UK consults on Rome I Regulation

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LONDON – The UK Ministry of Justice has published a consultation paper (CP) that seeks views on whether the UK should opt in to the proposed Rome I Regulation on the law applicable to contractual obligations (Rome I) and, if so, whether the Rome I rules should apply throughout the UK. When the draft EU legislation first emerged in December 2005, UK business leaders were up in arms as they believed that Rome I threatened to seriously undermine the financial services sector and damage online businesses, and has the potential to become a legal compliance nightmare.

Rome I, which the European Commission claims simply enshrines into European law the policies set out in the 1980 Rome Convention, sets out the rules to determine the applicable laws of contract in cross-border trade. However, the draft legislation contained substantial amendments to the Rome Convention that could have serious and wide-ranging ramifications for cross-border trade.

Under the draft proposal, a UK firm selling its goods and services to consumers across the EU would no longer be secure in the knowledge that it is broadly governed by English law. Instead it would have to navigate a minefield of up to 27 different, often conflicting legal regimes – or, more likely, opt not to do business outside the UK.

Following consultation with UK stakeholders in 2006, the UK government decided to engage in the negotiations but not opt in to the proposal. The Council and the European Parliament agreed the text of Rome I in December 2007 and the CP states that Rome I will be formally adopted this year and its substantive provisions will come into force 18 months later.

The provisions in the original proposal that were of greatest concern to UK stakeholders during negotiations have either been removed, substantially revised or returned to their Rome Convention form subject to later review. In the case of those provisions subject to review, future amendments will not automatically bind the UK. In light of this, the UK government's preliminary conclusion is that the UK should now opt in to Rome I and apply similar rules to contracts connected to two or more jurisdictions within the UK. But the government wishes to test this conclusion by seeking views from stakeholders. The closing date for responses to the consultation paper is June 25, 2008.

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