Scope of applicable law for employment contracts

Article 10 of the Rome Convention defines the limits of the substantive law governing the contract of obligations chosen by the parties to contractual relations with a foreign element or on the basis of designated determinants set out in the substantive law of conflict of laws laid down in the rules of private international law. The authors of the report-commentary to the Rome Convention write that the first draft version of the Convention does not contain provisions defining the scope of an appropriate system of substantive law. The indication of the limits of the applicable substantive law was limited to a brief statement that the national law chosen or identified as appropriate to regulate the contractual relationship with a foreign element is competent to regulate conditions of use and legal consequences of non-compliance or misuse. Since the first version of the draft rules govern conflicts of law in the legal relations arising from contractual and non-contractual obligations, and set out in this version of the draft provision of Article 11 of the Convention defined the scope of the law applicable to contractual obligations, and therefore the Committee also decided to define the scope of law applicable to contractual obligations. [footnote 144 ]

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The final draft of the Rome Convention governs only the conflicts of law standards resulting from the agreements. Removal of Article 11 from the final version of the draft in the early stage of legislative work did not cause marked changes in the content of Article 10, governing the scope of the law applicable to contractual obligations.

Article 10 of the Rome Convention consists of two regulatory bodies. Paragraph 1 of this provision, for example, lists the categories of cases which determine the extent of use by the parties and the authorities applying the law of the national substantive system of law in

obligatory relations involving an international element. Paragraph 2 of Article 10 of the Convention formulates directives on how to carry out obligations specified in the agreements and the remedies that may be available to the creditor making claims of breach of contract against the debtor (obligated to carry out the performance). The

catalogue of issues relating to indicate the scope of the applicable law is not closed off. It is demonstrated by the wording of the first sentence of Article 10, paragraph 1 of the Convention, in which the calculation of the five categories of cases to which the applicable law chosen or identified using the conflict of law rules governed by this Convention, uses the phrase “in particular.” It means that the law applicable to contracts affected by the provisions of Article 3 – Article 6 and Article 12 of the Rome Convention applies to all issues concerning such an agreement. Above all, however, it applies to categories of cases for example listed in the directory set out in Article 10, paragraph 1, points “a” to “e.”

At the top of the list are the relevant provisions of national systems of substantive law, which are applied to regulate the contractual relations with a foreign element (point “a”).

According to this provision, the law applicable to contracts involving a foreign element is relevant for the interpretation of this agreement. Various national systems of substantive law in many different ways set the priorities to use various techniques to the interpretation of contracts. In the case of differences of opinion of the contracting parties on matters relating to specific provisions of this agreement, the national system of substantive law designated as the authority to regulate the obligations set out in this contract and the handling of litigation, which occur against the background of the provisions of this contract, may be granted by the will of this crucial part of the provision in question is set out in the contract by the initiative of the parties. In continental European countries the importance attached to the process of interpretation of the agreements is not only assigned to the interpretation of the rules of grammar (language) content of the contract, but also (and perhaps even primarily) to the intention of the contracting parties, the purpose for which the contract was concluded, and – what is most important – functions that were contracted to carry out.

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In the UK and Ireland, more attention is paid to the interpretation of the wording of the contract. [footnote 145 ] These differences in attitudes of lawyers, encouraged by state and administrative authorities to supervise the compliance of contracting parties and the judiciary determining disputes arising between the parties as to the methods of interpretation of contracts, is important because of the widespread use of English in

international trade. Parties to a contract involving a foreign element often use British, Irish or American legal terms, which makes it necessary to clarify the understanding between the parties and the importance of these terms and to determine the context in which they were used in the interpreted contract. Therefore, in the case of contracts involving a foreign element, it is first and foremost to determine what both parties seek to achieve in the agreement, written down in a foreign language to both or one of the parties. Therefore it is not only important to establish the meaning of the terms of the contract in the country where the contract was entered into in the official language of that country, but also a teleological interpretation should be taken into account by the judicial authorities in claims arising from the contract. Legal terms occurring in the official English language may not correspond with the findings made by the parties to the contractual relationship with a foreign element, nor do they correspond to the intentions and the arrangements the parties entered into. Parties to the contractual relationship, however, should be aware of the legal consequences of submitting the contract to the national substantive conflict laws. With the power of Article 10, paragraph 1, point “a” of the Convention on the consequences of the choice of an appropriate system of substantive law apply equally to the interpretation of the rules in force in that country, the provisions of which were identified as appropriate.

