New EU Law Has Impact on Company Contracts

25 December 2009, filed under Commercial

All business contracts concluded after 17th December 2009 are now subject to Rome I, a new EU law which aims to clarify which national laws shall apply in contractual disputes. This new legal regime will provide additional ways of proving the intention of the parties involved in commercial negotiations.

Up to this point, the law has not been definitive regarding the need to place a jurisdiction clause within the contract. The Rome Convention of 1980 provided the instruments for determining which national laws shall apply in any given dispute regarding contractual obligations, and this Convention shall apply to all contracts created before 17th December 2009.

Within all of our commercial contract templates we have a jurisdiction clause to ensure they are legally valid and legally enforceable within the jurisdiction for which they are intended for use.

In 2008, the government accepted the proposed changes made by the implementation of Rome I to the Rome Convention and opted to sign the UK up to it in a bid to provide certainty for companies that find themselves in disputes.

While Rome I doesn’t dramatically overturn the previous Rome Convention, it simplifies the framework for establishing ambiguities, such as which national law should govern the contract in circumstances where the parties have forgotten to enter such a term into the contract or where the parties have intentionally evaded such a clause. Rome I offers a level of protection to weaker contractual parties.

Rome I is of greatest benefit to those trading across country borderlines as it prevents a conflict of laws arising. Rome I will be a notable and reliable regulation due to its structure as a Community instrument, and will also benefit consumers and companies by providing a framework to be followed for the formation of contracts for goods, services and property.