Contractual obligations in the EU - determining which national law applies

SUMMARY OF:

Regulation (EC) No 593/2008 - the law applicable to contractual obligations

SUMMARY

WHAT DOES THIS REGULATION DO?

• It sets out EU-wide rules for determining which national law should apply to contractual obligations in civil and commercial matters involving more than one country.
• This regulation, known as Rome I, works alongside two other regulations, Rome II (non-contractual obligations) and Rome III (divorce and legal separation) to determine the applicable law in different types of civil and commercial matters.

KEY POINTS

The regulation does not apply to revenue, customs or administrative matters, or to issues of evidence and procedure during legal proceedings. It also does not apply to obligations including those relating to:

• a person’s status or legal capacity
• family relationships
• matrimonial property regimes
• documents guaranteeing the payment of a specific amount of money such as bills of exchange, cheques and promissory notes
• arbitration and choice of court agreements
• law of companies and other corporate or unincorporated bodies
• trusts
• dealings that occur before a contract is signed.

Scope of the applicable law

The regulation determines the applicable national law on different aspects of contracts, including:

• how a contract is interpreted and what must be done to fulfil its terms
• the consequences of breaching a contract's obligations, including the assessment of damages
• the various ways of putting an end to contractual obligations (e.g. payment, compensation, annulling the contract), prescription* and the time limits on bringing legal action
• the consequences of a contract being legally void.

Choice of law

• The parties to a contract can choose the governing law.
• It may be applied to only a part or the whole of the contract.
• The applicable law can be changed at any time as long as all parties agree.

Applicable law in the absence of a choice being made

Where the parties have not chosen the applicable law, the type of contract determines the rules:

• For contracts for the sale of goods, provision of services, franchises or distribution, the law of the country of residence of the seller, service provider or franchisee applies.
• For contracts concerning immovable property, the law of the country where the property is located applies, except in the cases of temporary and private tenancy (maximum 6 consecutive months). In such cases, the applicable law is that of the landlord’s country of residence.
• In the case of sale of goods by auction, the law of the country of the auction applies.
• If none, or more than one of the above rules apply to a contract, the applicable law is determined based on the country of residence of the party carrying out the principal part of the contract.

If, however, the contract is related more closely to another country than provided by these rules, the law of that country applies. The same applies when no applicable law can be determined.

Specific contracts

For certain specific types of contract, the regulation also sets outs the options for choice of law and determines the applicable choice where no choice has been made. These include:

• contracts for the carriage of goods
• contracts for the carriage of passengers
• consumer contracts between consumers and professionals
• insurance contracts
• individual employment contracts.

FROM WHEN DOES THE REGULATION APPLY?

The regulation applies to contracts concluded after 17 December 2009.

BACKGROUND

Contractual and non-contractual obligations

KEY TERM

* Prescription: the role that the passage of time has in the making and ending of rights

ACT

Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) (OJ L 177, 4.7.2008, pp. 6–16)

Successive amendments to Regulation (EC) No 593/2008 have been incorporated into the original text. This consolidated version is of documentary value only.

RELATED ACTS

Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II) (OJ L 199, 31.7.2007, pp. 40–49)

Council Regulation (EU) No 1259/2010 of 20 December 2010 implementing enhanced cooperation in the area of the law applicable to divorce and legal separation (OJ L 343, 29.12.2010, pp. 10–16)

last update 11.01.2016