Rome I Regulation on cross-border contract liability cleared for adoption

17 December 2007

Graham Smith

The way is now clear for the adoption of the EU Rome I Regulation on the Law Applicable to Contractual Obligations, which will replace the existing 1980 Rome Convention. The Regulation, which is significant for online consumer transactions, will set out the rules determining which country's law should be applied to a contract in most courts within the European Union.

The EU Council announced on 7 December that, subject to scrutiny by lawyer-linguists, it approved the text adopted on First Reading by the European Parliament on 29 November. The Regulation will apply only to contracts entered into after its date of application, which will be 18 months after it enters into force. The Regulation will apply throughout the EU with the exception of Denmark. The United Kingdom, although it opted out of Rome I during its early development, is now expected to consult on opting in to the final version.

The aspect of most interest to online actors, and which gave rise to some of the greatest controversy during the debates about the Regulation, is the application of consumer protection laws to cross-border contracts. The existing Rome Convention provides that a choice of law cannot deprive a consumer of the protection of the mandatory rules of his country of habitual residence, if the steps necessary to conclude the contract were taken in his country and the conclusion of the contract was preceded, in that country, by a specific invitation or by advertising. The new Regulation abolishes these location requirements, replacing them with a test based on whether the online supplier by any means, directs its commercial or professional activities to the consumer’s home country or to several countries including that country. This is similar to the test in the existing Brussels I Regulation on Jurisdiction and Enforcement of Contracts. Recital (24) calls for the concept of targeted activity to be interpreted harmoniously in the two instruments.

Although the precise scope of the targeting test remains uncertain, compared with the European Commission’s first proposal, the final version of the Regulation is much closer to being the modernised version of the 1980 Rome Convention that the European Commission originally claimed it to be.