Do you feel that the Rome regulations have vastly improved upon the convention of 1980?

After six long years and many rounds of discussions and political debates, the Rome Convention on the Law Applicable to Contractual Obligations was converted into a Community instrument: the Rome I Regulation. This Regulation entered into force on July 24, 2008 and is applicable to the entire European Union (except Denmark). The Rome I Regulation applies to contracts concluded after December 17, 2009. The reason for converting the Rome Convention into a Regulation is because a regulation is more binding than a convention. Earlier, the Member States could withdraw or place reservations on the Convention. However, now with a set of binding rules, it is not easy for the member states to do so. Being a part of the Regulation they are expected to comply with the same. The Rome Convention, 1980 developed when the European Community was still in its nascent stage. It was the times when there was hardly any globalisation or industrialisation and the Convention was more or less a reflection of the customary practices. The ambition of the Rome I Regulation, on the other hand, is to lay down a comprehensive set of rules pertaining to choice-of-law for obligations in civil and commercial matters within the European Union. To this end, Rome I is complemented by the Regulation on the Law Applicable to Non-Contractual Obligations, which has been applied since January 11, 2009, and provides for choice-of-law rules regarding obligations arising out of tort/delict, unjust enrichment, negotiorum gestio, and culpa in contrahendo. The Rome Regulation, however, cannot act in certain condition, viz, (1) questions considering the legal status or capacity of a natural person, (2) obligations out of personal matters, eg. Marriage, succession, parentage, wills etc. Family law as such has been excluded from the Regulations. (3) Contracts relating to negotiable instruments, (4) arbitration agreements (5) principal- agent relationship contracts. (6) Fiduciary contracts (7) rules of evidence and procedure, which is decided by the forum where the matter is brought. An additional clause to these exceptions were introduced which excluded questions considering not just the legal status or capacity of a natural person but also that of artificial persons. This included within its ambit the liability, obligations of companies, insurance contracts etc. When compared to Rome II, which has no legal predecessor and, therefore, presents a milestone in the development of European private international law, Rome I is a relatively modest modernization of pre-existing choice of law rules designating the applicable law to contractual obligations. On the other hand, Rome I is by no means a verbatim copy of the

Rome Convention; indeed, the wording of several articles has been rephrased or clarified, and a number of important changes have been implemented. These changes include, inter alia: a minor adjustment to the principle of party autonomy (Article 3); a complete revision of the choice of law rules regarding the applicable law in the absence of choice (Article 4); new provisions on transports of carriage and insurance (Articles 5 and 7 respectively); an expansion of the choice of law rules regarding consumer contracts; and a rephrasing of the so-called mandatory rules of law. Some of the important changes in the Rome Regulation from that of the Rome Convention are discussed below: Article 3: This article essentially deals with the principle of party autonomy. The parties freedom to choose the law applicable to their contract, whether or not it is the law of an EU Member State, is still a fundamental principle in Rome I. The parties also continue to be allowed to choose the law applicable to only a part of their contract. No departure from the Rome Convention has been intended in these respects. In fact, except for one minor textual amendment, the principle of party autonomy has remained unaltered. This amendment relates to the criteria for making an implicit choice of law, which seem to have been tightened. Whereas under the Rome Convention an implicit choice must be demonstrated with reasonable certainty by the terms of the contracts or the circumstances of the case, Rome I says this choice must be demonstrated clearly. In this respect, Rome I embodies a preference for certainty over flexibility, limiting the courts discretion to determine whether the parties have made an implied choice of law. Moreover, under Rome I, one of the factors to be taken into account in determining whether an implicit choice of law has been clearly demonstrated is an agreement between the parties to confer on one or more courts or tribunals of a Member State exclusive jurisdiction to determine disputes under their contract. In the absence of an express choice of law, a choice of court could, therefore, bring about an implicit choice for the law of the country where the court has jurisdiction (the law of the forum). This soft rule, which is not to be found in the Rome Convention, has been both praised for its efficiency and criticized for its inconsistency with the principle of party autonomy. Like the Rome Convention, Rome I does not allow the contracting parties to choose anything but national law. Therefore, non-State rules of law - such as lex mercatoria. The Principles of European Contract Law, or the UNIDROIT Principles of International Commercial Contracts, cannot be chosen as the law applicable to the contract. This intentional omission has been criticized as being out-of-touch with international commercial reality, contradictory

