The scope of the Rome Convention

THE USE OF UNIFORM CONFLICT OF LAW RULES IN RELATION TO CONTRACTUAL OBLIGATIONS INVOLVING AN INTERNATIONAL ELEMENT

The scope of the Rome Convention is specified in the provisions contained in Chapter 1 of the Convention (Article 1-Article 2). According to Article 1, paragraph 1 of the analysed Convention, it applies “(…) to contractual obligations in any situation involving a choice between the laws of different countries.” The English version, to a greater extent than the Polish version of the Convention, stresses the role of the Rome Convention – to resolve conflicts of substantive law relating to contractual obligations and its application to legal relations, having its source in the contractual obligations in situations that involve the need to choose the law, and therefore need to take the decision to submit the legal relationships governed by one system of two or more different competing countries. [footnote 50 ]

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The provision of Article 1, paragraph 1 of the Rome Convention may conclude that the obligation to apply uniform standards in situations of conflict of laws, which oblige the legal relations arising from a contractual obligation to choose one of two or more national systems of substantive law that are applicable in the contractual relations with a foreign element.

According to M. Giuliano and P. Lagarde, Article 1, paragraph 1 of the analysed

Convention, establishes its main purpose, namely to solve a conflict of substantive legal

matters relating to contractual obligations. [footnote 51 ] The cited authors acknowledge that the practice of private international law often takes place in situations in which courts are obliged to apply the law to the contractual relations with a foreign element argue that there are serious discrepancies between the rules governing the foreign relations of obligations involving a foreign element and the system of substantive law in force in the forum to which courts are obliged to interpret and apply foreign law.

In their view, the unified substantive law rules adopted in the Rome Convention permit in a uniform way to resolve conflicts of rules of substantive law. [footnote 52 ]

Conflict rules allow you to resolve conflicts occurring between the national legislation in the process of applying the law. For this reason, some authors dealing with private

international law argue that Article 1, paragraph 1 of the Rome Convention is the standard applied by the courts of Member States obligated to settle disputes arising from

contractual relations involving a foreign element. [footnote 53 ] In Article 1, paragraph 1 of this Convention one can conclude that the obligation of the judicial authorities is to apply uniform conflict rules in cases of disputes between parties to legal relations having their own source of obligations under the agreements.

Emphasis placed in Article 1, paragraph 1 of the Rome Convention, that the uniform conflict rules are applied in case of conflict of norms of substantive law of “different

countries” as a reason for the difference of opinion in the literature of private international law and the obligation to make use of the Convention and its standards to resolve conflicts of laws enforced in the territory of one country. According to M. Giuliano and P. Lagarde, unified rules of private international law apply to all conflicts between two or more systems of law. [footnote 54 ] The above sentiment is grounded in the functional interpretation.

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Uniform rules on conflict of laws have been established to resolve conflicts between the systems of substantive law relating to the regulation of contractual obligations. As a rule, due to the principle of territoriality of law, national systems of contract law are in force in the territory of each Member State.

However, if a State has two or more territorial units, as is the case, for example, in federal political systems, and each of such territories has its own rules of law concerning the contractual obligations, then – in accordance with Article 19, paragraph 1 of the Rome Convention – each territorial unit is regarded as a state within the meaning of Article 1, paragraph 1 of the Convention. For this reason, conflicts between the standards of English law, Scottish or Welsh and the law of another Member State shall be governed by the

provisions of the Rome Convention on the Law Applicable to Contractual Obligations.

M. Bogdan [footnote 55 ] believes that the Rome Convention provides uniform rules on conflict of laws allowing to resolve conflicts between standards of Member States. He indicates that in the concept of a state one must also include administrative units of

Member States, which according to Article 19 requires that unit to be treated as a state, if it has a right to enforce legal norms governing the relations of contractual obligations, and if such regulations issued by these units remain in conflict with the provisions of substantive law of other Member States or agencies of those States authorised to enact legal norms.

Despite the different emphasis in the interpretation of Article 1, paragraph 1 and Article 19, paragraph 1 of the Rome Convention M. Giuliano and P. Lagarde and M. Bogdan reach the same conclusion that the collisions of the substantive rules of Member States and others territorial and internal organisational structures, operating in these countries are governed by the provisions of the Rome Convention, since the uniform conflict rules apply to all cases of conflicts of law applicable to the particular territory of each Member State. In the case of countries that do not have a uniform system of positive legal norms, are

considered by the Rome Convention as having the laws of a Member State. The main difference in the case of conflict of laws of a territorial unit and an organisation of a

Member State which does not have the legal status of a country in international relations, but has the power to enact separate laws in matters concerning contractual obligations with the contract law of another Member State or its responsibility to make the law applicable to contractual obligations and the case of a conflict of contractual obligations laws issued by the territorial units within one country. Article 1, paragraph 1 applying in relation to Article 19, paragraph 1 of the Rome Convention requires to solve conflicts of the substantive rules applicable to settlement of obligations arising from contracts on the basis of uniform rules of private international law as laid down in this Convention.

