Parties entering into commercial agreements should consider
agreeing in advance the law which governs non-contractual as well
as contractual obligations arising from their agreement.
The Rome II Regulation1 is an EU regulation which
serves to harmonise the choice of law rules for non-contractual
obligations throughout the EU in most commercial matters. Courts in
all EU Member States (with the exception of Denmark) will apply
Rome II to proceedings commenced after 11 January 2009.
Importantly, Rome II provides a choice of law rule for
torts/delicts. The general rule, where there has been no express
choice of law by the parties, is that the law applicable to
non-contractual obligations arising out of a tort/delict shall be
the law of the country in which the damage occurs. There are a
number of circumstances in which the general rule does not apply
(for example, where the non-contractual obligation arises out of
unfair competition, product liability and IP infringement claims).
Further, as indicated above, parties may also derogate from this
general rule by expressly agreeing to submit non-contractual
obligations to the law of their choice.
Rome II also provides a choice of law rule for obligations
arising out of unjust enrichment. The general rule, again where
there has been no express choice by the parties, is as follows: if
the non-contractual obligation arising out of unjust enrichment
concerns an existing relationship between the parties, for example
arising out of contract or tort, it shall be governed by the law
that governs that relationship, unless the non-contractual
obligation is manifestly more closely connected with another
In order to avoid the selection of a law by the courts that you
do not want to be applied to your dispute (for example, the country
in which the tortious damage occurs may be an arbitrary country),
it is advisable to consider agreeing the law which will govern
non-contractual obligations, in advance.
Impact on the drafting of governing law clauses
Rome II offers commercial parties an opportunity to review the
governing law clauses in commercial contracts as it permits parties
to agree contractually the law which governs non-contractual
obligations (as well as contractual obligations) arising from their
contract. The parties' choice of law will only be effective if
the parties are pursuing a commercial activity and the agreement
has been "freely negotiated".
What are the consequences for international arbitration?
Unlike the Rome I Regulation2 on the law applicable
to contractual obligations, which serves to harmonise the choice of
law rules for contractual obligations throughout the EU Member
States, Rome II does not exclude arbitration from its material
scope. Accordingly, its rules may indirectly affect national rules
governing arbitration and its supervision. Recital 8 to Rome II
provides that the Regulation should apply "irrespective of the
nature of the court or tribunal seised". This may suggest that
arbitral tribunals who are subject to Member States'
supervision are bound by its provisions.
1 Regulation (EC) No. 864/2007 of the European Parliament
and of the Council of 11 July 2007 on the law applicable to
2 Regulation (EC) No. 593/2008 of the European Parliament
and of the Council of 17 June 2008 on the law applicable to
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Making the right decision on whether to use a deed, standard contract or an agreement can make a significant difference to the success of a transaction or project.
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