ROME I: LAW APPLICABLE TO CONTRACTUAL
OBLIGATIONS (5203/06)
Letter from the Chairman to Rt Hon Baroness
Ashton of Upholland, Parliamentary Under Secretary of State, Department
for Constitutional Affairs
Thank you for your letter of 20 July 2006[103]
which has only recently been considered by Sub-Committee E. We
are most grateful for your clear description of the Government's
negotiating objectives and for outlining the proposed timetable
of the negotiations. We are pleased to see that the Government
are working closely with interested parties with the aim of ensuring
that the Regulation is brought properly within the scope of the
Treaty and, most importantly, provides a clear and workable set
of rules to which the UK might wish to become a party.
We note in particular that the deletion of Article
8(3) is "a major negotiating objective". We are also
pleased to see the importance which the Government attach to limiting
the scope of application of the Regulation (removing the principle
of universal application from Article 1) and for providing some
flexibility in Article 4 (applicable law and the absence of choice).
We would be interested to learn, in due course, what support there
is for the Commission's proposal to go beyond the Convention in
relation to agency (Article 7) and also voluntary assignment and
contractual subrogation (Article 13).
The Committee decided to retain the proposal
under scrutiny and would be grateful if you would keep us informed
of developments. Your letter of 20 July provides an excellent
example of how this can be done both clearly and concisely. We
would be grateful if you could pass on our thanks to all those
concerned in its preparation.
19 October 2006
Letter from Rt Hon Baroness Ashton of
Upholland to the Chairman
I am writing to update you on developments on
Rome I, in particular the production of the latest Presidency
text which was published on 2 March and the report by Dr Maria
Berger MEP, former Rapporteur to the JURI Committee of the European
Parliament. I am sorry that I have not updated the Committee on
this dossier since your last letter of 19 October last year.
As you know, although the Government decided
that the United Kingdom should not formally opt-in to the negotiations
on Rome I, we have been actively participating in the negotiations
in the Council Working Group and have maintained close links with
the European Parliament as it discusses the draft Regulation.
Discussions in the Council Working Group have
been progressing at a rapid pace. During the Finnish Presidency,
three Working Group meetings were held, which completed the initial
consideration of the Commission's proposal and produced a new
Presidency text on 12 October 2006. This was based on discussions
in the Working Group up to that point and also on written comments,
including those of the UK, which Member States were asked to submit.
So far this year the German Presidency has held
four Working Group meetings, one in January and two in February
(which concluded initial consideration of a subsequent Finnish/German
Presidency text of 12 December) and a further meeting in March.
The outcome of the discussions in January and February resulted
in the production of the new text dated 2 March, a copy of which
is attached. A further Council Working Group has been scheduled
to take place on 27-28 March and the Presidency has signalled
its intention to put Rome I on the agenda for both the April and
June Justice and Home Affairs Councils in order to get political
agreement on a number of articles.
Our main concerns continue to centre on Article
8(3) which deals with the application of the mandatory rules of
third countries, Article 5 (consumer contracts) and Article 13
(voluntary assignment and contractual subrogation). There is also
a further issue relating to a Presidency proposal to consider
the comprehensive coverage of insurance contracts within the Rome
I proposal. My Department, in conjunction with the Treasury, are
currently consulting on this and I attach a copy of the consultation
document. The Council negotiations so far have met our concerns
on some of these issues, notably Articles 4 and 7. However we
are still some way off a position where we could consider opting
in to the final Regulation.
I draw your attention to the following Articles
in the next text:
ARTICLE 3(5)
The Presidency proposed an amendment to this
provision in light of comments made in relation to Article 5 and
the protection provided by the Consumer Directives. The proposed
rule appears to envisage the application of mandatory rules of
Community law in a way that would both create legal uncertainty
and restrict the application of the law chosen by the parties.
This provision was discussed by the Working Group on 12 March,
but was not supported by the majority of Member States. The Presidency
agreed to retain the current rule which is in line with the equivalent
provision in Rome II.
ARTICLE 4 (THE
DEFAULT RULES)
We are encouraged by the main thrust of the
Presidency text which generally meets UK concerns by introducing
greater flexibility to the default rules. We are cautiously optimistic
that we will obtain a satisfactory outcome in this important area.
ARTICLE 4A
(CONTRACTS OF
CARRIAGE)
The Presidency have proposed a new Article to
cover contracts of carriage. In relation to contracts for the
carriage of goods the proposed rule is becoming increasingly complex
but any problems which this might cause should be strictly limited
in practice because, as a general rule, commercial parties in
this field tend to choose a specific applicable law. In relation
to contracts for the carriage of passengers, the Presidency has
opened up a wide area of debate with no less than four new options
which are yet to be considered by the Working Group. These options
reflect the desire among some Member States to establish a greater
degree of consumer protection in this field than currently exists
under the Rome Convention. My officials are currently consulting
on this matter but initial views are that any option that removes
party autonomy would be unwelcome and could pose significant difficulties
for commercial operators.
ARTICLE 5 (CONSUMER
CONTRACTS)
Business stakeholders have expressed concerns
about Article 5 on the basis that it does not strike a satisfactory
balance between the interests of business and consumers. The situation
is further complicated by the fact that, whether or not the UK
becomes a party to Rome I, it will be that instrument, and not
the Convention, which will in the great majority of cases apply
to British businesses in dispute with consumers living in the
rest of the EU (except Denmark). It is clear, however, from discussions
in the Working Group that it is unlikely that the main thrust
of the proposed rule for consumer contracts will be altered.
