20 Private international law
| (24213)
5516/03
COM(02) 654
| Commission Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation
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| Legal base | — |
| Department | Constitutional Affairs and Scottish Executive Justice Department
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| Basis of consideration | Minister's letter of 8 January 2004
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| Previous Committee Report | HC 63-xiii (2002-03), para 7 (26 February 2003)
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| To be discussed in Council | No date set
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| Committee's assessment | Legally and politically important
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| Committee's decision | Cleared
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Background
20.1 We considered the Commission Green Paper on 26 February 2003
when we noted that the Commission was seeking views on the desirability
of converting the 1980 Rome Convention on the law applicable to
contractual relations into a Directive or Regulation adopted under
Article 61(c)EC, and on whether such an instrument should seek
to "modernise" the substantive provisions of the Rome
Convention.
20.2 We recalled that the 1980 Convention set out
a number of rules for determining which system of law is to apply
to contractual obligations where there is an international element
(such as the case where a contract made in one Member State falls
to be performed in another), and that the Convention provides
for a choice of law of a "universal" nature, that is,
the choice of law rules which it contains may lead to the application
of the law of any country, including that of non-Member States.
20.3 We noted the arguments advanced by the Commission
in favour of a Community instrument, in particular the arguments
that this would lead to greater uniformity of interpretation by
national courts, and that it would "prevent the entry into
force of the uniform conflict rules from being delayed by ratification
procedures in the applicant countries".
20.4 As matters then stood, we did not think that
the Commission had made any compelling case for converting the
Rome Convention into a Community Regulation (this being the Commission's
preferred choice of instrument). It did not seem to us that there
was any evidence to show that the position of parties to contracts
would be improved to any material extent by such a conversion.
We also expressed concern over the cost and delay to litigants,
particularly those litigants from third countries who opt for
the laws of this country to determine their disputes, which would
be caused by the need to make references to the Court of Justice.
20.5 In relation to the Commission's argument that
adoption of a Community instrument would prevent delays caused
by the ratification process, we recalled that such procedures
required the involvement of the national parliaments and considered
that it was undemocratic to advocate the adoption of measures
at Community level in order to by-pass such parliaments, whatever
might be the arguments about convenience.
20.6 We also drew attention to the emphasis the Commission
placed in its Green Paper on the loss of competence by Member
States to conclude choice of law agreements with third countries
and the conferring on the Community of an exclusive competence
in this regard. We remained at least sceptical as to whether
the advantages flowing from adoption of a Community instrument
would be sufficient to offset the disadvantages which we considered
that the UK would suffer in its relations with third countries
and its ability to promote London as a centre for resolving international
commercial disputes.
20.7 We asked the Ministers to have regard to these
points when framing their reply to the Green Paper.
The Minister's reply
20.8 In his letter of 8 January 2004 the Parliamentary
Under-Secretary of State at the Department for Constitutional
Affairs (Lord Filkin) informs us about the Government's response
to the Green Paper and attaches a copy of that response.
20.9 The Minister agrees with us that no compelling
case has been made out for the conversion of the Rome Convention
into a Community instrument, and explains that this point has
been made in the Government's reply.
20.10 In relation to our point that cost and delay
might result from the need to make preliminary references to the
Court of Justice, the Minister explains that the Government supports
such a jurisdiction in principle in the interests of achieving
consistency of interpretation. The Minister adds that it would
be difficult not to do so, given that the UK has already agreed
to this under the Rome Convention. In relation to the point that
such references should be made only by national supreme courts,
the Minister confirms that, as a result of Article 68EC,[39]
this would be the situation in relation to any Community instrument
replacing the Rome Convention.
20.11 With regard to our point that it was undemocratic
to advocate the adoption of Community measures for the purpose
of by-passing national parliaments, the Minister comments as follows:
"The Committee's third point is of a general
nature. It is that a move to Community legislation would be inherently
undemocratic because it would enable national parliaments to be
'by-passed'. On this I would make two observations. The first
is that the Government attaches great significance to consulting
Parliament during the negotiations on draft Community legislation
and securing scrutiny clearance from it before the adoption of
any instrument. Any issues raised by the two expert Parliamentary
Committees are given serious consideration within Government;
if the Government agrees, proper efforts are made through negotiation
to secure their acceptance by the other Member States. My second
observation is that, although it is true that international agreements,
such as the Rome Convention, do indeed require implementing national
legislation, it is not open to national legislatures to amend
such agreements — they can only accept or reject them as
a whole. This may in practice result in a more limited Parliamentary
contribution than is the case with Community legislation."
20.12 On the question of the loss of national competence
to conclude agreements with third countries, The Minister refers
us to that part of the Government's response to the Green Paper
which raises the UK's concerns over the lawfulness of any Community
instrument to replace the Rome Convention which would have a "universal"
scope of application. The Government there points out that it
is far from clear how choice of law rules between parties, neither
of whom is domiciled or habitually resident in a Member State,
would be "necessary for the proper functioning of the internal
market" as required by Article 65.
20.13 On the more general issue of the desirability
or otherwise of any Community instrument, the Minister comments
that this will depend on the detailed content of the provisions
and that it is too early to predict how favourable these are likely
to be from the UK's perspective. The Minister adds that the Commission
is unlikely to produce any formal proposal before the middle of
this year, and assures us that if a proposal is made, the Government
will do its best to ensure that any text which is finally adopted
is clearly in the national interest and, in particular, in the
interests of London as an important centre for the resolution
of international commercial disputes.
Conclusion
20.14 We thank the Minister for informing us that
many of the points we have made have been incorporated in the
Government's response. We strongly support the Government's view
that Article 65 EC should not be used to adopt measures on choice
of law rules which have a universal scope and affect parties
neither of whom is domiciled or habitually resident in a Member
State. We find it hard to see how such a measure could be said
to be "necessary for the proper functioning of the internal
market".
20.15 We agree with the Minister that in debating
legislation to give effect to international agreements it may
not be open to the national parliament to amend such agreements,
but, as the Minister concedes, it is open to the national parliament
to reject such an agreement by refusing to pass the legislation
which would permit ratification. This is not a course which is
open to a national parliament in relation to a Community Regulation
and it is for this reason that we believe it is undemocratic of
the Commission to advocate the adoption of a Community measure
in order to prevent delays arising from national ratification
procedures.
20.16 We agree with the points which the Minister
has made in response to the Green Paper. The Green Paper is
now effectively spent, and we are therefore content to clear it
from scrutiny.
39 This amends the effect of Article 234 EC to the
effect that preliminary references may be made by supreme courts
(or other courts against whose decisions there is no judicial
remedy) in relation to Community measures adopted under Title
IV. The like limitation does not appear in the draft Constitutional
Treaty see Article III-274. Back
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