf eines EWG-Übereinkommens über das Internationale Schuldrecht, RIW 1973, 569 Siehr, Engste Verbindung und Renvoi in: Coester et al., FS für Hans Jürgen Sonnenberger zum 70. Geburtstag (2004), 667 Solomon, Die Renaissance des Renvoi im Europäischen Internationalen Privatrecht in: Michaels/ Solomon, Liber amicorum Klaus Schurig zum 70. Geburtstag (2012), 237 Sonnentag, Der Renvoi im internationalen Privatrecht (2001) von Hein, Der Renvoi im europäischen Kollisionsrecht in: Leible/Unberath, Brauchen wir eine Rom 0-Verordnung? (2013), 341 Watté, L’autonomie de la volonteì dans les conventions de la Haye, Rev. belge droit int. 1991, 424.

I.

II.

The doctrine of renvoi: general remarks 1. Renvoi defined . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Scholarly views with regard to renvoi 2 3. Renvoi in national systems of private international law and uniform texts . . . 3

Pietro Franzina

The general exclusion of renvoi under the Rome I Regulation 1. The rule in a nutshell and its predecessor in the Rome Convention

5

811

Article 20 2. Situations where the rule on renvoi is relevant in practice . . . . . . . . . . . . . . . . . . . . . . 7 3. Issues outside the scope of the rule on renvoi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4. The treatment of renvoi under other texts of uniform private international law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Rome I Regulation

III.

5. The reasons for excluding the relevance of renvoi in the Rome I Regulation . . . . 15 Exceptions to the rule on renvoi 1. The case of choice of law in respect of certain insurance contracts . . . . . . . . . . . . . 22 2. Are the parties entitled to agree to derogate from the rule on renvoi? . . . . . 26

I. The doctrine of renvoi: general remarks 1. Renvoi defined 1 In private international law renvoi means the reference made to a given law by the conflict-

of-law provisions of the country specified by the conflict-of-law provisions of the forum.1 The issue with renvoi is basically whether renvoi should be taken into account, or not, i.e., whether the operation of the conflict-of-laws rules of the forum should be reconsidered whenever the legal order specified by those rules refuses to apply its own law and rather provides that the situation be governed by the law of the forum (“remission”, Rückverweisung, renvoi au premier degré) or the law of a different country (“transmission”, Weiterverweisung, renvoi au deuxième degré). 2. Scholarly views with regard to renvoi 2 Authors advocating the relevance of renvoi suggest that, once properly regulated, renvoi may

enhance the efficiency of the conflict-of-law process in various respects.2 The advantage most frequently associated with renvoi is international harmony of solutions.3 By taking into account the point of view of the specified legal order (i.e., its unwillingness to apply its own substantive rules and the instructions it provides, in turn, to identify the applicable law), the legal order of the forum adopts the conclusion that would be reached, in the circumstances, by a court in the specified country. Renvoi is thus credited with ensuring some degree of uniformity in the treatment of cross-border legal situations across countries where different conflict-of-law provisions are applied. The substance of the legal relationship, so the argument goes, remains the same, no matter where the disputes in respect of the relationship may be adjudged. Legal security would ultimately be improved, since the rights and obligations of the parties would enjoy – without any unification of the relevant rules of private international law – a high degree of cross-border continuity. While the actual ability of renvoi to achieve these goals is disputed, critics often stress that the stated relevance of renvoi significantly increases the complexity of the conflictual reasoning and the practical burdens related to it, especially as regards the acquisition of informa1

2 3

812

A vast literature exists concerning renvoi. Recent contributions include; Daví, Rec. Cours (2010, vol. 352), 9, Kassir, Rec. Cours (2015, vol. 377), 9, and Romano, Le dilemme du renvoi en droit international privé (2015). See, among others, Briggs, ICLQ 1998, 877. See, among various authors, Derruppé, Trav. du Comité français 1964–1966, 181. See also Picone, Rec. Cours (1999, vol. 276), 44 et seq. and Daví, Riv. dir. int. 2014, 1032.

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Chapter III: Other Provisions

Article 20

tion in the forum on the content and actual operation of the relevant foreign conflict-of-laws rules.4 3. Renvoi in national systems of private international law and uniform texts The solutions adopted regarding renvoi under national systems of private international law 3 vary from one country to another. In some States, courts are generally instructed to disregard renvoi altogether. That is, e.g., the default solution enshrined in Art. 16 of the Belgian Code of Private International Law of 2004 and in Art. 5 of Book 10 of the Dutch Civil Code. In other countries renvoi is admitted, but its relevance is limited in various respects. For instance, Art. 12(2) of the Spanish Civil Code merely allows for remission to Spanish law, whereas Art. 13(2)(b) of the Italian Statute on Private International Law of 1995, excludes, inter alia, the relevance of renvoi to issues of formal validity. Renvoi, if made relevant, is likely to alter significantly the structure and practical outcome of 4 conflictual reasoning. In light of this, legal instruments that lay down uniform conflict-oflaws rules almost invariably include a provision stating whether – and under which circumstances, as the case may be – renvoi should be taken into account. Leaving this issue to the private international law rules of the forum would seriously undermine the ability of the instrument concerned to provide uniform and predictable solutions. II. The general exclusion of renvoi under the Rome I Regulation 1. The rule in a nutshell and its predecessor in the Rome Convention In situations falling within the scope of application of the Rome I Regulation, renvoi must, as 5 a general rule, be ignored, regardless of whether reference is made to the law of a third country or back to the law of the forum.5 Actually, when the law of a certain country is designated as the law applicable to the contract (or to a particular issue arising in connection therewith), the Regulation must be understood to refer to “the rules of law in force in that country other than its rules of private international law”. The expression “rules of laws in force” in the designated country encompasses all the rules that, according to the legal order of the country in question, are meant to govern the substance of the legal relationship at hand, regardless of their status and nature (they may be either legislative or regulatory provisions, written or non-written rules, etc.). The fact that a certain provision might have been conceived to address domestic, as opposed to cross-border, relationships is equally immaterial.6 The “rules in force” in the designated country will normally be rules enacted by the competent bodies of that States. However, if the specified legal order so provides, rules coming from other sources, such as international conventions laying down uniform rules of substantive law (where these are not “immediately” applicable in the forum), will equally form part of the “rules in force” in the designated country. For similar reasons, it will be for

4 5

6

See, recently, Hughes, Journal of Private Int. Law 2010, 195. The irrelevance of both forms of renvoi is stated in particularly clear terms, if need be, in the German version of the Regulation, where the heading of Art. 20 reads “Ausschluss der Rück- und Weiterverweisung”. Carrascosa González, La ley aplicable a los contratos internacionales: el Reglamento Roma I (2009), 83.

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Rome I Regulation

the lex contractus to determine whether, under which circumstances and to what extent, its own rules of substantive law may be departed from by trade usages. 6 The solution adopted by the Regulation as regards renvoi is the same of the Rome Conven-

tion of 19 June 1980 on the law applicable to contractual obligations. The wording of Art. 20 of the Regulation actually coincides with that of Art. 15 of the Convention, the only difference between the two texts being that, under the new provision, the exclusion of renvoi is no longer absolute in nature (“unless provided otherwise in this Regulation”). 2. Situations where the rule on renvoi is relevant in practice 7 The rule on renvoi is only practically relevant where the conflict-of-law provisions of the

Regulation refer to the law of a country whose conflict-of-law provisions (as applicable in the circumstances) are different – in their practical result – from those of the Regulation. Within the framework of Regulation No. 593/2008, this may happen in three situations. 8 The first situation arises when the law specified by the Regulation is the law of a State which

is not a Member of the European Union (an occurrence contemplated in Art. 2, which declares the “universal” character of the Regulation). For these purposes, Denmark should be regarded as a non-Member State, on account of the fact that it is not bound by the Regulation. 9 The second situation appears when the State whose law is specified by the Regulation is a

Member State of the European Union for which an international convention laying down special conflict-of-laws rules on contractual obligations is in force. Pursuant to Art. 25, the law applicable to the contract might in fact need to be determined, in that State, in accordance with a conflict-of-law provision that deviates from the corresponding provision of the Regulation. 10 The third situation may arise in those exceptional circumstances where, pursuant to the

relevant rules of European Union law, the Member States are entitled to maintain, in contractual matters, their own particular (non-uniform) conflict-of-law provisions. A scenario of this kind is contemplated in the second subparagraph of Art. 7(3), which will be analysed below. 3. Issues outside the scope of the rule on renvoi 11 Art. 20 only applies where the applicable law has been determined in accordance with the

Rome I Regulation. Issues arising in connection with a contract, but falling as such outside the scope of application of the Regulation, will thus be subject, as regards renvoi, to the relevant provisions of the forum or the applicable international conventions. 12 This line of reasoning will need to be followed, in particular, in determining the law appli-

cable to an incidental question, i.e., a legal issue falling outside the scope of the Regulation, the decision of which has an impact on the “main” issue at stake, regarding a contract.7 The preferred view is that incidental questions arising in connection with a contractual relation7

814

Rödl, in: Calliess, Rome Regulations – Commentary (2nd ed. 2015), 39.

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ship must not be decided in accordance with the Regulation, but rather with the conflict-oflaw provisions that would apply in the circumstances if that question arose as a main question, i.e., in isolation.8 Renvoi will thus be relevant to the identification of the law governing the latter question each time the conflict-of-law provisions to which it is submitted so provide.9 4. The treatment of renvoi under other texts of uniform private international law By excluding renvoi, the Rome I Regulation follows a rather common trend. The legal 13 instruments enacted so far by the European Union to govern conflict-of-law issues, generally stipulate that, in determining the law governing a cross-border relationship, regard must not be given to the rules of private international law of the specified legal order.10 Explicit provisions to this effect may be found in the Rome II Regulation on the law applicable to non-contractual obligations (Art. 24) and in the Rome III Regulation on the law applicable to divorce and legal separation (Art. 11). The same holds true for matrimonial property regimes and the property consequences of registered partnerships under Regulation 2016/ 1103 and Regulation 2016/1104 (Art. 32 of both texts). Regulation No. 650/2012, on succession upon death, deviates from this scheme; it prescribes that renvoi shall be taken into consideration (save for a few exceptions) whenever reference is made to the law of a Member State or to the law of a third State which would apply its own law (Art. 34). For their part, too, international conventions mostly take the view that the rules of private 14 international law of the designated legal order should have no bearing on the process leading to the identification of the applicable law.11 The conventions elaborated within the Hague Conference on Private International Law generally follow this pattern,12 although some conventions – often the older among them – do not include an explicit provision to this effect.13 Renvoi is likewise excluded, although not always explicitly, by conventions nego8

9

10

11

12

13

See generally, on incidental questions in the private international law of the European Union, Goessl, Journal of Private Int. Law 2012, 56. For example, in light of the exclusion under Art. 1(2)(g), one may think of the issue of whether the contract that company A seeks to enforce against company B has been concluded by a duly authorized representative of the former. For a systematic analysis of the issue of renvoi in the private international law of the European Union, see von Hein, in: Leible/Unberath, Brauchen wir eine Rom 0-Verordnung? (2013), 341; see also Solomon, in: Michaels/Solomon, Liber amicorum Klaus Schurig zum 70. Geburtstag (2012), 237. Migliorino, RDIPP 1996, 499; Kropholler, in: Gottwald et al., Festschrift für Dieter Henrich (2000), 393; see also Chen, Rück- und Weiterverweisung (Renvoi) in staatsvertraglichen Kollisionsnormen (2004). For an exception, see Article 4 of the Convention of 1 August 1989 on the Law Applicable to Succession to the Estates of Deceased Persons. This is the case, inter alia, of the Convention of 15 June 1955 on the Law Applicable to International Sales of Goods, mentioned above, and of the Hague Convention of 14 March 1978 on the Law Applicable to Agency. In prescribing the application of the “internal law” of a given country, the two instruments are in fact understood to refer to the rules in force in the legal order of the designated country, other than its rules of private international law: see, e.g., Watté, Rev. belge droit int. 1991, 424. A specific provision dealing explicitly with renvoi may be found in the Convention of 22 December 1986 on the Law Applicable to Contracts for the International Sale of Goods (Art. 15) and in all texts laying down conflict-of-law provisions adopted since then within the Hague Conference.

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tiated within other institutional contexts to the extent to which they set forth uniform conflict-of-laws rules.14 5. The reasons for excluding the relevance of renvoi in the Rome I Regulation 15 Common as it may be, the exclusion of renvoi must still be justified. Three policy consid-

erations underlie the option taken by the Regulation. 16 To begin with, the stated irrelevance of the conflict-of-law provisions of the specified legal

order corroborates the general goals of uniformity and predictability pursued by the Regulation.15 Thanks to Art. 20, the Rome I Regulation presents itself as the legal instrument laying down the single set of rules that a court sitting in a Member State will need to resort to for the purpose of determining the law applicable to a transnational contract. Emancipated from the possible interference of rules other than those of the Regulation itself, the process of identifying the lex contractus features a more linear shape and is more likely to lead to foreseeable results. 17 Secondly, the exclusion of renvoi removes for both the seised court and the contracting

parties the need to carry out an inquiry as to the conflict-of-law provisions of the specified legal order. The determination of the applicable law should accordingly become swifter and imply a lower amount of transaction costs.16 This reflects a general concern of the European legislator for the efficiency of court proceedings with a cross-border element. Policy documents adopted in the field of judicial cooperation in civil matters regularly stress the need of reducing the obstacles, including the costs, that businesses, workers and consumers might need to face in order to take full advantage of the opportunities offered by an integrated regional market without internal borders.17 18 Thirdly, renvoi is likely to hinder the policies underlying the individual conflict-of-law

provisions of the Regulation, or to alter the particular balance between competing values that the European legislator has strived to establish when drafting those provisions. Some examples will clarify this point. 19 The first example has to do with the rules regarding the agreement of the parties as to the law

governing their contract. One of the basic tenets of the Rome I Regulation is the idea according to which, in contract conflicts, party autonomy should be allowed to play a 14

15

16

17

816

See, e.g., the United Nations Convention of 12 December 2001 on the Assignment of Receivables in International Trade and, more particularly, the definition of “law” in Art. 5. As stated in Recital 6, the “proper functioning of the internal market creates a need, in order to improve the predictability of the outcome of litigation, certainty as to the law applicable and the free movement of judgments, for the conflict-of-laws rules in the Member States to designate the same national law irrespective of the country of the court in which an action is brought”. One should consider, however, that an unrestricted exclusion of renvoi prevents the seised court from benefiting from the practical advantages associated with the application of the lex fori whenever the conflict-of-law provisions of the specified legal order envisage a first-degree renvoi. See, generally, on the transaction costs connected with international contracts and the strategies meant to reduce them, Ortiz Vidal, Ley aplicable a los contratos internacionales y eficiencia conflictual (2014). See, e.g., the Stockholm Programme, OJ C 115 of 4 May 2010, para. 3.

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paramount role. This is generally regarded to be a sound policy as regards both the material interests involved in the transaction and the proper functioning of the legal devices set out by private international law to deal with transnational relationships. In light of this, when a choice of law has been made, it would be hard for the Regulation to admit that the practical outcome envisaged by the parties (presumably, the application of the substantive rules in force in the chosen legal order) could be set aside by the operation of renvoi.18 By the way, even the national systems of private international law that are favourable to renvoi set out a general exception to provide that – whenever the applicable law has been chosen by the individual(s) concerned – the chosen law applies irrespective of its willingness to regulate the matter.19 Similar remarks, mutatis mutandis, may be made in respect of conflict-of-laws rules that 20 employ objective connecting factors, i.e., those applicable absent a choice of law by the parties. These rules, too, embody strong substantive or conflict-of-law policies, such as proximity and the protection of weaker parties.20 The policies in question would run the risk of being frustrated if provisions alien to the Regulation were allowed to interfere with its rules. For instance, Art. 4(1)I of the Regulation, by providing that, failing a choice of law, a franchise contract “shall be governed by the law of the country where the franchisee has his habitual residence”, rests on the assumption that, in this kind of relationships, the franchisee is the weaker party.21 He should accordingly benefit from the application of the substantive rules of the country where he is based, as these are plausibly the ones he knows better (or those he can get to know without the extra costs involved in an international situation). If renvoi was to be taken into account, the realisation of the substantive policy pursued would ultimately be contingent upon elements outside the reach of the European legislation. In the end, the Rome I Regulation, by excluding renvoi, confirms that, from the point of view 21 of the European legislator, the goals of full uniformity and “simplicity” have a higher rank than international harmony of solutions. This way, the exclusion of renvoi substantiates the idea of the Regulation being an instrument serving a set of well-defined substantive and conflictual policies. Its provisions are in no way politically neutral, and the exclusion of renvoi is a means to protect their ability to perform the function for which they have been intended.

18 19

20

21

See already Siehr, RIW 1973, 569, 584. See, e.g., Art. 13(2)(a) of the Italian Statute on Private International Law of 1995, and Art. 40(2) of the Bulgarian Code of Private International Law of 2005. To put it with the Giuliano/Lagarde report, OJ C 282 of 31 October 1980, sub Art. 15, since the European uniform conflict-of-laws rules attempt, as far as possible, “to localize the legal situation and to determine the country with which it is most closely connected, the law specified by the conflicts rule […] should not be allowed to question this determination of place”. On the relationship between renvoi and proximity, see Lagarde, Rec. Cours (1986, vol. 196), 40, and Siehr, in: Coester et al., Festschrift für Hans Jürgen Sonnenberger zum 70. Geburtstag (2004), 667; see also Baratta, Il collegamento più stretto nel diritto internazionale privato dei contratti (1991), 251 et seq. See the report of the Commission accompanying the proposal for a Regulation on the law applicable to contractual obligations, COM (2005) 650 final, sub Art. 4.

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III. Exceptions to the rule on renvoi 1. The case of choice of law in respect of certain insurance contracts 22 Pursuant to Art. 20, the exclusion of renvoi is made subject to the exceptions provided for by

the Regulation. Failing any more explicit reference, scholars generally observe that the rider refers to a particular situation envisaged by Art. 7, on insurance contracts.22 23 Art. 7(3) of the Regulation is concerned with choice-of-law agreements concluded in respect

of an insurance contract other than a contract covering a “large risk”, as understood by the secondary legislation of the European Union. Its purpose is to limit the range of countries whose law may be chosen to govern the contract. The options available to the parties are in fact those enumerated in the provision. Now, the second subparagraph of Art. 7(3) adds that, where the parties have agreed to submit the contract to the law of a Member State included in that list, the parties “may take advantage” of the greater freedom of choice, if any, granted by the law of such Member State.

24 While this is, in fact, a situation where the Regulation requires the conflict-of-law provisions

of the specified legal order to be taken into account, the described scenario hardly fits into the notion of renvoi, as the latter is known in the theory of private international law. Taken in its traditional meaning, renvoi implies that, once a conflict-of-law provision of the forum (actually, any conflict-of-law provision in force of the forum) designates a given legal order, then regard must be had, in principle, to any conflict-of-law provision of the specified legal order. For its part, Art. 7(3) is concerned with a situation where a specific conflict-of-law provision in force in the forum (Art. 3 of the Regulation, as applicable within the limits fixed by Art. 7(3)) designates a specific foreign law (the law of a Member State, within a predetermined list). Where these conditions are met, Art. 7(3) gives effect to a specific conflictof-law provision of the latter law, namely the provision, if any, granting the parties greater autonomy than the Regulation. 25 In the end, what is envisaged in Art. 7(3) is not, properly speaking, a form of renvoi, but

something akin to it.23 As a matter of fact, the provision looks more like a (sophisticated) rule on the limits of party autonomy, than a rule on renvoi. 2. Are the parties entitled to agree to derogate from the rule on renvoi? 26 The question has been raised by some scholars of whether the parties should be allowed to

agree that, in spite of the exclusion in Art. 20, renvoi should be taken into account. An 22

23

818

See, among other authors, Carrascosa González, La ley aplicable a los contratos internacionales: el Reglamento Roma I (2009), 84. As a matter of fact, neither the rider in Art. 20 nor Art. 7 as a whole were present in the 2005 Commission’s proposal for a Regulation on the law applicable to contractual obligations. During the discussion that eventually led to the Rome I Regulation, the two innovations appeared together: see doc. 15316/07 of 19 November 2007, available through the public register of Council documents, at http://register.consilium.europa.eu. According to Lagarde/Tenenbaum, Rev. crit. dr. int. priv. 1991, 727, 775, this is in fact a “mécanisme apparenté au renvoi”. See also Piroddi, in: Boschiero, La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), 287, who speaks of a sui generis form of renvoi.

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agreement of this kind – actually a rarity – may present itself as a choice-of-law clause under Art. 3, explicitly stipulating that the chosen law is to include the conflict-of-law provisions in force therein. The following arguments could, in theory, be put forward to support the view that the 27 Regulation allows the parties to enter into stipulations of this kind. To begin with, since party autonomy is the cornerstone of the Regulation, one might be tempted to say that the will of the parties should generally be upheld, no matter whether it purports to bring about substantive or conflictual effects. Secondly, the reason traditionally indicated to exclude renvoi in the case of a choice-of-law agreement – i.e. the fact that, in choosing the applicable law, the parties have normally in mind the substantive rules of the law in question, not the rules on private international law24 – might be seen as no longer persuasive where it is established that the parties were aware of the implications of renvoi and explicitly decided to make it relevant to their contract. Finally, one may add that, while the Regulation is silent on the validity of an agreement as to the relevance of renvoi, other texts, though stating as a rule the irrelevance of renvoi, envisage the possibility of a voluntary derogation from that solution. Two non-binding texts are explicit in this respect. Reference is made to the Resolution dedicated to “The Autonomy of the Parties in International Contracts Between Private Persons or Entities” adopted by the Institut de Droit International in its Session of Basel of 1991,25 and to the Hague Principles on Choice of Law in International Commercial Contracts.26 In the present author’s view, this kind of agreements are incompatible with the Regulation, 28 and should accordingly be disregarded.27 It must be considered, in the first place, that Art. 20 of the Rome I Regulation is not itself a 29 conflict-of-law provision, but rather a rule concerning the operation of the various conflictof-law provisions of the Regulation, including Art. 3. As an ancillary provision, Art. 20 is not intended to deviate (or to allow the parties to deviate) from the Regulation’s conflict-of-law provisions; Art. 20 is meant to be an instrument to Art. 3, not a provision competing with it. The rider must be understood as referring to the particular purpose performed by the provision in question, not to the different purpose (namely the designation of the applicable law) that is performed by the conflict-of-law provisions of the Regulation. Actually, if the rider in Art. 20 were to be construed as allowing the parties to agree, through 30 Art. 3, on the relevance of renvoi, the agreement of the parties would not be an agreement on the applicable law, but rather an agreement to deviate from Art. 20. Now, nothing in Art. 20 24

25

26

27

The Giuliano/Lagarde report on the Rome Convention, OJ C 282 of 31 October 1980, sub Art. 15, takes a firmer view on this point: where the parties have made a choice of law, “it is clearly with the intention that the provisions of substance in the chosen law shall be applicable; their choice accordingly excludes any possibility of renvoi to another law”. According to Art. 2(2) of the Resolution, the law chosen by the parties “shall apply to the exclusion of its choice of law rules, unless the parties expressly provide otherwise”. The text of the Resolution is available at http://www.idi-iil.org. Art. 8 stipulates that a choice of law “does not refer to rules of private international law of the law chosen by the parties unless the parties expressly provide otherwise”. Rödl, in: Calliess, Rome Regulations: Commentary (2nd ed. 2015), 393–394.

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or in other provisions of the Regulation dealing with the operation of conflict-of-law provisions, seems to suggest that the Regulation lays down an optional regime, i.e., one that the parties are free to abandon if they wish. If this was the case, one would argue that, in the name of autonomy, the parties should be allowed to interfere with, and possibly subvert, any rule relating to the operation of the Regulation’s conflict-of-law provision, including, e.g., the rule in Art. 19 on the meaning of “habitual residence” or the rule in Art. 12 regarding the issues governed by the lex contractus.28 31 On a different note, it is true that the parties may well be aware of what renvoi stands for, and

might want to take advantage of the particular conflict-of-law regime of a given country. However, if this is the intended goal of the parties, they could directly select under Art. 3 the law of the country that the conflict-of-law provisions of an “intermediate” legal order would otherwise specify, without purporting to affect the functioning of Art. 20. 32 In the unlikely event that the intention of the parties is to agree on an “abstract” choice, i.e.,

to choose a certain law and its conflict-of-law provisions regardless of what these conflict-oflaw provisions would provide in respect of their contract, then their decision should no longer be upheld, since autonomy would fail, in the circumstances, to provide the advantages that are normally inherent to freedom of choice in private international law. Such an abstract choice would in fact be unable to increase uniformity and legal security and could be detrimental to those third parties, such as parties’ creditors or guarantors, as may be interested in determining (with reasonable certainty and no unnecessary costs) the law applicable to the contract. 33 In the end, absent a rider similar to those envisaged in the Basel Resolution or the Hague

Principles, an agreement purporting to derogate from Art. 20 must be considered to be invalid.29 Article 21: Public policy of the forum The application of a provision of the law of any country specified by this Regulation may be refused only if such application is manifestly incompatible with the public policy (ordre public) of the forum.

Bibliography Basedow, Recherches sur la formation de l’ordre public européem dans la jurisprudence in: Le droit

28

29

820

international privé: esprit et méthodes – Mélanges en l’honneur de Paul Lagarde (2005), 55

Party autonomy, as understood in the Regulation, consists in a set of options granted by private international law rules, that are meant to be exercised within the framework of those rules: as such, it cannot be resorted to with a view to creating a conflict-of-law regime à la carte. In light of such invalidity, the problem will arise of determining whether the parties may nevertheless be deemed to have chosen the law applicable at least to the substance of their relationship, or have not made a choice at all. The issue should normally be treated as a matter of contract interpretation, to be decided under the law identified pursuant to Art. 3(5), in conjunction with Art. 10 and Art. 12(1)(a).

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Chapter III: Other Provisions Biagioni, Le conseguenze dell’incompatibilità della legge straniera con l’ordine pubblico nella Convenzione di Roma, Riv. dir. int. 2003, 1083 Bismuth, L’émergence d’un “ordre public de la dette souveraine” pour et par le contrat d’emprunt souverain ? Quelques réflexions inspirées par une actualité très mouvementée, Annuaire français de droit international 2012, 489 Bucher, L’ordre public et le but social des lois en droit international priveì, Rec. Cours (1993, vol. 239), 9 Callsen, Human rights and public policy exception in private international law in: Alleweldt et al., Human Rights Abuses in the Contemporary World (2012), 125 Clarkson/Hill, The Conflict of Laws (4th ed. 2011) Courbe, L’ordre public de proximité in: Le droit international privé: esprit et méthodes – Mélanges en l’honneur de Paul Lagarde (2005), 227 de Vareilles-Sommières, L’ordre public in: Azzi/Boskovic, Quel avenir pour la théorie générale des conflits de lois? (2015), 169 de Vareilles-Sommières, L’exception d’ordre public et la reìgulariteì substantielle internationale de la loi eìtrangeÌre, Rec. Cours (2015, vol. 371), 153 Feraci, L’ordine pubblico nel diritto dell’Unione europea (2012) Fohrer-Dedeurwaerder, La prise en considération des normes étrangères (2008) Forteau, L’ordre public “transnational” ou “reìellement international”: l’ordre public international face aÌ l’enchevêtrement croissant du droit international priveì et du droit international public, JDI 2011, 3 Franzina, Sovereign Bonds and the Conflict of Laws: A European Perspective in: Nappi et al., Studi in onore di Luigi Costato (2014), 513 Hammje, L’ordre public international et la distinction entre états membres et états tiers in: SanaI.

The public policy exception under the Rome I Regulation: general remarks 1. The place of ordre public in private international law a) The notion defined . . . . . . . . . . . . . . . . . . . . . . . 1 b) The problem with public policy in uniform private international law . . . . . . . 2 2. Public policy in the Rome I Regulation a) The rule in a nutshell and its predecessor in the Rome Convention . . 4

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Chaillé de Néré, Droit international privé, États membres de l’Union européenne et États tiers (2009), 65 Hill/Chong, International Commercial Disputes (4th ed. 2010) Joubert, La notion de liens suffisants avec l’ordre juridique (Inlandsbeziehung) en droit international privé (2007) Kaye, The New Private International Law of Contracts of the European Community (1993) Kinsch, La “sauvegarde de certaines politiques législatives”, cas d’intervention de l’ordre public international? in: Vers des nouveaux équilibres entre ordres juridiques – Mélanges en l’honneur de Hélène Gaudemet-Tallon (2008), 447 Marzal Yetano, La cosmologie juridique de la Cour de justice de l’Union europeìenne illumineìe par le droit international priveì: de l’utiliteì nouvelle des notions d’ordre public et lois de police, Archives de philosophie du droit 2015, 267 Oster, Public Policy and Human Rights, Journal of Private Int. Law 2015, 542 Pauknerová, Mandatory rules and public policy in international contract law, ERA Forum 2010, 29 Renner, Article 21 Rome I in: Calliess, Rome Regulations – Commentary (2nd ed. 2015), 395 Siehr, Der ordre public im Zeichen der Europäischen Integration: Die Vorbehaltsklausel und die EU-Binnenbeziehung in: Stürner et al., Grenzen überwinden – Prinzipien bewahren – Festschrift für Bernd von Hoffmann zum 70. Geburtstag am 28.12.2011 (2011), 424 Villani, La Convenzione di Roma sulla legge applicabile ai contratti (2nd ed. 2000) Wurmnest, Ordre public in: Leible/Unberath, Brauchen wir eine Rom 0-Verordnung? (2013), 445.

II.

b) The scope of the rule . . . . . . . . . . . . . . . . . . . . . 6 c) Public policy and overriding mandatory provisions . . . . . . . . . . . . . . . . . . . . 9 Identifying the values and principles that may be protected through the public policy exception 1. A narrow construction, based on strict standards . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2. The relative character of public policy in space and time . . . . . . . . . . . . . . . . 15

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3. The national, international and regional dimension of public policy a) Public policy principles arising out of domestic sources . . . . . . . . . . . . . . . . . . . . . . . . . 17 b) The relevance of international law to the operation of the public policy exception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 c) The impact of European Union law on the public policy of Member States 28 d) Should a different approach be followed under Art. 21 depending on whether the lex contractus is the law of a Member State or that of a nonMember country? . . . . . . . . . . . . . . . . . . . . . . . . 34 The conditions under which the public policy exception may be raised and its operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Rome I Regulation

IV.

1. An actual and manifest incompatibility with one or more public policy principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 2. The variable strength of public policy depending on the proximity of the relationship (Inlandsbeziehung and ordre public de proximité) . . . . . . . . . . . . . . 43 3. Procedural issues . . . . . . . . . . . . . . . . . . . . . . . . 45 The effects triggered by the public policy exception 1. The “negative” effect (effet d’éviction) 47 2. The absence of uniform rules as to the different legal order from which the applicable rules should be drawn after the exception has been raised . . . . . . . . . . 52

I. The public policy exception under the Rome I Regulation: general remarks 1. The place of ordre public in private international law a) The notion defined 1 Traditional conflict-of-law provisions with a bilateral or multilateral design – i.e., rules that

can designate either the lex fori or a foreign law, depending on the localisation of the relevant facts and regardless of the substantive content of the laws at stake – expose the seised court to values and policies that may deviate dramatically from those enshrined in the legal order of the forum. An open attitude towards legal diversity lies at the heart of private international law, but openness cannot be unconditional. Actually, although States use to instruct their courts, in appropriate circumstances, to apply foreign substantive provisions (and to recognize and enforce foreign judgments, give effect to foreign authentic instruments, etc.), those courts are invariably allowed to refrain from doing so whenever this would infringe some fundamental interests of the forum, no matter whether they refer directly to the forum State as such (its political and social organization, etc.) or to the enforcement of its legislative policies in the field of private law.1 These fundamental interests, considered as a whole, are called “public policy” (or ordre public, as the notion is known in French), and the legal device by which public policy is allowed to alter the functioning of conflict-of-law provisions (and the provisions concerning foreign judgments or authentic instruments, as the case may be) is known as the public policy exception. b) The problem with public policy in uniform private international law 2 Binding legal texts that set forth uniform conflict-of-law provisions normally include a rule

on public policy. Its purpose is to allow national courts to derogate from the said provisions under certain circumstances and subject to appropriate limitations. As a matter of fact, where the forum State is under an international obligation to make use of a certain conflict1

822

On public policy in private international law, see generally Bucher, Rec. Cours (1993, vol. 239), 9.

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of-law provision, the decision not to apply the law of the country designated by such provision would normally amount to a breach of the obligation in question. A similar conduct may well be intended to preserve the fundamental principles of the forum, but, for the country in question, it could be hard to justify the ensuing breach on grounds of necessity, as restrictively understood by the Vienna Convention on the Law of Treaties. Hence, it is normal for uniform conflict-of-law provisions to come with a built-in general exception granting States the possibility to disregard those provisions on account of the substantive results that the application of the designated foreign law would trigger in the circumstances. Since the purpose of the exception is to make sure that individual States may safeguard the 3 basic principles of their legal order, the uniform texts usually confine themselves to contemplating the possibility of raising the exception.2 They do not require States to use this defence and leave in principle with each country the task of determining which values should form its ordre public. 2. Public policy in the Rome I Regulation a) The rule in a nutshell and its predecessor in the Rome Convention The Rome I Regulation broadly follows the pattern described above. Like all other legislative 4 measures enacted so far by the European legislator in the field of judicial cooperation in civil matters, Art. 21 allows Member States to refuse the “application of a provision of the law of any country specified” by the Regulation “only if” such application “is manifestly incompatible” with the public policy of the forum. The provision reproduces Art. 16 of the Rome Convention of 19 June 1980 and is identical in 5 its wording to the provisions dedicated to ordre public in the Rome II Regulation on the law applicable to non-contractual obligations (Art. 26), in the Rome III Regulation on the law applicable to divorce and legal separation (Art. 12), in Regulation No. 650/2012 on succession upon death (Art. 35), and in Regulations 2016/1103 and 2016/1104 on matrimonial property regimes and the property consequences of registered partnerships (Art. 31). b) The scope of the rule Art. 21 may be called into question whenever a foreign law is relevant to the substantive 6 Regulation of the contract in question or to deciding a particular issue arising in connection with it. This will typically happen where a conflict-of-law provision designates the foreign law in 7 question as the “applicable law”. However, it is submitted, nothing prevents a court in a Member State to rely on Art. 21 to rule out the application of a foreign provision whose relevance to the situation at hand is to be stated on a different ground, in particular where such foreign provision is one that the court is asked to “take into consideration”, not to “apply”.3 This will be the case, for example, of the foreign provisions relating to the “manner of performance and the steps to be taken in the event of defective performance”: Art. 12(2) of 2 3

Cf. Kaye, The New Private International Law of Contracts of the European Community (1993), 345 et seq. On the distinction between the two concepts, see in general Fohrer-Dedeurwaerder, La prise en considération des normes étrangères (2008).

