The plan is to update the Rome Convention of 1980 and convert it into a Community instrument – an instrument with a working title of Rome I. This should not be confused with Rome II, a different instrument which is intended to deal with non-contractual cross-border disputes, such as those on product liability or defamation.
The 1980 Convention deals with disputes over international contracts. It only came into force in 1991 and exists to clarify whose laws apply in the event of a cross-border contractual dispute where there is a choice between the laws of different countries.
It does not apply in certain disputes, including those involving wills and property rights related to family relationships, arbitration agreements and disputes governed by company law.
The 1980 Convention allows the signatories of a contract to choose the law applicable to their contract, and to select the court which will hear disputes arising from that contract.
If the parties have not stated the applicable law, the Convention provides that the contract will be governed by the law of the country with which it is most closely connected – usually the habitual residence of the party performing the contract, or the place of central administration for businesses.
The Convention does not provide for a judicial body which would hear disputes involving its interpretation. This is, according to the European Commission, a shortcoming that inhibits the co-operation between Member States' courts.
To solve this problem, the Commission suggested that the Rome Convention should be converted into a Community instrument. If this happens, Member States' courts will be able to ask the European Court of Justice to interpret the provisions of the convention, in cases of dispute.
Such a conversion would also, the Commission argues, be an opportunity to update the law in certain areas, such as consumer protection and employment contracts with cross-border elements.
The Commission included its proposals in a Green Paper. In January this year, it asked businesses and individuals to submit their opinions. The consultation closed on 15th September.
The ICC announced this week that its response favours the status quo. Michael Hancock, co-head of ICC's work on jurisdiction and applicable law issues, said:
"Companies base their decisions and business models on current laws and regulations. Tampering with the text of legal instruments therefore necessarily has a negative side effect that must be balanced against the expected benefits."
The ICC's fear is that the proposed revision could lead to the undermining of existing global commercial law instruments, which would then obstruct international trade.
Dr Georges Affaki, Vice-Chair of the ICC Banking Commission, said:
"International trade and increasing economic integration are based on business contracts concluded and performed across country borders. Thus, the rules concerning choice of law for international contractual relationships have a significant impact on the global economy."
He added:
"ICC believes that the European Commission's best choice would be to seek a mandate for collective ratification of the Assignment Convention, which is an international treaty, by all EU countries."
The Assignment Convention is an instrument of the UN Commission on International Trade Law (UNCITRAL).
Another ICC concern is that the European Commission may be taking a one-size-fits-all approach by failing to make a clear distinction between B2B contracts (contracts between two businesses) and B2C contracts (contracts between a business and a consumer) when employing the term 'weaker party'.
While the term is applicable to B2C agreements, it is inappropriate in the context of B2B contracts because, argues the ICC, there will always be an economically weaker party in such a contract. Mr Hancock said:
"There is no need for this to be specifically addressed in the wording of a regulation... Any business retains the option of seeking the best business terms available from potential partners, except in the relatively rare case of abuse of a dominant position."
The Green Paper is available as a 46-page pdf at:
http://europa.eu.int/eur-lex/en/com/gpr/2002/com2002_0654en01.pdf