Applicable law chosen by the parties or referred to using the determinants provided in the standards of conflict of laws is applicable in cases involving performance of the obligations under the contract, in which there are foreign elements. Article 10, paragraph 2, point “b”

of the Rome Convention has been given a reference to the benchmarks laid down in national legislation applicable substantive law. In no way should the rules contained in this provision be equated with that Article 10, paragraph 2 of the Convention on the

implementation of obligations by parties to a contract involving a foreign element. National substantive laws indicated as appropriate, govern the diligence with which the parties should carry out their obligations. They govern the conditions relating to the place and time of implementation of obligations as part of the subject of that agreement. They require the parties to personally fulfil their obligations under the contract or determine the conditions under which both parties or one of the parties has the right to substitute a third person or other entity to carry out the obligation.

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Further they establish the rules for the payment of monetary benefits by the party liable to pay salaries and make other similar remuneration benefits in return for fulfilling the

obligations specified in the concluded contract. In cases relating to individual labour law

these requirements are established either in the standards of a national system of substantive labour or civil laws that apply as appropriate to work relationships. National rules may be general, in that the employee is obliged to faithfully and diligently perform work. In this case, national standards for the completion of this obligation are shaped by the judiciary. They may also establish positive patterns and negative patterns of employee behaviour in the process of fulfilling obligations under a contract of employment and individual labour law provisions that govern the employee’s attitudes to their duties regulated by individual employment law as is desired by the legislator. In matters relating to the place and time of performance by the employee and their obligations under the contract of employment, national rules of substantive law of the Member States of the European Union authorise the parties to the employment relationship to determine in the contract of employment the time and place of work being carried out. Time and place of work are considered by the national laws of individual labour law as essential elements of a contract. The most characteristic feature of the employment relationship, used by

lawyers dealing with employment law to distinguish between the work provided in the employment relationship from the work done within other legal relations, is manifested in the law of the employer to identify the employee, within the limits specified in the contract of employment, and the time and place of work. Another defining feature of the work performed under the contract prevents the use of employee benefits in the process of working with the assistance of other persons not employed by an employer with whom the employee has established an employment contract. I am introducing the above claim, since in the case of contracts concluded with a temporary employment agency a worker who remains employed with the agency is required to perform work for a third party to set out the employment relationship – the employer. During the performance of work, the employee is generally required to comply with the limits set by the nature of the work specified in the contract of employment entered into with the employer, according to the employer’s instructions, on whose behalf the work is provided. The latter has the right to require the employee to benefit from the assistance of other persons not employed by a temporary employment agency. The terms and conditions of the contract, followed by an employee at work employed by the user employer, yet remaining in an employment relationship with a temporary employment agency, shall be governed by private economic laws, entered into by employers, with whom the employee has a relationship: the

employer, a party to the contract of employment and the employee on whose behalf the work is done – the user employer.

The national laws govern individual employment law bases for determining the

remuneration and the rules, procedures and the method of payment of employees’ salaries for work carried out, paid by their employers.

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Cases subjected to individual labour law, in the majority fall into the category of issues addressed in Article 10, paragraph 2 of the Rome Convention. However, the conditions for entitlement to receive remuneration for work are among the issues not directly related to the carrying out of the obligations by the employer, but rather on the obligations of employers placed by the legislature of the national obligation principle of equivalence in the process of determining remuneration for work. The amount of remuneration for work should be in direct relation to the type of work specified in the contract of employment, its quantity and quality and other objective indicators, such as, for example, responsibility for the employee by the employer to achieve the desired objective. It might seem that labour relations based on the employment contract, which the national laws of individual labour law is regarded not as a result of the agreement, but the welfare of the requirement outlined above, it remains in conflict with the basic principles of labour law. Modern employers require employees in managerial positions to accomplish their tasks and achieve the expected results. These attitudes of employers do not change the nature of the employment contract, which remains a contract of diligent actions. The duty of the worker hired for a managerial position is to undertake reasonable efforts to more or less fulfil the intentions of the employer.