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the Regulation provides that, for these aspects, “regard shall be had” to the law of the country where performance takes place.4 8 From a different perspective, Art. 21 merely covers the situations where a foreign law is

relevant to the circumstances pursuant to the Rome I Regulation. Thus, should a public policy concern appear with respect of an issue falling outside the scope of the Regulation, namely an incidental question, the seised court will need to deal with that concern in accordance with the private international law rules governing the issue in question, not in accordance with Article 21.5 c) Public policy and overriding mandatory provisions 9 Seen as a general limit affecting the operation of conflict-of-law provisions, the public policy

exception in Art. 21 maintains a close relationship with Art. 9. The latter deals with the interference caused on the functioning of uniform conflict-of-law provisions by overriding mandatory provisions, i.e. “provisions the respect for which is regarded as crucial by a country for safeguarding its public interests … to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation”. 10 Ordre public and overriding mandatory provisions, while remaining distinct in several

respects, actually feature some similarities, in particular if the comparison is made with the overriding mandatory provisions of the forum. Both mechanisms are ultimately concerned with safeguarding certain important substantive policies of the forum against the risks inherent in the application of a foreign law. In light of this, it should not be surprising that the same substantive value may happen to fit within both provisions; the value in question may, at the same time, display the features of a public policy principle and be protected by some overriding mandatory provisions of the forum.6 11 Yet, various differences exist between the mentioned devices. Only some of these will be

highlighted here.7 The public policy exception represents an ex post limit to the operation of conflict-of-laws rules, whereas overriding mandatory provisions may, at least in principle, prevent the latter from becoming relevant at the outset. By its nature, the public policy exception may only come into play after the relevant conflict-of-law provisions have performed their task, i.e., once the law applicable to the contractual relationship at hand has been identified. As a matter of fact, it is only at this stage that one can assess whether the 4

5

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The same, one would argue, might be said for the mandatory provisions of a third country, on account of the fact that Art. 9(3) grants the court the possibility to “give effect” to them. In reality, since the court enjoys a wide discretion in deciding whether these rules should be taken into account or not, in light, inter alia, of “the consequences of their application or non-application”, the issue of public policy should normally not arise in connection with foreign mandatory provisions of this kind: a potential reference to a repugnant provision would in fact be excluded at the outset, without the public policy exception being required to intervene at a later stage. The problem is identical, in its basic features, with the corresponding problem with incidental and other autonomous questions considered in the perspective of Art. 20. For further considerations, see the comment to the latter provision. Clarkson/Hill, The Conflict of Laws (4th ed. 2011), 238. See further on this topic Pauknerová, ERA Forum 2010, 29.

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fundamental principles of the forum run the risk of being offended. For their part, overriding mandatory provisions, according to the definition in Art. 9(1), are meant to regulate one or more aspects of a given relationship “irrespective of the law otherwise applicable to the contract”. Their relevance to the circumstances may thus be determined, in principle, before any survey as to the applicable law has been conducted. In fact, while the crucial issue surrounding the characterisation of a given policy as belonging to ordre public is whether it features a fundamental and unwaivable character in the legal order of the forum, a substantive provision qualifies as mandatory within the meaning of Art. 9 only if, in addition to the importance of the goals pursued, it is intended to apply to the specific situation at stake irrespective of the otherwise applicable law. To put it differently, the public policy exception works as a last resort and prevents the courts of the forum from giving a ruling based on wicked or unacceptable standards, whereas overriding mandatory provisions of the forum express a specific “will” of the forum to govern one or more specific issues of a given relationship, no matter what foreign provisions might provide in respect of the latter. II. Identifying the values and principles that may be protected through the public policy exception 1. A narrow construction, based on strict standards The Regulation does not provide an example, let alone a definition, of public policy. As a 12 matter of fact, ordre public is traditionally regarded to be a notion with an open-texture, the specification of which is left with the interpreter. In reality, the freedom of courts to establish what public policy may actually stand for is far from absolute. By providing that the application of a foreign law may be refused “only if” such application 13 runs counter the public policy of the forum, the Regulation makes clear that Art. 21 sets out an exception to the normal operation of conflict-of-laws rules.8 Accordingly, caution is required on the part of the authorities of a Member State in deciding whether a given policy is part of the inner circle of values that ordre public is meant to encompass.9 In order to trigger the application of Art. 21, a principle must be so important that, if it was to be ignored, the seised court would not only depart from, but actually repudiate the basic tenets of the legal system of the forum.10 Public policy may be understood to reflect (and preserve) 8

9

10

The exceptional character of the rule on public policy exception is explicitly stated in Recital 37 of the Rome I Regulation. In light of this, the notion of public policy cannot be equated to the notions of morality or legality as may be used in the domestic legal order of the forum to designate one or more basic requirements that a contract must meet to be valid. Some of these requirements – often referred to as forming part of “internal”, as opposed to “international”, public policy – perform a function associated with the substantive regulation of the contract and have nothing to do, as such, with the operation of conflict-of-laws rules. It is not excluded, however, that a requirement as to morality or legality may underlie a principle so important to be relevant also to the functioning by Art. 21. On the distinction between “internal” and “international” ordre public, see de Vareilles-Sommières, Rec. Cours (2015, vol. 371), 217 et seq. Scholars in common law countries often suggest that questions of public policy may generally be placed in one of two categories, depending on whether the application of the specified legal order is excluded on the ground that the application of its rules would be repugnant, or because of the undesirability of a court of the country being seen abroad to enforce an objectionable rule: Hill/Chong, International Commercial

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the identity of the legal order of the forum: if the State in question allowed its courts to subvert certain principles, it would in fact contradict itself. 14 If a more liberal approach was to be followed, the seised court would end up disregarding the

instructions provided for by the Regulation each time they lead to a substantive result that simply does not coincide with that of the lex fori. In a similar scenario, the purpose of the Rome I Regulation would clearly be defeated. Predictability would be undermined, to the detriment of the individuals concerned.10a 2. The relative character of public policy in space and time 15 The extent and content of public policy varies, in principle, from one country to another.

Although the national imprint of public policy is more evident in some areas of private law (e.g., the law of family relationships), and less in others (including the law of contracts) the point of view of the forum remains decisive for the operation of the public policy exception. This is explicitly acknowledged in Art. 21 of the Rome I Regulation by the reference, both in the heading and in the body of the provision, to the public policy “of the forum”. 16 On a different note, ordre public is, by its nature, a concept that evolves over time. In some

sectors of contract law, such as the law of employment contracts, new policies have seen the light of the day over the last few decades in Europe (e.g., policies against discrimination based on gender and age), while old ones have lost some of their intensity. The relevant point in time to carry out the assessment contemplated in Art. 21 is the time at which a decision is made in respect of the contract. In practice, pursuant to the tempus regit actum rule, the relationship between the parties may be subject to a body of “old” substantive rules of the lex contractus; yet, for the purposes of Art. 21, those rules will need to be examined against the backdrop of present-day public policy. If the rules in question happen to be incompatible with today’s ordre public, they must be disregarded under Art. 21, no matter whether, at the time when the contract was made, these old rules might have been perfectly consistent with the fundamental principles of the forum, as they then existed. 3. The national, international and regional dimension of public policy a) Public policy principles arising out of domestic sources 17 Public policy, as mentioned above, somehow conveys the identity of the legal order of the

forum. As a consequence, domestic law usually represents the first reference to be considered when constructing public policy. In order to determine the existence and content of a certain principle, interpreters tend to proceed inductively. The point of departure is often represented by one or more specific provisions of the legal order of the forum. Relying on

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Disputes (4th ed. 2010), 541 et seq. Seen from the standpoint of the Regulation, distinctions of this kind reflect the freedom enjoyed by individual Member States in deciding which values should be protected through the public policy exception: as long as the operation of ordre public remains confined to exceptional circumstances, each State is in principle free to resort to this device with a view to protecting, inter alia, the image of the forum. On the “perturbative” effect of public policy, see de Vareilles-Sommières, in: Azzi/Boskovic, Quel avenir pour la théorie générale des conflits de lois? (2015), 180 et seq.

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these elements, a more or less complex scrutiny is carried out in order to assess the rank and status of the underlying values within the legal system of the forum. The Constitution of the State of the forum tends to occupy the centre of the stage. In 18 countries where a specific court exists, charged with reviewing the legitimacy of legislation, the case law of that court may have a significant impact on the process of constructing public policy principles. However, in no way is the interpreter prevented from resorting to sources other than the 19 country’s Constitution for the purposes of public policy. Several indicia, coming from a variety of sources, may need to be gathered before coming to a reliable conclusion as to the existence and composition of a public policy principle. The Italian Corte di cassazione, for example, carried out a wide inquiry to determine whether the public policy exception then provided for in the Rome Convention could be raised to refuse the application of the law of the State of New York to the dismissal of a bank clerk hired by the New York branch of an Italian bank.11 Relying on the Italian Constitution, Italian legislation on employment contracts and other sources, the Supreme Court held that, where the foreign lex contractus fails to provide a fair and effective protection of the worker in the event of a dismissal, the application of the foreign law in question must be excluded on the ground of public policy. Domestic rules embodying basic considerations of fairness in contractual dealings will 20 similarly play a role when it comes to identifying the core policies of the forum as regards the formation of contracts and the treatment of duress. Should the designated foreign law be ready to enforce a contract concluded under blatant coercion, the seised court could refrain from applying the law in question as a means to protect the standards of contractual justice of the forum.12 Relying on rules and principles of national law, the public policy exception could equally be 21 invoked to prevent the application of foreign provisions on limitation periods, whenever the latter would provide an untolerable advantage to a party who acted in bad faith.13 b) The relevance of international law to the operation of the public policy exception It is a well settled principle, in European countries and elsewhere, that, in retrieving public 22 policy principles, the seised court should no longer look exclusively at domestic sources but should also consider the relevant rules of the international legal order.14 International conventions for the protection of human rights, such as the European Convention for the Protection of Human Rights and Fundamental Freedoms, are the obvious candidates for determining, in particular areas of law, the standards of treatment that a given State must

11 12

13

14

Corte di cassazione, 11 November 2002, No 15822, RDIPP 2003, 978. For a case where the public policy exception has been raised (to refuse the recognition of a judgment) on grounds of unfairness, see Bundesgerichtshof, 24 February 1999, IX ZB 2/98, NJW 1999, 2372. Cf. High Court of Justice. Queen’s Bench Division, 9 September 1998, City of Gotha and Federal Republic of Germany v. Sotheby’s and Cobert Finance S.A., 1 WLR 114, regarding the purchase of stolen goods. See generally Forteau, JDI 2011, 3; see also Feraci, L’ordine pubblico nel diritto dell’Unione europea (2012), 20 et seq.

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ensure in all cases brought before its courts, including cases submitted, in principle, to a foreign law.15 23 The emergence of an “international” public policy reflects the fact that States are more and

more involved in international legal cooperation and are increasingly inclined to undertake international obligations relating to (or having an impact on) the regulation of legal relationships in the realm of private law. The implementation of these international obligations within the legal order of the forum has a bearing on the evolution of public policy: this evolution is actually facilitated by the special status that the implementing measures may enjoy in the forum, pursuant to constitutional rules regarding the respect due to international conventions and other rules of international law, once they become binding upon the State. 24 By developing the international dimension of their ordre public, States enhance their ability

to pursue, and further promote, internationally shared policies, i.e. interests reflecting the particular regulatory needs of the international community, or a part of it. Through the public policy exception, national authorities are in fact instructed to enforce those shared policies in cross-border cases that would normally be decided in accordance to a foreign law. This way, under appropriate circumstances, public policy may contribute to the governance of particular international concerns. 25 The traditional view, according to which public policy is essentially charged with a defensive

task, loses some ground to a relatively new idea: public policy, when based on global or regional standards, becomes a way to promote those standards.16 States that are unwilling to join the common standards in question remain free not to adopt them, but their intercourse with the States that do share those standards (and treat them as public policy principles) will ultimately be affected by the point of view of the latter whenever litigation takes place before the courts of those States. 26 In the field of contract law, this promotional attitude of ordre public may manifest itself in

various sectors. That is the case, for example, of labour contracts, whenever the foreign applicable law falls short of protecting the fundamental rights of the employee, in particular as enshrined in the relevant conventions or labour standards elaborated within the International Labour Organization. This may also be the case of contracts for the international sale of artworks, whenever the applicable law does not provide for measures aimed at preventing the impoverishment of the cultural heritage of the country of origin, as required by the UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, made in Paris on 14 November 1970. The fight against corruption, as pursued by such international instruments as the United Nations Convention against Corruption, adopted by the General Assembly on 31

15

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On this topic see in recent literature, also for further references, Callsen, in: Alleweldt et al., Human Rights Abuses in the Contemporary World (2012), 125 et seq. In reality, public policy developed on the basis of national sources, too, is credited by several authors with a promotional, in addition to a defensive, function: in general, see on this topic Kinsch, in: Vers des nouveaux équilibres entre ordres juridiques – Mélanges en l’honneur de Hélène Gaudemet-Tallon (2008), 447.

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October 2003, may likewise represent a shared international concern, with a potential impact on the construction of the international public policy of the forum. In reality, for an international principle of public policy to emerge, it is not necessary that the 27 principle in question be stated in a formally binding legal instrument. The governance of some global phenomena may be hard to achieve through international conventions, but international standards (not necessarily yet amounting to settled rules of international customary law) may coagulate otherwise. Sovereign debt crises, e.g. where they raise issues related to the repayment of so-called odious debts or involve the need to strike a balance between the expectations of investors and the social rights of the population of a distressed country, would significantly benefit from the emergence of commonly accepted standards at global level.17 In an area where States are reluctant to undertake formal commitments, civil litigation may provide an opportunity to address outstanding issues and assert priorities. The country whose courts possess jurisdiction over disputes connected with the State loans from which the debt originated, could in fact substantiate its approval of commonly accepted standards (or its willingness to promote their emergence) by raising the public policy exception each time the foreign law applicable to the loans appears unable to enforce the standards in question, or deviates openly from them. c) The impact of European Union law on the public policy of Member States Some of the remarks made in the previous section may be extended to standards and policies 28 developed to accompany the process of European integration, as pursued by the Treaties and secondary legislation. The impact of these standards and common policies could actually be particularly significant. The political and legislative action of the European Union is of course extremely pervasive, both because of the wide range of areas that the institutions may be concerned with and the special force of penetration of European measures into the legal order of the Member States. Thanks to the primacy of European Union law, the policies enshrined in these measures may occupy a privileged position within the legal order of the Member States and possibly develop into ordre public policies. Some distinctions, however, need to be made when assessing the impact of European po- 29 licies upon the operation of conflict-of-laws rules under Art. 21 of the Regulation.18 On the one hand, Member States respond to the basic values underlying the European integration in a way that departs in some respects from the way in which other “external” standards are transformed into public policy principles. On the other hand, the legal order of the European Union – consistently with its peculiar supranational nature – does not confine itself to elaborating a regional set of fundamental values, but also performs a control as to the way in which the individual Member States make use of the public policy exception to protect national values.

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18

Cf. Bismuth, Annuaire français de droit international 2012, 489, and Franzina, in: Nappi et al., Studi in onore di Luigi Costato (2014), 531 et seq. A vast literature has developed with respect to the influence of the European integration process on the concept and functioning of public policy and overriding mandatory provisions. See, in particular: Hammje, in: Sana-Chaillé de Néré, Droit international privé, États membres de l’Union européenne et États tiers (2009), 65; Feraci, L’ordine pubblico nel diritto dell’Unione europea (2012), 78 et seq.; Wurmnest, in: Leible/Unberath, Brauchen wir eine Rom 0-Verordnung? (2013), 445.

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30 To begin with, the policies serving the process of integration are of course regional in nature

and may thus need to be treated as fundamental and unwaivable only in respect of situations that feature a close relationship with the internal market or, more generally, the European area. In the absence of explicit limitations as to the scope of the provisions that embody these policies, it is reasonable to assume that regional instruments do not normally purport to address situations falling entirely outside the territorial, economic and social borders of Europe. The case law of the Court of Justice concerning the mandatory nature of harmonisation directives supports this view.19 Accordingly, a contract submitted to the law of a non-Member State, featuring but a weak connection with the territory, economy or society of the European Union, may not be under the influence of fundamental policies developed at the European Union level, for the purposes of Art. 21 of the Regulation.20 31 In reality, the issue of the spatial limits of the policies of integration can hardly be decided

once and for all. The peculiarities of individual policies must be taken into account together with the characteristics of the case at hand. As a matter of fact, European policies are pursued through rules, the enforcement of which is frequently ensured through a variety of safeguards. In certain cases, the European legislator enforces its basic policies by limiting the ability of the parties to circumvent the applicability of European standards through a choiceof-law agreement designating the law of a non-Member country.21 In other cases, the protection of regional policies is ensured by characterising one or more provisions embodying the policies in question as overriding mandatory provisions within the meaning of Art. 9 of the Rome I Regulation; these provisions will thus interfere with the functioning of all conflict-of-law provisions (not only the provisions on choice of law), provided that the situation considered is within the scope of the provisions themselves. 32 As long as the relevant regional policies are conveniently protected by these safeguards,

there is no need to resort to Art. 21. The public policy exception may however play a role in some instances, namely where the rules enshrining the specific European policy in question do not come with appropriate safeguards, or where the policy has become so general and important that it eventually requires enforcement with respect to any situation brought before the courts of a Member State, no matter how close its connection with the forum. An example, it is submitted, may be taken from Directive 2011/7/EU of 16 February 2011 on combating late payment in commercial transactions.22 The Directive contemplates a number of mandatory provisions, but it is not easy to say whether they (all) qualify as overriding mandatory provisions. In part, this depends on the fact that it is not clear what precisely are 19 20

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See, e.g., ECJ Case C-381/98 – Ingmar GB Ltd [2000], ECR I-9305 para. 25. See further in this respect Siehr, in: Stürner et al., Grenzen überwinden – Prinzipien bewahren – Festschrift für Bernd von Hoffmann zum 70. Geburtstag am 28.12.2011 (2011), 424. These kinds of safeguards may either come directly with the rules in question or represent general safeguards provided for the Rome I Regulation itself. Several directives dealing with the protection of consumer rights include a provision requiring Member States to “take the necessary measures to ensure that the consumer does not lose the protection” granted by the directives themselves “by virtue of the choice of the law of a non-Member country as the law applicable to the contract” whenever “the latter has a close connection with the territory of the Member States”: see, e.g, Art. 6(2) of Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts; OJ L 95 of 21 April 1993. As to the general safeguards provided for by the Rome I Regulation, reference is made to Art. 3(4). OJ L 48 of 23 February 2011.

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the situations to which those provisions are meant to apply “irrespective of the law otherwise applicable”, i.e. what kind of connection must exist between a commercial transaction and the internal market to trigger the “internationally mandatory” applicability of the European standards in this area. That said, it is reasonable to assume that the basic policy underlying the Directive, i.e., the policy against contractual terms that are “grossly unfair to the creditor”, reflects such a general interest in the sound and equitable Regulation of commercial transactions that it amounts, in its core meaning, to a public policy principle of every Member State. On a different note, the integration process implies the possibility of a scrutiny, based on 33 regional standards, regarding the way in which the different Member States raise the barrier of their own public policy vis-à-vis other Member States. In Krombach, the Court of Justice has considered itself to be competent to deal (in the framework of a procedure for a preliminary ruling) with a case relating to the exercise of a public policy exception envisaged by European uniform rules of private international law. In particular, it found that it was legitimate for a Member State to raise the public policy exception then provided for in the Brussels Convention of 27 September 1968 as a bar to the recognition of a judgment in civil and commercial matters since the relevant national standards relied upon by that State correspond to those resulting “from the constitutional traditions common to the Member States and from the guidelines supplied by international treaties for the protection of human rights on which the Member States have collaborated or of which they are signatories”.23 Regional rules on public policy call, in principle, for the use of regional standards: national values may still play a role for the purpose of ruling out the application of unacceptable foreign provisions (or the recognition of offending foreign judgments), but their relevance – within the integrated area – is made subject to particularly rigorous standards. d) Should a different approach be followed under Art. 21 depending on whether the lex contractus is the law of a Member State or that of a non-Member country? The considerations made in the section above introduce some further questions. One is 34 concerned with whether the functioning of the public policy exception in the Rome I Regulation varies depending on the European or extra-European origin of the substantive provisions to which the contract is submitted. The Regulation makes no explicit distinction in Art. 21 based on whether the lex contractus 35 is the law of a Member State or that of a third country. Actually, it explicitly states that the exception may be raised against “any” law. The likelihood of the law of a Member State being at odds with the public policy of another Member State is, probably, comparatively lower, but it is undisputed that, in appropriate circumstances, the public policy exception may be resorted to against the law of a Member State, too.24

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ECJ Case C-7/98 – Krombach, ECR I-1935 [2000] para. 22 et seq.; see also ECJ Case C-38/98 – Maxicar, ECR I-2973 [2000], para. 27 et seq. During the legislative process that resulted in the adoption of the Rome I Regulation, Spain had suggested that the public policy clause should not be capable of being invoked against the law of a Member State. The proposed amendment, however, was rejected. See further McParland, The Rome I Regulation on the Law Applicable to Contractual Obligations (2015), 714.

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36 In reality, European Union law, in some cases, may limit the ability of national courts to

refuse the application of the law of another Member States on various grounds, including ordre public. Where the authorities of a Member State claim the preservation of the peculiar national policies of the forum with respect to intra-European cases, this could actually hinder the freedoms of movement enshrined in the Treaties, along the lines of a Cassis de Dijon scenario. Now that the process of regional integration is mature, and a significant amount of harmonised private law has been put in place by the Union, a situation of this kind is obviously less likely to arise. In those areas where the law has been harmonised by EU measures, the remaining divergences between the legislations of the various Member States should in principle be tolerated, and the use of the public policy exception should accordingly be confined to absolutely exceptional circumstances, consistent with the approach followed by the Court of Justice in Unamar.24a If this was not the case, the seised court would end up frustrating the goals of the institutions and actually defeat the balance struck by the European legislator between the goals of regional integration, on the one hand, and the sovereignty of individual Member States, on the other.25 37 Rather, there is one situation where European Union law may still allow – if not require – a

Member State to deny the application of the law of a Member State in a sector of private law where harmonisation has been achieved. The situation arises where the application of the relevant provisions of the specified legal order would bring about a violation of the law of the European Union, for example because the Member State specified by the Regulation failed to implement a particular directive within the prescribed time period. If the provisions of the defaulting State, applicable to the circumstances, prevent the interested individual from achieving the practical result that he or she would be entitled to under the directive, then the seised court should not apply the provisions in question, as it would otherwise propagate the effects of the violation of the negligent Member State. In a similar scenario, Art. 21 works as a safeguard, provided by the European legislator itself in order to prevent a rule of secondary legislation (the relevant conflict-of-law provision of the Rome I Regulation) from bringing about a practical result that would ultimately contravene the law of the European Union. III. The conditions under which the public policy exception may be raised and its operation 1. An actual and manifest incompatibility with one or more public policy principles 38 For Art. 21 to apply, it must be established that the actual application of the relevant

provisions of the specified legal order would clearly infringe one or more principles belonging to the ordre public of the forum. 39 Both requirements are meant to limit the scope of application of the public policy exception,

thereby reducing the situations in which the ordinary operation of the Regulation’s conflictof-law provisions could be diverted.

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ECJ Case C-184/12, Unamar, ECLI:EU:C:2013:663, para. 52. Basedow, in: Le droit international privé: esprit et méthodes – Mélanges en l’honneur de Paul Lagarde (2005), 63 et seq.

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The first requirement implies that, in analysing the foreign applicable law for the purposes of 40 Art. 21, one should not look at the general and abstract features of its rules or principles, but should rather assess whether the application of the specific provisions relevant to the case would lead to a repugnant result.26 In other words, public policy may only come into play when, in the particular circumstances considered, the actual application of the rules of the lex contractus would give rise to an objectionable outcome. Conversely, the seised court will refrain from raising the defence whenever the foreign rule in question, no matter how objectionable its wording may be, and regardless of whether it might have been enacted to pursue a revolting intent, would lead, in the particular case at hand, to a sensible solution. Foreign rules allowing discrimination on grounds prohibited by the lex fori may serve as an 41 example. While these rules, taken as such, do offend the public policy of the forum, their application will not always and not necessarily be refused: it will be decisive to see whether the discriminating factor is present, or not, in the relationship considered, and how it affects the rights and obligations arising therefrom. Another example relates to those public policy principles that essentially require a certain interest to be protected to an appropriate extent. If the interest is effectively protected by the foreign law, a mere difference as to the manner and the forms through which the protection is ensured under the lex contractus will normally be immaterial. Rather, the key assessment, as far as Art. 21 is concerned, will be whether the substantive regime of the specified legal order is equivalent, in its outcome, to that of the forum or, at least, whether it meets the minimum standards prescribed by the latter. The second requirement – the “manifest” character of the violation – implies that, even 42 where a fundamental value of the forum is at stake, a minor deviation would normally not be enough to allow the seised court to resort to Art. 21. To be more precise, the provisions of the lex contractus will not be ruled out on grounds of public policy unless they affect the core aspects of the infringed principle, and if they clearly do so. 2. The variable strength of public policy depending on the proximity of the relationship (Inlandsbeziehung and ordre public de proximité) In several countries, the argument has been put forward by scholars and courts, that the 43 functioning of the public policy exception in private international law should be influenced, inter alia, by the nature and intensity of the relationship between the situation at stake and the forum. Roughly stated, the general idea is that ordre public should work more strongly where the situation appears to be closely linked to the social or economic life of the country of the forum, whereas the exception should retain a narrower scope when the situation at issue is remote. Different advantages have been indicated to support this construction, and different variants of the idea have been proposed, mainly in German and French literature, where the topic – under the expressions Inlandsbeziehung and ordre public de proximité – has undergone the most significant developments.27 Rarely, however, has the debate in question been developed with specific reference to contracts. 26 27

See further Renner, in: Calliess, Rome Regulations – Commentary (2nd ed. 2015), 397–398. See, generally, Courbe, in: Le droit international privé: esprit et méthodes – Mélanges en l’honneur de Paul Lagarde (2005), 227, and Joubert, La notion de liens suffisants avec l’ordre juridique (Inlandsbeziehung) en droit international privé (2007).

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Rome I Regulation

44 Art. 21 of the Rome I Regulation does not clarify whether, and by which terms, the degree of

proximity of the contract to the forum should have a bearing on the functioning of the ordre public clause. Apparently, the relevance of the doctrines mentioned above to the operation of Art. 21 is left for the individual Member States to determine. To the extent to which the doctrines in question are intended to mitigate rather than reinforce, the influence of public policy on the uniform conflict-of-laws rules, one may assume that the Regulation is in no way opposed to them. 3. Procedural issues 45 The Regulation is silent as to the procedural issues that may arise whenever the application

of Art. 21 is envisaged in the framework of court proceedings. The lack of indications on this aspect reflects the exclusion of matters in respect of “evidence and procedure” from the scope of the Rome I Regulation pursuant to Art. 1(3). 46 As a rule, issues not covered by the Regulation will need to be decided in accordance with the

law of the forum. It will thus be for the procedural law of the country where litigation takes place to determine, for example, whether the issue of public policy may be raised by the court by its own motion (as suggested by the nature of the interest protected by public policy principles, and as actually provided for in the legal order of Member States), or should rather rest on the initiative of the interested party. IV. The effects triggered by the public policy exception 1. The “negative” effect (effet d’éviction) 47 Art. 21 allows the seised court to avoid, on the ground of public policy, the application “of a

provision” of the lex contractus. This wording is reminiscent of the rules dedicated to public policy in the national systems of some Member States, including Germany (Art. 6 of the Introductory Act to the Civil Code), Austria (Art. 6 of the Statute on Private International Law of 1978), and the Slovak Republic (Art. 36 of the Statute on Private International Law of 1993). In other countries, such as Spain (Art. 12(3) of the Civil Code), Italy (Art. 16(1) of the Statute on Private International Law of 1995), and Poland (Art. 7 of the Statute on Private International Law of 2011), the rule on public policy provides instead that, as a consequence of the exception, the specified foreign “law” will be denied application. 48 The implications of the different drafting of the two formulas should not be exaggerated.

The wording retained by the draftsmen of the Regulation has the advantage of clarifying that the assessment involved in the public policy exception must focus on the specific provision that is relevant to deciding the particular issue at stake. But, in reality, a similar issue-byissue approach is generally followed in those countries where the public policy exception is normally understood to lead to the non-application of the specified legal order as a whole.28 To put it otherwise, the generally accepted view is that, under any of the said formulas, the public policy exception is meant to interfere with the way in which a given issue of the legal relationship at hand must be decided (e.g., the interest rate applicable in the event of a late payment): this will not prevent the specified law from being resorted to for the purpose of 28

834

Cf. Villani, La Convenzione di Roma sulla legge applicabile ai contratti (2nd ed. 2000), 198.

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Chapter III: Other Provisions

Article 21

deciding other issues arising in respect of the legal relationship in question (e.g., the validity of the contract or the construction of its terms).29 Rather, the two formulas seem to differ as regards the immediate consequences prompted by 49 the non-application of the relevant provision(s) in the specified legal order. The wording of the Regulation, read in light of the practical experience with the public policy exception in the countries that adopt the same formula in their national system of private international law, suggests that the “defective” foreign provision may be replaced by another provision of the same legal order, i.e. one not giving rise to objections on grounds of ordre public. For its part, the second formula appears to be based on the idea that the specified legal order is to be treated as a unitary legal reality: the conflict with public policy may well arise in connection with one specific foreign provision, but – if that provision happens to be inapplicable due to public policy – then the whole foreign legal order must be disregarded for the purpose of deciding the particular substantive issue in question. The two approaches underlie two different rationales. The first formula seems to be inspired 50 by the concern of safeguarding, to the largest possible extent, the effectiveness of the conflictof-laws rule that has been employed to designate the applicable law in the circumstances. Once the applicable law has been identified, the court must make all efforts to draw the substantive Regulation of the matter precisely from that law. Thus if one of the provisions of the specified legal order leads to unacceptable results, then the quest for an alternative provision must initially be made within the same legal system. In contrast, the basic concern of the second formula is to make sure that the legal order designated by the relevant conflictof-law provision is applied in a genuine way, i.e., without any manipulation. By disregarding one provision in favour of another for reasons connected solely to the policies of the forum, the seised court would ultimately come to deciding the case pursuant to a law which is only nominally taken from the specified legal order, since the foreign legal order in question would not have instructed its courts to apply the alternative provision in lieu of the excluded one. In practice, for those advocating the second approach, the court should either apply genuinely the specified legal order (i.e., in the manner in which it is originally meant to be applied), or disregard it altogether. While both approaches convey sensible policies, the primacy of one over the other and the 51 relationship between the two is a matter for which the private international law system of the European Union still lacks a sufficiently well-developed answer. As long as the conceptual foundations of the European Union law on conflicts of laws will not be defined, national

29

The issue-by-issue approach in the operation of the public policy exception is in fact largely followed in national systems of private international: see, e.g., as regards France, Bureau/Muir Watt, Droit international privé (2nd ed. 2007), 496. In the context of the Rome I Regulation this approach appears to be consistent with the general idea according to which, while a contract should normally be governed by one law, it is not excluded that, in appropriate circumstances, different laws may be designated for the purpose of deciding specific issues arising with regard to one and the same contractual relationship. This may actually happen by means of voluntary dépeçage under Art. 3(1), or on through the operation of those objective connecting factors as are provided for by the Regulation to deal with particular aspects of the contract, such as its formal validity (Art. 11) or the assignability of claims arising therefrom (Art. 12 (2)).

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Article 21

Rome I Regulation

authorities should retain their discretion and be free to develop balanced solutions for individual cases. 2. The absence of uniform rules as to the different legal order from which the applicable rules should be drawn after the exception has been raised 52 The situation may arise where, subsequent to the operation of the public policy exception,

the seised court is required to resort to the law of a country other than the law specified by the relevant conflict-of-law provision. If the first of the two formulas described in the previous section has been followed, this scenario will appear when no appropriate alternative provision has been found in the designated legal system. Under the second approach, this state of affairs will manifest itself immediately. 53 The Regulation does not clarify how the seised court should proceed.30 This silence amounts

to leaving the issue to the solutions adopted in the national system of private international law of the forum. Two options may be found in national codifications and in the court practice of the Member States. In several systems of private international law, including the Austrian and Belgian systems, it is established that where the specified legal order cannot be resorted to for the purpose of regulating the matter, then the lex fori will apply.31 In a few other national systems, such as the Italian (Art. 16(2) of the Statute on private international law of 1995), the rule is that, as a consequence of the non-application of the rules of a given legal order, the seised court will determine the applicable law pursuant to a different conflictof-law provision applicable to the circumstances. If a different provision is not available, or if the available provisions lead to a useless result (i.e., the designation of the same legal order that had been specified in the first place or the designation of a legal order equally leading to objectionable rules), then – and only then – will the lex fori apply. 54 While the first option provides the court with a quick and simple way-out from the impasse

triggered by the negative effect of public policy, the second option, if applied to situations within the scope of the Regulation, has the merit of preserving to the largest possible extent the effectiveness of the uniform rules. For example, if the parties to a contract have agreed on a choice of law, but the application of the chosen law appears to infringe the public policy of the forum, the following solutions would be adopted, depending on which of the above options are taken. An Austrian or Belgian court would immediately fall back on the lex fori. Divergently, an Italian court would remain with the Regulation and determine the applicable law through the objective connecting factors set forth therein, no matter whether these point to the law of the forum, or not. 55 At this stage of development of the private international law of the European Union, both

options are acceptable. In a more mature legal framework, the higher degree of safeguard granted to the uniform rules by the second of the two schemes would represent an important asset and should accordingly be given appropriate consideration.

30 31

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On the whole topic, see Biagioni, Riv. dir. int. 2003, 1083. See, respectively: Art. 6 of the Austrian Statute on Private International Law of 1978; Art. 21 of the Belgian Code on Private International Law of 2004.

August 2016

Article 22

Chapter III: Other Provisions

Article 22: States with more than one legal system 1. Where a State comprises several territorial units, each of which has its own rules of law in respect of contractual obligations, each territorial unit shall be considered as a country for the purposes of identifying the law applicable under this Regulation. 2. A Member State where different territorial units have their own rules of law in respect of contractual obligations shall not be required to apply this Regulation to conflicts solely between the laws of such units.

Bibliography Borrás Rodriguez, Les ordres plurileìgislatifs dans le droit international priveì actuel, Rec. Cours (1994, vol. 249), 145 Gardella, Art. 3 (Libertà di scelta), in: Salerno/ Franzina, Regolamento (CE) n. 593/2008 del Parlamento europeo e del Consiglio del 17 giugno 2008 sulla legge applicabile alle obbligazioni contrattuali (“Roma I”) – Commentario, Nuove leggi civili commentate 2009, 611 Gebauer, Article 22 Rome I in: Calliess, Rome Regulations – Commentary (2nd ed. 2015), 412 Hartley, International Commercial Litigation (2nd ed. 2015) Idot, Variations sur le domaine spatiale du droit communautaire in: Le droit international privé: I.

II.

The notion of States comprising more than one legal system 1. Complex, as opposed to unitary, legal systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. The relevance of complex legal systems to the operation of the Rome I Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The operation of the conflict-of-law provisions of the Regulation in the event of the designation of a complex legal system 1. The problem with the designation of complex legal systems and the solution envisaged by the Regulation . . . . . . . . . . . . . 6 2. The rationale underlying the adopted solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3. Art. 22(1) as a guide to understanding

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esprit et méthodes – Mélanges en l’honneur de Paul Lagarde 2005, 431. Lagarde, Le nouveau droit international priveì des contrats apreÌs l’entreìe en vigueur de la Convention de Rome du 19 juin 1980, Rev. crit. dr. int. priv. 1991, 287 Maury, ReÌgles geìneìrales des conflits de lois, Rec. Cours (1937, vol. 57), 551 Papadopoulou, SItuations purement internes et droit communautaire, Cahiers de droit européen 2002, 95 Ricci, Il richiamo di ordinamenti plurilegislativi nel diritto internazionale privato (2004) Ubertazzi, Il regolamento Roma I sulla legge applicabile alle obbligazioni contrattuali (2008).

