Freedom of choice

The first sentence of Article 3, paragraph 1 of the Rome Convention stipulates that “the contract shall be governed by the law chosen by the parties.” Thus, the most important provision of the Rome Convention approved the achievements of the internal rules of private international law of the Member States of the European Economic Community.

Freedom of the contracting parties with an international element to choose the law applicable to regulate the content of the rights and obligations of labour relations has a long tradition in Europe. The authors of the report commenting that provision of Article 3 of the Rome Convention, draw attention to the established since 1910 judicial French

doctrine of autonomy de la volonté, freedom of choice of law enshrined in 1896, in German law, and even before, because already in 1865 formulated the implementing rules for the Italian Civil Code, the principle of freedom of contract under which the parties have the legal contractual relations with a foreign component of the national system to choose the substantive law applicable to regulate the rights and duties of these relations. [footnote 82 ] In precedents mentioned in the report, including international treaties, national legislation, the English and Scottish court decisions support the contention that in the Member States of the European Economic Community, there was full compliance of opinion that parties to contractual relations should have the assurance of full freedom of choice of the national system of substantive law under which all rights and obligations will be determined.

[footnote 83 ] In private international law literature it was expressed that the Rome

Convention does not prescribe to the parties to contractual relations with a foreign element for any specific requirements for the choice of a national system of substantive law which will apply to legal relationships that have been concluded. [footnote 84 ] I do not share this opinion. Its legal basis is Article 3, paragraph 4 of the Rome Convention, the standard which requires the application of its national system of national law for assessing the validity of the contract or its provisions (Article 8), the formal requirements (Article 9) and the ability of parties to conclude such a contract (Article 11).

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These factors are crucial to the validity of that agreement with an international element.

But they may not constitute the legal basis for the assessment relating to the choice of a national system of substantive law, which is crucial to the (formal and substantive legal requirements) content of the rights and obligations of the parties to that agreement and other institutions of the national system of substantive law applicable to this contract.

Article 3, paragraph 1 of the Rome Convention does not mention a demand for the parties to contractual relations with a foreign element to be subject to selected national laws.

Provision of Article 3, paragraph 1 of the Rome Convention consists of three sentences.

The first formulates the complete freedom of choice of law. The second includes the directive to make the above choice. The third upholds the full freedom of the parties, stressing that the choice may refer to either the whole contract – or, its individual parts. In this provision there is no mention of what could support the hypothesis put forward by M.

Bogdan, [footnote 85 ] who claims that the Rome Convention accepts the choice of law made by the parties, provided that it complies with the requirements laid down in the national system of substantive law, which was chosen. In Article 8, paragraph 1 of the Convention, national substantive law apply in cases of the existence and validity of the contract or its provisions. Article 9 and Article 11 of the Rome Convention, concerning the formal validity of the signed contract and legal capacity to act on selected contracts have been previously analysed. These are the standards used to evaluate the contractual obligations and agreements not to choose a national system of substantive law which, in accordance with the wishes of the parties will be applicable to the contract involving a foreign element. Therefore it is not without reason that the report’s authors commenting on the Rome Convention, stated that the provision of Article 3, paragraph 4 “refers only to decide about issues related to the existence and validity of the agreement of the parties to select an appropriate national system of substantive law to the provisions of Article 8, 9 and 11.” Despite the announcement that there would be a return to questions about how to

choose the national system of substantive law on the occasion of discussing the issue of substantive importance in a contract, in terms of its compliance with the formal

requirements of national legislation and the legal capacity to act of the parties, the

commentary to Article 8, 9 and 11 of the Rome Convention does not provide discussion on the requirements to be met in order to conclude that the parties to the contract with a foreign element benefit from the freedom to choose one of two or more systems of substantive law, which can be applied to contractual relations, which, owing to the presence of foreign elements may be given control of substantive laws in force in more than one country. Choosing the appropriate national system of substantive law is an action which follows the entering into the contract, which – due to the presence of foreign

elements – should undergo one of two or more competing national systems of law.

