Law Applicable in the Absence of Choice – The New Article 4 of the Rome I Regulation
| Published date | 01 September 2008 |
| Date | 01 September 2008 |
| DOI | http://doi.org/10.1111/j.1468-2230.2008.00715.x |
LEGISLATION AND REPORTS
LawApplicableintheAbsenceofChoice^TheNew
Article4oftheRomeIRegulation
ZhengTang
n
The applicable law to a contract in the absence of the parties’ choice is governed byArticle 4 of the
RomeCo nvention, which has been implemented in the UK by the Contracts (Applicable Law)
Act 1990. This rule adopts the ‘closest connection principle’ as a basic principle to decide the
applicablelaw,b ut also introducesspeci ¢c presumptionsto simplify the process.The current rule
has been criticised for its uncertainty. As a result, a substantive change has been provided in the
RomeI Regulation, which aims to modernise the current choice of law rules in contractual obli-
gations and convertthe Rome Conventioni ntoa Council Regulation.The newArticle 4 aims to
enhance certainty and to overcome the di⁄culties of the current rules of the Rome Convention.
However, a close scrutiny ofthe newArticle 4 shows thatit does not properly achieveits aim. The
article aims to critically analyse Article 4 of the RomeI Regulationand to provide suggestions for
its interpretation and understanding.
INTRODUCTION
The current choice of law in theUK designating the applicable law to a contract
in the absenceof choice is governed byArticle 4 of the EC Convention on the law
applicable to contractual obligations of 1980 (the Rome Convention),
1
which has
been implemented in the UK by theContracts (Applicable Law)Act 1990. Under
the current Article 4, a contract in the absence of choice is governed by the lawof
the country with which the contract has the closest connection.
2
It further pre-
sumes that such a country is the country with territorial connections to the party
whose performance is the characteristic of the contract.
3
The characteristic perfor-
mance is interpreted by the explanatory report of the Rome Convention as the
performance for which the payment is due as this performance constitutes the
centre ofgravity and thesocio-economic functionof the contractual transaction.
4
Besides the characteristic performance rule, Article4(3) provides a special rule for
contracts relating to a right in rem or in use of immovable property that these
n
Lecturer, University of Aberdeen. I am grateful to Professor Paul Beaumont for his helpful com-
ments. I also want to express my gratitude to the editor and anonymous referees. All errors remain
mine.
1 Convention on the Law Applicable to Contractual Obligations OJ 1980 L266/1 (Rome Conven-
tion).
2 RomeConvention, Art 4(1).
3 RomeConvention, Art 4(2).
4 M Giuliano and P Lagarde, ‘Report on the Co nvention on the law applicable to contractual obli-
gations’, OJ 1980 C 282/1,19.
r2008 The Author.Journal Compilation r2008 The Modern Law Review Limited.
Published by BlackwellPublishing, 9600 Garsington Road,Oxford OX4 2DQ,UK and 350 Main Street, Malden, MA 02148, USA
(2008) 71 (5) 78 5^800
contracts have the closest connection to the situs of the immovable property.
Article 4(4) also provides a special rule for contracts for the carriage of goods.
5
Finally, Article 4(5) introduces an escape clause whichprovides that‘if the charac-
teristic performance cannot be determined’, or ‘if it appears from the circum-
stances as a whole that the contract is more closely connected with another
country’, the lawof the country with the closest connection to the contract shall
apply. The current Article 4 has been criticised for its uncertainty. Two criticisms
are raised most frequently. One is the di⁄culty of applying the characteristic per-
formance rule in certain complicated contracts. Another is that the application
and importance of the escape clause is uncertain.
6
Eversi nce January 2003, the Rome Convention has been undergoinga process
of being converted into a Council Regulation.
7
On 29 November 2007, the
European Parliament approved the amended text of the proposal of the Regula-
tion of the European Parliament and the Council on the law applicable to con-
tractual obligations (Rome I Regulation),
8
which has been adopted by
the Council in 2008.
9
The UK government has not given notice to take part in
the adoption and application of the Rome I Regulation,
10
but it is expected that
the UK government will reconsider its position.
11
The Rome I Regulation has
made somechanges to the currentlaw.
12
One of the mostradical changesis Article
4 on determining the applicable law of a contract in the absence of the parties’
choice. The newArticle 4 ascertains the applicable lawby four steps.First, there are
hard-and-fast rules to determine the applicable law in eight categories of con-
tracts, namely contracts for the sale of goods, contracts for the provision of
5 Since contracts of carriage are excluded from the new Article 4 of the Rome I Regulation, and
subject to special rules in Article 5, whereno substantive changes have been made to the contract
of carriage of goods, (recital 22 of Rome I) this article will not examine issue s relating to such
contracts.
6 The current Article 4 has been discussed very frequently. See P.North and J.J. Fawcett, Cheshire and
North’s Private International Law (London: Butterworths, 13th ed., 1999) 564^574; L. Collins et al.,
Dicey, Morris & CollinsTheCon£ict of Laws (London: Sweet& Maxwell, 14th ed., 2006) 1580^1590;
J.Hil l,‘Choiceof Law in Contract under the RomeConvention:The Approach of the UK Courts’
(2004) 53 ICLQ 325; S. Atrill,‘Choiceof Law in Contract:The Missing Pieces of the Article 4 Jig-
saw?’ (2004) 53IC LQ 549. As a result, this article will not provide detailed analysis of the current
Art 4 but will focus on the analysis and interpretation of the newArt 4 of the Rome I Regulation.
7 European Commission,‘Green Paper on the conversionof the Rome Convention of1980 on the
law applicable to contractual obligations into a Community i nstrument and its modernisation’,
COM(2002) 654 ¢nal,14 Jan20 03.
8 See ‘EuropeanParliament legislative resolution of 29 Nov 2007 on the proposal for a regulation of
the European Parliament and of the Council on the law applicable to contractual obligations
(RomeI)’ COM(2005)0605-C6 - 04441/2005-2005/0261(COD).
9 Regulation(EC) No 593/2008 of the European Parliament and of the Council of 17June 2008 on
the law applicable to contractual obligations (Rome I),OJ 2008 L 177/6.
10 Recital 45 of the Regulation clearlystates that ‘the United Kingdom is not taking part in the adop-
tion of this Regulationand is not bound by it or subject to its application’. Formore information in
the UK’s position, see Ministry of Justice,‘Rome I ^ Should the UKopt in?’, Consultation Paper
CP05/08of 2 April 2008, http://www.justice.gov.uk/docs/cp0508.pdf (last visited 21 May2008),14.
11 The UK Mini stryof Justice has opened a public consultation on whether the UK should adoptthe
Rome I Regulation from 2 April 2008 to 25 June 2008.The consultation paper concludes that‘it
would be the national i nterest for the UK to apply’the Rome I Regulation. See Ministry of Justice
Consultation Paper, ibid,37.
12 For the major changes, see Ministry of Justice, n10 above,19^36.
Article 4 RomeI Regulation
786 r2008 The Author. Journal Compilation r2008 The Modern LawReview Limited.
(2008) 71(5) 785^800
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