III.

references made to a State with more than one legal system for purposes other than the designation of the applicable law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 4. Issues, arising in respect of situations within the scope of application of the Regulation, to which Art. 22(1) does not apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 The non-application of the Regulation to purely local, as opposed to international, conflicts 1. The solution adopted by the Regulation and its raison d’être . . . . . . . . 24 2. The possibility for Member States to regulate local conflicts in conformity with the Rome I Regulation . . . . . . . . . . . . 28

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Article 22

Rome I Regulation

I. The notion of States comprising more than one legal system 1. Complex, as opposed to unitary, legal systems 1 Some States possess a legal order featuring a complex structure. Instead of a single set of

rules of substantive private law – as may be found, e.g., in Germany or Italy, where the Bürgerliches Gesetzbuch and the Codice civile lay down the law in force in the whole country – the legal orders of the States in question comprise a variety of sub-systems, each corresponding to a “part” of the country. The latter may be either a portion of its territory or a particular community within its population (e.g., the community made of those who profess a given religion): the co-existence of the different sub-systems is organized on a territorial basis in the first case and on a personal basis in the second.1

2 The United Kingdom, Canada and the United States of America, among others, fit in this

scheme, since different regimes of substantive private law may be found in the different territorial units of those countries: the law of England and Wales is different from Scottish law, the law of Ontario or Alberta is not the same as the law of Québec, and the law of Massachusetts or Ohio differs in some respects from the law of Arizona or California. 2. The relevance of complex legal systems to the operation of the Rome I Regulation 3 Art. 22, which reproduces Art. 19(1) of the Rome Convention of 19 June 1980, deals with

two issues arising in connection with States where two or more legal systems coexist, organized on a territorial basis.2 4 On the one hand, Art. 22(1) contemplates the case that arises whenever the Regulation

points at a State with more than one legal system, each with its own rules of substantive law concerning contractual relationships.3 It is an ancillary rule intended to supplement the conflict-of-law provisions of the Regulation by clarifying the way in which the latter should

1 2

3

838

In general, concerning complex legal systems, see Borrás Rodriguez, Rec. Cours (1994, vol. 249), 145. Complex legal systems organized on a personal basis are not taken into consideration in the Regulation. As a matter of fact, in countries where different personal laws exist – such as Lebanon or India – the differences between one regime and the other usually concern the law of family relationships and the law of persons, not the law of contracts. In the unlikely event of the Regulation designating the law of a country where the substantive rules on contractual obligations vary depending on the ethnic, cultural, or religious status of the parties, recourse should be had to the private international law rules of the forum, as long as they do not defeat the effet utile of the Regulation. This is actually the line of conduct that the interpreter is normally required to follow whenever a gap appears in the uniform rules. See, Ricci, Il richiamo di ordinamenti plurilegislativi nel diritto internazionale privato (2004), 203. For Art. 22 to apply, it is not necessary that the sub-systems of the legal order in question provide a selfstanding body of rules laying down a complete substantive Regulation of contractual relationships. As a matter of fact, the specified legal order may well comprise some general rules, common to the different sub-systems, and some special provisions, varying from one sub-system to the other. In these circumstances, it is submitted, Art. 22 of the Regulation will apply to the extent to which the issue to be decided in the instant case is one governed, or affected, by provisions that change depending on the sub-system considered. Cf. Hartley, International Commercial Litigation (2nd ed. 2015), 594.

August 2016

Chapter III: Other Provisions

Article 22

operate in the above scenario. The rule states that, for the purpose of identifying the applicable law, each territorial unit shall be considered as a country. On the other hand, Art. 22(2) is concerned with the situation where, in a Member State 5 possessing more than one legal system, each laying down its own rules of substantive law on contracts, the legal relationship at hand raises a conflict involving “solely” the laws of two or more territorial units. The purpose of the provision is to determine the scope of application of the Regulation as a whole, by clarifying that these situations are unaffected by the Regulation, and accordingly remain subject to the rules in force in the Member State concerned. II. The operation of the conflict-of-law provisions of the Regulation in the event of the designation of a complex legal system 1. The problem with the designation of complex legal systems and the solution envisaged by the Regulation Literally, the conflict-of-law provisions of the Rome I Regulation are meant to designate the 6 law of a “country”. This reference is understood as excluding non-State law4 and should similarly be construed as excluding the law of political or administrative entities that fail to qualify as “States” for the purposes of public international law, such as the constituent entities of federal States. If the specified legal order includes two or more sub-systems, each laying down a particular 7 substantive regime of contract law, then the conflict-of-law provision, through which the said legal order has been designated, proves unable to perform its function in full, as it will not result in the identification of a single body of rules providing for the substantive Regulation of the matter. Art. 22(1) sets forth the missing part of the process by indicating the connecting factors that 8 need to be used to identify, within the specified legal order, the relevant infra-State subsystem. Under Art. 22(1), these connecting factors are, in fact, the same as those by which the specified (State) legal order has been determined in the first place. By resorting to a fictio iuris, the Regulation prescribes that each territorial unit of the designated country must be treated, for these purposes, as if it was a country of its own. For example, in order to determine the law applicable to a contract for the provision of 9 services, absent a choice by the parties, it will not be enough to identify, as provided in Art. 4 (1)(b), “the country where the service provider has his habitual residence”, but – where the country in question is a State with more than one legal system – it will also be necessary to identify, within that country, the specific territorial unit where the same connecting factor is present (e.g., if the service provider is an undertaking habitually resident in the United States, it will be necessary to determine where, exactly, is its habitual residence located; thus, if the habitual residence is in Miami, the applicable law will be the law of Florida). 4

See, among several authors, with reference to Art. 3 of the Rome Convention, Lagarde, Rev. crit. dr. int. priv. 1991, 287. As regards the Regulation, see Recital 13, recognizing that the parties may decide to “incorporate by reference” into their contract a non-State body of law or an international convention. See on this topic Gardella, Nuove leggi civili commentate 2009, 619 et seq.

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Article 22

Rome I Regulation

10 An almost identical reasoning applies to choice-of-law agreements. Under Art. 3(1) of the

Regulation, taken in conjunction with Art. 22(1), the parties are allowed to submit their contract to the law in force in a given territorial unit of a State possessing more than one legal system (e.g., English law or the law of the State of New York).5 As a matter of fact, it is as if the will of the parties simultaneously performed a double function, i.e. selecting the legal order of a given country (the United Kingdom or the United States) and the legal system of a particular territorial unit within the country in question. 2. The rationale underlying the adopted solution 11 Art. 22(1) adopts a solution that is widely followed in legal instruments laying down uniform

conflict-of-law provisions, both within the legislation of the European Union and in international conventions.6 12 A different solution, however, may still be found in some national codifications of private

international law. For example, Art. 5(3) of the Austrian Statute on Private International Law of 1978, Art. 34 of the Slovak Statute on Private International Law of 1993 and Art. 18 of the Italian Statute on Private International Law of 1995 provide that, whenever the specified legal order comprises more than one legal system, the applicable local law must be identified through the provisions adopted within the legal order in question to decide local conflicts.

5

6

840

Sometimes, practitioners come across contracts that include a choice-of-law clause that designates the law of a State possessing more than one legal system, without specifying any of its sub-systems, as in the following example: “This contract is submitted to the law of the United States of America.” At the outset, a situation like this raises an issue of contract interpretation. One must determine whether, in spite of the ambiguous wording of the clause, the parties had in fact agreed on a more specific designation. It is not easy to say what standards should be applied in carrying out this inquiry. Art. 3(5) of the Regulation stipulates that the “existence and validity of the consent of the parties as to the choice of the applicable law shall be determined in accordance with the provisions of Articles 10, 11 and 13”. Art. 10(1) provides in turn that the “existence and validity of a contract, or of any term of a contract, shall be determined by the law which would govern it […] if the contract or term were valid”, i.e., the hypothetical lex contractus. Pursuant to Article 12(1)(a), the same law should be resorted to with respect to the interpretation of the contract and its terms. In light of the foregoing, especially where elements exist indicating prima facie that the parties have agreed on the law of a given sub-system of the designated country (e.g., the law of the State of New York, because negotiations took place in New York and most of the obligations are to be performed there), the actual existence of an agreement to this effect should be determined in accordance with the standards provided for by the law of the sub-system. If the different sub-systems of the country in question provide for roughly the same standards regarding the construction of contractual clauses, these standards should plausibly be resorted to, as well. Should the inquiry be inconclusive or lead to unclear results, the parties will be deemed to have made no choice of law at all. The lex contractus will then need to be determined pursuant to the relevant objective connecting factors, such as those in Art. 4. See also, on the whole problem, Gebauer, in: Calliess, Rome Regulations – Commentary (2nd ed. 2015), 414. As a matter of fact, the different instruments enacted so far by the European legislator include a provision almost identical to Art. 22(1) to regulate “local” conflicts involving complex legal systems: see, e.g., Art. 25 (1) of the Rome II Regulation on the law applicable to non-contractual obligations. A similar formula is employed in various international conventions, including, e.g., the Hague Convention of 14 March 1978 on the Law Applicable to Agency (Art. 20).

August 2016

Chapter III: Other Provisions

Article 22

In practice, while under the Rome I Regulation, the uniform conflict-of-law provisions are 13 intended to designate both a given country and the specific legal system within that country, the rules in force in some national systems envisage a two-step process, where the conflictof-law provisions of the forum are in fact supplemented by the provisions of the specified legal order. In light of this, a parallel may be drawn between the logic behind Art. 22(1) and the exclusion 14 of renvoi prescribed in Art. 20 of the Rome I Regulation. The situations considered are different,7 but the two provisions have something in common. They are actually based on the idea that, in circumstances where the Regulation could in theory be supplemented by some other provisions to achieve its purposes (the conflict-of-law provisions of the specified legal order, in the case of renvoi; the rule of the specified legal order intended to deal with local conflicts, in the case of complex legal systems), such other provisions must be disregarded. Thus, the reasons explaining the rejection of renvoi in Art. 20 justify, as well, the “direct” 15 solution adopted by the Regulation to deal with the designation of complex legal systems.8 Uniformity is enhanced, since the Regulation does not require nor accept supplementation by outside sources. Predictability is reinforced, and the process leading to the identification of the applicable law is kept relatively simple. Furthermore, as with the stated irrelevance of renvoi, the substantive and choice-of-law policies of the Regulation are safeguarded. Thus, for example, the reasons on account of which a contract relating to a right in rem in immovable property is governed by the lex rei sitae, as stipulated in Art. 4(1)(c), will not be frustrated by the rules on local conflicts that one might find in the legal order of the country where the immovable is situated. On the other hand – but, again, similarly to what happens with the rule on renvoi – inter- 16 national harmony of solutions may prove impossible to reach. The Regulation’s unwillingness to take into consideration the point of the view of the specified legal order implies that the same situation could end up being submitted to different substantive regimes, depending on whether the case is viewed from a Member State bound to the Regulation, from a Member State possessing more than one legal system in which the situation is located (unless such Member State decides to conform its internal legislation to the Regulation), or from a third State. 3. Art. 22(1) as a guide to understanding references made to a State with more than one legal system for purposes other than the designation of the applicable law Taken literally, Art. 22(1) is exclusively concerned with the situation where a conflict-of-law 17 provision of the Regulation designates a complex legal system to govern a cross-border contractual relationship, or a particular aspect thereof. In reality, some provisions of the Regulation may, under appropriate circumstances, refer to a State with more than one legal system for purposes other than the designation of the applicable law.

7

8

On the different nature of the problem of renvoi, on the one hand, and the problem of the designation of non-unified legal systems on the other, see already Maury, Rec. Cours (1937, vol. 57), 551. See, for a more comprehensive analysis of these reasons, the comment of Art. 20.

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Article 22

Rome I Regulation

18 In Art. 13, for example, the case is considered of a contract “concluded between persons who

are in the same country”. In this scenario, “a natural person who would have capacity under the law of that country may invoke his incapacity resulting from the law of another country, only if the other party to the contract was aware of that incapacity at the time of the conclusion of the contract or was not aware thereof as a result of negligence”. One may wonder whether, for the purposes of Art. 13, the expression “same country” should be understood – in the event of a State with more than one legal system – as referring to a given territorial unit or to the country as a whole. The former option, it is submitted, should be preferred. Generally speaking, this approach is better suited to reflect the goal pursued by the European legislator in the provisions in question. In Art. 13, the reference made to the parties being present in one and the same country underlies the idea that, in these circumstances, one would normally expect incapacity to be governed by one particular law, the law of the country where both parties are present. Where the country in question comprises more than one legal system, each with its own rules on incapacity, the assumption will only make sense if the parties are present in the same territorial unit.

19 Similar arguments may be put forward, mutatis mutandis, for other provisions possibly

referencing complex legal systems. For example, Art. 5(2) of the Rome I Regulation stipulates that a contract for the carriage of passengers, failing a choice of law by the parties, be governed by the law of the country where the passenger has his habitual residence, “provided that either the place of departure or the place of destination is situated in that country”. For the latter reference to perform its intended purpose – i.e., ensuring the designation of a law displaying a sufficient degree of proximity with the factual circumstances of the carriage etc. – it must be understood to refer, in the event of a complex legal system, to the specific territorial unit where the passenger is habitually resident. 20 In the end, it is suggested that Art. 22(1) should be understood to mean that each time the

Regulation refers to a “country”, and the country in question is in fact a State with more than one legal system, the individual territorial units of such country should in principle be treated as if they were countries of their own, no matter what the purpose of the reference is in the circumstances (i.e., whether it is meant to designate the applicable law, to determine the conditions of applicability of a given conflict-of-law provision, etc.).

21 Actually, recent legal instruments laying down uniform conflict-of-law provisions often

include a provision clarifying the way in which one should construe any reference made to factors and circumstances arising in a country comprising several territorial units.9 Art. 22 (1) of the Rome I Regulation, in spite of its wording, should – it is submitted – be understood to perform substantially the same function.

9

842

This is the case, among others, of the Hague Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children (Art. 47), and the Hague Protocol of 23 November 2007 on the Law Applicable to Maintenance Obligations (Art. 16). Older Hague conventions, such as the Convention of 2 October 1973 on the Law Applicable to Products Liability (Art. 12) or the Convention of 14 March 1978 on the Law Applicable to Agency (Art. 19), employ in this connection a wording similar to the one that is now found in the Regulation.

August 2016

Chapter III: Other Provisions

Article 22

4. Issues, arising in respect of situations within the scope of application of the Regulation, to which Art. 22(1) does not apply Art. 22(1) is only concerned with situations where the applicable law is to be determined in 22 accordance with the Rome I Regulation. It is thus inapplicable where – for the purposes of deciding a conflict-of-law issue governed by the Regulation – recourse must be had to conflict-of-law provisions coming from other sources, such as the private international law system of the forum. This will happen, in particular, for incidental questions.10 If one assumes, according to a widely accepted view, that preliminary questions falling outside the scope of application of the Regulation must be decided in accordance with the private international law rules in force in the forum in respect of the issue at stake, then Art. 22 (1) will clearly be unable to affect the identification of the law applicable to the relationship or situation in question. The seised court will rely on the relevant rules applicable in the forum, including the rules concerning the designation of complex legal systems. An almost identical scenario arises in connection with Art. 13 of the Regulation as regards 23 incapacity. As stated earlier in a different context, the rule provides that a natural person who would have capacity under the law of the country where the parties were present at the time of the agreement “may invoke his incapacity resulting from the law of another country” only if certain conditions are met. The “law of the other country” referred to in Art. 13 is the law designated by the relevant conflict-of-law provisions of the forum. As these provisions are alien to the Regulation, their functioning is unaffected by its rules, including Art. 22(1). Thus, if the conflict-of-law provisions in question designate the law of a State with more than one legal system, the identification of the specific sub-system applicable to the circumstances will depend not on Art. 22(1), but on the rules in force in the forum, intended to complement the said provisions. III. The non-application of the Regulation to purely local, as opposed to international, conflicts 1. The solution adopted by the Regulation and its raison d’être Pursuant to Art. 22(2), a Member State where different territorial units have their own 24 substantive rules on contractual obligations shall not be required to apply the Regulation to conflicts “solely between the laws of such units”. The rule applies where a conflict among the laws of two or more units of a Member State arises before the courts of that same Member State, e.g., where an English court is asked to determine which law applies to a contract concluded in Birmingham between a party habitually resident in England and a party habitually resident in Scotland, providing for obligations to be performed in the territory of the United Kingdom.11 If a contract with the same features were to be considered from the 10 11

Regarding the basically similar problem arising with regard to renvoi, see the comment on Art. 20. In principle, the standards to be applied to determine whether a contract involves a conflict “solely” between the laws of two or more units of a given Member State should not differ from those used to determine whether the situation is one “involving a conflict of laws” within the meaning of Art. 1(1), or to assess whether, under Art. 3(3), apart from the choice of law made by the parties, “all other elements relevant to the situation at the time of the choice are located in a country other than the country whose law has been chosen”.

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standpoint of a Member State other than the United Kingdom, the situation would no longer be one involving a conflict solely between English and Scottish law, and would accordingly need to be decided pursuant to the Rome I Regulation.12 25 While the provision reproduces verbatim Art. 19(2) of the Rome Convention, the purpose

performed by Art. 22(2) of the Regulation is not identical to the one performed by its predecessor. 26 The legal basis upon which the Regulation was adopted – Art. 65 of the Treaty establishing

the European Community, now corresponding to Art. 81 of the Treaty on the Functioning of the European Union – allows the European legislator to enact measures aimed at developing judicial cooperation in civil matters “having cross-border implications”. The latter expression is generally understood to mean that, in this area of law, the European institutions have the power to regulate nothing more than situations featuring an international character.13 Although it may sometimes prove difficult to state exactly where the dividing line should be drawn between cross-border and purely domestic situations, there is, in fact, little doubt that – as a matter of principle – the latter remain essentially within the province of individual Member States. In light of this, Art. 22(1) of the Rome I Regulation may be seen as reiterating, for the sake of clarity, a limitation which, in the context of the European legislation, was actually imposed by the primary law of the European Union.14 Had the European legislator opted for the opposite solution, the legality of the ensuing provision could well have been challenged before the Court of Justice. 27 Since restrictions of this kind do not apply to international conventions, nothing prevented

the contracting States of the Rome Convention to undertake the obligation to submit both “inter-local” and international conflicts to one and the same set of rules, those in the Convention. If they decided not to do so, it was on the basis of freely conceived policy reasons, not because they had to. 2. The possibility for Member States to regulate local conflicts in conformity with the Rome I Regulation 28 Member States, while not bound by the Regulation as regards conflicts solely among the laws

of their territorial units, may nevertheless decide to regulate these conflicts along the lines of the Regulation, if not fully in conformity with its provisions. In practice, a Member State may decide to extend the scope of application of the Regulation so as to include conflicts arising solely among the laws of its territorial units, or simply draw inspiration from one or more specific provisions of the Regulation when addressing particular issues associated with local conflicts. 29 The advantages inherent in the first option are two-fold. On one side, extension facilitates

the work of the seised court. Where the uniform rules are extended without exceptions (or 12 13

14

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Giuliano/Lagarde report on the Rome Convention, OJ C 282 of 31 October 1980, sub Art. 19. See, generally, Papadopoulou, Cahiers de droit européen 2002, 95, and Idot, in: Le droit international privé: esprit et méthodes – Mélanges en l’honneur de Paul Lagarde 2005, 431. For a different view, see Ubertazzi, Il regolamento Roma I sulla legge applicabile alle obbligazioni contrattuali (2008), 58 et seq.

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almost without exceptions), it becomes irrelevant to determine whether the situation involves a conflict solely among the laws of the territorial units of the country of the forum, or rather features a connection, no matter how weak, with another State. On the other side, extension enhances international harmony of solutions. Thanks to extension, the legal relationship in question will in fact be submitted to the rules of the same sub-system, irrespective of whether the relationship itself is viewed from the standpoint of the concerned country (through Art. 22(2)) or from the standpoint of a court of a different country (i.e., through the Regulation, as applicable by its own force). The practical implications of the extension are all the more relevant if one considers that the 30 Court of Justice is available, in principle, to give a preliminary ruling under Art. 267 of the Treaty in the Functioning of the European Union, whenever the provision of European Union law submitted for the Court’s interpretation is made applicable by the law of a Member State, even though it is outside the scope defined by European Union law.15 This means that the courts of a Member State, where the decision has been made to make use of the Regulation (or, at least, the essential provision thereof) in circumstances within the scope of Art. 22(2), are entitled to refer to the Court of Justice the interpretive questions raised by the Regulation no matter whether, in the case at hand, the latter applies by its own force or only by virtue of a choice of the national legislator. The United Kingdom – actually the only Member State concerned with Art. 22(2) of the 31 Regulation – chose to extend the European regime to the solution of local conflicts. It did so, originally, with respect to the Rome Convention and later retained the solution when the Rome I Regulation was adopted. Today, pursuant to Regulation 5 of the Law Applicable to Contractual Obligations (England and Wales and Northern Ireland) Regulations 2009,16 the Rome I Regulation applies – in England, Wales and Northern Ireland – to “conflicts between the laws of different parts of the United Kingdom” and between “the laws of one or more parts of the United Kingdom and Gibraltar” in the same way as it applies in the case of conflicts among the laws of other countries. An almost identical provision may be found in Regulation 4 of the Law Applicable to Contractual Obligations (Scotland) Regulations 2009.17 The extension, however, is not absolute. Both instruments clarify that, when it comes to local conflicts within the meaning of Art. 22 (2), Art. 7 of the Rome I Regulation is inapplicable. Article 23: Relationship with other provisions of Community law With the exception of Article 7, this Regulation shall not prejudice the application of provisions of Community law which, in relation to particular matters, lay down conflict-of-laws rules relating to contractual obligations.

15

16 17

ECJ Joined Cases C-297/88 and C-197/89 – Dzodzi, ECR I-3763 [1990], para. 36 et seq.; ECJ Case C-231/ 89 – Gmurzynska-Bscher, ECR I-4003 [1990], para. 15 et seq. UK Statutory Instrument No. 3064 of 2009, available at http://www.legislation.gov.uk. Scottish Statutory Instrument No. 410 of 2009, available at http://www.legislation.gov.uk.

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Bibliography Cannone, Rapporti della proposta di reg. “Roma I” con le altre disposizioni rilevanti di diritto comunitario e con le convenzioni internazionali, in: Il nuovo diritto europeo dei contratti: dalla Convenzione di Roma al reg. “Roma I” (2007), p. 199 Kuipers, Bridging the Gap – The Impact of the EU on the Law Applicable to Contractual Obligations, RabelsZ 76 (2012), 562 Lagarde, Les limites objectives de la convention de Rome (Conflits de lois, primauté du droit communautaire, rapports avec les autres conventions), in: Ballarino (a cura di), La Convenzione di Roma sulla legge applicabile alle obbligazioni contrattuali (1994), p. 59

Lüttringhaus, Eingriffsnormen im internationalen Unionsprivat- und Prozessrecht: Von Ingmar zu Unamar, IPRax 2014, 146 Wulf-Henning Roth, Handelsvertretervertrag und Rom I-Verordnung – eine Skizze, in: FS Ulrich Spellenberg (2010), p. 309 Sacerdoti, I rapporti con le altre convenzioni e con le norme di diritto comunitario, in: Treves (a cura di), Verso una disciplina comunitaria della legge applicabile ai contratti (1983), p. 74 Sacerdoti, Il coordinamento della Convenzione di Roma con altre convenzioni e con il diritto comunitario, in: Sacerdoti/Frigo (a cura di), La Convenzione di Roma sul diritto applicabile ai contratti internazionali (2nd ed. 1994), p. 77.

I. Principle 1 Arts. 23–25 deal with the relation between the Rome I Regulation and other legal instru-

ments. The provisions distinguish depending on the source and quality of these instruments. Art. 23 starts with the relation to other EU instruments by establishing the principle of lex specialis. The other, more specific instrument takes priority and precedence over the Brussels I Regulation. This is on the basis of the supposition that the other legal instrument contains more specific ideas and interests so that it is better in tune with the relevant field of law than the Brussels I Regulation which is based upon more general thoughts.1 It is irrelevant if the concerned instruments take effect before or after the Rome I Regulation. The principle of lex posterior derogat legi priori is not applied.2 Equally irrelevant is whether the potentially conflicting other act of EU legislation expressly provides for it demanding priority.3 2 The other legal instrument involved prevails and takes precedence under the condition that

it deals directly or indirectly with the determination of the law applicable to contractual obligations. Otherwise such instruments are not in conflict with the Rome I Regulation because the scopes of application, as regards the subject matter, do not overlap.4 II. Conflict with PIL rules stemming from primary law 3 In the rather unlikely event that highest art of interpretation unveils a conflicts rule relating

to contracts in the primary law, i.e. the TFEU or the EU Treaty, this conflicts rule will prevail over the Rome I Regulation at least by virtue of Art. 23,5 if not simply as a matter of legal 1 2 3 4

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Mankowski, in: Rauscher, Art. 67 Brüssel I-VO note 1. Kropholler/von Hein, Art. 67 EuGVO note 2 in fine. Tentatively contra David C. Jackson, Enforcement of Maritime Claims (3rd ed. 2000), para. 6.6. Marongio Buonaiuti, NLCC 2009, 923, 927; Mankowski, in: Rauscher, Art. 67 Brüssel I-VO note 2.

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hierarchy with primary law exerting precedence over secondary rule. There are some legal instruments gaining relevance for the purposes of Art. 23. In contrast to Art. 22 (a) Proposal, Art. 23 does not refer to an Annex listing which Acts of EU law are concerned. Nonetheless, the respective Annex of the Proposal still gives a first orientation.6 III. PIL rules stemming from secondary legislation The main examples are provided by the conflict rules in the Directives on consumer pro- 4 tection which have not been repealed when the Rome I Regulation was promulgated.7 They comprise: Arts. 6 (2) Unfair Contract Terms Directive;8 12 (2) Distance Selling Directive;9 7 (2) Consumer Sales Directive;10 12 (2) Directive 2002/65/EC.11 The original Consumer Credit Directive12 did not contain a conflicts rule; its recast13 changed course in its Art. 22 (4). The reason for not repealing the pre-existing rules in the Directives on consumer protection may be found in the distribution of internal competences inside the Commission: General Directorate Home and Justice is only responsible for the Rome I Regulation whereas consumer protection rests with other General Directorates, in particular SanCo.14 Recital (40) of the Rome I Regulation might pronounce a general policy of reducing the number of rules to which regard ought to be paid but obviously this has its (political) limits. Subsequent EU legislation replaced the Consumer Credit Directive by a recast and substi- 5 tuted the Doorstep Selling and the Distance Selling Directives with the Consumer Rights Directive.15 The latter’s Recital (58) signals a different approach towards matters of PIL and in principle leaving the floor to the Rome I Regulation.16 A tricky issue difficult to resolve is the relation between the Rome I Regulation and the 6 Unfair Terms Directive beyond the latter’s Art. 6 (2). Annex (1) (q) Unfair Contract Terms 5 6 7 8

9

10

11

12

13

14 15

16

Marongio Buonaiuti, NLCC 2009, 923, 925 f. Leible/Matthias Lehmann, RIW 2008, 528, 531. Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 23 note 4. Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ EEC 1993 L 95/ 29. Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts, OJ EC 1997 L 144/19. Directive 99/49/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, OJ EC 1999 L 171/12. Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7EC and 98/27/EC, OJ EC 2002 L 271/16. Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit, OJ EEC 1987 L 42/48. Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC, OJ 2008 L 133/66. Mankowski, EuZ 2009, 2, 15. Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on Consumer Rights, amending Council Directive 93/13/EEC and Directive 99/44/EC and repealing Council Directive 85/577/EEC and Directive 97/7/EC, OJ EU 2011 L 304/64. See in more detail Art. 3 note 425 (Mankowski).

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Directive indicates that jurisdiction clauses17 or arbitration clauses18 might be rendered invalid by Art. 3 (3) of said Directive. There is no express counterpart for choice of law clauses in the Directive or its Annex. But that nothing to this avail emerges from the Annex does not give rise to an argumentum e contrario for the Annex is not exhaustive. In particular, Art. 5 cl. 1 Unfair Contract Terms Directive could be deemed applicable to choice of law clauses if only very arguably. Insofar as rules of the Unfair Contract Terms Directive were applicable to choice of law clauses they ought to be regarded as special conflict rules for the PIL of contractual obligations and thus would feature amongst the rules envisaged by Art. 23.18a 7 Usually the other legal instruments do not regulate questions of conflicts law. Due to respect

for the Rome I Regulation, some of them intentionally even leave the areas of law concerned out of consideration. A prominent example for this technique is Art. 1 (4) var. 1 E-Commerce Directive19 (which can be relied on for this account since the lemmata 5 and 6 of the Annex to the E-Commerce-Directive expressly exclude parties’ choice of law and obligations concerning consumer contracts from the scope of application of the Directive)20. Likewise, pursuant to its Art. 3 (2) the Services Directive21 is not concerned with private international law, but only with substantive law.22 But on the other hand some influence may result from other legal instruments. Such constellations may be provided for by the application of Art. 23.23

17

18

18a

19

20

21

22

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Océano Grupo Editorial SA v. Roció Murciano Quintero and Salvat Editores SA v. José M. Sánchez Alcón Prades, José Luis Copano Badillo, Mohammed Berroane and Emilio Viñas Feliú, (Joined Cases C-240/98 to C-244/98) [2000] ECR I-4941 paras. 21–24; Pannon GSM v. Erszébet Sustikné Györfi, (Case C-243/08), [2009] ECR I-4713; discussed e.g. by Heinig, EuZW 2009, 885; Pfeiffer, NJW 2009, 2369; Christian Mayer, GPR 2009, 220; Poissonnier, D. 2009, 2312; Paisant, JCP G N°. 42, 2009, p. 33. Elisa María Mostaza Claro v. Centro Móvil Milenium SpA (Case C-168/05), [2006] ECR I-10421, I-10448 et seq. paras. 35–39; Asturcom Telecomunicaciones SL v. Cristina Rodríguez Nogueira (Case C-40/08), [2009] ECR I-9579, I-9614-I-9620 paras. 37–59; discussed i.a. by d’Alessandro, Riv. arb. 2006, 679; Norbert Reich, ERCL 2007, 41; Jordans, GPR 2007, 48; Idot, Rev. arb. 2007, 115; Pavillon, NTBR 2007, 149; Legros, Les petites affiches 2007 n°. 152 S. 9; Celeste Pesce, Dir. pubbl. comp. eur. 2007, 430; Mourre, Clunet 134 (2007), 583; Poissonnier/Tricoit, Les petites affiches 2007 n°. 189 S. 13; Liebscher, (2008) 45 CMLRev. 545; Jarrosson, Rev. arb. 2009, 822; Mankowski, EWiR Art. 6 RL 93/13/EWG 1/10, 91; Cheneviere, Rev. eur. dr. consomm. 2010, 351; Stuyck, (2010) 47 CMLRev. 879; Ebers, ERPL 2010, 823. Mankowski, NJW 2016 sub V 1; see also Art. 3 notes 13–20 (Mankowski). Verein für Konsumenteninformation v. Amazon EU Sàrl (Case C-191/15), ECLI:EU:C:2016:612 paras. 67 et seq. subjects choice of law clauses in consumer contracts to a review under Directive 93/13 EEC, but does not mention Art. 23. Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market, OJ 2000 L 178/1. Matters are different with regard to Art. 6 Rome II Regulation where Art. 1 (4) var. 1 E-CommerceDirective should not be taken on face value given the purpose of the country of origin principle established in Art. 3 E-Commerce-Directive. Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2012 on services in the internal market, OJ EU 2006 L 376/36. Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 23 note 5; Leible, in: Nomos Kommentar BGB, Art. 23 note 9.

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The scope of the EU instrument in question has to be ascertained by interpretation on its 8 own terms,24 particularly if it addresses matters relevant for the Rome I Regulation at all.25 Sometimes this might require some art of interpretation or even some differentiation. If the other EU Act has an optional nature only the Rome I Regulation is not prejudiced. But 9 whether an Act is optional or, albeit optional, defines a special relation with the Rome I Regulation hinges yet again on the interpretation of that very Act. The prime example was the (now failed)26 Proposal for the CESL Regulation27 (which is not be to be confused with the Proposal CESL itself;28 the Proposal CESL Regulation was else coined the chapeau,29 and the Proposal CESL was some kind of Annex to it). The Proposal CESL Regulation provided that the Proposal CESL should only be applied if the applicable law is the law of a Member State, and it left it for the Rome I Regulation to ascertain which law is applicable. It aimed at establishing a so-called Vorschaltlösung leaving the general PIL rules untouched.30 Special regulations and directives of the Union law and Decisions of the Union institutions 10 can claim precedence. Pursuant to Art. 288 subpara. 3 TFEU (ex-Art. 249 (3) EC Treaty) directives have to be transformed into national law. Necessarily the national transforming act has to take precedence because otherwise the directive system would be inferior to the Rome I Regulation. Art. 23 does not take this into account expressly by giving priority to national legislations harmonized pursuant to the above-mentioned EU instruments. But the overarching principle remains valid. Art. 67 Brussels Ibis Regulation is more expressive and employs a better and more precise wording which should be used as model for interpreting Art. 23. This is meant to cover the national acts implementing the respective directives and transforming them into parts of national law.31 But it does not cover national legislation which extends legislative Acts of the EU beyond their own scope (so-called überschießende Umsetzung).32

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24

25 26 27

28 29 30

31 32

See Aud. Prov. Santa Cruz de Tenerife REDI 2002, 378 with note Jiménez Blanco; Heinig, GPR 2010, 36, 41. See ArbG Wiesbaden NZA-RR 2000, 321, 322 = IPRspr. 1999 Nr. 131 p. 312; Mankowski, in: Rauscher, Art. 67 note 2. Garriga Suau, AEDIPr 2008, 876, 877. Art. 3 note 281 (Mankowski). Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law, COM (2011) 635 final (11. October 2011). See in more detail Art. 3 notes 277–281 (Mankowski). Mankowski, IHR 2012, 1, 2. Thereon e.g. Mankowski, RIW 2012, 97; Leible, in: Remien/Herrler/Limmer (eds.), Gemeinsames Europäisches Kaufrecht für die EU (2012), p. 21; Fornasier, RabelsZ 76 (2012), 401; Corneloup, ZEuP 2012, 705; Flessner, ZEuP 2012, 726; Wojcik, in: Gebauer (ed.), Gemeinsames Europäisches Kaufrecht – Anwendungsbereich und kollisionsrechtliche Einbettung (2013), p. 51; Christian Kohler, in: Essays in Honour of Hans van Loon (2013), p. 259; Lagarde, in: Essays in Honour of Hans van Loon (2013), p. 287; Heiss, in: FS Attila Fenyves (2013), p. 874; Heiss, in: FS Dieter Martiny (2014), p. 917; Dannemann, in: Dannemann/Vogenauer (eds.), The Common European Sales Law in Context (2013), p. 21; von Hein, in: FS Dieter Martiny (2014), p. 365. Mankowski, in: Rauscher, Art. 67 note 3; Garriga Suau, AEDIPr 2008, 876, 877. Marongio Buonaiuti, NLCC 2009, 923, 929.