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It may eventuate that a contract cannot be considered valid in light of the successful national system of substantive law that would apply to it if it had not been affected by major drawbacks from the standpoint of the law. The contract entered into with an

international element may not meet the formal requirements laid down in legislation in the countries in which the parties or their representatives reside. Finally, both parties who have entered into a contract or one of them may not meet the legal requirements for participation in legal transactions regulated by law of contract in the absence of a legal capacity to act or an incapacity. The question therefore arises whether parties to a contract involving a foreign element, or one of them that does not meet the requirements

prescribed by the national substantive law set out under the provisions of the Rome

Convention is able to choose the applicable substantive law, which will be used to regulate the legal relations created by the agreement. It may indeed prove that the obstacles to concluding an obligatory contract by certain parties do not interfere in the choice of

applicable law, by which the validity of the substantive element will be assessed, a formal signed contract and the parties’ ability to enter into such an agreement. No identical set of criteria of validity of a contract with a foreign element was established in any of the

provisions (Articles 8, 9 and 11) referred to in Article 3, paragraph 4 of the Rome

Convention. There is no legal basis to accept the hypothesis of M. Bogdan, who claims parties to a contract choosing a national system of substantive law should be consistent with all national legislation “mentioned” in the provisions Articles 8, 9 and 11 of the Rome Convention, which, owing to the presence of a foreign element in the agreement are in conflict, and participate in a sort of competitive procedures, which should result in a choice

of one national system of substantive law, which will be evaluated according to the legal relationship between the parties to these agreements. I write the word “mentioned” in quotation marks because in any of the following provisions of the Rome Convention it is not directly mentioned in the national rules of substantive law by which you would evaluate your contract with the national standards. The Rome Convention contains conflict of law standards allowing to indicate the relevant national law. Thus, the term “mentioned” refers to the provisions of these regulations, which will be indicated as appropriate on the basis of the conflict rules laid down in the Convention. Therefore I uphold the claim that the Rome Convention does not contain requirements relating to the conclusion by the parties to a contract involving a foreign element to make an agreement on the selection of the proper national system of substantive law. The validity of this claim is also expressed by M. Bogdan, that the requirements of the provisions of national substantive law selected using the determinants listed in Articles 8, 9 and 11 of the Rome Convention may not conflict with those set out in Article 3, paragraph 1 of the Convention. [footnote 86 ]

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It is of concern that Article 3, paragraph 1 of the Rome Convention does not set any

requirements for an agreement to exist for parties to a contract involving a foreign element in matters relating to the choice of substantive law. In my opinion, the parties to a contract may not meet the legal conditions to enter into that agreement in light of certain rules of substantive law. It does not impede, however, if the parties select the national substantive law system validly and effectively according to which the contract will be evaluated. The above assertion is justified by the following first sentence of Article 3, paragraph 1 of the Rome Convention: “This agreement shall be governed by the law chosen by the parties.”

In the second sentence of Article 3, paragraph 1 of the Convention it is stated that “the choice must in a clear and reasonable certainty result from the contract or the

circumstances of the case.” From the above the authors of the report on the Rome Convention bring the proposal that the choice of a national system of substantive law by the parties to a contract with a foreign element should be firm, categorical (express), or made so as to ensure reasonable certainty to which the national system of substantive law shall be subject to this legal relationship. [footnote 87 ] Examining the provision of the Rome Convention it is clear it contains no guidance on matters relating to the form in which the contractual relationship should demonstrate its decision to submit the legal relationship chosen by each party the national law system. The provision of Article 3, paragraph 4 of the Convention included a reference to Articles 8, 9 and 11, requiring the

parties to submit to an agreement on the choice of the substantive requirements of law and formal legal rules that set a national system of substantive law, which parties shall apply to contractual relations with a foreign element. These requirements may not be in contradiction with the rule expressed in Article 3, paragraph 1 of the Rome Convention.

[footnote 88 ] The above sentiment is unclear, since in the second sentence of Article 3, paragraph 1 of the Convention, the Community legislature used the open method of

coordination, allowing the parties to the contractual relationship the freedom to choose the law, provided that this choice should be made clear. However, Article 3, paragraph 4 allowed the authorities of the Member States constituting the legal standards governing the various relationships of obligations, not only to specify the requirements that should be applied to various types of contracts where there are foreign elements, but also to make requirements for the agreements on choosing the law applicable to regulate the

contractual relationship with a foreign element. This means that if the parties to a contract of employment or to another obligatory contract, intend to select as the relevant provisions of labour law or other appropriate division of law, before they enter into an appropriate agreement, should familiarise themselves with the requirements set out in the legal system, which they intend to select and apply the requirements set out in the decision to conclude an agreement on the subject of a contract or other agreement of commitment to the provisions of the labour law or any other branch of law governing the appropriate relationship of obligations.