We continue, however, to press for modifications
particularly in relation to an exclusion for goods and services
and a financial carve out for City Instruments. There is strong
support for the latter provision within the Working Group and
we have been encouraged by the recent Commission proposal in this
area which was briefly presented to the Working Group on 12 March.
The Commission's proposal is based on those financial instruments
defined in EC Directive 2004/39. We are currently discussing this
proposal with Treasury and commercial stakeholders.
ARTICLE 5A
(INSURANCE)
This is a relatively new provision and one that
the UK has so far indicated a general scepticism about. My Department,
in conjunction with the Treasury, are currently consulting with
the insurance industry to ascertain the advantages/disadvantages
of such a provision and its impact, and to identify any issues
which may be insurmountable. The formal UK position will be formulated
after analysis of their views.
ARTICLE 7 (AGENCY)
This provision, particularly in relation to
its application to third parties, was of concern to commercial
stakeholders. We are encouraged by its deletion from the text
and we are hopeful of a satisfactory outcome on this particular
issue.
ARTICLE 8(3) (MANDATORY
RULES OF
A THIRD
COUNTRY)
The deletion of Article 8(3) would remove the
single most objectionable aspect of the Commission's proposal.
We had until recently been cautiously optimistic that it would
be simply deleted from the text. However, several Member States
have now spoken in favour of its retention and the Presidency
have now agreed that there should be further discussion on the
matter, including consideration of possible compromise solutions.
We are consulting with City stakeholders as to which compromise
would be acceptable.
ARTICLE 13 (ASSIGNMENT)
Article 13(3) (the proposed rule to govern the
priority of claims between competing assignees) is also of significant
concern to commercial stakeholders. The UK has tabled an amendment,
which proposes that priority issues should simply be subject to
the law of the assigned debt under Article 13(2). This would be
a straightforward and workable solution that would properly respect
the principle of party autonomy and accord with the reasonable
expectations of the parties. The initial response to this proposal
in the Working Group was favourable. Member States are, however,
currently considering it further with their own experts. If accepted
by the majority it would resolve an area of significant difficulty
for the UK.
The next meeting of the Council Working Group
on 27-28 March will consider the new Presidency text, but in particular
discussion will focus on those areas where there has been points
of contention. The aim is to try and find a basis for compromise
as the German Presidency aim to be in a position to take a package
of measures to the Council in April for agreement.
DISCUSSIONS IN
THE EUROPEAN
PARLIAMENT
Discussions in the European Parliament have
also continued. Dr Maria Berger presented her report to JURI Committee
on 11 September 2006. A copy is attached. In our view, her report
was broadly welcome in the light of our concerns. In particular
we welcomed her proposal to delete Article 8(3) of the Commission's
proposal which deals with the application of the mandatory rules
of third countries; this was the single most significant issue
of concern to UK stakeholders. We also welcomed her proposal to
re-draft Article 4 which would introduce a greater degree of flexibility
for cases where there is no valid choice of law by the parties.
However, the report proposed no substantial amendments to Article
5 (consumer contracts), Article 7 (agency) or Article 13 (voluntary
assignment and contractual subrogation). We are continuing to
engage with Cristian Dumitrescu, the new Rapporteur, and other
interested MEPs on these issues and the draft Regulation as a
whole as discussions in the European Parliament progress. I will
continue to keep the Scrutiny Committees informed about the progress
of these discussions and those in the Council Working Group.
22 March 2007
Letter from the Chairman to Rt Hon Baroness
Ashton of Upholland
Thank you for your letter of 22 March which
has been considered by Sub-Committee E. We are grateful for sight
of the latest Presidency text and also to receive your comments
on the more controversial changes being discussed. We note that
you make no reference to the question of scope of application.
We trust that this is not simply an oversight as we are concerned
by the uncertainty raised by a number of the changes proposed,
including those to Article 1 and Article 22(a)(2).
As you say, there have been some improvements,
in particular the deletion of Article 7. But, unhappily, as one
problem disappears another two (Articles 4(a) and 5(a)) arise.
As regards Article 4(a), options 1 and 3 appear preferable to
options 2 and 4, which could lead to as many laws as passengers
on board one ship. The provisions on insurance appear to be based
on an over simplistic model of insurance; for example, they may
not be capable of catering sensibly for a group insurance or multiple
risks or the same risk situated in many countries. We are pleased
to see that you are consulting with experts and interested parties
on these new provisions.
We are also interested to see that you are in
discussion with City stakeholders as to whether a compromise can
be reached as regards Article 8(3) (mandatory rules of third countries).
I hope you will agree that this is not an area where a political
"fudge" would be acceptable. Indeed we would be surprised
if City interests would accept anything which was not 110% certain.
On the question of assignment (Article 13),
you say that the UK has tabled an amendment. On the texts we have
seen, the proposal in footnote 35 appears preferable, particularly
because of clause (e).
You make clear that the German Presidency is
pushing for some measure of political agreement on the Regulation.
We would be interested to learn of the outcome of the discussions
in the Justice and Home Affairs Council next month and look forward
to hearing from you. In the meantime the proposal is retained
under scrutiny.
28 March 2007
103 Correspondence with Ministers, 40th Report of Session
2006-07, HL Paper 187, pp 401-403. Back
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