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11 The Passengers’ Rights Regulations deserve special attention. The EU has promulgated

Regulations dealing with passenger rights in air traffic,33 in rail traffic,34 in sea and inland water traffic35 and in overland carriage by road36 respectively. Each of these Regulations contains a rule specifically defining its respective scope of application in the international dimension.37 These rules should be classified as special unilateral conflicts rules calling for precedence by virtue of Art. 23.38 The alternative would be to regard these rules as merely ancillary to the unification of substantive law promoted by the Regulation and thus to coin them statutistic conflicts rules.39 This would result in a like precedence over the Rome I Regulation in its entirety, but would not be inclined to employ Art. 23 to this avail.40 12 Other examples for special conflicts rules in other Acts of EU law which claim precedence

over the Rome I Regulation by virtue of Art. 23 are Arts. 3 (1) (a) Regulation (EC) No. 3921/ 91;41 6 Regulation (EC) No. 3118/93.42,43 13 The Annex to Art. 22 Rome I Proposal mentioned the Posting of Workers Directive44 and the

Cultural Goods Directive.45 The latter does not relate to contractual obligations, even in the 33

34

35

36

37

38

39 40

41

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43 44

45

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Regulation (EC) No. 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation of long delay of flights, and repealing Regulation (EEC) No. 295/91, OJ EU 2004 L 46/ 1. Regulation (EC) No. 1371/2007 of the European Parliament and of the Council of 23 October 2007 on rail passengers’ rights and obligations, OJ EU 2007 L 315/14. Regulation (EU) No. 1177/2010 of the European Parliament and of the Council of 24 November 2010 concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No. 2006/2004, OJ EU 2010 L 334/1. Regulation VO (EU) No. 181/2011 of the European Parliament and of the Council of 16 February 2011 concerning the rights of passengers in bus and coach transport and amending Regulation (EC) No. 2006/ 2004, OJ EU 2011 L 55/1. Arts. 3 (1) Regulation (EC) No. 261/2004; 2 Regulation (EC) No. 1371/2007; 2 (1) Regulation (EU) No. 1177/2010; 2 (1) Regulation No. 181/2001. Mankowski, TranspR 2008, 177, 180–184; Führich, Reiserecht (7th ed. 2015) § 4 note 42, § 34 note 20. Tentatively contra, but to a similar final result Franzina, NLCC 2009, 935, 937 et seq.; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 23 note 3; Leible, in: Nomos Kommentar BGB, Art. 23 note 6. See Kreuzer, RabelsZ 70 (2006), 1, 46; Rolf Wagner, TranspR 2009, 103, 107. See Ruhwedel, TranspR 2008, 89, 91; Rolf Wagner, TranspR 2008, 221, 224; Rolf Wagner, TranspR 2009, 103, 107. Council Regulation (EC) No. 3921/91 of 16 December 1991 laying down the conditions under which non-resident carriers may transport goods or passengers by inland waterway within a Member State, OJ EC 1991 L 373/1. Council Regulation (EC) No. 3118/93 of 25 October 1993 laying down the conditions under which nonresident carriers may operate national road haulage services within a Member State, OJ EC 1993 L 279/1. Leible, in: Nomos Kommentar BGB, Art. 23 note 8. Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services, OJ EC 1997 L 18/1. Council Directive 93/7/EEC of 15 March 1993 on the return of cultural objects unlawfully removed from the territory of a Member State, OJ EEC 1993 L 74/74.

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widest sense, and could thus not possibly collide with the Rome I Regulation.46 The former is rather to define some rules which are mandatory in the sense envisaged by Art. 8 (1).47 Recital (34) refers to it as a possible example for internationally mandatory rules under Art. 9.48 But Art. 8 and Art. 9 respectively can only become operable if the Rome I Regulation is applicable at all. Thus the question whether Art. 23 is triggered is an issue primary to the application of Arts. 8; 9. EU conflicts rules might materially be lois de police, but formally they are leges speciales and step through the door opened by Art. 23.49 Many directives of EU consumer law comprise conflicts rules, namely Arts. 6 (2) Unfair 14 Contract Terms Directive; 12 (2) Distance Selling Directive; 12 (2) Distance Selling of Financial Products Directive; 9 Timeshare Directive; 12 (2) Timeshare Directive (Recast). But this technique is not employed anymore in Recital (58) cl. 2 Consumer Rights Directive50 whereas the Consumer Rights Directive formally repeals the Door-Step Selling Directive and the Distance Selling Directive. What Art. 3 (4) did not, is achieved this way but only partially solves the problem of Directives competing with the Rome I Regulation for effectiveness. Art. 22 (4) Consumer Credit Directive (Recast)51 for instance is still in force as is Art. 12 (2) Timeshare Directive (Recast). Art. 23 generally gives the Directives precedence insofar as any real collision with the Rome I Regulation ensues.52 Neither the legislative history nor Recital (40) militate against a tentatively extensive interpretation of Art. 23.53 A purposive interpretation of Art. 23 should lead to an approach that gives way also to 15 implicit or implied conflict rules in other Acts of EU law which do not expressly regulate matters of PIL. The prime example is Arts. 17; 18 Commercial Agents Directive54 in the light of the Ingmar judgment of the CJEU.55,56 Ingmar has neither been overruled nor been made 46

47 48 49 50

51

52

53

54

55

Leible/Matthias Lehmann, RIW 2008, 528, 531; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 23 note 5; Leible, in: Nomos Kommentar BGB, Art. 23 note 9. Leible, in: Nomos Kommentar BGB, Art. 23 note 9. See Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 23 note 5. Wulf-Henning Roth, in: FS Ulrich Spellenberg (2010), p. 309, 320. Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 99/44/EC and repealing Council Directive 85/577/EEC and Directive 97/7/EC, OJ EU 2011 L 304/64. Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC, OJ EU 2008 L 133/66. But cf. Wulf-Henning Roth, in: FS Ulrich Spellenberg (2010), p. 309, 315 based on an interpretation which reads the approach by Art. 6 into the conflicts rules of the Directives insofar as they oblige the Member States to take the necessary steps to insure that consumers do not lose the protection granted by the respective Directives, and into the term “necessary” in particular. Contra Kuipers, RabelsZ 76 (2012), 562, 580 (who 581, conversely, even argues that absent special conflicts rules Directive should be made applicable dependent on the Rome I Regulation). Directive 86/653/EEC of the Council of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, OJ EC 1986 L 382/17. Ingmar GB Ltd. v. Eaton Leonard Technologies, Inc., Case C-381/98, [2000] ECR I-9305; annotations i.a. by Reich, EuZW 2001, 51; Thume, RIW, 4/2001, I; Jayme, IPRax, 2001, 190; Raynard, JCP E, 2001 supp. n°. 2 p. 12; Idot, RCDIP 90 (2001), 112; van Hoek, SEW, 2001, 195; Freitag, EWIR § 89b HGB 4/2000, 1061; Michaels/Kamann, EWS 2001, p. 301; Leible/Freitag, RIW 2001, 287; Simon Schwarz, ZVglRWiss 101 (2002), 45; Ofner, ecolex 2001, 715; Nourissat, Les petites affiches N° 124, 22 juin 2001, p. 14; Wulf-

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redundant or superfluous by the advent of Art. 3 (4).57 Since Ingmar only unearthed the conflicts rule already dormant but pre-existent in Arts. 17; 18 Commercial Agents Directive it is not decisive that this conflicts rule is not expressly spelled out in a written act of legislation.58 An implied conflicts rule is a conflicts rule nonetheless, and it takes precedence as lex specialis. A comparison to the Posting of Workers Directive does not lead to a different result59 as Art. 3 (1) of this Directive contains a conflicts rule (or more precisely: a Community order addressing the Member States to safeguard the application of the standards established by the Posting of Workers Directive even against the lex causae). Qualifying the respective rules as special conflicts rule for the purposes of Art. 23 relieves of the more difficult question to which extent the rules contained in the Directives can be characterized as internationally mandatory rules as envisaged by Art. 9.60 16 Art. 23 expressly preserves the precedence of Art. 7. This precedence governs the relation to

the Insurance Directives61 and their conflicts rules. The Annex to Art. 22 Rome I Proposal still listed the Insurance Directives for the reason that at that time an inclusion of the PIL of insurance contracts in the Rome I Regulation was not yet planned. Later on the relation was reversed, and the preservation of Art. 7 signals this switch of policy.62 But the conflicts rules of the Insurance Directives retain relevance for Denmark which is a Member State only of the EU, but not of the Rome I Regulation.63 17 Secondary law operating outside the field of private law and of contract law in particular is

not addressed by Art. 23.64 Even if an Act of secondary legislation operates in the field of contract law and contains conflict rules this does not necessarily lead to a collision with the

56 57 58

59 60

61

62 63 64

852

Henning Roth, (2002) 39 CML Rev. 369; Verhagen, (2002) 51 ICLQ 135; Nemeth/Rudisch, ZfRV 2001, 179; Höller, RdW 2001, 396; Ansgar Staudinger, NJW 2001, 1974; Jacquet, RTDcomm 2001, 1067; Font i Segura, EuLF 3–2000/01, 179; Font i Segura, Rev. der. com. eur. 9 (2001), 259; Adobati/Giangrossi, Dir. comm. int. 2001, 725; Bitterich, VuR 2002, 155; Schwartze, in: FS Wolfgang Kilian (Baden-Baden 2004), p. 783; Schurig, in: FS Erik Jayme (München 2004), p. 837; Ezquerra Ubero, in: Calvo Caravaca/Areal Ludeña (dir.), Cuestiones actuales del derecho mercantil internacional (Madrid 2005), p. 193. To a like result Leible, in: Nomos Kommentar BGB, Art. 23 note 4. See in more detail Art. 3 note 426 (Mankowski). Contra Martiny, in: Münchener Kommentar zum BGB Art. 23 note 10; Thorn, in: Rauscher, Art. 23 note 6; Magnus, in: Staudinger, Art. 23 note 15; Lüttringhaus, IPRax 2014, 146, 148. Contra Lüttringhaus, IPRax 2014, 146, 148. See Freitag, in: Reithmann/Martiny, para. 547; Wulf-Henning Roth, in: FS Ulrich Spellenberg (2010), p. 309, 319–320. Second Council Directive 88/357/EEC of 22 June 1988 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/ EEC, OJ EEC 1988 L 172/1; Council Directive 90/619/EEC of 8 November 1990 on the coordination of laws, regulations and administrative provisions relating to direct life assurance, laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 79/267/EEC, OJ EC 1990 L 330/50. Fricke, VersR 2008, 443, 445; Leible, in: Nomos Kommentar BGB, Art. 23 note 11. Marongio Buonaiuti, NLCC 2009, 923, 930. Steinrötter, Beschränkte Rechtswahl im Internationalen Kapitalmarktprivatrecht und akzessorische Anknüpfung an das Kapitalmarktordnungsrecht (2014), p. 341.

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Rome I Regulation since there is the possibility that the respective rule itself refers to the law applicable to the contract and thus impliedly to the Rome I Regulation. An example for this type of conflict rule cooperating with the Rome I Regulation is Art. 6 (3) (a) Takeover Directive.65, 66 Article 24: Relationship with the Rome Convention 1. This Regulation shall replace the Rome Convention in the Member States, except as regards the territories of the Member States which fall within the territorial scope of that Convention and to which this Regulation does not apply pursuant to Article 299 of the Treaty. 2. In so far as this Regulation replaces the provisions of the Rome Convention, any reference to that Convention shall be understood as a reference to this Regulation.

Bibliography Dickinson, Territory in the Rome I and Rome II Regulations, [2013] LMCLQ 86 Franzina, Las relaciones entre el regolamento Roma I y los convenios internacionales sobre conflictos de leyes en materia contractual, CDT 1(1) (2009), 92 von Hein, Konflikte zwischen völkerrechtlichen Übereinkommen und europäischem Sekundärrecht I.

Replacing the Rome Convention 1. Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3. Special scenarios concerning particular territories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

auf dem Gebiet des Internationalen Privatrechts, in: FS Meinhard Schröder (2012), p. 29 Wulf –Henning Roth, Maßgebliche Kollisionsnormen im deutsch-dänischen Rechtsverkehr, IPRax 2015, 222.

II.

4. United Kingdom after Brexit has become effective . . . . . . . . . . . . . . . . . . . . . . . 21a References to the Rome Convention as references to the Rome I Regulation, (2) 22

I. Replacing the Rome Convention 1. Principle (1) regulates the relation between the Rome I Regulation and the Rome Convention. The 1 respective settlement is simple, proper and satisfactory. The Rome I Regulation does not simply take priority or precedence, but supersedes and replaces the Rome Convention as between the Member States.1 The Rome Convention (all contracting states are members of the EU) loses nearly its entire significance. With Rome Convention, any reservations to the 65

66

1

Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids, OJ EC 2004 L 142/12. Georg Eckert, Internationales Gesellschaftsrecht (Wien 2010), p. 434; Steinrötter, Beschränkte Rechtswahl im Internationalen Kapitalmarktprivatrecht und akzessorische Anknüpfung an das Kapitalmarktordnungsrecht (2014), p. 342. See only Rb. Almelo NIPR 2003 Nr. 206 p. 310; Trib. Rovereto RDIPP 2005, 162, 163.

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Rome Convention made by Contracting Member States cease to have effect.2 (1) might be regarded as some kind of lex specialis to Art. 253 expressly dealing with the fate of the most important convention replaced. But for Denmark, the same result might have been reached via Art. 25 (2) even if (1) did not exist. 2 On the other hand the first paragraph neither repeals the Rome Convention nor forces the

Member States to denounce it.4 The EU could not formally repeal a multilateral Treaty of which the EU is not a Contracting Party whereas only the Member States are Contracting Parties. 2. Denmark 3 The Rome Convention is still important for cases taking place before the entry into force of

the Rome I Regulation and for cases which bear a relation to Denmark. The Regulation is not in effect for Denmark,5 and Denmark is not a Member State of the Rome I Regulation as evidenced by Recital (46). Yet from the EU perspective, Art. 2 casts the die6 since the Rome I Regulation does not distinguish as to whether the applicable law is the law of a Member State or the law of a non-Member State. It treats all laws indiscriminately, and Denmark does not get any special treatment amongst non-Member States. Furthermore, Art. 1 (4) cl. 2 strongly indicates that the Rome I Regulation calls for application in cases which bear a relation to Member States of the EU which are not Member States of the Regulation.7 Denmark is not a Member State for the purposes of Art. 24.8 Besides this, it would be very difficult if possible at all to define what constitutes a relevant connection with Denmark in a concrete case.9 Neither Art. 1 (4) cl. 1 nor Art. 25 militate in favour of the opposite result that cases with a relation to Denmark ought to be handled under the Rome Convention even in Member States of the Rome I Regulation.10 Nor does the maxim pacta sunt servanda save the day for the Rome Convention in “Danish” cases.11 That Art. 351 TFEU displays a certain tendency to pay respect to international law12 is not a convincing argument, either, since it is for the 2 3 4 5

6

7

8 9

10

11 12

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Franzina, CDT 1(1) (2009), 92, 98. von Hein, in: Rauscher, Art. 25 note 1; von Hein, in: FS Meinhard Schröder (2012), p. 29, 31. Franzina, NLCC 2009, 931, 932; Mankowski, in: Rauscher, Art. 68 Brüssel I-VO note 1. See only BGH GRUR 2005, 431, 432 – Hotel Maritime. See for further Details Mankowski, in: Rauscher, Art. 1 note 32 and Ansgar Staudinger, in: Rauscher, Introduction note 15. Leible/Matthias Lehmann, RIW 2008, 528, 532; Pfeiffer, EuZW 2008, 622, 623; Rauscher/Pabst, GPR 2008, 302, 306; Martiny, RIW 2009, 737, 739; Ringe, in: jurisPK Art. 1 note 52; von Hein, in: FS Meinhard Schröder (2012), p. 29, 39; Leible, in: Nomos Kommentar BGB, Art. 24 note 4; Piltz, IHR 2014, 68; WulfHenning Roth, IPRax 2015, 222, 224. Martiny, RIW 2009, 737, 739; von Hein, in: FS Meinhard Schröder (2012), p. 29, 39. Misunderstood by OLG Koblenz IPRax 2015, 255, 257. Wulf-Henning Roth, IPRax 2015, 222, 224. Martiny, RIW 2009, 737, 739; von Hein, in: FS Meinhard Schröder (2012), p. 29, 40; see also WulfHenning Roth, IPRax 2015, 222, 224. For this opposite result OLG Koblenz IPRax 2015, 255, 257 = IHR 2014, 65, 66; Brödermann/Wegen, in: Prütting/Wegen/Weinreich, Art. 25 note 2; see also Ansgar Staudinger, AnwBl 2008, 8, 9; Lando/Peter Arnt Nielsen, (2008) 45 CMLRev 1687, 1689. Contra Brödermann, NJW 2010, 807, 810. Brödermann/Wegen, in: Prütting/Wegen/Weinreich, Art. 25 note 2.

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single Act of EU law to determine if and to which extent it gives way to international conventions. There is no reservation or provision in the Rome I Regulation to the avail that in “Danish” cases courts in Member States should still apply the Rome Convention.13 It could even be argued that by actively participating in negotiating the Rome I Regulation Denmark tacitly submitted to an assumption that courts in Member States would apply the Rome I Regulation in cases related to Denmark.14 From the Danish perspective, the legal relationships between the other Member States 4 (including the United Kingdom and Ireland) on the one hand and Denmark on the other hand are regulated and governed further on by the Rome Convention which is still effective in this regard.15 A Danish court will still apply the Rome Convention.16 This holds true for the Faeroe Islands and Greenland, too.17 Art. 25 (2) and its ratio cannot be transferred since Denmark is not a Member State for the purposes of Art. 25 (2) which rule is not reserved in Art. 1 (4) cl. 2.18 It remains to be seen if a separate treaty relating to international law transposes the provi- 5 sions of the Rome I Regulation into the relationship between the EU and Denmark or if the Rome Convention continues to have effect. An alternative option would be for Denmark to unilaterally introduce national legislation importing the content of the Rome I Regulation.19 The European way should rather be to follow the lead established by the bilateral EU-Denmark conventions on jurisdiction and recognition and enforcement20 and on service of documents.21 3. Special scenarios concerning particular territories Furthermore, (1) clarifies that the Rome Convention remains applicable to those territories 6 of Member States who are parties of the Rome Convention but are exempted from the application of EU law pursuant to Art. 299 (2)–(6) EC Treaty as it was at the time when the Rome I Regulation was promulgated, and today to Art. 355 TFEU. The EU secondary legislation draws the necessary conclusions from the imperative primary Union Law. 13 14 15

16 17 18 19

20

21

Franzina, CDT 1(1) (2009), 92, 98. Franzina, CDT 1(1) (2009), 92, 98. Garcimartín Alférez, EuLF 2008, I-61, I-62; Leible/Matthias Lehmann, RIW 2008, 528, 532; Pfeiffer, EuZW 2008, 622, 623; Wilderspin, ERA-Forum 2008, 259, 261; Lando/Peter Arnt Nielsen, (2008) 45 CMLRev 1687, 1689; Martiny, RIW 2009, 737, 739; Franzina, NLCC 2009, 931, 933 et seq.; von Hein, in: FS Meinhard Schröder (2012), p. 29, 38; Wulf-Henning Roth, IPRax 2015, 222, 224. Leible, in: Nomos Kommentar BGB, Art. 24 note 5; Wulf-Henning Roth, IPRax 2015, 222, 224. Leible, in: Nomos Kommentar BGB, Art. 24 note 5. Wulf-Henning Roth, IPRax 2015, 222, 224. See for the catalogue of possible and conceivable options Lando/Peter Arnt Nielsen, (2008) 45 CMLRev 1687, 1689; Mansel/Thorn/Rolf Wagner, IPRax 2009, 1, 7; Francq, Clunet 136 (2009), 41, 49 with fn. 27; von Hein, in: FS Meinhard Schröder (2012), p. 29, 40. Agreement between the European Community and the Kingdom of Denmark of 19 October 2005 on jurisdiction and the recognition and enforcement of decisions in civil and commercial matters, OJ EC 2005 L 299/62. Agreement between the European Community and the Kingdom of Denmark of 19 October 2005 on the service of judicial and extrajudicial documents in civil and commercial matters, OJ EC 2005 L 300/55.

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7 This reservation is not merely prophylactic but has quite some relevance since the territorial

scope of the Rome Convention is more extensive than that of the Rome I Regulation. Art. 27 Rome Convention 1980 provided the following: “(1) This Convention shall apply to the European territories of the Contracting States, including Greenland, and to the entire territory of the French Republic. (2) Notwithstanding paragraph (1): (a) this Convention shall not apply to the Faroe Islands unless the Kingdom of Denmark makes a declaration to the contrary; (b) this Convention shall not apply to any European territory situated outside the United Kingdom for the international relations of which the United Kingdom is responsible, unless the United Kingdom makes a declaration to the contrary of any such territory; (c) this Convention shall apply to the Netherlands Antilles if the Kingdom of the Netherlands makes a declaration to that effect. (3) Such declarations may be made at any time by notifying the Secretary-General of the Council of the European Communities. (4) Proceedings brought in the United Kingdom on appeal form courts in one of the territories referred to in paragraph (2) (b) shall be deemed to be proceedings taking place in these courts.” 8 To summarize subsequent events and non-events: Denmark opted in for the Faeroe Islands

by the means of a Declaration of 18 July 1986.22 The United Kingdom opted in under Art. 27 (2) (b) Rome Regulation, but only for Gibraltar23 (and not the Channel Islands or the Isle of Man)24 And finally the Netherlands opted in for the (former) Netherlands Antilles and Aruba.25 9 Matters became slightly complicated after the 1992 Accession Convention of Funchal had

repealed Art. 27 Rome Convention 1980 by its Art. 2 (1) without inserting any replacement. But the correct approach still is to disregard this and to acknowledge and apply the content of Art. 27 Rome Convention 1980 though the very latter had vanished and vaporised.26 Accordingly, the Rome Convention should be regarded as applicable in all territories for which the Member States are administratively responsible (save for express exceptions) under Art. 27 (1) Rome Convention 1980 or to which the Member States have extended the Rome Convention by express declaration under Art. 27 (2) Rome Convention 1980.27 Anyway, in the relation between i.a. Germany on the one hand and Denmark on the other hand the Rome Convention is in force as by the Luxembourg Accession Convention of 1984 22 23 24 25 26 27

856

Rev. crit. dr. int. pr. 76 (1987), 471. BGBl. 1995 II 132. von Hein, in: Rauscher, Art. 24 note 10; Magnus, in: Staudinger, Art. 24 note 8. BGBl. 1994 II 2534. von Hein, in: Rauscher, Art. 24 note 6. See von Hein, in: Rauscher, Art. 24 note 7; Brödermann/Wegen, in: Prütting/Wegen/Weinreich, Art. 24 note 3.

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unscathed by the Funchal Accession Convention of 1992 resulting in the Rome Convention still being in force for Greenland and the Faeroe Islands.28 The provisions of the Treaties and accordingly of EU law in its entirety apply to Guadeloupe, 10 French Guiana, Martinique, Réunion, Saint-Barthélemy, Saint-Martin,29 the Azores, Madeira and the Canary Islands by virtue of Art. 355 (1) TFEU, furthermore to Ceuta and Melilla who are part of the EU territory pursuant to Art. 25 Accession Act 1985.30, 31 Insofar, the Rome I Regulation replaces the Rome Convention if the latter was in force in any of the said territories. Pursuant to Art. 355 (2) subpara. 1 in conjunction with Annex II TFEU, some overseas 11 territories of the Member States are not subject to EU legislation but to the special association system of Arts. 198–204 TFEU. The list comprises: Greenland; Saint-Pierre, Miquelon, Mayotte, French Polynesia, French Southern Territory; French Antarctica, New Caledonia including accessory territories, Wallis and Futuna;32 the former Netherlands Antilles (Bonaire, Curaçao, Saba, Sint Eustatius, Sint Maarten) and Aruba;33 Anguilla, Bermuda, the British Virgin Islands, the British Indian Ocean Territory, the Falkland Islands, the Cayman Islands, Montserrat, Pitcairn, St. Helena, Ascension, Tristan da Cunha, South Georgia, the Southern Sandwich Islands, the Turks and Caicos Islands. The general rule is that those overseas territories which are not listed are not subject to EU law34 and are to be regarded as non-Member Countries.35 Courts in the mentioned and listed territories still apply the Rome Convention insofar as it 12 has been extended to these territories.36 The wording of Art. 24 (“as regards”) should be read as a much simpler and more comprehensible “in”.37 Supreme courts on the national level insofar as they act as courts of appeal or courts of last 13 instance for these territories, ought to be regarded as courts of these territories, not as courts of the motherlands and are thus not to apply the Rome I Regulation. Art. 27 (4) Rome Convention 1980 sets the tone and should be taken as a statement of principle. The location of the first instance defines whether the case at stake is one in excluded territories or in the motherlands. For instance, the Hoge Raad sitting in Arubian cases (Arubaanse zaken) should revert solely to the Rome Convention, not to the Rome I Regulation.

28 29

30 31

32 33 34 35 36

37

von Hein, in: Rauscher, Art. 24 note 4. On the status of the French Départements Outre-Mer and Overseas Territories Gautron, Rev. aff. eur. 15 (2006), 385. OJ EEC 1985 L 302/27. Schmalenbach, in: Christian Calliess/Ruffert, EUV/AEUV (4th ed. 2011), Art. 355 AEUV note 5; von Hein, in: Rauscher, Art. 24 note 9; Kokott, in: Streinz, EUV/AEUV (2nd ed. 2012), Art. 355 AEUV note 42. von Hein, in: Rauscher, Art. 24 note 6. Franzina, CDT 1(1) (2009), 92, 97. Ulrich Becker, in: Schwarze, EU-Kommentar (3rd ed. 2012), Art. 355 AEUV note 7. International Agreement on Natural Rubber (Opinion 1/78), [1979] ECR 2871 para. 62. Magnus, in: Staudinger, Art. 24 note 8; Brödermann/Wegen, in: Prütting/Wegen/Weinreich, Art. 24 note 3. Franzina, NLCC 2009, 931, 932.

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14 Hong Kong has become a part of the People’s Republic of China in 1997, hence long before

the Rome I Regulation was promulgated, and is not a case for Art. 355 (2) subpara. 2 TFEU anymore in any event38 like it was envisaged originally and historically.39 15 According to Art. 355 (3) TFEU, the provisions of the Treaties and consequentially any EU

law including the Rome I Regulation apply to those European territories for whose external relations a Member State is responsible. The only instance this relates to at present is Gibraltar40 (whereas historically the respective rule in the original EEC Treaty related to the Saarland and whilst Art. 33 (3) TFEU applies to Gibraltar only with the modifications sanctioned by Art. 28 1985 Accession Act)41. The United Kingdom is taken to be the Member State “responsible” for Gibraltar, and arrangements have been put into place to facilitate this in the Context of the TFEU, without prejudice to the respective positions of the United Kingdom and Spain on the issue of sovereignty in relation to Gibraltar.42 The European micro-States, i.e. the Vatican State, San Marino, Monaco, and Andorra, do not fall under Art. 355 (3) TFEU.43 16 The Åland Islands are subject to EU law pursuant to Art. 355 (4) TFEU but for some

provisions as contained in Protocol 2 to the Act of Accession of Austria, Finland and Sweden to the then EC.44 Accordingly, courts on the Åland Islands have to apply the Rome I Regulation.45 17 Art. 355 (5) (a) TFEU excludes the application of EU law to the Faeroe Islands. This is not of

particular relevance for the Rome I Regulation since Denmark as the motherland of the Faeroe Islands is not Member State of the Rome I Regulation anyway. 18 Art. 355 (5) (b) TFEU in principle excludes the application of EU law to the United King-

dom Sovereign Base Areas of Akrotiri and Dhekelia in Cyprus reflecting some distant 38 39 40

41

42 43

44

45

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Schmalenbach, in: Christian Calliess/Ruffert, EUV/AEUV (4th ed. 2011), Art. 355 AEUV note 7. See Ulrich Becker, in: Schwarze, EU-Kommentar (3rd ed. 2012), Art. 355 AEUV note 7. See Parliamentary Question N. 655/85 with answer by Jacques Delors, OJ EEC 1985 C 341/8–9; Ministry of Justice, Should the UK Opt In? (January 2009) http://www.justice.gov.uk/consultations/docs/rome-iconsultation-govt-response.pdf; Schmalenbach, in: Christian Calliess/Ruffert, EUV/AEUV (4th ed. 2011), Art. 355 AEUV note 9; Kokott, in: Streinz, EUV/AEUV (2nd ed. 2012), Art. 355 AEUV note 7; Dickinson, [2013] LMCLQ 86, 89. Meinhard Schröder, in: von der Groeben/Schwarze, EUV/EGV, vol. IV (6th ed. 2004), Art. 299 EGV note 32. Dickinson, [2013] LMCLQ 86, 89. Meinhard Schröder, in: von der Groeben/Schwarze, EUV/EGV, vol. IV (6th ed. 2004), Art. 299 EGV notes 33–36; Jaeckel, in: Grabitz/Hilf/Nettesheim, Das Recht der Europäischen Union (looseleaf 1993ongoing), Art. 355 AEUV note 15 (August 2011); Kokott, in: Streinz, EUV/AEUV (2nd ed. 2012), Art. 355 AEUV note 8 and in detail Sack, EuZW 1997, 45; Stapper, Europäische Mikrostaaten und autonome Territorien im Rahmen der EG (1999); Katrin Friese, Die europäischen Mikrostaaten und ihre Integration in die Europäische Union: Andorra, Liechtenstein, Monaco, San Marino und Vatikanstadt auf dem Weg in die EU? (2011). In detail Fagerlund, in: Hannikainen (ed.), Autonomy and Demilitarisation in Internationale Law (1997), p. 13. von Hein, in: Rauscher, Art. 24 note 5.

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remnants from the time when Cyprus was a British territory, and the struggles of the Cypriot fight for independence.46 The relevance for the Rome I Regulation is marginal if any but it is not in force there.47 Of greater relevance is Art. 355 (5) (c) TFEU: EU law applies only to a limited extent to the 19 Channel Islands (Jersey, Guernsey, Alderney and Sark) and the Isle of Man. The limited extent does not comprise the Rome I Regulation.48 A special case is posed by the so-called Cyprus Problem. As is well known, the Northern part 20 of Cyprus is occupied by Turkish forces and declared itself an independent Turkish Republic of Northern Cyprus which has not been recognised by any EU Member State under international law. In any event, the government of the Republic of Cyprus does not exercise effective control in these areas. This is reflected in Art. 1 (1) of Protocol No. 10 of the Treaty of Accession of the Republic of Cyprus which reads: “The application of the acquis shall be suspended in those areas of the Republic of Cyprus in which the Government of the Republic of Cyprus does not exercise effective control.” This has to be interpreted restrictively, though, insofar as courts sitting in the government-controlled area adjudicate the case regardless of where the substrate of the lawsuit ought to be located.49 But such restriction would not allow for a court sitting in the Northern area of Cyprus to be bound by the Rome I Regulation. States only adhering to the EEA, but not the EU cannot be Member States of the Rome I 21 Regulation, not even for the purposes of Art. 3 (4) or Art. 7.50 This relates to Iceland, Liechtenstein and Norway. Switzerland, the Vatican State, Andorra, Monaco, San Marino do not even fall into this category51 and are thus even less Member States of the Rome I Regulation.52 4. United Kingdom after Brexit has become effective Once Brexit has become effective the United Kingdom might join Denmark insofar as the 21a Rome Convention still ties it to the continent. At the point of time when Brexit will become effective the UK ceases to be a Member State of the Rome I Regulation. Like the Brussels 46

47

48 49

50 51

52

See Protocol No. 3 of the Treaty of Accession of [i.a.] the Republic of Cyprus on the Sovereign Base Areas of the United Kingdom of Great Britain and Northern Ireland in Cyprus. von Hein, in: Rauscher, Art. 24 note 10; Brödermann/Wegen, in: Prütting/Wegen/Weinreich, Art. 24 note 3. von Hein, in: Rauscher, Art. 24 note 10. Meletis Apostolides v. David Charles Orams and Linda Elizabeth Orams (Case C-420/07), [2009] ECR I-3571 paras. 37–38; Dickinson, [2013] LMCLQ 86, 89–90. von Hein, in: Rauscher, Art. 24 note 11. On the relation between the EU and Andorra, Monaco and San Marino with particular regard to enhancing integration and cooperation in the future see Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions “EU Relations with the Principality of Andorra, the Principality of Monaco and the Republic of San Marino: Options for their participation in the Internal Market”, COM (2013) 793 final (18 November 2013). von Hein, in: Rauscher, Art. 24 note 11.

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Convention is to govern again the free movement of judgments in civil and commercial matters between the UK and the EU53 and like bilateral Treaties on recognition and enforcement with Member States of the EU might be revitalised in the post-Brexit future for matters not covered by the Brussels Convention,54 new life might be inflated into the Rome Convention in the UK, courtesy of Art. 24 Rome I Regulation.55 From the UK perspective this would rather not lead directly to the Rome Convention, but rather to the Contracts (Applicable Law) Act 1990; from the European perspective Art. 2 Rome I Regulation calling for a universal application of the Rome I Regulation regardless of whether the case has connections with Third States remains decisive.56 II. References to the Rome Convention as references to the Rome I Regulation, (2) 22 Some other legal instruments enacted between the passing of the Rome Convention and the

Rome I Regulation refer to the Convention. These concerns relate mainly to national legal instruments, but also to some EU Union instruments, (2) clarifies that such references shall be understood as references to the Rome I Regulation.57 This clarification in the Regulation is more practicable than to change all legal instruments referring to the Rome Convention. Otherwise such alteration would have been necessary in every case to take the special constellation of Denmark into account. Yet the other instruments should be read as though they were altered in the mentioned manner.58 23 The EU has the jurisdiction for the enactment of the second paragraph, although it is a

passing on from the Rome Convention because the Member States transferred this competence to the EU already in the Treaty of Amsterdam. Practitioners however should be reminded that they must be aware that references to the Rome Convention are not what they appear to be at first sight. Many surprises might be hidden behind these references for practitioners not familiar with private international law. 24 National legislation of its free motion can voluntarily refer to the Rome Convention or the

Rome I Regulation for cases which would per se be outside the ambit of either act. For instance, interlocal conflicts in a State territorially sub-divided may be solved by such reference. Insofar as national legislation still refers to the Rome Convention it is alleged that it should be for the interpretation of that national law following its own yardsticks to determine as to whether the reference should be read as static and petrified, i.e. still to the Rome Convention, or as a dynamic reference.59 Yet (2) should be given guiding force for this interpretation, too. Taking (2) into account the reference should be read as dynamic.60 National legislators are free in deciding whether to refer but not where to refer to. 53 54 55 56 57

58 59 60

860

Dickinson, (2016) 12 JPrIL 195, 204–205; Contra Hess, IPRax 2016, 409, 413. Basedow, ZEuP 2016, 567, 572; Hess, IPRax 2016, 409, 413. Hess, IPRax 2016, 409, 417; Dickinson, (2016) 12 JPrIL 195, 203-204. See supra Art. 24 notes 3–4 (Mankowski). See only Lydia Fuchs, ÖJZ 2005, 624, 626. Probably overlooked by Christian Kohler, in: FS Reinhold Geimer (2002), p. 461, 464 et seq. Lydia Fuchs, ÖJZ 2005, 624, 626. Christian Kohler, in: FS Reinhold Geimer (2002), p. 461, 464; Geimer/Schütze Art. 68 note 2. Mankowski, in: Rauscher, Art. 68 Brüssel I-VO note 6; Mankowski, in: Magnus/Mankowski, Art. 68 Brussels Ibis Regulation note 6.