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The requirements set out in the national system of substantive law should not restrict the freedom of the parties. In assessing the dependence found between the standards of Article 3, paragraph 1 and Article 3, paragraph 4 of the Rome Convention should conclude that the requirements laid down in national legislation should only assert the general definition set out in Article 3, paragraph 1 of the second sentence. A clear, categorical statement about the selection of the national system of substantive law responsible for regulating certain contractual relations is based on the agreement that the parties submit their contract to be regulated by the labour, civil, commercial law of country X. Parties to a contractual relationship need not so clearly choose a particular law. They may use the standard forms, which are characteristic to a particular legal system of a country. For example, parties to an employment relationship need not decide that the legal relationship is subject to the provisions of US law, if they formulate a contract in a manner indicating complete freedom to each of them, including the employer’s termination of this agreement

without notice or need to provide a valid reason. Lawyers specialising in labour law without difficulty will realise that entering into this concept of employment at will, particular only to American labour law, the parties emphasise that the employment relationship will come under the provisions of the labour law of that country. Use of specified legal wording in the contract, occurring in the labour law of the country is perceived in the literature on private international law as sufficient indication of the decisions taken by the parties to choose the system of substantive law from which these terms are taken. [footnote 89 ] Another

indication, which is applicable to the routine contracts, for example, specified period of work contracts, concluded between the same parties, is a clear statement to submit the first of these agreements set out clearly mentioned to the system of labour law in that country. In such cases where the subsequent contract for a specified period of time is entered into, and the parties do not bring this choice of law clause, it can be assumed that the earlier choice is still relevant [footnote 90 ] especially when the circumstances of the case show that no major changes have been made to the relations between the parties.

Choosing the right law may be made indirectly. The parties may, for example, provide that in the event of a dispute about a claim arising from the employment relationship concluded on the basis of a contract of employment with an international element, the disputed matter shall be resolved under the laws of the labour law in the country in which the work was performed normally, or where the seat of the employer is located, or where there is residence, or where the plaintiff or the defendant is located.

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Reference made in a contract to certain provisions of the labour code of country X may be a clear indication that the relationship has come under the labour law of that country. In some situations, the choice of court may indicate that the parties intend for the contract to be governed by the laws of that country, whose courts have been designated by the parties. However, in this case, because of separate regulations of the conflict rules of procedural law, the lawyers specialising in private international law, recommend caution, since the conflict rules allow parties to contractual relations on a separate choice of law and the court forum in which the disputed matter will be conducted. Although it is natural that a court adjudicating in the country applies the most familiar to it substantive laws in force in the country, distinguishing between the substantive law and the courts applying the law chosen by the parties, means the forum in which any dispute is to be considered, should be supported by additional circumstances which confirm the choice of substantive law applied by the court hearing the disputed case. [footnote 91 ] In the event that the

parties decide upon the inclusion of a clause concerning the applicable arbitrary tribunal, or arbitration board or arbitrator for resolving any disputes arising from this legal

relationship and the parties simultaneously or subsequently agree that the elected body empowered to exercise justice in certain contractual relations is permitted to use the substantive laws of the country where the arbitration has its seat, becomes a clear indication to which system of substantive law as part of the legal relationship the signed contract is submitted to. Although the second sentence of Article 3, paragraph 1 of the Convention of Rome obligates the parties to the contract to expressly select a system of law, due to the introduction of additional factors, such as the provisions of the agreement or the circumstances of the case, the literature on private international law favours the silent selection (tacit choice of law). Selecting an appropriate system of substantive law may be made, as well as legal action, in a formal way in writing or in another way that is sufficiently clear expressing the common will of the parties to the legal relationship in which there are foreign elements.

In Article 3, paragraph 1 of the Rome Convention parties to a contract with a foreign element have the absolute freedom to choose the applicable substantive law of the national system. In contrast to the internal rules of private international law of some countries such as Poland, allowing a limited choice of law, limited by Article 32 of Polish Act of November 12, 1965, that the parties may submit statutory law of their choice, provided that it remains, therefore, a legal relationship in the analysed provision of Article 3, paragraph 1 of the Rome Convention and does not set any restrictions on the parties to contractual relations, and therefore also to labour relations in matters relating to the

selection of any national system of substantive law in the world.

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I share the views expressed in the writings on private international law, that freedom of choice of the national system of substantive law guaranteed by Article 3, paragraph 1 of the Rome Convention is in no way limited to laws related in any way with the relationship of the contract with a foreign element, which can be governed by the law of one of two or more countries. [footnote 92 ] Acting in accordance with the said provision of the

Convention, the parties to the contract are allowed to choose any modern national system of substantive law in force in any country. When deciding on the choice of an appropriate system of substantive law the parties may be guided by any reasons such as, for example, knowledge of the functioning of a particular law, for example, UK law, German or French, or the widespread perception of the neutrality of a particular law, such as, for example, a

system of law in force the Nordic countries. As a rule, however, the parties to the contract shall decide on the selection of a national system of substantive law which will apply to regulate the contract with a foreign element on the basis of the degree of knowledge of

system of law in force the Nordic countries. As a rule, however, the parties to the contract shall decide on the selection of a national system of substantive law which will apply to regulate the contract with a foreign element on the basis of the degree of knowledge of