to the principle of party autonomy and inconsistent with the arbitration laws of many countries. However, Rome I does not preclude the contracting parties from incorporating by reference into their contract non-State rules. Clause 3 of Article 3 also mentions that as long as there is no contradiction, the parties are free to be governed by the law chosen by them. However, when a contradiction arises, and if all the elements of the contract, such as performance, habitual residence etc., is found in one country which is not the preferred country, then the courts choose that country over the preferred country. One should also note that the freedom of choice is governed by the mandatory rules. The meaning of which, varies from the Convention to the Regulation and has been clarified in the Regulation.

Article 4: Article 3 deals with situations when the parties choose the law applicable, however, Article 4 is applicable when such a choice is not made. Rome I contains some major changes in respect of the choice-of-law rules regarding the law applicable to the contract in the absence of an express or implied choice of law by the contracting parties. First, Rome I provides for a bright-line approach in respect of eight categories of contracts, stating for each category the determinative connecting factor to designate the applicable law (the first main rule). Included in this list of categories are, for example, contracts for the sale of goods, contracts for the provision of services, franchise contracts, and distribution contracts. According to Rome I, the aforementioned contracts are governed by the law of the country where the seller, service provider, franchisee, or distributor, respectively, has his habitual residence. This bright-line approach contrasts with that of the Rome Convention, under which the main rule for every contract is that the contract shall be governed by the law of the country with which it is most closely connected, (close connection was generally presumed to be that place where the person effecting the contract habitually resides) subject to certain presumptions regarding, most importantly, characteristic performance. Note that Rome I also introduces a new provision on the definition of habitual residence. Second, contracts which fall outside the aforementioned categories 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 (the second main rule). This rule also applies to contracts which fall into more than one of the aforementioned categories. Thus, the presumption of the Rome Convention relating to characteristic performance has been turned into one of the two main rules of Rome I regarding the applicable law in the absence of choice. Third, where the applicable law cannot be determined pursuant to the two main rules of Rome I mentioned above, the contract shall be governed by the law of the country with which

it is most closely connected. Thus, the main rule of the Rome Convention has been turned into the residual rule in Rome I. Just as with the implicit choice of law, certainty wins over flexibility in Rome I with respect to the choice-of-law rules regarding the applicable law in the absence of a choice. However, Rome I leaves some discretion to the courts in determining the applicable law in the absence of choice, by providing that the two main rules mentioned above (the categories rule and the characteristic performance rule) shall not apply 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 by either of these two main rules. In such a case, the law of that other country shall apply. A similar exception is present in the Rome Convention, but without the adverb manifestly. This means that under Rome I courts have less leeway to resort to this exception than under the Rome Convention. Once again, therefore, Rome I provides for more certainty, albeit less flexibility, than the Rome Convention. On the other hand, the preamble of Rome I makes it clear that to determine the country with which the contract is manifestly more closely connected, account should be taken of, inter alia, whether that contract has a very close relationship with one or more other contracts. This suggests that the manifestly more closely connected exception may be more readily satisfied than on first sight.

On analysing certain articles of the Rome I Regulation and the Rome Convention, I, personally feel that Rome I regulation has indeed vastly improved upon from the Convention of 1980. Rome I is a welcome update of the choice-of-law rules previously laid down by the Rome Convention. Several important new provisions have been introduced, such as those on contracts of carriage and insurance contracts, renvoi etc. and the language of pre-existing rules has been clarified, such as the rules that designate the applicable law in the absence of a choice. As a result, Rome I provides for more certainty than the Rome Convention, albeit sometimes at the cost of reduced flexibility. However, some issues, most notably the parties freedom to choose non-State rules as the law applicable to their contract, are not dealt with in Rome I and have been left for another day. It is clear, therefore, that Rome I is not an end product but merely another step in the development of private international law within the EU, although one that, together with Rome II and Brussels I, results in a more coherent framework of European choice-of-law rules.