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Chapter III: Other Provisions

If national legislators deleted references to the Rome Convention paying respect to the 25 Rome I Regulation becoming effective (as for instance the German legislator did when it extinguished Arts. 27–37 EGBGB including the reference to the Rome Convention contained in Art. 36 EGBGB) this must be accepted.61 Yet it should be noted that (2) is not intended to alter the temporal scope of application of the Rome I Regulation as it is set out in Art. 28 so that the Rome Convention still applies in its own right to contracts concluded before 17 December 2009.62 References to the Rome Convention in judgments by the CJEU or national courts must not 26 be re-interpreted ex post factum but stand as they are. (2) is not applicable in this regard.63 Article 25: Relationship with existing international conventions 1. This Regulation shall not prejudice the application of international conventions to which one or more Member States are parties at the time when this Regulation is adopted and which lay down conflict-of-laws rules relating to contractual obligations. 2. However, this Regulation shall, as between Member States, take precedence over conventions concluded exclusively between two or more of them in so far as such conventions concern matters governed by this Regulation.

Bibliography Attal, Droit international privé communautaire et conventions internationales: un délicate articulation, Pétites affiches 2010 no. 238 p. 32 Bischoff, Die Europäische Gemeinschaft und die Konventionen des einheitlichen Privatrechts (2010) Bonfanti, Le relazioni intercorrenti tra il regolamento Roma I e le convenzioni internazionali (in vigore e non), in: Boschiero (a cura di), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), p. 383 Brière, Les conflits de conventions internationales en droit privé (2001) Cannone, Rapporti della proposta di reg. “Roma I” con le altre disposizioni rilevanti di diritto comunitario e con le convenzioni internazionali, in: Il nuovo diritto europeo dei contratti: dalla Convenzione di Roma al reg. “Roma I (2007)”, p. 199 Cochet/Castell, L’articulation entre le droit international privé communautaire et les conventions bi- ou multilaterales, Gaz. Pal. 21–22 mars 2008, p. 16 61 62 63

Cortese, La proposta di regolamento “Roma I”: spunti critici su collegamento obiettivo e rapporti con le convenzioni di diritto internazionale privato uniforme, in: Franzina (a cura di), La legge applicabile ai contratti nella proposta di regolamento “Roma I” (2006), p. 41 Franzina, Las relaciones entre el regolamento Roma I y los convenios internacionales sobre conflictos de leyes en materia contractual, CDT 1(1) (2009), 92 Brian Harris, The “Force of Law” of International Carriage Conventions in the EU Internal Market, (2014) 25 ICCLR 98 von Hein, Konflikte zwischen völkerrechtlichen Übereinkommen und europäischem Sekundärrecht auf dem Gebiet des Internationalen Privatrechts, in: FS Meinhard Schröder (2012), p. 29 von Hein, Einheitsrechtliche Anwendungsnormen und Internationales Vertragsrecht, in: FS Dieter Martiny (2014), p. 365

See Magnus, in: Staudinger, Art. 24 note 11. Magnus, in: Staudinger, Art. 24 note 12. Magnus, in: Staudinger, Art. 24 note 13.

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Article 25 Jayme/Nordmeier, Multimodaler Transport: Zur Anknüpfung an den hypothetischen Teilstreckenvertrag im Internationalen Transportrecht – Ist § 452a HGB Kollisions- oder Sachnorm?, IPRax 2008, 503 Kadner Graziano, The Relationship between the Rome I Regulation and the CISG, in: Binchy/Ahern, The Rome I Regulation (2012) van der Klooster, Het TNT/AXA-arrest – het oplossing van een problem of het problem van een oplossing, in: IPR in de spiegel van Paul Vlas, 2012, p. 113 Kreuzer, Gemeinschaftskollisionsrecht und universales Kollisionsrecht, in: FS Jan Kropholler (2008), p. 129 Kuijper, The Changing Status of Private International Law Treaties of the Member States in Relation to Regulation No. 44/2001, (2011) 38 Legal Issues Econ. Integration 89 Kuypers, Eenheid en verdeelheid en Europa: EEX-Verordening versus CMR en de vrij verkeer van vonnissen, NTER 2011, 13 Lagarde, Les limites objectives de la convention de Rome (Conflits de lois, primauté du droit communautaire, rapports avec les autres conventions), in: Ballarino (a cura di), La Convenzione di Roma sulla legge applicabile alle obbligazioni contrattuali (1994), p. 59 Magrone, Trasporto di merci: Convenzione ad hoc applicabile solo se prevedibile in grado di limitare liti parallele, Guida dir. 2010 n. 21 p. 96 Majoros, Les conventions internationales en matière de droit privé, Vol. II (1980) Majoros, Konflikte zwischen Staatsverträgen auf dem Gebiete des Privatrechts, RabelsZ 46 (1982), 84 Mankowski, Spezialabkommen und EuGVÜ, EWS 1996, 301 Mankowski, Gelten die bilateralen Staatsverträge der Bundesrepublik Deutschland im Internationalen Erbrecht nach dem Inwirkungtreten der EuErbVO weiter?, ZEV 2013, 529 Mankowski, EuGVVO, Brüssel Ia-VO und Spezialübereinkommen, TranspR 2014, 129

I.

862

Multilateral and bilateral conventions with non-Member States 1. Ranking rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Rome I Regulation de Miguel Asensio, Convenios internacionales y unificación del Derecho internacional privado de la Unión Europea, in: Liber amicorum José Luis Iglesias Buhigues (2012), p. 57 Nicholas, The New Rome I Regulation on the Law Applicable to Contractual Obligations: relationships with International Conventions of UNCITRAL, the Hague Conference and UNIDROIT, in: Cashin Ritaine/Bonomi (éds.), Le nouveau règlement européen “Rome I” relatif à la loi applicable aux obligations contractuelles (2008), p. 49 Pauknerová, International Conventions and Community Law: Harmony and Conflicts, in: Liber Fausto Pocar, vol. II (2009), p. 793 Pauknerová, EU Regulations and International Conventions – Shifts in Time, in: Liber amicorum Algeria Borrás (2013), p. 671 Sacerdoti, I rapporti con le altre convenzioni e con le norme di diritto comunitario, in: Treves (a cura di), Verso una disciplina comunitaria della legge applicabile ai contratti (1983), p. 74 Sacerdoti, Il coordinamento della Convenzione di Roma con altre convenzioni e con il diritto comunitario, in: Sacerdoti/Frigo (a cura di), La Convenzione di Roma sul diritto applicabile ai contratti internazionali (2nd ed. 1994), p. 77 Johannes Schilling, Materielles Einheitsrecht und Europäisches SchuldvertragsIPR, EuZW 2011, 776 Tuo, Regolamento Bruxelles I e convenzioni su materie particolari: Tra obblighi internazionale e primauté del diritto dell’Unione Europea, RDIPP 2011, 377 Valdini, Der Schutz der schwächeren Vertragspartei im Internationalen Vertriebsrecht (2013) Vettorel, Una pronuncia della Corte di giustizia sui rapporti fra il regolamento (CE) n. 44/2001 e le convenzioni in materie particolari, Riv. dir. int. 2010, 826 Volken, Konventionskonflikte im internationalen Privatrecht (1977) Rolf Wagner, Normenkonflikte zwischen den EG-Verordnungen Brüssel I, Rom I und Rom II und transportrechtlichen Rechtsinstrumenten, TranspR 2009, 103. 2. Conventions already ratified by the Member States a) Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

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Chapter III: Other Provisions b) Authorisation by the EU to conclude new conventions . . . . . . . . . . . . . . . . . . . . . . . . . . 6 c) The impact of the CJEU judgments in TNT v. AXA, Nipponkoa and Nickel & Goeldner . . . . . . . . . . . . . . . . . . . . . . . . 8 3. Specialised Conventions newly ratified by the EU . . . . . . . . . . . . . . . . . . . . . . . . 15 4. Specialised Conventions newly ratified

II.

by the Member States authorized by the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 5. Uniform law conventions . . . . . . . . . . . . . . . 19 6. Application of specialised Conventions 25 7. Reference to specialised Conventions . 26 Bilateral or multilateral Conventions exclusive between Member States . . . . . . . . . 29

I. Multilateral and bilateral conventions with non-Member States 1. Ranking rule Given the rather technical nature of Arts. 23–25, the most important provision amongst 1 them is (1). The objective of (1) is to deal with possible conflicts of directly applicable lawmaking instruments.1 Such conflicts may arise between the Rome I Regulation and other eminent conventions in the area of PIL of contracts, particularly those concluded with third countries.2 The focus lies especially on the multiple conventions of the Hague Conference on Private International Law, but possibly as well on various conventions in the field of international transportation law. The potential conflict is solved by (1)3 allowing specialised conventions to take precedence over the Rome I Regulation, in order to ensure compliance with those conventions and to enable Member States to meet with paramount obligations as arising from international law.4 Recital (41) cl. 1 unambiguously asserts that respect for international commitments entered into by the Member States means that this Regulation should not affect conventions relating to specific matters to which the Member States are parties. Phrased in the terminology generally prevailing in international law, (1) is a socalled disconnection clause,5 a safeguard or compatibility clause.6 It is to secure maximum uniformity with respect to the legal order of individual Member States and their obligations towards Third States.7 Of course, Art. 25 is only called into operation in matters which fall in the temporal8 and the material scope of application of the Rome I Regulation as defined by Art. 1. Hence, in the light of Art. 1 (2) (g) it appears rather futile to discuss at length the relation between (1) and the Hague Agency Convention.9 1 2

3

4 5

6 7 8

9

Mankowski, EWS 1996, 301, 302; Gaia, RDIPP 1991, 253, 255. Conventions concluded solely among Member States do not lie within the scope of Art. 71, but are dealt with in Art. 69. On the legislative history of this rule Bonfanti, in: Boschiero (a cura di), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), p. 383, 392–394. See The “Po” [1991] 2 Lloyd’s Rep. 206, 209 (C.A., per Lloyd L.J.). Pauknerová, in: Liber Fausto Pocar, vol. II (2009), p. 793, 802; Pauknerová, in: Liber amicorum Algeria Borrás (2013), p. 671, 673. Franzina, CDT 1(1) (2009), 92, 94. Pauknerová, in: Liber Fausto Pocar, vol. II (2009), p. 793, 803. See Bonfanti, in: Boschiero (a cura di), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), p. 383, 402. But cf. Bonfanti, in: Boschiero (a cura di), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), p. 383, 397–400.

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2 The application of the Regulation is deemed to be precluded solely in relation to questions

governed by a specialised convention.10 The purpose of the exception is to ensure compliance with the rules on determining the applicable law laid down by such specialised conventions, since when those rules were enacted, account was taken of the specific features of the matters to which they relate.11 (1) emulates a lex specialis rule.12 Although the Rome I Regulation generally accounts for an overall approach, this is a proper way to pay due regard to the particularities of some areas of the law, in particular maritime law.13 Of course, it is a prerequisite in order for Art. 25 to become operable that the Regulation and the international convention at stake contain concurrent rules.14 3 National legislation providing for the enforcement and execution of a ratified convention

precedes the Rome I Regulation to the same extent as the specialised convention itself does.15 Otherwise the UK and other Member States that considering multilateral conventions as non-binding, with respect to the national legal framework, and relying solely on provisions of a national origin which stem from the convention, would face unwarranted discrimination.16 On the other hand, national legislation deriving from a convention takes only precedence over the Rome I Regulation if the convention has been formally ratified.17 Similarly, national provisions designed for the execution of a ratified convention but clearly exceeding its scope of application may not take any precedence over the Rome I Regulation.18 2. Conventions already ratified by the Member States a) Principle 4 Although (1) withholds priority of other conventions on specific matters over the general

rule of the Regulation, this only applies to conventions to which the Member States already were parties at the time of the adoption of the Regulation.19 There is no reservation in favour 10

11

12

13 14 15 16 17

18

19

864

The owners of the cargo lately laden on board the ship “Tatry” v. The owners of the ship “Maciej Rataj” (Case 406/92), [1994] ECR I-5439, I-5471 para. 24; The “Anna H” [1995] 1 Lloyd’s Rep. 11, 18 (C.A., per Hobhouse L.J.); Trib. Lecco RDIPP 1990, 357, 359. The owners of the cargo lately laden on board the ship “Tatry” v. The owners of the ship “Maciej Rataj” (Case 406/92), [1994] ECR I-5439, I-5471 para. 24; Nürnberger Allgemeine Versicherungs-AG v. Portbridge Transport International BV, (Case C-148/03) [2004] ECR I-10327, I-10335 para. 14; TNT Express Nederland BV v. AXAVersicherung AG (Case C-533/08, [2010] ECR I-4107, I-4159 para. 48; A-G Kokott, [2010] ECR I-4110, I-4120 para. 34; Rolf Wagner, TranspR 2009, 103, 106. See only A-G Strikwerda, NJ 2008 Nr. 623 p. 6446, 6449; Delebecque, Rev. trim. dr. com. 2010, 622, 626; van den Oosterkamp, SEW 2011, 193. Pataut, RCDIP 93 (2005), 129. TNT Express Nederland BV v. AXAVersicherung AG (Case C-533/08, [2010] ECR I-4107, I-4159 para. 46. The “Po” [1991] 2 Lloyd’s Rep 206 (C.A.); Mankowski, in: Rauscher, Art. 71 note 2. Mankowski, in: Rauscher, Art. 71 Brüssel I-VO note 2. Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht (1995), p. 297 et seq.; Mankowski, EWS 1996, 301, 302. Philip, NTIR 46 (1977) 113, 119; Basedow, VersR 1978, 495, 502; Basedow, in: Handbuch des internationalen Zivilverfahrensrechts, Vol. I (1982), Ch. II note 140; Lagarde, RCDIP 68 (1979), 100, 101; Mankowski, EWS 1996, 301, 302. See only Bonfanti, in: Boschiero (a cura di), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), p. 383, 403.

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of conventions to which Member States “will be” parties.20 In sharp contrast to Art. 21 Rome Convention, respect for any such new conventions is not maintained. This reflects a remarkable shift of competence to the European Institutions, largely corresponding to the growth of EU legislative activity in the field of private international law.21 According to the so-called AETR doctrine established by the CJEU, the EU alone is in a position to assume and carry out contractual obligations towards third countries, as far as EU rules are promulgated for the attainment of the objectives of (today) the TFEU.22 On the basis of Art. 81 (a) TFEU (formerly Artt. 61; 65 (c) EC Treaty in the Amsterdam version), private international law falls within the competence of the EU. It is a competence that has been exercised, as the Rome I Regulation derives directly from the then new Title IV of the EC Treaty. Therefore individual Member States must not accept international commitments that could affect the EU rules or alter their scope. Exclusive EU competence as acknowledged internally within the EU comes forth externally also and restricts Member States’ liberty to negotiate conventions. (1) is a brainchild of the AETR doctrine.23 (1) does not distinguish between multilateral and bilateral conventions. It covers both kinds 5 indiscriminately. The decisive feature is that at least one non-Member State must be amongst the Contracting States of the respective convention. Bilateral conventions between a Member State and a non-Member State qualify for this criterion.24 This coincides with the ratio underlying (1), for bilateral conventions do not exert a lesser binding force under international law than multilateral treaties. A limiting “international” or “multilateral” must not be read into the wider wording of (1).25 The Report Schlosser may only list multilateral conventions,26 but the list contained in it is neither exclusive nor exhaustive.27 In a wider 20

21

22

23 24

25 26

Kennett, (2001) 50 ICLQ 725, 736; Droz/Gaudemet-Tallon, RCDIP 90 (2001), 601, 620 et seq.; Laviani, RDIPP 2004, 157, 190 et seq.; Tuo, RDIPP 2011, 377, 379. Takahashi, (2003) 52 ICLQ 529, 530; Jonathan Harris, (2001) 20 Civ. Just. Q. 218, 223; Tuo, RDIPP 2011, 377, 380. Commission of the European Communities v. Council of the European Communities (AETR) (Case 22/ 70), [1971] ECR 263, 275 para. 28; Cornelis Kramer (Joined Cases 3, 4 & 6/76), [1976] ECR 1279, 1311 paras. 30–33; Draft Agreement establishing a European laying-up fund for inland waterway vessels (Opinion 1/76), [1977] ECR 741, 756 para. 5; Convention No. 170 of the International Labour Organization concerning safety in the use of chemicals at work (Opinion 2/91), [1993] ECR I-1061, I-1079 para. 18; Competence of the Union to conclude international agreements concerning services and the protection of intellectual property, (Opinion 1/94) [1994] ECR I-5267, I-5411 para. 76, I-5413 para. 82 et seq., I-5416 para. 95; Competence of the Union or one of its institutions to participate in the Third Revised Decision of the OECD on national treatment (Opinion 2/92), [1995] ECR I-521, I-559 paras. 31–33; Accession by the Union to the European Convention for the Protection of Human Rights and Fundamental Freedoms (Opinion 2/94), [1996] ECR I-1759, I-1787 paras. 25–27; Cartagena Protocol (Opinion 2/00), [2001] ECR I-9713, I-9764 para. 45; Commission of the European Communities v. Kingdom of Denmark (Open Skies) (Case C-467/98), [2002] ECR I-9519, I-9556 para. 82. Franzina, CDT 1(1) (2009), 92, 99. To the same result Hoge Raad NJB 1980, 40 = S&S 1980 Nr. 25; Geimer/Schütze, Internationale Urteilsanerkennung I/1, p. 71; Donzallaz, para. 212; Domej, in: Dasser/Oberhammer, Art. 67 LugÜ 2007 note 2; see also Basedow, in: Handbuch des Internationalen Zivilverfahrensrechts, vol. I (1982), Ch. II note 133; Klauser, in: Fasching/Konecny, Art. 71 EuGVVO note 1; Kropholler/von Hein, Art. 71 EuGVO note 1. Mankowski, ZEV 2013, 529, 531. Report Schlosser, OJ EEC 1979 C 59/71 para. 59.

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context, (1) should accord with the yardsticks prevailing under Art. 351 TFEU since Art. 351 TFEU provides the backing for (1) and its likes in other Regulations of European PIL and international procedural law.28 Art. 19 Rome III Regulation even expressly refers to Art. 351 TFEU. Under Art. 351 (1) TFEU it is accepted that this rules give precedence also to bilateral conventions with a single non-Member State.29 Further support is rendered by Art. 69 (1) Maintenance Regulation where bilateral conventions are expressly given precedence.30 b) Authorisation by the EU to conclude new conventions 6 Difficulties arise as some conventions on specific matters may not allow for direct EU

participation.31 The EU itself cannot conclude any agreement which lacks an accession clause allowing not only States, but also organizations to accede.32 As a solution the Council may authorize Member States to sign and ratify such a convention in the interest of the EU. Such authorization has for instance been provided by a Council Decision (the Bunkers Decision) of 19 September 2002 regarding the International Convention on Civil Liability or Bunker Oil Pollution Damage 2001.33 Originally a reservation had been considered in favour of applying the Brussels I Regulation if the defendant was domiciled in a Member State and the damage occurred in a Member State,34 but that was opposed35 and finally dismissed.36 Nothing parallel or equivalent happened with regard to the Rome I Regulation. 7 The same delegatory procedure was employed specifically in the context of private inter-

national law and international procedural law when the Council decided in December 2002 to authorize the Member States to sign the Hague Convention on the Protection of Children of 1996.37 In Recital (4) cl. 1 of this Decision the Council on the one hand reserved the exclusive competence of the EC but on the other hand emphasised that such competence would follow the principle of begrenzte Einzelermächtigung. Recital (4) cl. 2 accordingly acknowledges that the Member States remain competent where the respective convention goes beyond the areas covered by EU law. For now it has become established and common 27 28 29

30 31 32 33

34 35 36 37

866

See Mankowski, ZEV 2013, 529, 531. Franzina, CDT 1(1) (2009), 92, 94; Mankowski, ZEV 2013, 529, 533. Terhechte, in: Schwarze, EU-Kommentar (3rd ed. 2012), Art. 351 AEUV note 4; see also Commission v. Austria (Case C-205/06), [2009] ECR I-1301 para. 33; Commission v. Sweden (Case C-249/06), [2009] ECR I-1335 para. 34; Commission v. Finland (Case C-118/07), [2009] ECR I-10889 para. 27 where in all three Cases the CJEU applies Art. 307 (1) EC Treaty to Bilateral Investment Treaties without even discussing whether this rule covers bilateral conventions. Mankowski, ZEV 2013, 529, 532. Mankowski, in: Rauscher, Art. 71 Brüssel I-VO note 4. Takahashi, (2003) 52 ICLQ 529, 530. Council Decision 2002/762/EC of 19 September 2002 authorising the Member States, in the interest of the Union, to sign, ratify or accede to the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 (the Bunkers Convention), OJ 2002 L 256/7. COM (2001) 675 final p. 8. European Parliament A5–0201/2002 final p. 8. Dörfelt, IPRax 2009, 470, 471 f. Council Decision 2003/93/EC of 19 December 2002 authorising the Member States, in the interest of the Union, to sign the 1996 Hague Convention on jurisdiction, applicable law, recognition, enforcement and cooperation in respect of parental responsibility and measures for the protection of children, OJ EU 2003 L 48/1.

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practice that the Member State get authorization by the EU to ratify or accede to Conventions.38 Insofar competence is returned to the Member States.39 The EU might even direct respective recommendations to open negotiations towards the Member States (with the ensuing danger of such recommendations being ignored).40 The second option for a way-out is for the EU to implement parallel EU legislation if it is not allowed to accede as such to an international instrument.41 c) The impact of the CJEU judgments in TNT v. AXA, Nipponkoa and Nickel & Goeldner The comparative look on the Brussels I/Ibis Regulations as required by Recital (7) reveals a 8 hidden limitation resulting from the CJEU’s jurisprudence relating to Art. 71 (1) Brussels I Regulation, the Brussels I pendant and, to some extent, model for (1). A paradigm shift might have occurred, a deviation from classic principles of international law to idiosyncratic precedence of EU law.42 Even with regard to such Conventions which Member States had already ratified before the 9 Brussels I Regulation came into force, the CJEU superimposes some additional restrictions. Pursuant to the CJEU the application of such specialised Conventions cannot compromise the principles underlying judicial cooperation in the EU, such as the principles recalled in recitals (6), (11), (12) and (15)-(17) Brussels I Regulation, namely free movement of judgments, predictability as to the courts having jurisdiction, legal certainty for litigants, sound administration of justice, minimisation of the risk of concurrent proceedings, and mutual trust in the administration of justice in the EU,43 which principles are deemed to be the raison d’être of the Brussels I Regulation.44 The CJEU asserts that conventions concluded by Member States with non-member countries cannot, in relations between the Member States, be applied to the detriment of the objectives of EU law.45 The CJEU restricts Art. 71 Brussels I Regulation for this rule is said that it cannot have a purpose that conflicts with these basic principles.46 The practical result of this restriction is to avoid results which are less favourable for achieving sound operation of the internal market than the results to which the provisions of the Brussels I Regulation would lead.47 The objectives of EU law are thus held paramount.48 Member States’ own public international law obligations are thus relegated to an inferior status vis-à-vis EU law.49 38

39 40 41 42 43 44 45 46 47 48

49

E.g. Council Decision 2004/246/EC of 2 March 2004, OJ EU 2004 L 78/22, as revised by Council Decision 2004/664/EC of 24 September 2004, OJ EU 2004 L 303/28. Ramming, TranspR 2007, 13, 15; Mankowski, in: Rauscher, Art. 71 Brüssel I-VO note 4. Kuijper, (2001) 38 Legal Issues Econ. Integr. 89, 97. Kuijper, (2001) 38 Legal Issues Econ. Integr. 89, 97. Cf. Pauknerová, in: Liber amicorum Algeria Borrás (2013), p. 671, 683. TNT Express Nederland BV v. AXAVersicherung AG (Case C-533/08), [2010] ECR I-4107, I-4159 para. 49. TNT Express Nederland BV v. AXAVersicherung AG (Case C-533/08), [2010] ECR I-4107, I-4160 para. 50. TNT Express Nederland BV v. AXAVersicherung AG (Case C-533/08), [2010] ECR I-4107, I-4160 para. 52. TNT Express Nederland BV v. AXAVersicherung AG (Case C-533/08), [2010] ECR I-4107, I-4160 para. 51. TNT Express Nederland BV v. AXAVersicherung AG (Case C-533/08), [2010] ECR I-4107, I-4160 para. 51. TNT Express Nederland BV v. AXAVersicherung AG (Case C-533/08), [2010] ECR I-4107, I-4160 para. 52 with reference to Ministère public v. Gérard Deserbais (Case 286/86), [1988] ECR 4907 para. 18; RTE and IPT v. Commission (Joined Cases C-241/91P and C-242/91P), [1995] ECR I-743 para. 84; Irène Bogiatzi, married Ventouras v. Deutscher Luftpool (Case C-301/08), [2009] ECR I-10185 para. 19. Biran Harris, (2014) 25 ICCLR 98, 102.

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10 Methodologically, teleological and purposive means of interpretation gain the upper hand

over verbal and textual interpretation.50 Effectiveley, the Brussels I Regulation is taken as establishing a type of minimum harmonisation with specialised Conventions being only applicable where they enhance the European level reached.51 The CJEU constitutes the paramount nature of the goals identified in Recitals (11), (12) and (15) Brussels I Regulation in the field of jurisdiction including lis pendens and identified in Recitals (6), (16) and (17) Brussels I Regulation in the field of recognition and enforcement.52 To the CJEU this means, for instance, that rules governing jurisdiction as contained in a Convention apply but only provided that they are highly predictable, facilitate the sound administration of justice and enable the risk of concurring proceedings to be minimised.53 This is the strictest and least generous way of interpreting now Art. 71 Brussels Ibis Regulation,54 doing harm to the wording of now Art. 71 Brussels Ibis Regulation55 and having a potentially devastating effect.56 Legal certainty is damaged by adding unwritten requirements of an unclear ambit.57 The unity of the EU systems steps upfront as it has done in other respects of Member State agreements with third states.58 But any attempt to educate Member States to pay proper attention to the purposes of EU law59 is entirely futile if in the respective field only Conventions concluded in the past are concerned. 11 Yet it appears highly questionable that the Recitals take precedence over the wording of the

actual rules as to such far-reaching measure. Nothing in the Recitals specifically relates to Art. 71 Brussels I/Ibis Regulation and to solving the possible conflict with conventions on special matters. The specific conflict and the specific weighing of interests involved are dealt with in Art. 71 Brussels Ibis Regulation, not in any Recital whatsoever. The Recitals contain general statements and are in no ways meant to restrict even express rules addressing a specific problem. Rules within an Act of EU legislation are normatively binding whereas the Recitals are interpretative means only. The approach implemented by the CJEU switches heads and heels. 12 Furthermore, it undermines and in fact disregards the ratio underpinning Art. 71 Brussels I

Regulation as evidenced in Recital (35) Brussels I Regulation. If the EU legislator has intended to implement some kind of rather strict EU control before in fact delegating regulatory power to the specialised convention it should have established respective safeguards expressly. This has not been done, which, reversely, gives rise to a strong argumentum e contrario. The tension between the restriction of the field of application of the Brussels Ibis 50 51 52

53 54 55

56 57 58 59

868

Haak, NJ 2010 Nr. 482 p. 4741 et seq. Kuypers, NTER 2011, 13, 19. TNT Express Nederland BV v. AXA Versicherung AG (Case C-533/08), [2010] ECR I-4107, I-4160 paras. 53–54. TNT Express Nederland BV v. AXAVersicherung AG (Case C-533/08), [2010] ECR I-4107, I-4161 para. 56. Haak, NJ 2010 Nr. 482 p. 4741, 4742; see also Tuo, RDIPP 2011, 377, 391 et seq. Attal, Petites affiches n°. 238, 30 novembre 2010, p. 32, 36; Marmisse-d’Abbadie d’Arrast, Rev. trim. dr. com. 2010, 825, 826; Kuijper, (2001) 38 Legal Issues Econ. Integr. 89, 99; van den Oosterkamp, SEW 2011, 193; see also Tuo, RDIPP 2011, 377, 385. Tuo, RDIPP 2011, 377, 388. See Tuo, RDIPP 2011, 377, 391. Kuijper, (2001) 38 Legal Issues Econ. Integr. 89, 98. See the references in fn. 55. Marmisse-d’Abbadie d’Arrast, Rev. trim. dr. com. 2010, 825, 827.

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Regulation and the fundamental claim to applicability of EU law60 has been resolved by Art. 71 Brussels I Regulation in a clear manner. Recital (35) Brussels I Regulation adds additional strength. If and insofar EU law itself cedes and gives way it has withdrawn from any struggle for supremacy. This is the particularity here which should not be overlooked in order to bring the area in line with current practice of the CJEU in other areas (which in itself might be questioned for very good reasons)61.62 Continuity is badly disrupted.63 The CJEU is overstepping its competence for it in fact strives to occupy quasi-legislative power.64 The restrictive approach of the CJEU in TNT v. AXA, however irreconcilable it is with the 13 wording of (1), has yet to prove its effectiveness in practice. For instance, it would appear not only far-fetched, but beyond any belief if the heads of jurisdiction as contained in Art. 31 (1) CMR or Art. 33 Montreal Convention were alleged to be unpredictable.65 In practical effect, the CJEU’s approach might thus be less subject to criticism than with regard to its theoretical and dogmatic ambition. Practical results might differ less than policy statements. TNT v. AXA should be taken as a mere programmatic statement and not a truly operational device. Else and paradoxically, TNT v. AXA itself would amount to a source of uncertainty and unpredictability.66 Particularly, if differences in interpretation of substantive rules as contained in the Convention at stake happen to occur between the courts of the Contracting States this does not affect the procedural rules and even less the rules on jurisdiction. These issues are to be judged separately and have no repercussions on Art. 71 Brussels I Regulation which is only applicable with regard to limited aspects of the procedural sphere.67 Yet in the field of recognition and enforcement results might differ if the CJEU’s approach based on favour executionis is applied to the letter.68 Difficulties in combining specialised Conventions and the Brussels I Regulation will occur and grow after TNT v. AXA, though.69 Recital (7) notwithstanding, to give TNT v. AXA, Nipponkoa, and Nickel & Goeldner impact 14 also for (1) would require a transfer of the rationale from Art. 71 Brussels I Regulation to (1). The CJEU has not expressly pronounced on (1) yet. (1) cedes unconditionally to Conventions already ratified by the Member States and does not reiterate the conditional regime established by Art. 351 (2) TFEU (ex-Art. 307 (2) EC Treaty).70 Insofar it differs remarkably form the wording of Art. 69 (1) Maintenance Regulation.71 A possible explanation might be that the conventions envisaged mainly generate benefits in external relations with Third States and that the EU acknowledges this with the second thought of profiting from it.72 60 61 62 63 64 65

66 67 68 69 70 71 72

A-G Kokott, Opinion of 28 January 2010 in Case C-533/08, nyr, para. 35. See most extensively Klabbers, Treaty Conflict and the European Union (2009). Vettorel, Riv. dir. int. 2010, 826, 827 et seq. Wesołowski, ETL 2011, 133, 137; van den Oosterkamp, SEW 2011, 193. Vettorel, Riv. dir. int. 2010, 826, 829 et seq. See to a similar avail Kuypers, NTER 2011, 13, 19 when testing Art. 31 (1) CMR against Art. 6 (1) Brussels I Regulation. See Attal, Petites affiches n°. 238, 30 novembre 2010, p. 32, 35. See Haak, NTHR 2009, 69, 76. Hoeks, NIPR 2011, 468, 471. Douchy-Oudinot/Guinchard, Rev. trim. dr. eur. 2010, 421, 428. Franzina, CDT 1(1) (2009), 92, 95. Franzina, CDT 1(1) (2009), 92, 95. Franzina, CDT 1(1) (2009), 92, 95 et seq.

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Furthermore, the lack of any preconditions might avoid any negative conflict with disconnection clauses contained in the respective Conventions.73 3. Specialised Conventions newly ratified by the EU 15 (1) does not specify how the Regulation relates to specialised conventions to which the EU

itself will be party in the future. It provides for precedence solely with regard to conventions to which the Member States are parties already. At a first glance, the lex specialis rule may apply as well: As far as the convention in respect covers aspects comprised within the Regulation, the specialised convention may take precedence. The Union acts on behalf of the Member States, and the effects of direct Union participation may be the same as all Member States participating in the enactment of a specialised convention simultaneously. But there are hints to a deviant approach. Any specialised convention is binding only and exclusively its own Contracting States; and the Union is deemed to act as such a single Contracting State if it participates in the enactment of the convention. Then there is no binding effect of such a convention within any of the Member States, and consequently no intra-Union ruling by the convention, for the Union as a whole is treated as a single Member State. This approach benefits from disturbing the Brussels I Regulation as little as possible compared to any lex specialis rule. Technically, two competing avenues are open: The first is an analogy to Art. 71,74 the second to apply Art. 23 for Conventions ratified by the EU are said to become part of EU law by virtue of Art. 218 (7) TFEU (ex-Art. 300 (7) EC Treaty).75 16 The problem of concurring EU conventions will probably, at first blow, be tested in the

neighbouring field of international procedural law on the Hague Convention on Choice of Courts Agreements (HCCA).76 According to its autonomous conflict rule as laid down in Art. 26 (6) lit. a HCCA, the Hague Convention shall not affect the application of the rules of a Regional Economic Integration Organisation where none of the parties to a choice of court agreement is resident in a Contracting State that is not a Member State of the Regional Economic Integration Organisation. This solution allows for distinguishing several specific settings.77 17 As a whole, the EU will, and is bound to, pay attention to not tampering with the scope of the

well-adjusted Rome I Regulation and its approach to intra-Union matters if participating in the enactment of specialised conventions. Thus, sorting out conflicts of law-making-rules must not be dealt with academically, but is to remain sufficiently flexible. Practical solutions are to be found according to the following schedule: Fundamentally and by virtue of (1), the Regulation leaves it to the specialised convention itself whether it precedes Rome I. Here, one must scrutinize the miscellaneous provisions of the convention in respect, where the Commission is obliged to put up a specific conflict rule. As far as the convention in respect refrains from ruling matters of a solely intra-EU nature, the Regulation applies. As far as the convention in this respect claims to be applicable even in intra-community cases, so be it, 73 74

75 76 77

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Franzina, CDT 1(1) (2009), 92, 96. Florian Schulz, HanseLR 2005, 147, 154; Ansgar Staudinger, RRa 2007, 155, 156; Michael Lehmann, NJW 2007, 1500; Mankowski, TranspR 2008, 67. Rolf Wagner, TranspR 2009, 103, 109. Hague Convention on Choice of Court Agreements of 30 June 2005, available at http://www.hcch.net. See Mankowski, in: Rauscher, Art. 23 Brüssel I-VO notes 77–80.

