International Transactions: Jurisdiction and Applicable Law
I. The Brussels I Regulation
II. The Rome Convention and the Rome I Regulation
Even though the directives discussed so far have the purpose of harmonizing consumer contract law within the European Union, determining the applicable law is still of utmost importance. This is for three reasons: a) only a limited area of law has been harmonized so far, b) most of the directives allow Member States to introduce more stringent provisions and c) European consumers may chose to conclude contracts with parties domiciled outside the territory of the European Union.
In case a dispute arises, it furthermore needs to be established which courts possess jurisdiction to hear the case.
I. The Brussels I Regulation
Benefits of the
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 Regulation)
- Common provisions for jurisdiction on matters with transborder relevance, as long as the defendant is domiciled in a Member State.
- Automatic recognition of the judgment in any other Member State.
- Immediate declaration of enforceability by the courts of any other Member State upon application of one of the parties.
Principles
- Scope: civil and commercial matters (except for family and inheritance law, insolvency, social security, arbitration) if the defendant is domiciled in a Member State (Art. 1, Art. 2(1).
- The defendant shall be sued in the courts of the Member State where he is domiciled (the so-called 'natural forum', based upon the principle of actor sequitur forum rei).
- The defendant may also be sued in another Member State according to Art. 5, 6.
- Specific rules for jurisdiction in insurance matters (Art. 8 et seq.), consumer contracts (Art. 15 et seq.) and employment contracts (Art. 18 et seq.).
- Exclusive jurisdiction for the matters covered by Art. 21.
- Forum selection clauses possible under Art. 23.
Consumer Protection, Art. 15 et seq.
- Contract between a trader and a consumer.
- One of the situations described in Art. 15 lit. a to c.
- Exception: a contract of transport other than a contract which, for an inclusive price, provides for a combination of travel and accommodation.
- Regarding lit. c and its application on marketing contained on websites, a Council declaration of 14 December 2000 states the following: 'This provision relates to a number of marketing methods, including contracts concluded at a distance through the Internet. In this context, the Council and the Commission stress 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.'
- If the prerequisites of Art. 15 are given, the trader may sue the consumer only in the Member State in which the latter is domiciled, Art. 16(2).
- Whereas the consumer may sue the trader in the Member State in which either of them is domiciled, Art. 16(1).
- Forum selection is admissible only in very limited circumstances, Art. 17, 23(5).
II. The Rome Regime regarding the applicable contract law
The 1980 Rome Convention on the law applicable to contractual obligations (consolidated version)
was open for signature to Member States of the European Union only. The Convention is replaced by the
so-called
Rome I Regulation (Regulation (EC) No 593/2008 of the European Parliament and of the
Council of 17 June 2008 on the law applicable to contractual obligations). The Rome I Regulation entered into force
on 24 July 2008 and applies to contracts concluded after 17 December 2009 (cf. Art. 28).
Principles for the law governing contractual obligations:
- Art. 3 of both the Rome Convention and the Rome I Regulation stipulate the principle of party autonomy, that is the law chosen by the parties shall govern the contract, under the qualifications provided by Art. 3(3), (4).
- In the absence of a choice of law clause, the contract is governed by the law with which the contract is most closely connected (Art. 4(3) Rome I Regulation, Art. 4(1) Rome Convention).
- Legal presumption under Art. 4(2) Rome I Regulation / Convention: contract is most closely connected with the country where the party who is to effect the characteristic performance has its residence.
- For example: a sales (services) contract is most closely connected with the law of the country where the seller (service provider) has his habitual residence, cf. Art. 4(1) Rome I Regulation.
Consumer protection under the Rome Convention
- Art. 5 protects the 'passive consumer' under specific circumstances:
- Supply of goods or services to a consumer, Art. 5(1),
- one of the situations spelt out by Art. 5(2),
- none of the exceptions of Art. 5(4) apply (take note of Art. 5(5)).
- Consequence no. 1: in the absence of a choice of law clause, the contract is governed by the law of the country in which the consumer has his habitual residence, Art. 5(4).
- Consequence no. 2: in the case of a choice of law clause, the mandatory consumer protection rules of the law of the country in which the consumer has his habitual residence still apply, Art. 5(2).
Consumer Protection under the Rome I Regulation
- The scope of the consumer contracts provision in Art. 6 of the regulation mirrors Art. 15 lit. c of the Brussels Regulation, that is
- any type of contract is covered (not limited to sales and services contracts).
- an 'active' consumer is protected: It is sufficient if the trader directs his commercial activities at the Member State in which the consumer resides.
- Consequence: The contract is governed by the law of the country in which the consumer has his habitual residence, Art. 6(1).
- The parties to a consumer contract remain free to choose the law applicable to a contract; this choice however may not have the effect
of depriving the consumer of the benefit of mandatory provisions of the law that would otherwise be applicable, cf. ARt. 6(2) Rome I Regulation.
- The exceptions contained in Art. 6(4) Rome I Regulation remain close to Art. 5 Rome Convention.
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