Rome I Regulation on cross-border contract liability comes into force

11 January 2010

Graham Smith

The EU Rome I Regulation, which lays down rules to determine the national law applicable to contractual obligations, came into force on 17 December 2009.  The Regulation replaced the existing 1980 Rome Convention and is of especial relevance to cross-border online retail businesses. 

The Regulation applies only to contracts that were entered into from 17 December 2009 and applies throughout the EU with the exception of Denmark.

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 has abolished these location requirements, replacing them with a ‘targeting’ 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) of Rome I calls for the concept of targeted activity to be interpreted harmoniously in the two instruments.

Any retail online business that takes orders from an EU country other than its own is potentially made subject to the mandatory rules of the consumer’s own country.  A wide variety of factual indicia, typically gleaned from a close scrutiny of the website, may be taken into account in determining whether the online retailer’s activities are directed to that country, so triggering the targeting provisions of the Regulation.