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and the Regulation gives way to the Convention at stake. Any future convention ratified by the EU will prevail over the Rome I Regulation as it demands so.78 4. Specialised Conventions newly ratified by the Member States authorized by the EU Although in general the EU has the external competence, in practice it is more likely that the 18 EU re-delegates competence to the Member States. This has already happened several times by single Decisions of the Council.79 A general framework80 defining the limits has been implemented81 by virtue of Regulations (EC) Nos. 662/200982 and 664/200983 if only for matters outside the scope of the Rome I Regulation. If the Member States, authorized and duly empowered by the EU, conclude, sign and ratify new Conventions they do so in their own name and not as agents for the EU. The respective conclusion takes place under the traditional rules of international law, the only particularity being the authorization in the internal relationship between the EU and its Member States. Clinging to the letter Art. 25 does not cover such Conventions newly ratified by the Member States. Yet it appears advisable to apply it per analogiam. 5. Uniform law conventions Uniform law conventions deserve special attention as to whether they fall under (1) or not. 19 Their rules of their respective international scope of application serve (inter alia) as unilateral conflicts rules of PIL.84 This applies for instance to Arts. 1 (1) CISG; 1 CMR; X Hague 78 79 80 81 82

83

84

Franzina, CDT 1(1) (2009), 92, 101. Supra Art. 25 note 5 (Mankowski). Leible, in: Nomos Kommentar BGB, Art. 25 note 6. Bischoff, ZEuP 2010, 321. Regulation (EC) No. 662/2009 of the European Parliament and of the Council of 13 July 2009 establishing a European procedure for the negotiation and conclusion of agreements between Member States and third countries on particular matters concerning the law applicable to contractual and non-contractual obligations, OJ EU 2009 L 200/25. Regulation (EC) No. 664/2009 of the European Parliament and of the Council of 7 July 2009 establishing a European procedure for the negotiation and conclusion of agreements between Member States and third countries concerning jurisdiction, recognition and enforcement of judgments and decisions in matrimonial matters, matters of parental responsibility and matters relating to maintenance obligations, and the law applicable to matters relating to maintenance obligations, OJ EU 2009 L 200/46. In extenso, Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht (1995), pp. 301–304 and also e.g. BGHZ 96, 313, 316, 318, 321–323; Lemhöfer, RabelsZ 25 (1960), 401, 411 et seq.; Siesby, AfS 5 (1961–64), 417, 450; Malintoppi, RdC 116 (1965 III), 1, 63; von Caemmerer, in: FS Walter Hallstein (1966), p. 63, 83–84; Vitta, RdC 126 (1969 I), 111, 198–199; Rigaux, J. trib. 1972, 561, 563–564, 567; Kropholler, AWD 1973, 401, 402; Kropholler, RabelsZ 38 (1974), 372, 374; Kropholler, Internationales Einheitsrecht (1975), pp. 190 et seq.; Neuhaus, Die Grundbegriffe des internationalen Privatrechts (2nd ed. 1976), p. 88; von Overbeck, Ann. Inst. Dr. Int. 58 I (1979), 97, 115; Schurig, Kollisionsnorm und Sachrecht (1981), p. 233; von Bar, in: Recht und Wirtschaft (1985), p. 19, 25; Czerwenka, RIW 1986, 293, 295; Drobnig, in: Mélanges en l’honneur d’Alfred E. von Overbeck (1990), p. 15, 26, 29–30; MeyerSparenberg, Staatsvertragliche Kollisionsnormen (1990), p. 89; Lieser, Ergänzung der CMR durch unvereinheitlichtes deutsches Recht (1991), pp. 10–12; Carbone, Dir. mar. 94 (1992), 919, 925; Mankowski, IPRax 1995, 320; Mankowski, TranspR 2008, 177, 178; Hartenstein, TranspR 2008, 143, 146; Bischoff, Die

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Rules; X Hague Visby Rules; 2 Hamburg Rules; 5 (1) Rotterdam Rules; 1 Warsaw Convention; 1 Montreal Convention; 1 § 1 CIV 1999; 1 § 1 CIM 1999; 2 CMNI; 2 Athens Convention; 1 Factoring Convention. Any assertion that there is no potential of a conflict between the two regimes since uniform law operates on the level of substantive law whereas the Rome I Regulation operates on the level of PIL85 disregards the nature of said rules. 20 Whether this brings those rules under (1)86 is a matter of discussion and highly contested.87

One line of arguments regards said rules as so-called statutistic conflict rules which are ancillary to the uniform substantive rules implemented by Uniform Law Conventions;88 the precedence of uniform law (which in its core means substantive law) should be observed besides and primarily to (1).89 The main difference compared to the application of (1) lies in the field of (external) competence of the EU.90 That the Rome I Regulation prevails over the said scope rules91 is untenable anyway. In the special case of the CISG, it has been argued that the CISG takes precedence over the Rome I Regulation by virtue of Art. 90 CISG where the two Acts happen to collide, for instance exceptionally in the field of consumer contracts.92,93 21 (1) does not distinguish between different classes or types of conflicts rules but covers all of

them indiscriminately.94 (1) does not maintain the rather restrictive wording which Art. 24 Rome Convention employed; that might be the ground for an argumentum e contrario.95 The latter was restricted and limited to conventions the main purpose of which was the

85

86

87

88 89

90

91 92

93

94 95

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Europäische Gemeinschaft und die Konventionen des einheitlichen Privatrechts (2010), p. 183; WulfHenning Roth, IPRax 2015, 222, 223. Contaldi, in: Boschiero (a cura di), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), p. 359, 370–371. Affirmative Garcimartín Alférez, EuLF 2008, I-61, I-65; Pfeiffer, EuZW 2008, 622, 624; Jayme/Nordmeier, IPRax 2008, 503, 507 et seq.; Bonfanti, in: Boschiero (a cura di), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), p. 383, 395–396, 400–401; Martiny, RIW 2009, 737, 739; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 25 note 4; see also Rauscher/von Hein, Art. 25 note 8; von Hein, in: FS Meinhard Schröder (2012), p. 29, 35 et seq. Undecided Leible, in: Nomos Kommentar BGB, Art. 25 note 7. Negative Rolf Wagner, TranspR 2009, 103, 107; Magnus, IPRax 2010, 27, 32; Magnus, in: Staudinger, Art. 25 note 13; Johannes Schilling, EuZW 2011, 776, 778 et seq.; Calliess/Hermann Hoffmann, in: Calliess, Art. 25 note 4; Ringe, in: jurisPK, Art. 25 note 8; Brödermann/Wegen, in: Prütting/Wegen/Weinreich, Art. 25 note 5; see also Hartenstein, TranspR 2008, 143, 146 et seq.; Fallon, Rev. dr. comm. belge 2008, 549, 557; Pauknerová, in: Liber amicorum Algeria Borrás (2013), p. 671, 676. Kreuzer, RabelsZ 70 (2006), 1, 46; Rolf Wagner, TranspR 2009, 103, 107. Ruhwedel, TranspR 2008, 89, 91; Rolf Wagner, TranspR 2008, 221, 224; Rolf Wagner, TranspR 2009, 103, 107; Magnus, IPRax 2010, 27, 32; Magnus, in: Staudinger, Art. 25 note 13. Rolf Wagner, TranspR 2009, 103, 108 fn. 61; von Hein, in: FS Meinhard Schröder (2012), p. 29, 35; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 25 note 4. To this avail Kampf, RIW 2009, 297, 299 et seq.; see also OLG Koblenz IPRax 2015, 255. On these instances Magnus, in: Liber amicorum Kurt Siehr (2010), p. 407; see also Mankowski, in: FS Ingeborg Schwenzer (2011), p. 1175, 1191–1195. Ferrari, Obbligazioni e contratti 2007, 972, 978; Ragno, in: Ferrari/Leible (eds.), Rome I Regulation (2009), p. 129, 163–164. See Jayme/Nordmeier, IPRax 2008, 503, 507. Rauscher/von Hein, Art. 25 note 8; von Hein, in: FS Meinhard Schröder (2012), p. 29, 35.

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unification of private international law. Any contention that (1) envisages solely and exclusively traditional conventions for the unification of PIL96 is at odds with this contrast. Neither an argument that Art. 1 (1) cl. 1 relates only to “situations involving a conflict of laws” is convincing97 since a conflict of laws is also at stake if one is to determine whether uniform law or not unified law applies. In addition, the EU legislator did not seize upon suggestions98 to expressly exclude such conventions which primarily aim at unifying substantive law.99 The practice of the EU also tends towards an inclusion of scope rules of uniform law 22 conventions in (1):100 The EU101 (and not the Member States) has ratified the Cape Town Convention;102 it based its competence to do so on the scope rule of Art. 3 Cape Town Convention and the particular conflicts rules in Art. 5 (2), (3) Cape Town Convention which is only sensible under a generous understanding of (1). Under Art. 26 (1), none of the Member States has notified a uniform law convention as 23 covered by (1) but for the CMNI (evidently by reason of its Art. 29).103 This indicates a more common if not explicit understanding by the Member States that scope rules of uniform law conventions do not qualify as conflict rules for the purposes of (1) and thus do not trigger any obligation to notify under Art. 26 (1).104 But this is not more than a mere indication given that the single Member States have not given reasons why they notified certain conventions or why not. Furthermore, the list of notifications contains sometimes grotesque and massive misapprehensions and should thus not be taken as starting point for any argument.105 The case for an application of (1) is clear and beyond any doubt where a Uniform law 24 convention contains special conflicts rules for particular questions.106 The prime example is Art. 29 CMNI.107 6. Application of specialised conventions Insofar as a specialised convention is applicable pursuant to (1), the Rome I Regulation is 25 96 97 98

99 100 101

102

103 104 105 106 107

Rolf Wagner, TranspR 2009, 103, 107 et seq.; Johannes Schilling, EuZW 2011, 776, 778 et seq. Contra Johannes Schilling, EuZW 2011, 776, 779 et seq.; see also Kampf, RIW 2009, 297, 300. Max Planck Institute for Foreign Private and Private International Law, RabelsZ 68 (2004), 1, 117 Art. 21 (1) (b). von Hein, in: FS Meinhard Schröder (2012), p. 29, 35 et seq. Rauscher/von Hein, Art. 25 note 8; von Hein, in: FS Meinhard Schröder (2012), p. 29, 35. Council Decision 2009/370/EC of 6 April 2009 on the accession of the European Community to the Convention on International Interests in Mobile Equipment and its Protocol on matters specific to aircraft equipment, adopted jointly in Cape Town on 16 November 2001, OJ EU 2009 L 121/3. UNCITRAL Cape Town Convention on International Interests in Mobile Equipment of 16 November 2001. Infra Art. 26 note 8 (Mankowski). Johannes Schilling, EuZW 2011, 776, 779. von Hein, in: FS Meinhard Schröder (2012), p. 29, 35. Rolf Wagner, TranspR 2009, 103, 108; von Hein, in: FS Meinhard Schröder (2012), p. 29, 33. Rb. Rotterdam S&S 2015 Nr. 88 p. 557. On Art. 29 CMNI Mankowski, TranspR 2008, 177, 178 et seq.

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precluded.108 Whether such a convention actually contains conflicts rules for contractual obligations, is left to the convention itself and to its interpretation.109 The convention might aim at an interpretation which amounts to as small an incursion into the territory of the Rome I Regulation as possible. But there must not be a principle that the Rome I Regulation would only give way if there is a binding (and this means: binding in the strict sense) interpretation110 of the convention, for almost no convention has a supra- and international instance of interpretation which would issue binding rulings, and thus (1) would be reduced almost to nil by such a restrictive understanding. This extents to implications not expressly spelt out in the other Convention but to be derived from it,111 as e.g. in the case of Art. III (8) Hague Rules which can amount to an obstacle in the way of choice of law clauses.112 To the extent to which the convention does not affect the PIL of contractual obligations, the Regulation remains applicable without alteration or modification.113 Similarly, the Regulation remains applicable as far as the rules prescribed in a specialised convention are confined to specific aspects.114 As a whole, (1) intends to integrate any specialised set of rules into the larger legal framework of the Regulation.115 Insofar it goes beyond a simple lex specialis rule, but tentatively amounts to a rule of coordination;116 generally, subsidiarity fits the bill better than strict precedence of the other convention.117 7. Reference to specialised Conventions 26 From a methodical point of view, (1) refers to other conventions. As far as other legal

instruments are concerned, the Regulation considers itself explicitly as an instrument of reference, but, by referring to other conventions, does by no means refrain from governing 108

109

110

111

112 113

114 115

116

117

874

The owners of the cargo lately laden on board the ship “Tatry” v. The owners of the ship “Maciej Rataj” (Case 406/92), [1994] ECR I-5439, I-5471 para. 24; TNT Express Nederland BV v. AXA Versicherung AG (Case C-533/08, [2010] ECR I-4107, I-4159 para. 48. Deaville v. Aeroflot Russian International Airlines [1997] 2 Lloyd’s Rep 67, 71 (Q.B.D., Judge Brice Q.C.) (with relation to the Warsaw Convention and lis pendens); Tuo, RDIPP 2011, 377, 380 et seq. Contra Valdini, Der Schutz der schwächeren Vertragspartei im Internationalen Vertriebsrecht (2013) pp. 101–102. Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht (1995), pp. 297 et seq.; Briggs/Rees para. 2.47; see also David C. Jackson, Enforcement of Maritime Claims (3rd ed. 2000), para. 6.31. Contra Baatz, [2011] LMCLQ 208, 219; Treitel/Reynolds, Carver on Bills of Lading (2nd ed. 2005), para. 9.077 fn. 92; Aikens/Lord/Bools, Bills of Lading (2006), para. 10.50 fn. 73, para. 14.43 and tentatively Layton/Mercer para. 32.021 fn. 48. Seminally The “Morviken” [1983] 1 A.C. 1 (H.L.). Cassaz. Foro it. 1978 I col. 2240; Cassaz. RDIPP 2004, 245, 251; The “Anna H” [1995] 1 Lloyd’s Rep. 11, 18 (C.A., per Hobhouse L.J.); Vassalli di Dachenhausen, Il coordinamento tra convenzioni di diritto internazionale privato e processuale (1993), pp. 110 et seq.; Siig, [1997] LMCLQ 362, 364 et seq.; David C. Jackson, Enforcement of Maritime Claims (3rd ed. 2000), para. 6.9; Ramming TranspR 2007, 13, 16; Dörfelt IPRax 2009, 470, 472; Wallner-Friedl, in: Czernich/Kodek/Mayr Art. 71 EuGVVO note 2. Kropholler/von Hein Art. 71 EuGVO note 5; Mankowski, in: Rauscher, Art. 71 Brüssel I-VO note 5. See Vassalli di Dachenhausen, Il coordinamento tra convenzioni di diritto internazionale privato e processuale (1993), p. 108. Mari, Il diritto processuale civile della convenzione di Bruxelles (1999), pp. 119 et seq.; Tuo, RDIPP 2004, 193, 208 et seq. Applauded by Tuo, RDIPP 2011, 377, 381.

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matters of judicial cooperation on a general basis. As a consequence, the Rome I Regulation is in no way excluded from application if (1) a specialised convention referred to in Art. 25 (1) fails to govern a matter dealt with in the provisions of the Regulation or (2) if any specialised convention referred to in Art. 25 (1) re-refers to the law of the forum State. If so, the Rome I Regulation happens to supersede any forum State’s conflicts law due to the general precedence of EU rules. The situation is similar if the specialised convention follows the principle of favor negotii and takes, by means of an alternative reference rule, explicit provisions not to deprive an interested party of any right it may have according to another law or multilateral agreement.118 The Regulation is excluded from application not in a wholesale manner119 but only to the extent to which the specialised convention purports to govern a specific matter exclusively.120 It follows by way of converse inference that the Rome I Regulation may be relied on where a specialised Convention contains no rules or only incomplete rules.121 Whether a certain Convention claims exclusivity is a matter of interpretation of that very Convention.122 Art. 25 might be thought of as an integration clause designed to embed specialised conven- 27 tions in the Rome I Regulation.123 It needs to be emphasised that the concept of reference as laid down in (1) does not aim at full integration of specialised conventions into the Rome I Regulation, but resembles a fictitious implantation of single provisions from other conventions into the structure of the European regime of jurisdiction.124 Any attempt to fully integrate multilateral commitments of the Member States into the Rome I Regulation would meet severe vicissitudes from the points of view of EU law and international law as well. The scope of application of the Regulation must not hinge upon individual Member States’ membership to international conventions.125 Furthermore, an integrative approach might iniquitously amplify the CJEU’s competence of interpretation by extending it to non-EC 118

119 120

121

122 123

124

125

A-G Kokott, Opinion of 28 January 2010 in Case C-533/08, nyr, paras. 42 et seq.; Mankowski, EWS 1996, 301, 304; OLG Köln MDR 1980, 1030; OLG Koblenz EuZW 1990, 486; OLG Frankfurt DAVorm 1989 col. 102; OLG Hamm IPRax 2004, 437, 438; App. Milano 13 April 1973 (see Pocar RDIPP 1978, 655, 676); Strikwerda, in: Bundel opstellen aangeboden aan C.J.H. Brunner (1994), p. 389, 395; de Meij, Samenloop van CMR-Verdrag en EEX-Verordening (2003), p. 144; Mankowski, in: Rauscher, Art. 71 Brüssel Ia-VO note 8; Geimer, IPRax 2004, 419, 420. Contra e.g. H. Stein, in: Offerhauskring vijfentwintig jaar (1987), p. 185, 186 et seq.; Verschuur, Vrij verkeer van vonnissen (1995), p. 181. Tuo, RDIPP 2011, 377, 383. A-G Kokott, [201] ECR I-4110, I-4120-I-4122 paras. 36, 40, 44; CA Orléans Rev Scapel 2007, 111, 113; Mankowski, EWS 1996, 301, 304; Cerina, RDIPP 1991, 953, 959; Basedow, VersR 1978, 495, 501; Basedow, in: Handbuch des internationalen Zivilverfahrensrechts, Vol. I (1982), Ch. II note 144; de Meij, Samenloop van CMR-Verdrag en EEX-Verordening (2003), pp. 221 et seq.; Haak, NTHR 2009, 69, 70; Tsimplis, (2010) 16 JIML 289, 298; Tuo, RDIPP 2011, 377, 381 et seq. Sceptical Haak, TranspR 2009, 189, 196. A-G Kokott, [2010] ECR I-4110, I-4121 para. 39; Wesołowski, ETL 2011, 133, 138; Tuo, RDIPP 2011, 377, 382, 385. See only Haak, NJ 2010 Nr. 482 p. 4741. See A-G Tesauro, [1994] ECR I-5442, I-5447 para. 9; The “Anna H” [1995] 1 Lloyd’s Rep. 11, 21 (C.A., per Hobhouse L.J.); Haak, NTHR 2009, 69, 70; Tsimplis, (2010) 16 JIML 289, 297. Mankowski, EWS 1996, 301, 303; Verschuur, Vrij verkeer van vonnissen (1995), p. 180; Tuo, RDIPP 2011, 377, 398; see Report Schlosser para. 240. Mankowski, EWS 1996, 301, 303.

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laws and statutes. Yet in effect the CJEU has rejected to assume such competence when it refused to interpret the CMR in the context of Art. 71 (1) Brussels I Regulation.126 28 Mere Model Laws are not covered by (1). Model Laws are optional only by their very nature.

The contain an offer which States might select from the menu but they do not oblige States to take the respective steps. This is true even where a Model Law is promulgated by an international organisation to which States are Member States. If a Model Law is promulgated by an international institution with a different structure, for instance UNCITRAL, it is even less binding. Model Laws are strict and logical alternatives to proper Treaties. They do not submit States to obligations which might conflict with obligations stemming from the Rome I Regulation and thus do not trigger Art. 25. This becomes of particular importance with regard to Art. 28 UNCITRAL Model Law on Arbitration. Every national conflicts rule which is designed after the model set by this Article (like § 1051 ZPO in Germany) may succumb to the preponderance and precedence of the Rome I Regulation without any relief to be gained from (1).127 II. Bilateral or multilateral Conventions exclusive between Member States 29 According to (2), the Rome I Regulation shall, as between Member States, take precedence

over conventions concluded exclusively between two or more of them in so far as such conventions concern matters governed by the Rome I Regulation. (2) stands in the tradition of Art. 59 Brussels Convention and Art. 69 Brussels I Regulation. It deals with relations solely and exclusively between Member States. The frontier between (1) and (2) is the participation of one or more non-Member States as Contracting States of the convention at stake. Whereas (1) can be said to be a compatibility clause, (2) can be said to be an incompatibility clause.128 30 The Rome Convention did not contain a direct predecessor to (2). Art. 21 Rome Convention

was less explicit, if not to say: more ambiguous. It stated that the Rome Convention should not prejudice the application of international conventions to which a Contracting State is, or becomes, a party. The criterion for distinguishing thus was whether a Contracting State was party to the convention at stake. It did not matter if and how many non-Member States were parties to that convention. Art. 25 now reverses the approach and the test. 31 Pure intra-EU-relations only between Member States shall be governed solely and exclu-

sively by the Rome I Regulation. Recital (41) cl. 1 and its rationale to carry respect for international commitments entered into by Member States vis-à-vis non-Member States are not at stake here since non-Member States are not involved. E contrario, multilateral conventions to which also non-Member States are Contracting Parties do not fall under (2), but under (1).129

126

127 128

129

876

TNT Express Nederland BV v. AXA Versicherung AG (Case C-533/08, [2010] ECR I-4107, I-4162 et seq. paras. 58–62. Mankowski, in: FS Rolf A. Schütze zum 80. Geburtstag (2014) sub VII. Bonfanti, in: Boschiero (a cura di), La nuova disciplina comunitaria della legge applicabile ai contratti (Roma I) (2009), p. 383, 391 fn. 10. See von Hein, in: FS Meinhard Schröder (2012), p. 29, 37.

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Article 26

A problem might arise where a multilateral convention presently and actually is only be- 32 tween Member States, but is virtually open for the future accession of non-Member States.130 One might possibly think of a convention developed in the framework of the Hague Conference on Private International Law but actually ratified only by Member States empowered and authorised by the EU to which other, non-European Contracting States of the Hague Conference might accede. The framework is not an intra-EU one. But virtual scenarios and possibilities are not actualities, finalisations and realisations, either. The historical background of (2) indicates that primarily bilateral conventions solely and 33 exclusively between Member States were envisaged.131 The same might be derived if one takes Arts. 55 Brussels Convention; 69 Brussels I Regulation; 69 Brussels Ibis Regulation into account for the sake of comparison and as required by Recital (7). There is a decisive argument which turns the table in favour of applying (2) to conventions 34 to which non-Member States can and might accede in the future: Else the Rome I Regulation would apply until the first non-Member State accedes, and after this point of time the respective convention would apply; this would generate unsustainable uncertainty about the status and the applicability of the convention on the one hand and the Rome I Regulation on the other hand.132 Member States are not obliged by Art. 10 TFEU and loyalty towards the EU to cancel 35 conventions to which at present only Member States are Contracting Parties, but to which non-Member States might accede in the future.133 Article 26: List of Conventions 1. By 17 June 2009, Member States shall notify the Commission of the conventions referred to in Article 25(1). After that date, Member States shall notify the Commission of all denunciations of such conventions. 2. Within six months of receipt of the notifications referred to in paragraph 1, the Commission shall publish in the Official Journal of the European Union: (a) a list of the conventions referred to in paragraph 1; (b) the denunciations referred to in paragraph 1.

I. Duty to notify Conventions relevant under Art. 25 (1) on the Member States’ side, (1) The main and primary purpose of Art. 26 is to generate transparency1 and informational 1 clarity. It supplements (1) and makes this rule operable.2 To accomplish this feat, (1) obliges 130 131 132 133 1 2

Magnus, in: Staudinger, Art. 25 note 19. Magnus, in: Staudinger, Art. 25 note 19. Magnus, in: Staudinger, Art. 25 note 19. Contra Magnus, in: Staudinger, Art. 25 note 19. Magnus, in: Staudinger, Art. 26 note 1. Magnus, in: Staudinger, Art. 26 note 1.

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Article 26

Rome I Regulation

the Member States to notify the Commission of the relevant conventions of which they are Contracting Parties respectively, and in turn the Commission shall publish a compiled list in the OJ EU pursuant to (2). Information thus would be official, and information costs would be low. Furthermore, Member States clarify which conventions they believe to contain conflicts rules relevant in the field of contractual obligations. If a convention has been notified to the Commission and has been included in the list officially published by the Commission this goes beyond a mere declaratory act but exerts some normative force. 2 The Member States were obliged to perform their notifications by 17 June 2009. This

deadline was reached by backward calculation: The Rome I Regulation was to become effective on 17 December 2009, and the Commission was allowed six months to collect and publish the data received. 17 December 2009 less six months equates 17 June 2009. 3 The early deadline was fully justifiable for (1) is only concerned with such Conventions to

which the Member States became Contracting Parties before the entry into force of the Rome I Regulation. According to Art. 29 (1), the Rome I Regulation entered into force on 24 July 2008. Additionally, Art. 29 (2) expressly declared that Art. 26 should be applicable as of 17 June 2009. This avoids internal contradictions between different rules of the Rome I Regulation. 4 Yet which conventions are effectively referred to in (1) was frozen on 24 July 2008. Ratifica-

tions of, or accessions to, international conventions after that date could not trigger (1). Only subsequent denunciations matter, and (1) subpara. 2 duly acknowledges a respective duty to notify. 5 (1) ought to be applied per analogiam to Croatia after her accession to the EU became effective

as of 1 July 2013. Of course, the relevant date by which Croatia had to comply with her respective duty, cannot be 17 June 2009 but should be calculated as 1 June 2014 roughly mirroring the time span of approximately eleven months between 24 July 2008 and 17 June 2009. II. Official publication of data collected, (2) 6 Unpublished information would not have value for the general public and the contract

parties specifically interested. Hence, (2) calls for a publication of the data collected and compiled on the basis of the notifications which the Commission received from the Member States. Publication is due in no lesser organ than the Official Journal (if only Part C, not Part L). But the publication is declaratory only and not constitutive, though.3 7 The Commission did not execute its obligation with utmost expedition and speed, perhaps

due to the Member States providing the necessary data only lazily. A certain sloppiness reigned and resulted in a remarkable delay,4 in sharp contrast to the – perhaps over-optimistic – date of 17 June 2009 plus six months. The Commission published the initial list as late as in the OJ of 17 December 2010.5 Later supplements are not discernible. It should be 3 4 5

878

Leible, in: Nomos Kommentar BGB, Art. 26 note 3. von Hein, in: FS Meinhard Schröder (2012), p. 29, 30–31. Notifications under Article 26 (1) of Regulation (EC) No. 593/2008 of the European Parliament and of the Council on the law applicable to contractual obligations, OJ EU 2010 C 343/3.

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Chapter III: Other Provisions

Article 26

noted that under (2) there is not a deadline until which the Commission has to publish the data collected, in contrast to the deadline set for the Member States under (1). It should further be noted that the published list only comprises data under (2) (a) in conjunction with (1) cl. 1.6 This list gives astonishing insights. Some Member States did not notify anything, namely 8 Belgium and Spain. Others notified that they had no conventions to notify, namely Greece, Ireland, Italy, Malta, Slovenia and the United Kingdom. Germany, the Netherlands and Luxemburg notified only the CMNI – whereas Romania nominated the CIM, the CIVand its respective Protocols (but not the COTIF as such) to which at least Germany has also been a Contracting Party. This reveals an astonishing spread and a broad variety of the understandings which are 9 prevailing in the single Member States as to the relevance of certain Conventions. Interestingly, not one Member State bothered to notify the CMR, the Montreal Convention, the Hague Rules, the Hague Visby Rules or the CISG although their respective rules on the scope of application can be classified as having, inter alia, the function of a unilateral conflicts rule.7 Whether this expresses some kind of conscious or common policy decision or simply results from sloppiness overlooking the likes of Art. 1 CISG could deserve further investigation.8 There is at least a doctrinal justification expressed by the competent German official writing extra-officially: He regards the said rules as so-called statutistic conflict rules which are ancillary to the uniform substantive rules implemented by Uniform Law Conventions;9 the precedence of uniform law (which in its substance means substantive law) should be observed besides and primarily to (1).10 In turn, many of the former COMECON countries, the Accession States of 2004 and of 2007, 10 notified a surprising number of bilateral treaties with single non-Member States on legal assistance and/or legal relations in civil, family or criminal matters. Another surprise, given Art. 1 (2) (g) and the exemption of the issue from the Rome I Regulation,11 is that Portugal nominated the Hague Convention on the Law Applicable to Agency.12 Austria named a single Convention and that on industrial accidents. The most sensible candidate from the panopticum which might draw unanimous consensus 11 is the Hague Convention on the Law Applicable to the International Sales of Goods of 195513 as nominated by France. Italy did not nominate it although it is also a Contracting Party.14 6 7 8 9 10

11 12

13 14

Leible, in: Nomos Kommentar BGB, Art. 26 note 3. Johannes Schilling, EuZW 2011, 776, 779. For the doctrinal and systematical background see Art. 25 notes 19–22 (Mankowski). Kreuzer, RabelsZ 70 (2006), 1, 46; Rolf Wagner, TranspR 2009, 103, 107. Ruhwedel, TranspR 2008, 89, 91; Rolf Wagner, TranspR 2008, 221, 224; Rolf Wagner, TranspR 2009, 103, 107. See von Hein, in: Rauscher, Art. 25 note 4; von Hein, in: FS Meinhard Schröder (2012), p. 29, 32. The Netherlands, also Contracting Party to the Hague Agency Convention, did not notify it, for whichever reason; see von Hein, in: Rauscher, Art. 25 note 4; von Hein, in: FS Meinhard Schröder (2012), p. 29, 35. Franzina, CDT 1(1) (2009), 92, 96. von Hein, in: FS Meinhard Schröder (2012), p. 29, 35.

Peter Mankowski

879

Article 27

Rome I Regulation

Article 27: Review clause 1. By 17 June 2013, the Commission shall submit to the European Parliament, the Council and the European Economic and Social Committee a report on the application of this Regulation. If appropriate, the report shall be accompanied by proposals to amend this Regulation. The report shall include: (a) a study on the law applicable to insurance contracts and an assessment of the impact of the provisions to be introduced, if any; and (b) an evaluation on the application of Article 6, in particular as regards the coherence of Community law in the field of consumer protection. 2. By 17 June 2010, the Commission shall submit to the European Parliament, the Council and the European Economic and Social Committee a report on the question of the effectiveness of an assignment or subrogation of a claim against third parties and the priority of the assigned or subrogated claim over a right of another person. The report shall be accompanied, if appropriate, by a proposal to amend this Regulation and an assessment of the impact of the provisions to be introduced.

1 Reporting duties of the Commission with a particular emphasis on a possible review have

become a tradition in European PIL. They are an attempt of preservation against the respective Regulation becoming utterly dated. They are intended to keep legislation in pace with developments under the promulgated Regulation. And they shall prevent that the Regulation rules are deemed to be set in stone and gain some moment of unchangeable eternity. The addressees of the Commission reports are the legislative organs of the EU plus the European Economic and Social Committee as the most important advisor to European legislation, hence the very organs which would have to legislate for any recast Regulation. 2 The particular date of 17 June, be it 2010 as in (2) or 2013 as in (1) is deliberately chosen, for

the Rome I Regulation was promulgated on 17 June 2008 as evidenced by the date in its official full-length title. Thus every 17 June marks an anniversary of the Rome I Regulation. 17 June 2013 was the fifth anniversary of the Regulation. Apparently, EU legislators believed it to be a fine idea to welcome and celebrate this occasion by a review report being issued. (In reality the Commission spoiled the party.) 3 The two topics expressly mentioned in (1) (a) and (b), namely the law applicable to insur-

ance contracts and the application of Art. 6 on consumer contracts, in particular as regards the coherence of EU law in the field of consumer protection, feature amongst the politically most discussed issues of the Rome I Regulation. That is why they are subjected to timely review and possibly reconsideration.1 As to consumer contracts, the coherence issue remains an issue since the conflict of law rules contained in Directives in the field of consumer protection have not been deleted or superseded at the advent of the Rome I Regulation. 4 Yet to address the two topics expressly mentioned in (1) (a) and (b) only describes the

minimum content of the Commission report called for. The Commission report may address other topics, too, if it feels that way.2 1 2

880

See Magnus, in: Staudinger, Art. 27 note 3; Leible, in: Nomos Kommentar BGB, Art. 27 note 1. Martiny, in: Münchener Kommentar zum BGB, Art. 27 note 3; Magnus, in: Staudinger, Art. 27 note 1.

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Article 27

(1) obliged the Commission to present a report five years after the entry into force of the 5 Rome I Regulation at latest. The Commission did not comply with this obligation, and did not even set out to commission the preparatory academic reports on which the official report would be based, around the time when according to the letter an official report would have been due. Five years are only a rather short span of time. In five years’ time only very few, if any, cases, and requests for preliminary rulings on the Regulation will have reached the CJEU. A steady case-law of the CJEU is given small opportunity only to develop with regard to the interpretation of the newly implemented rules. Five years are simply too short to substantiate and issue a sensible and robust review report. The ten years after the entry into force opted for by Art. 79 Brussels I Regulation by contrast, are far more realistic and sensible. It takes little wonder and it doesn’t come as a surprise that there wasn’t a Commission report in 2013. Even more unrealistically, (2) obliged the Commission to present a report on the trickiest 6 and most contested issue not only surrounding Art. 14 but of the entire Rome I Regulation, five years after the entry into force of the Rome I Regulation at latest. The Commission did not comply with this obligation, but only set out to commission3 the preparatory academic study on which the official report would be based, around the time when according to the letter an official report would have been due. It was in clear delay.4 The British Institute of International and Comparative Law won the respective tender5 and duly submitted a carefully researched and voluminous study6 in December 2011 (which was well after 17 June 2010, nota bene). Even after the submission of this academic study, which in turn was based on a well-designed questionnaire,7 the Commission did not bother to file the report it was obliged to submit under (1). Seen in a wider context, (2) served a political purpose only: It formed part of the overall 7 compromise (or should one better say: non-compromise or compromising compromise?) eventually reached over the effectiveness of an assignment or subrogation of a claim against third parties, namely first to retain the non-solution by voluntary omission as it stood under Art. 12 Rome Convention, second to add Recital (38) and third else to refrain from legislating on the issue. This “agreement to disagree”8 saved the Rome I project.9 One might recall that this very issue was so hotly contested that for quite some time it threatened the coming

3

4 5

6

7

8 9

Critical as to the formulation of the Commission’s questions Kieninger, ZEuP 2011, 747; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 27 note 4. Kieninger, IPRax 2012, 289 (289). Tender JLS/ 2010/JCIV/PR/007/E4 – Study on the question of the effectiveness of an assignment or subrogation of a claim against third parties and the priority of the assigned or subrogated claim over a right of another person. British Institute of International and Comparative Law, Study on the question of the effectiveness of an assignment or subrogation of a claim against third parties and the priority of the assigned or subrogated claim over a right of another person – Final Report http://ec.europa.eu/justice/civil/files/report_assignme nt-en.pdf. Critical as to the distribution on the questionnaire and in particular as to the quantity of return answers Kieninger, IPRax 2012, 289, 290 fn. 11. Fentiman, 17 Ind. J. Glob. Led. Stud. 245 (245) (2010). Mankowski, IPRax 2012, 298 (298).

