The new EU law, which will come into effect in December 2009, is
known as Rome I. It does not actually harmonise contract laws but
it does outline whose law applies in certain disputes.
The deal was initially proposed in 2005 but the UK Government
opted out of negotiations, saying that the existing Rome Convention
was preferable and Rome I undermined British business
interests.
Amendments proposed in November of last year satisfied the
Government's concerns, though, and it consulted with businesses on
signing up to the new deal. A statement from the Council of the
European Union has said that the UK now accepts Rome I.
"The Council noted that the United Kingdom wished to accept, in
its entirety, the Regulation on the law applicable to contractual
obligations (Rome I)," said the statement.
International Justice Minister Bridget Prentice said that the
move follows a consultation in which most participants backed
signing up.
"I am delighted that the vast majority of those who responded to
the consultation were in favour of the proposal," said
Prentice.
"Much of the business conducted by the UK is done by contract,
and with international parties. Contracts are the basic building
block of many of the financial transactions that occur in huge
numbers in the City of London and throughout the UK every day. For
these businesses and individuals, it is crucial that the law
applying to their contracts is certain and predictable. That is
what this regulation will achieve," she said.
The UK had said that Rome I deviated too much from the Rome
Convention. After the changes, though, it said that it was close
enough to the Convention and that it approved of the new
regulation.
Both the Convention and Rome I say that two parties can choose
which of their countries' laws will govern their dealings and
determine which laws will apply if there is no agreement between
the parties. This changes depending on whether a contract involves
a consumer or not and whether it is for goods or services or
property, amongst other factors.
In its consultation paper the Government explained the benefits
of Rome I.
"Some of the benefits of the Rome I Regulation arise from its
structure as a Community instrument, rather than the specifics of
the text," said the consultation paper. "In conflict of laws
issues, the widespread application of similar rules can provide a
benefit for those contracting across borders. In particular,
maintaining a single system prevents the need for extensive legal
advice."
"This benefit, presently provided by the Rome Convention, will
be lost if the UK does not opt in, as the Regulation will apply in
other Member States in any event. While the Convention and the
Regulation are similar in many respects, maintaining two separate
systems would increase complexity, especially for business."
