Rome I Regulation (593/2008)

The Rome I Regulation (Regulation (EC) 593/2008) determines the law applicable to contractual obligations in civil and commercial matters involving a conflict of laws. It replaced the Rome Convention of 1980 on the Law Applicable to Contractual Obligations, converting its provisions into directly applicable EU law and introducing modernisations reflecting developments in European private international law. The Regulation applies universally: the designated law applies whether or not it is the law of a Member State (Article 2).

Scope and General Principles

The Regulation applies to contractual obligations in civil and commercial matters, irrespective of the nature of the court or tribunal seised (Article 1). It excludes revenue, customs, or administrative matters; the status or legal capacity of natural persons; obligations arising out of family relationships; matrimonial property regimes; bills of exchange and negotiable instruments; arbitration and choice-of-court agreements; matters of company law; and obligations arising out of dealings prior to the conclusion of a contract.

The Regulation applies in all EU Member States except Denmark. The United Kingdom applied it during the transition period following Brexit but is no longer bound. Ireland participates under Protocol 21 to the TFEU.

Party Autonomy — The Cornerstone

Article 3 establishes party autonomy as the primary connecting factor: a contract shall be governed by the law chosen by the parties. The choice must be express or clearly demonstrated by the terms of the contract or the circumstances of the case. The parties may select the law applicable to the whole or to part only of the contract, and may change the applicable law at any time.

Party autonomy is virtually unlimited: the parties may choose any law, even where the contract has no connection to the chosen legal system. This reflects the commercial reality of international contracting, particularly in finance, shipping, and commodities, where English law or Swiss law is frequently chosen for its sophistication and neutrality.

The only constraints are overriding mandatory provisions (Article 9) and public policy (Article 21).

Applicable Law in the Absence of Choice

Article 4 provides specific rules where the parties have not chosen the applicable law. The general rule is that the contract is governed by the law of the country where the party required to effect the characteristic performance has its habitual residence. However, several specific presumptions apply:

• Sale of goods: the law of the seller’s habitual residence (Article 4(1)(a));
• Provision of services: the law of the service provider’s habitual residence (Article 4(1)(b));
• Franchise: the law of the franchisee’s habitual residence (Article 4(1)(e));
• Distribution: the law of the distributor’s habitual residence (Article 4(1)(f));
• Rights in rem in immovable property: the law of the country where the property is situated (Article 4(1)(c));
• Auction: the law of the country where the auction takes place (Article 4(1)(h)).

Where the applicable law cannot be determined under Article 4(1) or (2), the contract is governed by the law of the country with which it is most closely connected (Article 4(4)).

Consumer Contracts

Articles 6 and 7 provide mandatory protection for consumers and certain other weaker parties. Article 6 provides that a consumer contract shall be governed by the law of the consumer’s habitual residence if the professional pursues commercial activities in that country or directs such activities to it. The parties may choose another law, but such choice cannot deprive the consumer of the protection afforded by the mandatory rules of the consumer’s habitual residence.

Insurance Contracts

Article 7 establishes specific rules for insurance contracts, distinguishing between large risks (where party autonomy prevails) and mass risks (where the law of the Member State of the risk is generally applicable). The rules reflect the structure of the Solvency II Directive and ensure that policyholders receive the protection of their home state’s mandatory insurance law.

Individual Employment Contracts

Article 8 provides that an individual employment contract shall be governed by the law chosen by the parties, but the choice cannot deprive the employee of the protection of the mandatory rules of the law that would apply in the absence of choice. In the absence of choice, the applicable law is the law of the country in which (or, failing that, from which) the employee habitually carries out their work, even temporarily. Where the employee does not habitually work in any one country, the law of the country of the engaging place of business applies.

The Court of Justice in Schlecker (Case C-64/12) held that a closer connection exception can displace the habitual workplace rule only in exceptional circumstances.

Overriding Mandatory Provisions

Article 9 preserves the application of overriding mandatory provisions — provisions regarded as crucial by a country for safeguarding its public interests, such as competition rules, exchange controls, and sanctions regimes. Nothing in the Regulation restricts the application of the overriding mandatory provisions of the forum, and effect may be given to those of the place of performance where they would render performance unlawful.

Assignment, Subrogation, and Set-Off

Articles 13 through 17 address the law applicable to voluntary assignment, contractual subrogation, legal subrogation, and set-off. The relationship between assignor and assignee is governed by the law applicable to the contract of assignment; the law governing the assigned claim determines the assignability of the claim and the relations between the assignee and the debtor.

Scope of the Applicable Law

Article 12 defines the scope of the governing law, covering interpretation, performance, consequences of breach, extinction of obligations, prescription and limitation, and the consequences of nullity of the contract. Matters of procedure and evidence remain governed by the lex fori.