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881

Article 28

Rome I Regulation

into existence of the entire Rome I Regulation.10 It is quite understandable that the Commission did not feel any urge and any hurry to raise it again and even less so since the philosopher’s stone had not emerged within two years after the entry into force of the Rome I Regulation. (2) serves a cosmetic alibi function and is schemed as some kind of cover-up action. On top of that, (2) is badly drafted for if judged verbatim on its black letters it relates to substantive law issues whereas its genesis clearly points to the conflict of laws.11 8 Both reports requested from the Commission might go beyond merely reviewing the then

past and the developments in the life of the Rome I Regulation, but also comprise proposals to amend the Rome I Regulation. The Commission is at liberty to decide in its discretion whether it deems it appropriate to make proposals to amend. There is no obligation in the strict sense to submit such proposals. On the other hand nothing in Art. 27 would stop the Commission in its tracks from making a full-scale recast proposal. Only (2) deliberates that an impact assessment might be added to a proposal made. Yet this should be equally applicable to the report envisaged by (1). Impact assessments have become a standard feature of EU legislation, in particular in the field of PIL and International Procedural Law. Article 28: Application in time This Regulation shall apply to contracts concluded after 17 December 2009. Corrigendum (of 24 November 2009, OJ EU 2009 L 309/87) This Regulation shall apply to contracts concluded as from 17 December 2009.

1 Art. 28 clarifies an issue important for the early phase in the life of the Rome I Regulation,

namely to which contracts the Regulation shall apply. It does so in a simple, but comprehensive manner: The Rome I Regulation shall apply to all contracts concluded as from 17 December 2009 without any exceptions made. 2 The original wording was ambiguous at best and was a source of possible misunderstand-

ings.1 Hence, it was corrected even before the date of application was reached, namely by a Corrigendum dated 24 November 20092 which introduced the present (and final) wording. It confirms that the Rome I Regulation is also applicable to contracts concluded exactly on 17 December 2009. Art. 28 became eventually parallel to Art. 29 subpara. 2. The Corrigendum came in the nick of time, and one should not ask all too many questions as to whether the issuing bodies really were competent to promulgate it. 3 Still the wording is slightly misleading, but in another regard: If scrutinised to the letter,

“contracts” is narrower than “contractual obligations” and thus would not cover the full 10 11 1

2

882

See only Mankowski, IPRax 2012, 298 (298). Kieninger, IPRax 2012, 289, 290. Garcimartín Alférez, EuLF 2008, I-61, I-64; Pfeiffer, EuZW 2008, 622 (622); Mankowski, NJW 2009 issue 51 p. XIV/XVI. Corrigendum to Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations, OJ EU 2009 L 309/87.

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Article 28

scope of application as defined by Art. 1 (1). Hence, “contracts” should be read correctly as “contractual obligations” in order to keep accordance with Art. 1 (1) and in particular to allow a sensible application with regard to culpa in contrahendo which is primarily subjected to the rules for contractual obligations pursuant to Art. 12 (1) Rome II Regulation.3 Art. 28 applies indiscriminately and invariably to all kinds of contracts4 and does make any 4 allowance for a special rule related to long-term contracts like employment agreements or tenancy agreements. It makes plainly clear that only the date when the contract was concluded, matters and nothing else,5 even in employment agreements6 or other long-term contracts like tenancy or lease agreements concerning real estate,7 bonds,8 insurance contracts8a, commercial agency agreements, franchise agreements9 or umbrella contracts for distribution purposes. This avoids any split of the applicable regime in the middle of the lifetime of a running contract. It protects the expectations which the parties had when they concluded the contract and does not surprise them ex post by possibly switching over to a different lex causae.10 Yet there is a serious drawback to this, namely, that possibly for decades long-term contracts and in particular employment contracts might be subjected to the old regime of the Rome Convention.11 National law might also have opted for different, alternative concepts with regard to employment contracts instead of traditional mechanisms of concluding contracts.12 But an interpretation in the light of certain national laws or doctrines would hardly be compatible with uniform and autonomous interpretation as required for every Article in an European Regulation. When a contract is concluded is a matter for the applicable substantive law to answer. Art. 10 5 (1) subjects all questions relating to the existence of the contract to the law that would be applicable if the contract was existent. This ratio also applies here.13 It is not for the old 3 4 5 6

7 8 8a 9 10

11 12

13

Magnus, in: Staudinger, Art. 28 note 5; Leible, in: Nomos Kommentar BGB, Art. 28 note 2. E.g. to contracts for cosmetic surgery; Rb. Midden-Nederland, locatie Utrecht NIPR 2013 Nr. 392 p. 655. Leible/Matthias Lehmann, RIW 2008, 527, 531; Magnus, in: Staudinger, Art. 28 note 6. A-G Trstenjak, Opinion of 8 September 2011 in Case C-3844/10, ECLI:EU:C:2011:564 para. 1; BAGE 137, 375 = BB 2011, 2748 with note Reiserer; BAG BB 2012, 577 with note Krannich = GWR 2011, 532 with note Henne = EWiR § 613a BGB 8/11, 699 with note Rossa/Fuhlrott; BAG NJW 2013, 252 = AP Nr. 1 zu § 167 ZPO; BAG RIW 2014, 534, 535; BAG RIW 2015, 313, 315; Deinert, RdA 2009, 143, 144; Magnus, IPRax 2010, 27, 31–32; Schneider, NZA 2010, 1380; Kellner, RdW 2010/209, 193; Schacherreiter ZfRV 2015, 172; Leible, in: Nomos Kommentar BGB, Art. 28 note 1. But see the reference to the ECJ by BAG RIW 2015, 313, 315 [12] = ZfRV 2015, 170 with note Schacherreiter. See KG NZM 2013, 124, 125. BGH ZIP 2015, 769, 775 [53]. BGH WM 2016, 128 = VersR 2016, 1099 [20]. LG Düsseldorf WuW/E DE-R 4416 = IPRspr. 2013 Nr. 52 p. 113. See for the arguments based on faith and trusted belief in the applicability of the initially applicable law Mankowski, IPRax 1994, 88, 89–92. BAG RIW 2015, 313, 315 [12]. BAG RIW 2015, 313, 315 [12] with reference to BAGE 93, 310; von Stebut, in: FS Otto Kissel (1994), p. 1135; Adomeit, NJW 1996, 1710; Boemke, Schuldvertrag und Arbeitsverhältnis (1999), pp. 226 et seq. Pfeiffer, EuZW 2008, 622 (622); Nordmeier, in: Gebauer/Wiedmann, ch. 37 note 154; Magnus, in: Staudinger, Art. 28 note 8; Kieninger, in: Ferrari/Kieninger/Mankowski/Otte/Saenger/G. Schulze/A. Staudinger, Art. 28 note 2; Ringe, in: jurisPK Art. 28 note 3.

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Article 29

Rome I Regulation

conflict rules and the law made applicable by them14 to decide on the applicability of the Rome I regime, but for the Rome I regime itself and the prospective lex causae determined by it.15 6 If a contract which originally was concluded at a certain date, is subject to a substantial

amendment or alteration afterwards the question arises as to whether the date of the original conclusion or rather the date of the later amendment or alteration is the relevant one for the conclusion of the contract as amended and altered.16 To require that the amendment or alteration is “substantial” generates a great measure of uncertainty, contrary to Recital (16),17 whereas exclusively relying on the date of the original conclusion might become rigid. In practice, it often is fortuitous and not a matter of closer consideration whether parties formally only amend or alter an already existing contract or rather supersede a contract with a new one. 7 Sometimes it is argued that Art. 9 should apply as of 17 December 2009 to all contracts

regardless whether the respective contract was concluded since internationally mandatory rules as envisaged by Art. 9 are per definitionem beyond the ambit of the concrete contract.18 This line of argument is not convincing. Eingriffsnormen or lois de police might apply independent from the lex causae and might be regarded as extraneous ingressions into the contract, but nevertheless they define limits of the contract and of party autonomy. Furthermore, the wording of Art. 28 appears crystal clear and does not leave any space for manoeuvring: “This Regulation shall apply to contracts concluded after 17 December 2009.”, and “this Regulation” comprises Art. 9. It ought not be understood as “This Regulation minus its Art. 9” or “This Regulation but for Art. 9”. Art. 29 and in particular its second subparagraph evidence that Regulation takes care of the fate of particular provisions if it wants to single such provisions out for special treatment.

Chapter IV: Final Provisions Article 29: Entry into force and application This Regulation shall enter into force on the 20th day following its publication in the Official Journal of the European Union. It shall apply from 17 December 2009 except for Article 26 which shall apply from 17 June 2009.

1 The publication in the Official Journal of the EU dates from 4 July 2008. Accordingly, the

Rome I Regulation entered into force on 24 July 2008.1 The entry into force made the 14

15 16 17 18

884

As Leible/Matthias Lehmann, RIW 2008, 527, 531; Martiny, in: Münchener Kommentar Art. 28 note 3; Leible, in: Nomos Kommentar BGB, Art. 28 note 3 suggest. Magnus, in: Staudinger, Art. 28 note 8. BAG RIW 2015, 313; Mauer, jurisPR-ArbR 42/2015 Anm. 3 sub C. See Thomas Ewert, jurisPR-IWR 3/2015 Anm. 5 sub B. Siehr, RdA 2014, 206, 209.

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Chapter IV: Final Provisions

Article 29

Regulation directly binding upon the Member States.2 To which contracts the Regulation applies is regulated by Art. 28 as lex specialis.3 Art. 29 establishes a two-step tier and distinguishes between entry into force and applica- 2 tion. Application equates becoming practically effective. The rule employs the technique of a vacatio legis.4 It established the role model for the roughly 18 months gap between entry into force and applicability as regards European PIL and international procedural law. Art. 81 Brussels Ibis Regulation follows in its footprints, not in those of Art. 76 Brussels I Regulation and Art. 32 Rome II Regulation. Art. 76 Maintenance Regulation follows in the same vein as do Art. 18 Rome III Regulation and Art. 84 Successions Regulation. The European legislator has adopted a policy of giving practitioners one and a half years of time to prepare for the novelties whilst they are already in force with a binding text easily accessible in the Official Journal. In Art. 24 subpara. 2 Rome I Proposal the Commission tentatively chose one year,5 and even this was an advance compared to, and a deviation from, the approach pursued by Art. 29 Rome Convention. But the European Parliament intervened and extended the time available for private parties to eighteen months. Article 26 became effective six months year before the remainder, or better: the bulk, of the 3 Rome I Regulation. It relates to obligations by the Member States to convey certain information to the Commission and are only relevant in the interaction between the Member States and the Commission, but not as for or against private parties. The data collected by the Commission should be available to interested persons when the operative part of the Rome I Regulation became applicable. Subpara. 2 is not a legislative masterpiece, anyway.6 Reading Arts. 26 and 29 jointly in a 4 literal fashion, Art. 26 applied for a single day, namely the 17th of June 2009 for Art. 26 itself states that the Member States should provide the data required by 17 June 2009 whereas subpara. (2) asserts that Art. 26 shall apply from 17 June 2009. The ensuing pseudo-contradiction between the two rules should be solved in favour of, and giving precedence to, Art. 26 over subpara. 2.7

1

2 3 4 5 6 7

Martiny, in: Münchener Kommentar Art. 29 note 2; Freitag, in: Rauscher, Art. 29 note 2; Magnus, in: Staudinger, Art. 29 note 3. Magnus, in: Staudinger, Art. 29 note 3. Leible, in: Nomos Kommentar BGB, Art. 29 note 3. Marongio Buonaiuti, NLCC 2009, 947 et seq. COM (2005) 650 final p. 22. Freitag, in: Rauscher, Art. 29 note. 6. Freitag, in: Rauscher, Art. 29 note. 6.

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885

Index The first number indicates the relevant article, the second number relates to the respective note with the commentary on this article.

Abode 4/89 Absorption theory 1/40 Abstraction; principle of 4/531 Acceptance 11/13; 11/18; 11/24; 11/63; 11/90; 18/12 via email 13/16 Accession Convention of Funchal 24/9 accessorium sequitur principale 3/179 acta iure imperii 4/143 Act on private limited-liability companies (GmbHG) 11/112 acte clair doctrine Intr/112; Intr/115-116 acte éclairé Intr/116 Action competing Intr/4 for recourse 16/5; 16/10-11; 16/19; 16/29 negative declaratory Intr/4 tort 1/16 action directe 1/7 ADR 3/141-142 AETR doctrine 25/4 Agent 1/14; 11/9; 13/6 acts for a party 11/9 the legitimacy of an agent to conclude a contract 13/8 commercial ~ Intr/89; 19/41 contract concluded by ~ 11/24; 11/65; 11/77 undisclosed 14/31 unilateral act 11/91 Agreement choice of jurisdiction Intr/46 choice of law see choice of law agreement collective bargain 1/6 on proven facts 1/18 on the choice of court 1/10-11 on the proof of foreign law 1/18 on transfer 14/23 pre-contractual 1/6 procedural 11/33 purporting to derogate from Art. 20 20/26-33 relating to substantive law 11/33 sale of goods 1/9; 1/27 set-off 17/56 subsequent 11/56 suretyship 11/15

886

Airplanes 4/87; 4/221; 4/307; 4/403 Air Transport Regulation Insurance 7/192-193 Akrotiri 24/18 Akzessorische Anknüpfung 3/479 Åland Islands 24/16 Alteration 3/336 Alternative choice of law clauses 3/373 Ancillary contracts 3/179; 479 Andorra 24/15; 21 Annuity see contracts- care Anti-assignment clauses 14/32; 15/8 Anticipatory breach 12/20 Antilles 24/8 Antitrust law 4/141 Anti-trust legislation 9/71 Antitrust rules 4/127 Arbitration agreement 1/10-11; 17/53 clause 23/6 commercial 17/53 court Intr/105 international 1/11 risks; large 7/123-124 tribunals of non-compulsory ~ Intr/105 Aruba 24/8 Asset deal 4/277-280 Association 4/93 Assignability 14/31-35 limitation of 14/32; 14/50 non-assignability clause 14/22; 14/32 Assignment against third parties 14/3; 14/14; 14/25 contract 14/7; 14/14; 14/20; 14/36; 14/43 form of the contract of assignment 14/20 double 14/38 future and bulk 14/47; 14/51 global 14/34 inter partes 3/86 legal 15/2 non-consensual 14/11 notification of 14/35 of claims 14/1-4; 14/12; 14/15; 14/17; 14/42 effects 14/27 of future claims 14/34

September 2015

Index of the guarantee 14/36 proof of 14/35 ‘proprietary aspects’ 14/38 second 14/48 voluntary Intr/34; 14/9-11; 14/13; 14/27 Athens Convention 25/19 Autonomous definition 4/117; 4/129 Autonomous interpretation 4/86; 4/88 European 4/86; 4/88; 4/175 Away game 3/198 Bank account 14/45; 14/48; 14/50 Banking Directives 4/501-502 Bankruptcy 17/14; 18/57 Battle of forms 3/468-477 Behavioral Law and Economics 3/29-33 “Best law” 3/37-41 BIICL Proposal 15/54 Bilateral conventions 25/1-35 Bill of lading 3/50 BIMCO 3/231 Block Exemption Regulation on vertical agreements 4/132 Bootstrap principle 3/427-477 Brexit Intr/23; Intr/30; Intr/52-53; 24/21a Brussels Convention Intr/9; Intr/17 Brussels I Regulation 1/11 Brussels Ibis Regulation Intr/5; Intr/33; Intr/38; 4/94; 4/98; 4/100; 4/103; 4/416; 4/597; 6/7; 6/10; 6/40; 6/58 Interpretation Intr/36 Brussels IIbis Regulation Intr/38 Burden of proof 4/231-233; 18/13 Business method 4/118 Canada 22/2 Capacity 11/14; 12/4; 12/35; 13/1; 22/18; 22/23 administrative Intr/104 contractual 1/20 lack of 12/35 judicial Intr/104 legal 1/11; 1/13; 1/20; 13/1; 13/5-7; 13/11-13 of corporations 13/8 of natural persons 1/20; 13/1; 13/5; 13/10 Capital redemption operations 7/20-21 Carriage 5/1 et seq. arbitration 5/9; 5/14 arrival 5/30 carrier; definition 5/24 characteristic performance 5/18-20 choice of law; restricted 5/27 consignor 5/26 definition 5/31; 5/33 departure 5/31; 5/33

Peter Mankowski

Choice of Law destination 5/31 goods 5/14 habitual residence 5/17; 5/30 liability for damages 5/12 non-approved country 5/30 passengers 5/4-5; 5/27 place of delivery 5/18 scope 5/21-23 Cartel prohibition 4/132 Cashless transactions 4/522 Case non-European 2/12 not covered by the Rome I Regulation 2/6 real European 2/12 Central place of administration 19/24 CENTRAL Transnational Law Digest 3/296 certainty 4/23 certification 4/219 CESL 3/277-281; 4/259; 11/5; 23/9 Chain of contracts 3/480 Chambers of commerce 3/137 Channel Islands 3/415; 24/8 Channel tunnel case 3/66 Characteristic performance Intr/3; Intr/121; Intr/124; 1/35; 4/3; 4/23; 4/42; 4/124-126; 4/135; 4/137; 4/157; 4/163; 11/19-20; 17/56; 19/14/165-183 habitual residence 4/3 rules for determination 4/177 territorial connection 4/179 Charges 4/89 Charter demise 5/21 multi-voyage 5/21 time-charters 5-21 Charterparty 3/50 Choice angst 3/196 Choice-of-court agreements 3/21-22; 115-134 overriding mandatory provisions 9/195-206 Choice of Law 3/1-end; 11/111; 16/22; 19/3; 19/5; 20/19-20; 21/54 ACQP 3/273 Acquis Principles 3/273 Agreement 3/427-477 Alternative choice of law clauses 3/373 Arbitration agreement 3/135-141 Battle of forms 3/468-477 Behavioral Law and Economics 3/29-33 ”Best law” 3/37-41 Breach 3/485-493 Bootstrap principle 3/427-477 Business relations 3/174-175 CESL 3/277-281 Choice of law agreement 3/427-477 Codes of Conduct 3/310

887

Choice of Law Common European Sales Law 3/277-281 Coin toss 3/372 Colliding choice of law clauses 3/468-477 Conciliation agreement 3/142 Concurrent choice 3/285 Conditional choice 3/229-230 Conflicting choice of law clauses 3/468-477 Conflict rules 3/226-228; 243-246 Consciousness 3/111-112 Consensus 3/436-439 Consent 3/436-439 Construction 3/85-87 Construction clause 3/181-183 Content review 3/443-458 Contrat sans loi 3/305-307 Costs 3/464 Court proceedings 3/143-159 DCFR 3/274-276 Dépeçage 3/313-327 Domestic cases 3/374-397 Draft Common Frame of Reference 3/274-276 Drafting 3/51-78 Elaborate law 3/212-221 English law 3/212; 214 EU cases 3/398-422 European law 3/286 Express choice of law 3/48-103 Fact of choice 3/439-442 FIFA Rules 3/250; 293; 299 Financing contracts 3/212 Floating choice of law clauses 3/344-360 Form 3/338-339; 462-466 Free choice of law 3/193-246 Fundamental rights 3/4 Future law 3/224 Game theory 3/34-36 General principles of law 3/302-304 Governance 3/8 Hague Principles on Choice of Law 3/311-312; 477; 11/4 Hierarchical choice of law clauses 3/367-371 Implicit choice of law 3/104-192; 12/10 Incapacity 3/467 INCOTERMS 3/309 International law 3/284-285 Intra-EU cases 3/398-422 Invalidity 3/13-20; 21-22 Jewish Law 3/292 Jurisdiction clause 3/21-22; 115-134 Lando-Principles 3/266 Law and Economics 3/23-47 Law Market 3/42-47 Lex mercatoria 3/294-300 Liability 3/485-493 Lottery 3/372

888

Index Maritime contracts 3/212 Market standard 3/212-221 Mediation agreement 3/142 Multipartite contracts 3/484 Negative choice 3/308; 4/18 Neo-classical Law and Economics 3/23-24 Network effect 3/217 Neutral law 3/201-211; 452 New Institutional Law and Economics 3/25-28 New Law Merchant 3/294-300 New York law 3/49; 212; 214 Non-state instruments 3/247-312 Not existing State 3/223; 225 Partial choice of law 3/313-327; 17/55 Party autonomy 3/1-47 Past law 3/223 PECL 3/266 PEICL 3/267 Petrification clauses 3/79-80 Philosophy 3/3 PIL rules 3/226-228; 243-246 Power of attorney 3/146-149 Paramount Clauses 3/231-240 PICC 3/268-272 Place of performance 3/172-173 Preceeding contracts 3/94 Previous contracts 3/94 Principal-agent-conflict 3/146-149 Principles of European Contract Law 3/266 Principles of European Insurance Contract Law 3/267 Qui eligit forum apparet eligere ius 3/122-128 Qui eligit forum eligit ius 3/122-128 Regulatory Competition 3/42-47 Related contracts 3/88-94 Religious law 3/287-292 Remedies 3/485-493 renvoi 3/243-246; 258 Reservations 3/459-467 Review 3/443-458 Rules 12/2; 17/19a; 19/1; 19/12 Rules of institutions 3/160-171 Self-regulatory contract 3/305-307 Sharia 3/288-291 Specimen clauses 3/58-61 Split choice of law clauses 3/361-366 Stabilisation clauses 3/81-84 State liability 3/491-493 Subsequent choice of law 3/328-366 Tacit choice of law 3/104-192; 326 Third Parties 3/478-484 Torts 3/95-101; 483 Transactions 3/176-180; 481-482 Transaction structures 3/176-180 Transition States 3/222

September 2015

Index Transparency 3/15-19 Umbrella agreements 3/89-90 Unfair Contract Terms Directive 3/13-20 UNIDROIT Principles 3/249; 251; 268-272 Uniform Law 3/282-283 Uniform place of performance 3/172-173 Unjust enrichment 3/102 Usages 3/301 Validity 3/13-20; 21-22; 338-339 Choice of law agreement 3/427-477; 11/4; 11/1920; 11/51; 11/70-71; 11/94; 11/96; 11/98; 11/107; 12/12; 20/27; 21/31; 22/10 concluded in respect of an insurance contract 20/23 in consumer contract 11/95 Choice of law clause 14/51; 20/26 consent and material validity 10/7-12 employment contract 8/4-6 CIM 25/19 Circulus vitiosus 3/431 CISG Intr/74; Intr/82; Intr/90; 3/282; 4/46; 4/50; 4/120; 4/131; 4/143-144; 4/165; 4/194; 4/246; 4/258-260; 4/315; 4/404; 11/3; 12/21; 12/32; 12/45; 17/13; 17/22; 18/11-13; 18/20-2225/1922; 26/9 countries which ratified 4/246 conditions of application 4/246-247 citizenship 4/14; 4/190; 4/215 CIV 25/19 Civil and commercial matters Intr/37; Intr/68; 1/4; 11/91 CJEU 4/128; 4/185; 4/324; 4/640; 4/647 Claims 14/13-17 bank accounts 14/45 breach of contract 12/21 financial contracts 14/45 monetary 17/33 non-contractual 14/16 nullity of the contract 12/36 personal 14/15 principal 17/24 restitutionary 12/36 third party 1/7 Closer connection 4/10; 4/22-23; 4/84-85; 4/91; 4/102; 4/125; 4/142; 4/175-195 Closest connection 4/199-201 indicia 4/208-228 Closest connection clause 16/29 Cloud computing 4/663 Club membership 4/98 CMNI 25/19; 25/23; 26/9 CMR 25/8-14; 27 Codes of Conduct 3/310 Coercion 3/437-438 ‘Coffee tours’ Intr/13

Peter Mankowski

Consortium agreement Collective agreements 3/165 Colliding choice of law clauses 3/468-477 Combination theory 1/40 COMECON 26/10 Comfort letter 1/37; 1/39 see Letter of patronage Commercial Agents Directive Intr/44; Intr/127; 3/411; 4/121; 4/132; 23/15 Commodity exchange 4/150 Common European Sales Law 3/277-281; 23/9 Common law 2/214; 380 Common Market cases 4/123 Company law 1/13 Company 13/9 private limited 11/112 Comparative advantage 3/198-201; 3/208-209; 3/451 Compensation transaction 4/291 Concurrent choice of law 3/285 Concurring claims 3/99-100 Conditional choice of law 3/229-230 Condominium 4/89 Confiscation 4/143 Conflicting choice of law clauses 3/468-477 Conflict of laws 1/25-26 interregional 2/6 Conflict rules 1/33; 2/9; 4/7; 4/123-126; 4/186 general Intr/35 harmonized Intr/5 implicit Intr/43 internal 2/5 special Intr/39 in directives Intr/39-41 statutory Intr/24 Connection see closest/closer objective 4/135 Consensus 3/436-439 Consent 3/436-439 Consent and material validity 10/1 scope of application 10/1-6 ”double” scope of application 10/2 choice of law clause 10/7-12 commercial entities 10/22-27 corporate entities 10/22-27 exception 10/17-21 fundamental principle 10/13-16 habitual residence 10/19-20 international conventions 10/28-29 late acceptance 10/3 legal entities 10/22-27 right to termination 10/3 silence 10/3-6 vitiating factors 10/3 Consignation 12/27 Consortium agreement 4/204

889

Construction clause Construction clause 3/181-183 Consulting 1/39 Consumer Intr/3; Intr/125; 4/105; 4/135; 4/302; 4/320; 4/363; 4/528; 6/10 to end; 11/11-12; 11/20; 11/103; 19/32 Consumer contract 6/1 to end; Intr/13; Intr/18; Intr/122; 11/54; 11/92-96; 11/103; 11/122 aim 6/7 assignments of rights 6/18 choice of law clause 6/24 conditions of application; history 6/3-6 derogation 6/79-80; 6/98 directed activities 6/57; 6/62-74 disclaimer 6/57 distance contracts 6/55-61 dual purpose contract 6/15-17 financial instruments 6/45-47 financial services 6/44 Gran Canaria Cases 6/86-91 habitual residence 6/77; 6/81 immovable property 6/39-41 mandatory 6/79-80 supply of goods 6/3 supply of services 6/33 timeshare contract 6/41 package travel 6/38 professional 6/19-21 profit contracts 6/14 provision of credit 6/3 Consumer Credit Directive 3/425; 23/5; 14 Consumer Credit Directive (Recast) 23/14 Consumer insurance contracts 7/147 Consumer protection 4/155; 4/280; 4/328-329; 5/4; 6/1; 6/76-80; 6/91 Consumer protection law 11/93 Consumer protective provisions Intr/91 Consumer Rights Directive 3/425; 11/100-103 Consumer sales Intr/13 financing of Intr/13 Consumer Sales Directive Intr/40; 3/412; 11/100 Consumer transaction 11/99 Contract 1/3-4 accommodation 4/422-428 acknowledgement of debt 4/491 agency Intr/44; 4/129; 19/41 arbitrator 4/444-448 architectural 4/408-410 atypical 1/32-40 auction sale 4/25; 4/42; 4/142-147; 4/262 avoidance 12/20 banking 4/499-555 barter 4/5; 4/56; 4/201-203; 4/289-292 bet see game bond 4/337-345 brokerage 4/129; 4/194; 4/367-372

890

Index cancellation 12/26 care 4/453; 4/628-630 carriage 5; 22/19 see Carriage casino see game cloud computing 4/663 commission 4/129; 373-374 commercial 4/126; 4/138 commercial agency 4/128; 4/375 commodity exchanges 4/264 company 4/615-621 concluded through the internet 19/14; 19/43 construction 4/92; 4/163; 4/396-403 consulting 4/442-443 consumer 4/19; 4/67; 4/79; 4/135; 4/287; 4/507; 4/528; 6; see also Consumer ‘control~’ 1/13 copyright 4/583-591 credit 4/158; 4/329-336; 4/511 credit card 4/527 custody business 4/550-552 deposit 4/508 distance 11/18; 11/26; 11/55; 11/79; 11/114 distinction between ~ and unilateral act 11/90 distribution Intr/15; 4/25; 4/39: 4/42; 4/45; 4/129-141; 4/387 exclusive 4/139-140 transborder 4/140 documentary credit 4/529 documentary collection 4/541 domestic 1/24; 1/38-39 donation 4/158; 4/293-299 organ donation 4/664 e-commerce 4/17 electricity 4/64 employment 4/19; 4/135; 4/213 family 4/631-633 factoring 4/513-517 financial 4/23; 4/148-155; 4/264; 4/556-562; 6/44; 14/54 forced 1/7 forfeiting 4/518-521 frame 4/130; 4/134-135 franchise Intr/15; 1/35; 20/20; 4/25; 4/39: 4/42; 4/44; 4/117-128; 4/387; 6/11 freight 5/21 game 4/563-568 giro 4/522 gratuitous loan 4/311 gratuitous service 4/454 guarantee 4/474-487 house 4/92 hybrid 1/38; 1/40 immovable property 4/84-86; 4/107; 4/238245; 4/285; 11/17; 11/31

September 2015

Index industrial 4/12 insurance Intr/19; Intr/124; 7/1 to end; 20/22-35 (see insurance contracts9 insurance 4/19; 4/135; 4/460 intellectual property 4/12; 4/118; 4/158; 4/576 copyright 4/583-591 directives 4/577 editor 4/594 in general 4/577-582 publishing 4/592-595 international Intr/1; 1/24-25; 1/27; 1/36 internet 4/634-635 auctions 4/652-654 consumer 4/647-48 domain registration 4/646 provider 4/649-651 interpretation 12/10 investment 4/546-549 joint venture 4/624-627 know-how see technology transfer land 4/23; 4/43; 4/61; 4/77-81 land management 4/92 language (see Language) lease 4/76; 4/95-7; 4/107; 4/312-318 financial 4/313 operating 4/414 licence 4/118; 4/130; 4/158; 4/596 collecting society 4/610 exploitation 4/605-610 film distribution 4/608-609 film production 4/605 transmission 4/606 lottery see game management 4/429-434 manufacturing 4/286 mixed 4/158-163 non-existing 1/6 not covered by the Rome I Regulation 2/6 null 1/6 nullity 12/35 ‘on demand guarantee’ 1/36 online 13/18 order 4/496-498 package tour/travel 4/96; 6/38 pre-agreement 1/16 preliminary 4/194 price competition 4/569-576 profit 6/14 promise of debt 4/488-490 promise of price see price competition property development 4/92; 4/399 publishing 4/592-595 racing see game rating 4/411 real estate 11/21

Peter Mankowski

Countertrade transaction form requirement 11/110 rent/al 4/76; 4/95-97; 4/107; 4/306 usufructuary 4/307 repair of buildings 4/92 sales 4/236-288 sale of goods 4/25; 4/38; 4/50-65; 4/130; 4/143; 4/246-; 4/263 sale of rights 4/158; 4/281-282 sale of immovable property 4/236-245 securities 4/461-498; 4/544-545 service 4/38; 4/66-76; 4/129; 4/137; 4/346-386 brokerage 4/367-372 commercial agency 4/375-386 commission 4/373 educational 4/360-365 with lease obligations 4/164 lawyer and client 4/349-357 medical 4/358-359 performance 4/366 sports 4/366 settlement 4/492-494 supply 4/260 surety 4/467-487 sponsoring 4/389 State contract 4/667-668 storage 4/455-459 technology transfer 4/611-614 timeshare 4/93; 4/98; 4/107; 4/245; 4/302; 4/319-327; 6/41 transport Intr/124-125; 4/13; 4/19; 4/66; 4/135; 5/1 to end travel 4/415-421 trust 4/449 turnkey 4/163; 4/404-407 typical 1/32-39 underlying 14/23 waiver 4/495 warehousing see storage work 4/390-414 Contractual incorporation 3/374-397 Contractual subrogation 14/1; 14/10; 14/13; 14/27 contrat sans loi 3/305-307 contrat-type 3/164 Convention on the Law Applicable to Trusts and on Their Recognition 4/451 Convention on the Liability of Hotel-Keepers concerning the Property of their Guests 4/423 Corporate entities 13/1; 13/8 consent and material validity 10/22-27 Corporation law 11/31 Correspondence 3/114 Corruption 21/26 Costs of choice of law 3/464 COTIF 5/11 Countertrade transaction 4/291

891

Counter-offer Counter-offer 18/12 Country 22/20 Country Agreement 3/325 Country of origin principle 4/638 Court settlement 11/33 Creditor 12/18-20; 12/25; 14/2; 14/33-35; 15/2; 16/6; 16/12 multiple 16/20 substitution of 14/9-10; 14/31 Croatia Intr/22; Intr/51; Intr/69 Cross-border implications 22/26 Cross-claim 3/353 Culpa in contrahendo Intr/76; Intr/131; 1/7; 1/16; 12/46 insurance contracts 7/56 Cultural Goods Directive 23/13 Currency 3/188; 4/217; 12/4; 12/47-48; 17/33 regulations 12/39 stability 9/71 “Custodian agreement” 1/39 CVR 5/11 Cyprus 24/20 Damages 3/486 aggravated 12/24 assessment of 11/44; 12/19; 12/22-24 for breach 18/13 right to claim 14/16 Data message 11/4 Datumtheorie overriding mandatory provisions 9/186 DCFR 3/274-276; 4/117; 4/132 Dealers 3/469 Debtor 12/18; 12/20; 12/40; 14/27-35; 14/52-53; 16/1; 16/3-29 Deception 3/437 Deed of assignment 14/23-24 Delegation of competence 25/6-7; 25/18 Denmark Intr/1; Intr/10; Intr/17; Intr/22; Intr/24; Intr/29;Intr/48; Intr/54-56; 1/28; 1/29-31; 3/405; 3/415; 20/8; 24/3-5; 24/8 insurance contracts 7/33; 40-42 dépeçage Intr/18; Intr/129-130; 3/313-327; 4/11; 4/21; 4/85; 4/156; 4/188; 4/230; 11/51-55; 12/5; 14/26 additional obligation 4/44-46 exeption for financial instruments 4/156 objective 4/43; 4/85 voluntary 3/313-327; 11/67 Default Intr/121; 12/21; 20/3 Default rule 4/1; 4/157-165 Derivatives 4/150 Deviation 4/94 Dhekelia 24/18 Digital Single Market 3/281

892

Index DIN 3/166 direct action insurance contracts 7/57-59 Directive 85/611/EEC 4/547 Directive 85/577/EEC 6/84; 6/87 Directive 86/653/EEC 4/121; 4/132; 4/375-386 Directive 1987/102/EEC 4/329 Directive 1990/314/EEC 4/417; 5/8 Directive 1993/13/EEC 6/91 Directive 1994/97/EC 4/320; 6/94 Directive 1998/5/EC 4/349 Directive 1999/44/EC 4/258 Directive 2004/25/EC 4/272 Directive 2004/39/EC 4/149; 4/151-154; 6/44 Directive 2005/36/EC 4/349 Directive 2007/64/EC 4/523 Directive 2008/48/EC 4/329 Directive 2008/122/EC 4/289; 6/93 Directive 2009/65/EC 4/547 Directive 2011/7/EU 21/32 Directive 2011/83/EU 4/258; 6/97 Directive 2014/65/EU 4/149; 4/151-154 Directives 3/407-408; 3/421-422; 3/423-426 Choice of law rules 3/423-426; 6/95 Commercial Agents Directive 3/411; 4/121; 4/132; 4/375-386; 24/15 Consumer Credit Directive 3/425; 23/5; 14 Consumer Credit Directive (Recast) 23/14 Consumer Rights Directive Intr/43; 3/425; 23/5; 23/14 Consumer Sales Directive 3/412; 23/4 Cultural Goods Directive 23/13 Directive 85/611/EEC 4/547 Directive 85/577/EEC 6/84; 6/87 Directive 86/653/EEC 4/121; 4/132; 4/375-386 Directive 1987/102/EEC 4/329 Directive 1990/314/EEC 4/417; 5/8 Directive 1993/13/EEC 6/91 Directive 1994/97/EC 4/320; 6/94 Directive 1998/5/EC 4/349 Directive 1999/44/EC 4/258 Directive 2004/25/EC 4/272 Directive 2004/39/EC 4/149; 4/151-154; 6/44 Directive 2005/36/EC 4/349 Directive 2007/64/EC 4/523 Directive 2008/48/EC 4/329 Directive 2008/122/EC 4/289; 6/93 Directive 2009/65/EC 4/547 Directive 2011/7/EU 21/32 Directive 2011/83/EU 4/258; 6/97 Directive 2014/65/EU 4/149; 4/151-154 Distance Selling Directive 11/101; 23/4; 23/14 Distance Selling of Financial Products Directive 23/14 Doorstep Selling Directive 23/5

