On 1 March 2006, the Rome Convention on the law applicable to contractual obligations (the "Rome Convention") and the first and second protocols on its interpretation by the Court of Justice of the European Communities came into force in Latvia. The Rome Convention, which establishes uniform rules concerning the law applicable to contractual obligations, is regarded as part of the acquis communautaire and was acceded by Latvia together with the 10 other new Member States of the European Union.
The provisions of the Rome Convention override the conflict of laws provisions relating to contractual obligations embodied in the introductory part of the Civil Law. The Rome Convention provides a much more detailed regulation of the subject than that previously available under the Civil Law, thus rendering it easier to navigate in this complex area of law. The advantages of Latvia joining the Rome Convention include the raising of the level of certainty and confidence as to the law applicable to contractual relationships with Latvian persons and entities. Another advantage to mention is the public availability of travaux preparatoires and case materials in support of uniform interpretation of the Rome Convention.
While the freedom of parties to choose a foreign law to govern their contractual relationship is recognised also by the Civil Law, the Rome Convention sets a more clear borderline of such freedom by stating that the choice of foreign law does not prejudice the application of the mandatory rules of the law of the country with which the contract is most closely connected. Also, the Rome Convention codifies the principle which was previously recognised under Latvian law that the parties may select the law applicable not only to the whole but also only a part of the contract.
The Rome Convention sets a somewhat differrent mechanism to determine the applicable law in the absence of choice by the parties. While, in such case, the Civil Law always directs to the law of the country where the obligation is to be performed, the Rome Convention is more general in providing that the applicable law is that of the country with which the contract is most closely connected. In help of determination of the applicable law in the absence of choice, the Rome Convention provides several presumptions as to the country with which the contract is most closely connected. Although the application of such presumptions may lead to the same result as the Civil Law, it is likely that the applicable law under the Rome Convention will be different in most cases.
In contrast to the Civil Law, the Rome Convention contains provisions relating to consumer contracts and individual employment contracts aimed at protection of consumers and employees. Also, the Rome Convention has solved the always present dilemma as to what law applies to determine the validity of a contract and the consequences of nullity of a contract and provides detailed rules as to the determination of the law applicable to voluntary assignment. Another difference from the Civil Law is that the Rome Convention expressly excludes renvoi, i.e., the "sending back" of a question by the conflict of laws provisions of a country in a situation where the applicability of the laws of that country has been determined by the conflict of laws provisions of another country.
On the basis of Article 22 of the Rome Convention, while ratifying the convention, Latvia has reserved the right not to apply Article 7(1) thereof. That Article provides that, when applying the law of a chosen country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract.
It is important to note that the Rome Convention applies exclusively to contractual obligations. The determination of the law to govern any other matters, such as proprietary rights, remains within the scope of the conflict of laws provisions provided by the Civil Law.
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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