Internet law: GOVERNING LAW

How to resolve a dispute if the parties are based in different countries?

Last class key questions:

1. where will the parties seek redress in the event of a dispute?

Now we (should) know!

2.            which law will govern the contract?

It is important to establish what law will apply to a contract before the parties enter into any binding agreement.

Generally people give no importance or make confusion between jurisdiction and choice of law clauses.

Why include a governing law clause?

•       Enables the parties to specify the law which will be used to interpret a contract and deal with any disputes which arise under that contract.

•       no express choice ? in the event of a dispute, a court will decide which law to apply in accordance with the relevant conflict of laws principles in that jurisdiction.

Contracts on internet

Generally the on-line trader obliges the user to accept his competent Court and the governing law of his country.

The user has no power of negotiation, just the “click option”.

Rome I Regulation (EC 593/2008)

Rome II Regulation (EC 864/2007)

EC Directive on Electronic Commerce (“Country of origin” principle: the activity of the service provider must comply with the law of his country)

Rome I Regulation

“Rome I Regulation” (EC 593/2008): Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations.

Replaced Rome Convention 1980 in Member States to which Rome Convention 1980 does not apply.

Contracts concluded after 17 December 2009.

•       Does NOT make any express reference to electronic commercial transactions

•       Provides the provisions relating to the choice of law rules for reference in on-line contracting.

•       The basic rule of Rome Convention 1980 has been preserved: in the absence of party choice the governing law is the law of the place where the party which has to perform the main obligations of the contract is normally resident.

•       Rome I converts the existing presumptions into a fixed rule.

The most important changes are:

Rome I sets out the rules that apply to a list of specific contract types, such as those dealing with: sale of goods, services, franchising arrangements, distribution agreements.

If the contract in question is not one of these, then the governing law will be determined by reference to "where the party required to effect the characteristic performance of the contract has his habitual reference", unless it is clear from the circumstances of the case that the law of another country should apply.

•       In order for Rome I to apply, the parties need not have any EU connection – all that is required is that the case is raised in a relevant court which raises a choice of law issue in subject matter that falls within the regulation. Any law may be specified as the applicable law of the contract, whether or not it is the law of an EU member state.

•       Rome I applies to "contractual obligations in civil and commercial matters". The term 'contractual obligation' is not defined, and care must be taken about whether a claim is one made in tort (to which Rome II will apply) or one made in contract. Some claims which are regarded as torts in English law may be regarded as contract claims for the purpose of the two regulations.

MATTERS EXPRESSLY EXCLUDED

•       revenue, customs and administrative matters;

•       questions involving people's status or legal capacity;

•       obligations arising out of family relationships;

•       obligations concerning matrimonial property;

•       obligations arising under bills of exchange, cheques and promissory notes;

•       arbitration agreements and agreements on choice of court;

•       issues governed by company law – for example registration, legal capacity, internal organisation, winding-up or personal liability;

•       disputes relating to trusts;

•       obligations arising out of dealings before the contract was finalised;

•       insurance contracts.

•       In addition Rome I does not apply to matters of evidence and procedure. These are governed exclusively by the law of the court hearing the claim, regardless of the law which applies to the substantive issues.