September 2015

Index E-Commerce Directive 6/79; 19/43; 23/7 Insurance Directives 23/16 Posting of Workers Directive 23/13; 15 Services Directive 23/7 Timeshare Directive 23/14 Timeshare Directive (Recast) 23/14 Unfair Contract Terms Directive 3/13-20; 23/4; 6; 14 Displacement, rule of 5/2 Distance Selling Directive 11/101; 23/4 Directive on consumer rights 4/258; 6/97 Distance Selling Directive 11/101 Distribution Directive 7/19 Divorce 1/22; 20/13; 21/5 Distributors 19/41 Documentary credit see Contract Documentary collection see Contract Doorstep Selling Directive 11/101 Draft Common Frame of Reference (DCFR) Intr/77; Intr/81; 3/274-276; 16/21 Draft Hague Principles on the Choice of Law in International Commercial Contracts 11/42; 20/27 Dual use goods Intr/90 Dubai International Financial Centre 3/293 Duress 3/437-438 Duty to notify 26/1-5 Easements 4/89 École de Dijon 3/294 E-commerce 11/24-25; 11/83 E-commerce Directive Intr/42; 7/69; 19/43; 23/7 Economic duress 3/437-438 Economic sanctions 9/71 EEA 3/406; 24/21 EEA states 7/40-42 insurance contracts 7/33 EEC Custom Code (EEC CC) 16/17 Effect ex nunc 3/333-337 Effect ex tunc 3/333-337; 355 ‘Effects theory’ 1/25 ‘effet utile’ doctrine Intr/94 Eingriffsnormen 9/75 see Overriding mandatory provisions Electronic communication see Contract- internet Electronic devices; use of 11/78 Electronic trading platforms/systems 4/151; 4/154 Employee Intr/3; Intr/76; 11/123-126; 11/19; 19/34; 21/26 protection 8/1;6

Peter Mankowski

European Union competence Employment contract Intr/31; Intr/124; 11/122127; 18/22; 19/1; 21/16; 21/19 animus retrahendi 8/13 animus revertendi 8/13 autonomous definition 8/2 capacity 8/19 choice of law 8/4-6 definition 8/2-3 Directive 96/71/EC 8/14 employee protection 8/1;6 escape clause 8/18 formal validity 8/19 Giulano/Lagarde Report 8/2 habitual working place 8/8-10 lex laboris 8/5;8 mandatory provisions 8/20 material scope 8/2-3 multiple workplaces 8/16 objective connection 8/7 party autonomy 8/4-6 protection of employee 8/1;6 Rome Convention 8/1;7 temporary posting 8/11-15 transfer 8/11-15 Encumbrances 4/89 Enforcement of judgments overriding mandatory provisions 9/207-212 English 3/182 Enterprise 4/84; 4/113; 4/267 takeover 4/270-280 Escape clause 4/4; 4/184 Establishment 19/7-8; 19/25; 19/29-31 freedom of Intr/8; Intr/17; Intr/44 legal organizations 19/37 principal 19/7 right of 19/21 secondary 19/36-37 Estoppel 12/33 EU 3/398 EU law see Directives; EU Treaty; Regulations; TFEU European Certificate of Succession 1/23 European Convention for the Protection of Human Rights and Fundamental Freedoms Intr/97; 21/22 European Court of Justice (CJEU) Intr/98-101; 22/30 European Court of Justice (ECJ) 4/94; 4/98; 4/103 European Economic Area (EEA) 3/406; 4/140; 24/21 European law 3/286 see also Directives; EU Treaty; Regulations; TFEU European PIL Intr/35; Intr/38 European Union 3/398 European Union competence

893

EU Treaty exclusive Intr/26 external Intr/26; 25/5-6 internal Intr/26 conclusion of treaties Intr/26 EU Treaty 23/3 ex ante opportunism 3/208 Evidence 1/18; 11/28; 11/33; 11/37; 11/44-45; 18/4; 18/21 exceptio doli 12/20 exceptio inadimpleti contractus 12/20; 12/40 Exchange control 9/71 Exclusive Economic Zone Intr/49 Exit option 3/46 Export 9/71 Export financing 4/518 Express choice of law 3/48-103 External competence Intr/26; 25/5-6 Extinctive novation 12/28 Factoring 14/7; 14/11; 14/19; 14/51; 15/54 Factoring Convention 25/19 Faeroe Islands 24/8; 17 favor consumatoris 11/99 favor gerentis 11/1; 11/14 favor negotii 4/227; 11/1; 11/14; 11/16; 11/37-38; 11/99; 11/118 favor offerentis 11/99 favor validatis 11/14 Federal law 3/241-242 Federal States 3/241-242; 22/1 to end FIFA Rules 3/250; 293; 299 FIFA Statute 3/299 Financial instruments 4/149-150 Financial interest cover risks; large 7/108-109 Financing contracts 3/212 Flag 4/221 Floating choice of law clauses 3/344-360 Foreign element theory 1/26 form 11/1-7; 11/27-28; 11/40; 11/46; 11/55; 11/99 ‘battle of’ 11/13 Choice of law 3/338-339; 3/462-466 lack of ~ requirement 12/35 of procedural acts 11/33 of unilateral acts 11/32; 11/35 Formenleere 11/73 ‘form shopping’ 11/74 forum shopping Intr/4-5; 2/10 avoidance of Intr/5 ‘justified’ Intr/5 one-sided Intr/3-5 Fraud 3/437 fraus legis 3/376; 398 ‘Freedom not to contract’- rule 1/16 Freedom of choice 1/1-47; 193-246

894

Index Freight contract 5/21 Future law 3/224 Futures 4/150 Game theory 3/34-36; 218 GD see General Directorate GDR 3/223 Gencon Charterparty 3/373 General Directorate 23/4 General maritime law 3/322 General principles of law 3/302 General Terms and Conditions 3/184; 3/198; 3/468-477 Geneva Convention 1/12 Gibraltar 24/8; 24/15 Gifts 1/23; 14/11 Global Legal Pluralism 3/255 Gratuitous service 4/75 Gravity 4/85; 4/163-165 centre of Great Britain Intr/10 Greenland 24/7-8 Ground leases 4/89 Group polarisation 3/218 Guarantee accessory 14/36 on first demand 1/36 personal 14/36 Günstigkeitsvergleich 3/449; 3/456 Guernsey 3/415 Guidelines on Vertical Restraints 4/127 Habitual residence 4/3; 4/14; 4/26; 4/32; 4/47; 4/67; 4/102; 4/113-115; 4/124; 4/163; 4/179; 4/211 change of 19/44 common 4/102; 4/113-115; 434811/26; 11/78; 11/83-85; 13/11; 19/2-5 consent and material validity 10/19-20 of natural persons 11/83 of the agent 11/84 of the assignor 14/46; 15/54 of the debtor 14/52 party without ~ 19/18 Hague Convention on Choice of Court Agreements 25/16 Hague Articles on the law applicable to certain consumer sales 6/106-108 Hague Convention on the Conflicts of Laws 11/40 Hague Convention on the Law Applicable to Agency 4/375; 6/109-111; 11/40; 26/10 Hague Convention on the Law Applicable to International Sales of Goods 1955 4/143-144; 4/255-256; 6/105

September 2015

Index Hague Convention on the Law Applicable to International Sales of Goods 1986 4/257; 11/42; 26/11 Hague Convention on the Law Applicable to Trusts 1/15; 4/461 Hague Convention on the Liability of Hotel-Keepers concerning the Property of their Guests 4/423 Hague Principles on Choice of Law 3/311-312; 477 Hague Protocol of 23 November 2007 1/21 Hague Rules 3/232-234; 25/19; 25/25 Hague Uniform Sales Law 4/248-250 Hague-Visby Rules 3/232-234; 3/238-240; 5/1112; 25/19 Halachah 3/292 Hamburger Freundschaftliche Arbitrage 3/137 Hamburg Rules 3/235; 25/19 Herding 3/219 Herd phenomenon 3/212 Hierarchical choice of law clauses 3/367-371 Holiday home 4/102-103; 4/108; 4/303; 4/319; 6/36; 6/86-91 see also Tenancy – short term Home game 3/198 Home port 4/221 Hong Kong 24/14 Hypothecation 4/91 ICC 3/138 ICC Incoterms 12/15 ICC Model Contracts 3/268; 3/303 ICC Rules of Arbitration 3/139; 3/246 ICC Uniform Customs and Practice for Documentary Credits 4/503 ICC Uniform Rules for Collection 4/503 ICC Uniform Rules on Demand Guarantees 4/479; 4/484 Iceland 3/406; 7/33; 24/21 Identity of carrier clause 5/24-25 Immaterial property rights 4/12; 4/63; 4/125; 4/147 Immovable property 4/94; 4/99; 4/147 Immovable property contracts 4/84-86; 4/95-99 Immutability; principle of 4/183 Implicit choice of law 3/104-192; 3/326 see Tacit choice of law Import 9/71 Incapacity 3/467; 22/23 awareness of 13/21; 13/23 legal 13/1-3 of corporate entities 13/8 of natural persons 13/8 provided by the foreign law 13/13; 22/18 resulting from a foreign court decision 13/13

Peter Mankowski

Insurance; compulsory Incidental questions 22/22 Incorporation 3/260; 262; 263; 272; 275; 283; 322; 374-397 INCOTERMS 3/309; 4/260 Ingmar 3/411; 413; 426; 23/15 Inlandsbeziehung 21/43 in rem 4/84; 4/88-89; 4/91-92; 4/100 Insolvency 17/57 Insolvency of the assignor 14/47 Insolvency Regulation 14/47; 14/51; 17/57 Instant presence 11/59; 11/65 Institute Cargo Clauses 3/324 Insurance certificate 7/79 Insurance contract 7/1 agency 7/80 choice of law 7/11 compulsory 7/158-197 culpa in contrahendo 7/56 Data Protection Directive 7/70 definition 7/15-22 direct action 7/57-59 domestic accidents green card system 7/63-65 E-Commerce Directive 7/69 excluded contracts 7/23 formalities 7/78-79 insurance-based investment products (PRIIP) 7/73-76 internal market goals 7/8-13 international insurance programs 7/105-107 investment funds 7/19 investment products 7/19 large risk 7/24-28; 95-124 mass risks 7/29-34; 125-157 mass risks; third countries 7/35 Motor Insurance Directive 7/66-67 multiple liability 7/84 overriding mandatory provisions 7/86-91 policy holder protection 7/9 protection mortgage creditors 7/92-94 reinsurance 7/36-38; 217-244 (see reinsurance) relationship to consumer contracts 7/49 second hand policies 7/47 social insurance 7/22 subrogation 7/60;83 temporal scope 7/45-48 territorial scope 7/39-44 uncertainty 7/17 Insurance; compulsory 7/158-197 Accidents as Work 7/194-196 Air Transport Regulation 7/192-193 demarcation 7/163-167 harmonized 7/188-191 obligations 7/158-162 proper law 7/171 substitute health insurance 7/194-196

895

Insurance; Consumer Protection Directive Insurance; Consumer Protection Directive 7/5255 Insurance-based investment products regulation (PRIIP) 7/73-76 Intellectual property rights 4/118 Interest analysis 9/3; 9/10 Integration clause 25/27 ‘Inter-local’ conflict 22/27 Internal insurance market 7/10 Internal Market 3/400 International Chamber of Commerce see ICC International conventions Intr/70; 1/24; 4/67; 6/99; 11/22; 14/5-6; 17-21; 20/5; 20/9; 20/11; 20/14; 21/23; 21/27; 22/27; 25/1 to end for the protection of human right 21/22 International family law Intr/38 International insurance programs 7/105-107 international jurisdiction 4/100-101 International Labour Organization 21/26 International law 3/284-285; 25/1 to end International treaties Intr/27; Intr/45; Intr/49; 21/33; 25/1 to end Interpretation Intr/28; Intr/31; Intr/33; Intr/3738; Intr/71-75; 12/9-13 see also method of interpretation Investment funds insurance 7/19 Investment products insurance 7/19 PRIIP Regulation 7/73-76 invitatio ad offerendum 11/32 Ireland Intr/10; Intr/17; Intr/52-53 ISDA Master Agreement 3/212; 297 Islamic Banking 3/289 Islamic Finance 3/289 Isle of Man 3/415; 24/8 ius cogens 3/381 ius dispositivum 3/381 Jersey 3/415 Joint venture 1/37-38; 4/5 Judgment Intr/103; Intr/111; Intr/119; 21/1 free movement of Intr/5 interpretative Intr/120 value 11/20 Judicial duties 3/155-159 Judicial recording 11/2; 11/99 Jurisdiction overriding mandatory provisions 9/192-194 Jurisdiction clause 3/21-22; 115-134 consumer contract 3/397 exclusive 3/115-131 non-exclusive 3/132-134 validity 3/129-131

896

Index Knock out rule 3/473-475 Lando Commission 3/266 Lando Principles 3/266 Language Intr/86; Intr/95; 3/188; 3/390; 4/216; 11/48; 12/1; 14/35; 16/14; 18/1; 19/16 Large risks (see risks; large) Last shot rule 3/473-475 Law applicable Intr/6 Community ~ Intr/11 Community related ~ Intr/11 Company~ matters 1/13 Corporate~ matters 1/13 international contract ~ harmonization of Intr/10 non-State law 22/6 of the place 11/81 shopping Intr/4 substantive ~ 11/33 succession ~ 1/23 Law and Economics 3/23-47 Law-hopping 3/369 Law Market 3/42-47 Lease short term for private use 4/13; 4/78 immovable property contract 4/95 Legal fiction 18/8 Legal Origins Theory 3/215 Legal subrogation 16/5 of contractual claims by social security authorities or other public funds 15/4 on non-contractual claims 15/5 Legislative action 11/25 of the European Union 21/28 Letter of credit see contracts – documentary credit Letter of patronage 4/486-487 lex cartae sitae 4/544 lex causae Intr/76 lex contractus 1/40 lex domicilii communis 4/103; 4/107; 4/184 lex fori 3/153-154; 6/85 lex laboris 8/5 lex loci actus 11/35; 13/3; 13/10 lex loci protectionis 4/577; 4/595; 4/601 lex mercatoria 3/294-300 lex posterior 23/1 lex rei sitae 4/77; 4/86; 4/89; 4/92; 4/191; 22/15 lex situs 4/77; 4/94; 4/102; 4/111 lex specialis 25/2; 15 lex validitatis 3/435 Liechtenstein 3/406; 24/21 insurance contracts 7/33 Liability Exclusion of 12/21

September 2015

Index joint and several ~ 16/17 multi-party ~ 15/6 multiple ~ 16/18 prospect ~ 11/99 Liability clause Limitation of 12/18 Life estate 4/89; 4/91 Life Insurance Directive 7/4 Limitation see Prescription Lloyd’s 3/161 locus regit actum 11/17; 11/40 lois de police see Overriding mandatory provisions London Maritime Arbitrators’ Association 3/137 London market 3/185 Long-term contracts 3/396 Mandatory provisions Intr/43-44; 1/26; 9/1 to end overriding Intr/14; Intr/20; Intr/25; Intr/31; Intr/41; Intr/127; 9/1 to end; 11/93; 11/110; 11/119; 21/9-11; 21/31-32 Maritime contracts 3/212 Mass risks 7/29-35 see Risks, mass M & A transactions 3/50; 211; 321 Materiellrechtliche Verweisung see Incorporation Marriage 1/21-22 Membership 4/93 Member State 1/28-30; 3/405-406 Method of interpretation Intr/33-34 european-autonomous manner Intr/76 autonomous interpretation Intr 78-82; 11/41 interpretation criteria Intr/83-97 comparison Intr/95 conformity with fundamental principles of Community Law Intr/96 Human Rights Intr/97 legislative history Intr/87-88 purpose Intr/93 systematic context Intr/89 wording Intr/86 uniform interpretation 11/36 Minor 13/4 Mistake 3/437 Model Contracts 3/184 Model Laws 25/28 Monaco 24/15; 21 Money transfer 4/50 Montreal Convention 5/11-12; 25/19 More favourable law principle 3/449; 456 Mortgage 4/84; 4/88; 4/92; 4/282; 4/333; 6/36; 15/3 Movables 4/87; 4/158 Movie-related contracts 3/161 Multilateral conventions 25/1-35

Peter Mankowski

Obligation Multilateral system 4/151-153; 6/49-50 Multilateral trading facility 4/151-153 Multipartite contracts 3/484 Nash-Equilibrium 3/361 Nationality Intr/47; 2/2; 11/28; 13/11 National standards 3/166 Negative choice of law 3/308; 4/18 Negotiable instrument 1/9 negotiorum gestio 15/6 Neo-classical Law and Economics 3/23-24 Neutral law 3/201-211; 452 Neutrality 3/206 New Institutional Law and Economics 3/25-28 New Law Merchant 3/294-300 New York law 3/49; 212; 214 Nickel & Goeldner 25/8-14 Nipponkoa 25/8-14 Non-contractual obligations 3/95-102 Non-state instruments 3/247-312 Norway 3/406; 7/33 Notarial deed 11/2; 11/111-112 Notarial recording 11/38; 11/111-112 Notary 4/78 Notice of termination 11/32; 11/90; 11/126 Notice to pay 11/90 Notification 26/1-5 Nullity 12/35 consequence 12/34 partial 11/118 total 11/118 Obligation additional 4/44-46 ancillary 12/17 arising from donations 1/6 from negotiables instruments 1/6 out of damage 1/7 under bills of exchange; cheques and promissory notes 1/9 concerning the private aspects of collective bargain agreements 1/6 confidentiality 12/17 contractual Intr/8; Intr/10; 1/5; 2/11; 11/1 uniform Regulation of the conflict rules for contractual obligations Intr/18 formally invalid 11/117 Draft of a Convention on the Law Applicable to obligations of June 1972 Intr/10 erroneous 16/21 extinguishing 12/25-26 main 12/17 non-contractual Intr/6; Intr/10; 1/7

897

Offer pre-contractual 1/6; 1/16 PIL of obligations Intr/9 to contract 1/7 solidarity of the obligation 16/16 Obligatio naturalis 1/6 Offer 11/11; 11/13; 11/24; 11/63; 11/90; 18/12 to the public 1/6 Official Journal 26/6 Opt-in Intr/17; Intr/20; Intr/52 options 4/150 Ordre Public 4/30 Ownership 4/89; 4/107 co-ownership 4/88 full transfer of 4/107 Ordre public Intr/35; Intr/128; 17/17; 21/3; 21/10-13 Ordre public de proximité 21/43 Organ the legitimacy of ~ to conclude a contract 13/8 Overriding mandatory provisions 9/1 to end anti-trust legislation 9/71 certainty 9/124;126;135 choice-of-court agreements 9/195-206 commercial embargoes 9/71 compatibility with EU law 9/91-93 compatibility with international law 9/94 competence of ECJ 9/97-100 connection with enacting state 9/95-96 consumer 9/26-32;38;83 currency stability 9/71 definition 9/53-100 mandatory nature 9/62-67 overriding reach 9/86-90 public interest 9/68-85 Eingriffsnormen 9/75 employee 9/26-32;38;83 enforcement of judgments 9/207-212 EU law instruments 9/39-42 European law rules 9/47-51 exchange control 9/71 express reach 9/86-90 implied reach 9/86-90 import and export 9/71 Inlandsbeziehung 9/95-96 international law 9/52 Jurisdiction 9/192-194 Matrimonial Property 9/16 methodology 9/8-10 of foreign lex contractus 9/108-119 of lex fori 9/101-107 of third state 9/120-191 comity 9/123 conditions 9/141-191 conflicting duties 9/123;139 cooperation 9/123

898

Index Datumtheorie 9/186 discretion 9/168-169 factors 9/172-178 harmony of decisions 9/123 Machttheorie 9/123;139 place of performance 9/154 political compromise 9/128 quasi-political role 9/126 reasons 9/170-171 Sittenwidrigkeit 9/186 uncertainty 9/126 party autonomy 9/117-119 prices and fees 9/71 public interests 9/71 public markets 9/71 public policy 9/42-44 recognition of judgments 9/207-212 Registered Partnerships 9/16 restraint of trade 9/71 Rome II Regulation 9/14 sanctions 9/71 scope of application 9/20-23 Sonderprivatrecht 9/75 Sources 9/45-52 stock exchange 9/71 Succession Regulation 9/15 unilateral approach 9/10 universal application 9/23 Workers Directive 9/80 pacto de non cedendo 14/22; 14/32 Paramount Clauses 3/231-240 Parol evidence rule 18/20 Parteischutzvorschriften 9/81 Partial choice of law 3/313-327 Parties’ Choice of Law see Choice of Law Party autonomy Intr/3; Intr/6; Intr/122; 1/27; 1/40; 3/1-47; 11/1; 11/39 see Choice of Law employment contract 8/4-6 Passengers’ Rights Regulations 3/457; 23/11 ‘Payer’s law principle’ 16/9-11; 16/29 Payment mandate of 15/3 promise of 1/6 sine titulo 16/21 PECL 3/249; 266 PEICL 3/267 general 7/12-13 definition insurance contract 7/16-17 risks; large 7/124 Penalty clause 12/20 Performance 12/17-18 characteristic Intr/124; 11/19-20 defective 12/37

September 2015

Index late 12/19 non 12/19 non-monetary 11/19 not in conformity with the contract 12/19 of the obligation 12/25 partial 12/19 time of 12/18 Petrification clauses 3/79-80 PICC 3/268-272; 7/38 see UNIDROIT Principles Place of administration 19/10; 19/21; 19/23-24; 19/25 Place of business Intr/124; 19/6; 19/8; 19/10; 19/24; 19/27-34; 19/43 Place of conclusion of the contract 3/384 Place of performance 3/172-173; 384 Policy holder protection 7/9;49 Political neutrality 3/206 Political sanctions 9/71 Political stability 3/201 Posting of Workers Directive 23/13; 23/15 Prescription 11/41; 12/29; 12/32 Interruption and suspension 12/31 Primary law 23/3 Prize-notifications 1/6 Price reduction 12/20 Price regulation 12/39 PRIIP Regulation 7/73-76 Principle of good faith 13/4; 13/22-23 Principles of European Contract Law 3/266 see PECL; Lando Principles Principles of European Insurance Contract Law (PEICL) 3/267; 7/12-13 see PEICL Principles of Reinsurance Contract Law (PRICL) 7/229 Principles of European Contract Law 3/266 Principles of European Insurance Contract Law 3/267 private use 4/107; 4/108; 4/116 Procedural agreement 11/33 Proper law approach 4/14 Property immaterial 4/12 immovable 4/12 Protection consumer 9/26-32;38 employee 8/1; 6; 9/26-32; 38 policy holder 7/9 Protection clause 11/99 Protective clause 11/98 Public act 11/47-48 Publication 26/6-7 Public interest Intr/41; Intr/127; 9/71; 11/93; 11/127; 21/9

Peter Mankowski

Religious law Public law Intr/37; Intr/76; 1/4; 11/48 Public markets 9/71 Public policy 11/128; 17/18; 21/1 exception 21/1; 21/15 ‘international’ 21/23 of the forum state Intr/3 Qualification Intr/76-77; 4/31; 11/40; 11/41; 11/48; 14/25 Qui eligit forum eligit ius 3/122-128 Real estate 11/4; 11/9; 11/20; 11/107-111 Receivable 4/84 ‘Recharacterization risk’ 14/51 Recognition of debt 1/6 Recognition of judgments overriding mandatory provisions 9/207-212 Recourse between debtors 16/28 Reference procedure Intr/98-118 Reference rule 11/14-15 Registered partnerships 1/21 Registered seat 19/25 Registration 4/221 Regulated market 4/151 Regulation (EC) No.261/2004 5/10 Regulation (EC) No. 1371/2007 5/10 Regulation (EC) No. 1060/2009/EC 4/412 Regulation (EEC) No. 4087/88 4/117 Regulation (EU) No.330/2010 4/127; 4/13 Regulation (EU) No.650/2012 20/13 Regulations on matrimonial and partnership property Intr/38 Regulatory Competition 3/42-47 Reinsurance 3/185; 7/36-38 alternative risk transfer (ART) 7/221 arbitration 7/240-244 captive reinsurers 7/223 choice of law 7/225-231 company reinsurers 7/223 customs 7/236-238 definition 7/217-223 financial 7/220 objective connection 7/232-235 overriding mandatory provisions 7/239 pools 7/222 Principles of Reinsurance Contract Law (PRICL) 7/229 proportionality 7/219 UNCITRAL Model Law 7/241 UNIDROIT Principles of International Commercial Contracts (PICC) 7/229 Relevant point in time 4/32-35; 4/99 Religious law 3/287-292

899

Remedies for breach of choice of law agreement Remedies for breach of choice of law agreement 3/485-493 Remedies for breach of contract 11/44 Remission 12/26; 20/1 Remission of a debt 11/32; 11/36 Renunciation 12/26 Renvoi 3/226-228; 3/243-246; 3/258; 4/29; 20/1 to end Residence permit 19/13 Residential property 4/89; 4/91 Resolution dedicated to “The Autonomy of the Parties in International Contracts between Private Persons or Entities” adopted by the Institut de Droit International in its Session of Basel of 1991 20/27 Report Giuliano/Lagarde 7/2 Restatement of European Insurance Contract Law 7/12 review clause Intr/43; 11/12; 14/25; 14/42 Review of choice of law 3/443-458 Revisibility 4/234 Rights in rem see in rem Rights of abode see Abode Risks; large arbitration 7/123-124 choice of law 7/96; 100-101 co-insurance 7/110-118 excess of loss insurance 7/119-120 financial interest cover 7/108-109 objective connection 7/102-104 risks; mass choice of law 7/125-144; 148-150 choice of law extension 7/142-144 consumer insurance contracts 7/147 group insurance 7/153-157 objective connection 7/145-146 third countries 7/35; 198-216 choice of law 7/200-211 objective connection 7/212-216 Rome Convention Intr/5; Intr/29; Intr/43; Intr/56; 24/1 to end Art. 4 Intr/15 Art. 5 Intr/13 Art. 7 Intr/14 decisions of the CJUE Intr/31 difficulties Intr/12-15 interpretation Intr/72 material scope 1/1 on the law applicable to Contractual Obligations Intr/11 Protocols that granted the CJEU jurisdiction to interpret the Rome Convention Intr/12 ratification Intr/12 transformation into a Community instrument Intr/18

900

Index Rome I Regulation Intr 5; Intr/11; Intr/38 aims Intr/2-3 amendment Intr/24 applicability Intr/22-23 modifications Intr/24 negotiations Intr/20 objectives Intr/2-3 precedence over national law Intr/24-25 preparation of Intr/17-18 primacy of 2/4 principles Intr/121 universal application 2/1-4 Rome II Regulation Intr/5; Intr/32; Intr/38 Rome III Regulation Intr/38 ‘Rome Zero Regulation’ Intr/35 Rotterdam Rules 3/235; 25/19 Royalties see Contracts -licence Rules of Procedure of the CJEU Intr/117-118 Sale of artwork 21/26 Salvatory clause 3/332 San Marino 24/15; 24/21 Scheme of Arrangement 3/328 Scope of application of the Rome I Regulation; international element of the contractual relationship Intr/46 Scope of application of the Rome I Regulation; personal Intr/47 Scope of application of the Rome I Regulation; territorial Intr/48-67 Cyprus Intr/50 Denmark Intr/54 European micro-States Intr/67 External territories Intr/57 Finland: Aland Islands Intr/58 France: départements et régions d’outre mer and collectivités d’outre mer Intr/59 Netherlands: Aruba and the Netherlands Antilles Intr/60 Portugal: Azores and Madeira Intr/61 Spain: Islands and exclaves Intr/62 United Kingdom Intr/63-66 Faeroe Islands Intr/56 Republic of Ireland Intr/52 United Kingdom Intr/52 Scope of application of the Rome I Regulation; substantive Intr/68 Scope of application of the Rome I Regulation; temporal Intr/69 Seat 4/35; 4/47; 4/50; 4/137; 4/181; 4/191; 13/9; see also Habitual residence of the administration 19/23; 19/25 of the central administration 19/26; 19/38 of the employer 11/126 registered 19/43

September 2015

Index statutory 19/25 Securities transferable 4/149-150 Seizure 4/143 Self-regulatory contract 3/305-307 Service contracts 4/137 Services Directive 23/7 Servitudes 4/89 Set-off Intr/34; 17/1-7 contractual 17/9; 17/54 declaration 17/4 extrajudicial appeal for 17/16 in case of bankruptcy 17/14 legal effects 17/43 non-contractual 17/10 procedural aspects of 17/5 prohibition 17/28-30 Severability of issues 3/317-325 Share acquisition 4/274 Share deal 4/267-276 information disclosure concerning public take over bids 4/275 Shareholder 1/13; 11/112 Sharia 3/288-291 Ships 4/87; 4/221; 4/283-284; 4/307; 4/403 Short term lease see Lease Signalling 3/221 Silence consent and material validity 10/3-6 “Sister contracts” 3/91-93 Sittenwidrigkeit overriding mandatory provisions 9/186 Situs of contract object 4/212 SME 3/38 Social insurance 7/22 Social security 3/168 Soft law 3/381 Sonderprivatrecht 9/75 Speciality 4/25; 4/42 Specific conflicts rule 4/19-20 Specimen choice of law clauses 3/58-61 Split choice of law clauses 3/361-366 Stabilisation clauses 3/81-84 Standard Contracts 3/184 Standard Terms and Conditions 3/184; 3/369; 3/468-477 Statute of limitation 12/30 Stock exchange 4/142; 4/148; 4/556; 9/71 arbitration agreement 4/561 direct transactions 4/557 futures transactions 4/559 virtual financial market place 4/560 Subrogation insurance contracts 7/60 Subsequent choice of law 3/328-366

Peter Mankowski

Trade associations Surprise 3/459 Swap 4/150; 4/203; 5/553 Sweden 3/203 Swiss Act on Private International Law 4/168 State liability 3/416; 3/491-493 Swiss law 3/49; 3/69; 3/206 Switzerland 3/206; 3/209 Tacit choice of law 3/104-192; 3/326; 4/190-191; 4/237; 4/535 ADR 3/142 Arbitration agreement 3/135-141 Business relations 3/174-175 Conciliation agreement 3/142 Construction clauses 3/181-183 Court proceedings 3/143-159 Currency 3/188 Intentions 3/191-192 Jurisdiction clauses 3/115-134 Language 3/188; 3/390 Mediation agreement 3/142 Mindset 3/191-192 Place of performance 3/172-173 Rules of a certain law 3/160-171 Transaction structures 3/176-180 Technical device 11/60 Teilfrage 3/313 Tenancy 4/91; 4/94; 4/107 short term 4/94; 4/101-102; 4/108-112; 4/184; 4/301; 4/305 of immovable property 4/107; 4/300; 6/41 territoire ou île flottants Intr/49 TEU Art. 52 Intr/48 TFEU 23/3; 25/4-5 Arts. 67-89 Intr/53-54 Art. 267 TFEU Intr/98-118 Art. 349; 355 Intr/29; Intr/56-57 “Theorie der Doppelnatur” 11/33 “Theorie des Doppeltatbestands” 11/33 Third country 6/97 Third country clause 11/100; 11/102 Third parties 3/340-343; 478-484 Third persons 4/219 Time charters 5/22 Timeshare 4/88; 4/93; 6/41; 6/88; 6/94 see also contracts- time share Timeshare Directive 23/14 Timeshare Directive (Recast) 23/14 TNR v. Axa 25/8-14 Tontines insurances 7/20-21 Top Level Domain 3/188 Tort Intr/37; 3/95-101; 3/483; 14/29; 15/5; 16/21 Trade associations 3/220

901

Traders Traders 3/469 Trade usages 12/18; 20/5 Transactions 3/176-180; 481-482 Transaction structures 3/176-180 Transfer of property 11/108 of rights 11/31 of rights in rem 11/31 of shares 11/31; 11/112 Transition State 3/222 Transnational law 3/254 Trap 3/208 Treaty of Amsterdam Intr/2; Intr/17; Intr/52 Treaty of Lisbon Intr/17; Intr/100-101 Trennungsprinzip 14/23 trust 1/15 UCP 3/270 ultra vires 3/325 Umbrella agreements 3/89-90 UNCITRAL Convention on the assignment of receivables in international trade 2001 14/6 UNCITRAL Convention on Contracts for the Sale of Goods 6/103 UNCITRAL Convention on the Limitation Period in the International Sale of Goods 12/32 UNCITRAL Legal Guide on International Countertrade Transactions 4/289 UNCITRAL Model Law reinsurance 7/38 risks large 7/124 UNCITRAL Model Law on Arbitration 25/28 UNCITRAL Model Law on Electronic Commerce 4/636; 11/4 UNCITRAL Model Law on Electronic Signatures 4/636 UNCITRAL Model Law on International Credit Transfers 4/500; 4/524 UN Convention on Independent Guarantees and Stand-by Letters of Credit 4/462; 4/478 UN Convention on the Law of the Sea Intr/49 UN Convention on the Liability of Operators of Transport Terminals in International Trade 4/456 UN Convention on the Use of Electronic Communication in International Contracts 4/636 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import; Export and Transfer of Ownership of Cultural Property; made in Paris on 14 November 1970 21/26 Unfair Contract Terms Directive 3/13-20; 11/100

902

Index UNIDROIT Agency Convention 4/254 UNIDROIT Convention on International Factoring 4/281; 4/513; 14/7 UNIDROIT Convention on International Financial Leasing 4/313 UNIDROIT Convention on International Interests in Mobile Equipment of 2001 (Cape Town Convention) 4/462 UNIDROIT Convention on Substantive Rules for Intermediated Securities 4/462; 4/550 UNIDROIT Model Franchise Disclosure Law 4/117; 4/122 UNIDROIT Principles 3/249; 3/268-272 UNIDROIT Principles of International Commercial Contracts (PICC); reinsurance 7/38; 7/299 UNIDROIT Uniform Law on the International Sale of Goods 6/100-103 see CISG Uniform Customs and Practice for Documentary Credits (UCP 600) 4/531 Uniform Rules on Collections (URC 522) 4/542 Uniform usages 3/301 United Kingdom Intr/17; Intr/20; Intr/52; Intr/ 63-66; 1/29; 22/2; 22/10; 22/25; 22/31 United States 22/2 Unjust enrichment 3/102 UN Legislative Guide on Secured Transactions 4/462 UN Limitation Convention 4/251 Usufructs 4/89; 4/307 Vacuum 3/307 Vatican State 24/15; 21 Vertragsspaltung 3/320; 323; 365 Vessel see ships venire contra factum proprium 12/20 Vienna Convention on the Law of Treaties Intr/ 75; 21/2; 4/667 Vorschaltlösung 3/278 Waiver 11/57 Warsaw Convention 25/19 Withdraw 12/20 right to withdrawal 12/26 Witness testimony 18/22 Workers’ Posting Directive 9/80 Writing requirement 11/1-2 Xetra

4/151

September 2015