National labour laws are applicable to the effects of total or partial non-performance of obligations under the contract of employment and the law of individual employment law, in which diligence was specified by the legislature of the national standards of workers in the labour relations. According to the authors of the report-commentary on the Rome

Convention, some Committee members felt that the impact assessment of damage caused by the contractual relations does not fall within the scope of regulation of the conflict rules of substantive law, because it cannot be regarded as a legal issue, but is the real problem, which affects economic and social situation of individual states. Other

members of the Committee were of the opinion that the methods of regulating the ways of assessing the consequences of improper performance or defaults, in particular,

determining the amount of damage are regulated by national legislation. For this reason, there are grounds to enable this matter to be governed by the conflict rules of substantive law. [footnote 146 ] Article 10, paragraph 1, point “c” of the Rome Convention was

formulated as a compromise between the standard positions of supporters and critics of

regulation through choice of law rules of the legal consequences of failure or improper performance of obligations and determining compensation for injured persons and entities following the failure or improper fulfilment of the obligations to comply with contractual obligations in accordance with the standards laid down in national law. According to Article 10, paragraph 1 of this provision, point “c” the above effects, including the determination of damage shall be governed by the provisions of the relevant national substantive law, or be left to the assessment of courts operating within the limits of the procedural rules.

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This provision governs only the substantive conflict rules used by the judicial authorities to assess the consequences of failure to comply with the obligations contained in

agreements involving an international element. The basic formulation contained in this provision is not precise. Article 10, paragraph 1, point “c” applies to “the effects of total or partial default, including the assessment of damages.” Since the quoted provision is a conflict standard, and therefore it contains no indication relating to damage assessment.

This matter was left to the powers of the national legislature. The discourse on the conflict of law standards analysed in the book devoted to problems of private international labour law notes that the term “consequences of default” refers only to those consequences which have been identified in the national substantive laws. In these regulations there may be a set up of a flat-rate or a maximum rate of compensation for damage caused to the employee as a result of failure by the employer of the basic duty of care to protect the health or life of the employee (lump sum) or in the absence of due diligence of the worker in the employer’s interests (the maximum compensation). Reservation made at the end of Article 10, paragraph 1, point “c” of the Convention concerning the role of the court hearing the cases of compensation for failure in whole or in part of the default specified in the contract, in which there are foreign elements is a twofold role. On the one hand it allows the courts in adjudicating such matters in the legal systems not regulated by state authorities to set rules and limits of liability for damages, on the other it authorises the courts closely related to the directives set out in regulations by the state to guard over compensation levels according to the provisions of the relevant national system of

substantive law applied by the court in another state, where applicable procedural rules do not authorise the court to rule on the basis of the lex fori in favour of damages within the limits set in the appropriate law.

The controversy resulted in the idea of solving conflicts between national legislation in matters relating to the regulation of termination of obligations, limitations, loss of rights

resulting from the passage of time (Article 10, paragraph 1, point “d”) and the

consequences of nullity of the contract (Article 10, paragraph 1, point “e”). Due to the differences between the national laws on matters relating to the jurisdiction of the substantive or procedural issues related to the aftermath of the passage of time on the existence or termination of the obligations established under the contract, national courts are not obliged to apply the rules chosen by the parties or by the designated determinants controlled by the conflict rules laid down by the Rome Convention. By contrast, substantial differences between the effects of nullity of the contract, cause according to some national legislation to reactivate the contractual relationship erroneously considered resolved and payment of compensation or to introduce only the obligation of compensation for breaches of causing negative consequences for the contract, meant that Article 22 of the Rome Convention had a right reserved for the national authorities, who had decided to ratify the Convention, not to use the determinants deciding on the proper indication of the national system of law in matters regulated in Article 10, paragraph 1, points “d” to “e.”

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The determinants introduced by Article 10, paragraph 2 of the Convention indicate the relevant provisions of the national system of substantive law applicable in matters relating to the way the implementation of obligations and resources enjoyed by the creditor, which may be taken in cases of non performance by the debtor. As the applicable law, the provision states the country in which there is a fulfilment of the obligation. In the social relations regulated by individual labour laws carrying out obligations are clearly defined in the rules defining the obligations of each party to a contract. An employee has a duty to faithfully and accurately perform the work, observe work discipline and observe the order established in the plant, and must look after the interests of the employer. The employer shall, within the time limits laid down in the provisions of the applicable law, pay an

employee remuneration payable for the work carried out. Punctuality and attention to detail on both sides of the employment relationship in fulfilling the obligations imposed on it give some indication that apply to determine how to carry out obligations. Because of the far-reaching differences in national laws regulating individual labour law of employees on how to carry out worker obligations, Article 10, paragraph 2 of the Rome Convention requires the application in cases of conflict of laws rules of substantive law in force at the place of performance of the obligation. In labour relations these are the provisions in the place of work. Lex loci laboris determines the legal remedies that may be applicable to the parties inadequately carrying out obligations, as expressed in the provisions of substantive law. In

matters of employment law the above conflict rule is crucial because of the different nature

matters of employment law the above conflict rule is crucial because of the different nature