19 April 2007

JUSTICE AND HOME AFFAIRS COUNCIL

ROME I

The Council agreed on a number of issues of this proposal, among which the following should be highlighted:
(a) Principle of choice of law by the parties to the contract (Article 3)
As in the Rome Convention, the basic rule for the law applicable to a contract is the choice of the law of a country by the parties. This rule respects party autonomy and is particularly appropriate in the area of contractual obligations which are created and governed by the parties to the contract (Article 3). However, where all other elements relevant to the situation are located in a country other than the country whose law has been chosen, the choice of law does not allow parties to avoid the application of provisions of the law of that country which cannot be derogated from by agreement (Article 3(4)).

Concerning rules of Community law which cannot be derogated from by agreement, the Commission proposed that those rules should prevail wherever they would be applicable to the case. However, since the majority of delegations took the view that it would be appropriate to treat rules of national law and of Community law which cannot be derogated from by agreement on an equal footing, as in the Council Common position on the Rome II-Regulation, the Council agreed to follow this approach .

(b) Law applicable in the absence of choice (Article 4)
In the absence of a choice of law by the parties, Article 4 provides essentially for two connecting factors: the habitual residence of the party who is required to effect the characteristic performance, if such performance can be determined (Article 4(1) and (2)), or otherwise the closest connection of the contract with a specific country (Article 4(4)).

Delegations agreed that in order to achieve more legal certainty, some of the most typical contracts should be explicitly mentioned in Article 4(1). Where the contract does not fall under Article 4(1), in particular if it does not fall within the scope of one of the typical contracts listed in that paragraph, the court has to apply Article 4(2). Member States also recognised the need for an 'escape clause' allowing for flexibility where the connecting factors in Article 4(1) or (2) would exceptionally lead to an unsatisfactory result because it is clear from all the circumstances of the case that the contract is manifestly more closely connected with another country (see Article 4(3)).

The Council confirmed the structure and the content of Article 4 as set out in the Addendum, with the exception Article 4(1)(j1) which still needs to be further discussed by the Committee on Civil Law Matters (Rome I).

(c) Individual employment contracts (Article 6)
Delegations agreed that, as in the Rome Convention, a special rule should provide for the appropriate connecting factors concerning individual contracts of employment in the absence of a choice of law. However, where a choice of law is made by the parties, the employee should not lose the protection given to him by the rules of the law of the country whose law would have been applicable in the absence of the choice and which cannot be derogated from by agreement.

The Council agreed on a provision on individual employment contracts which aims at balancing the interests of employees and those of employers.

(d) Other issues
The Council also agreed on the text of a number of other provisions (Articles 1 and 2, deletion of Article 7, Articles 9, 10, 14, 15, 16, 17, 19, 20 and 21).'

The Council agreed to define its position on the fundamental aspects of a future common frame of reference for European contract law.
It instructed the Committee on Civil Law Matters to examine this matter on the basis of a document which will be submitted by the Presidency.
It is recalled that the Commission Communication on European contract law of July 2001 launched a process of consultation and discussion about the way in which problems resulting from divergences between national contract laws in the EU should be dealt with at the European level.
This Action Plan maintains the consultative character of this process and presents the Commission’s conclusions. It also summarises the problems identified during the consultation process, which concern the need for uniform application of EC contract law as well as the smooth functioning of the internal market.
The Council adopted a resolution in 2003 on 'A More Coherent European Contract Law'. In particular, the Council considered useful, in order to achieve greater transparency, coherence and simplification of contract law, to further improve, consolidate and codify, the existing EC legislation in the area of contract law for example as regards consumer law and the legislative framework for financial services.
The Council was also of the view that the elaboration of EU-wide general contract terms can be useful. However, such general terms should be developed by the contractual parties themselves and respect mandatory Community law and national provisions, including the provisions regarding the protection and information of consumers.

It was also felt that further reflection was necessary on the need for non-sector specific measures, for example an optional instrument in the area of European contract law. The Commission should pursue this reflection, in close collaboration with Member States and taking due account of the principle of contractual freedom.
The Hague Programme, adopted in November 2004, specified that “in matters of contract law, the quality of existing and future Community law should be improved by measures of consolidation, codification and rationalisation of legal instruments in force and by developing a common frame of reference. A framework should be set up to explore the possibilities to develop EU-wide standard terms and conditions of contract law which could be used by companies and trade associations in the Union. Measures should be taken to enable the Council to effect a more systematic scrutiny of the quality and coherence of all Community law instruments relating to cooperation on civil law matters”.
In 2006 the European Parliament expressed its views in two Resolutions. The Commission has announced that it will submit a second Progress Report on European Contract Law and the Acquis Review.

Full Council Document
Agenda
Background note
Presidency briefing

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