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However, in the event of “district” collisions of the substantive rules, the Member States with different territorial units that are competent to legislate law and have their own legal standards, are not obliged to apply the Rome Convention to conflicts of laws applicable to contractual obligations solely between the laws of such units (Article 19, paragraph 2).

Argumentum a contrario, allows the authorities of Member States consisting of

autonomous territorial units, where the administrative authorities have the right to enforce laws applicable to contractual obligations, to use the Rome Convention to resolve a conflict in substantive law of contractual legal relationships governed by the provisions of

the “districts.” [footnote 56 ] Illustrating the arguments outlined above with examples, it should be noted that collisions between the Scottish provisions of contractual obligation and the laws enforced on Faroe Island, part of the territory of Denmark, are regulated by the Rome Convention, which must be applied to the conflict exists between the English and French obligation laws. By contrast, the Rome Convention can be used with the consent of the United Kingdom authorities to resolve the conflict of law applicable to contractual obligations that exist between the relevant provisions of the English and Scottish laws. According to M. Bogdan, the Rome Convention applies to contracts that do not have an international dimension. [footnote 57 ] The above statement is misleading because the author does not consider international agreements, where all elements are determinanted exclusively to one state, foreign or the forum state.

As I wrote in Part 1 of the book, the rules of private international law or international labour law apply to regulate conflict of law in labour relations with a foreign element. So in

obligatory labour relations, where both parties are nationals of one country or live in the same country, while the workplace is situated on the territory of another state, it is necessary to regulate conflicts of substantive labour law due to competition between the provisions in force in two countries – a country whose citizens are parties or in which the parties reside and the country where the workplace is located. Parties to labour relations involving foreign element, such as is the workplace, may enter into an agreement to apply to the legal relationship a different law than the lex loci laboris. In this case, it will be necessary to consider which of the three competing systems of substantive labour law will apply in case of disputes between the parties to the labour relations, which, because of having the same nationality or residence or office did not enter into a contract, which could be qualified as an international agreement. Private international law, however, can be applied to employment relationships involving an international element, and such elements are present both in contracts under the government regulations enforced in one country, as well as in international agreements. In Article 1, paragraph 1 of the Rome Convention it was not decided that this act applies to international agreements, but it clearly stated that the provisions of this Convention shall apply to the factual content of contractual

obligations, which are related to the laws of different countries.

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Thus, it is not the international nature of obligatory contracts, but the determinants of any such agreement that form the legal basis for the use of conflict of law rules in the

obligatory legal relations involving an international element.

THE UNIVERSAL NATURE OF THE CONFLICT OF LAW RULES

Conflict of law rules of substantive law applicable to conflicts between the contractual obligations, have a common application in the sense that they can be used to resolve a conflict of substantive law in force in any country, not just the Member State whose authorities have ratified the Rome Convention. Reciprocity in recognising the conflict of law rules used to resolve conflicts between the laws of obligations of any country in the world, is not a necessary condition for the application of the Rome Convention. Therefore I share the sentiment expressed by M. Giuliano and P. Lagarde that the provision of Article 2 of the Rome Convention emphasises the “universal nature of the unified rules of conflict of laws.” [footnote 58 ] The universal character of this Convention, stems from the

unrestricted freedom of choice of law by the parties to contractual relations with a foreign element. Article 3, paragraph 1 of the Rome Convention, which will be analysed in detail later in this volume allows the parties to contractual relations with a foreign element to have the contract covered by law chosen by the parties. Authors of the report are right to point out that the Rome Convention on the applicable law to contractual obligations does not apply only in cases where the legal relationship of obligations shows any relationship with the system of law of a Member State whose authorities have ratified this Convention.

[footnote 59 ] Only when the parties to the legal relationship do not make use of the unrestricted freedom of choice of law, a contract involving a foreign element is subject to the law of the country, with which it is most closely connected (Article 4, paragraph 1).

In the case of work agreements involving a foreign element, the closest connection with the contract as the second most important determinant used to indicate the proper national system of substantive labour law has been preceded by determinants that allow to identify a proper national system of labour law provisions enforced in the country which the

employee usually carries out his employment or the rules of the country, where the company (workplace) employs the worker (Article 6, paragraph 2, points “a”-“b”).

Only when the circumstances as a whole conclude that the contract with a foreign element is closely connected with the law of another state, the determinant commonly used to indicate an appropriate system of substantive law, referred to in Article 4, paragraph 1 of the Rome Convention applies to contracts of employment involving a foreign element by determinants mentioned in Article 6, paragraph 2, points “a”-“b”).

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The universal nature of the provisions of the Rome Convention is not in contradiction with the question of exemptions specified in Article 1, paragraph 2 of the Convention analysed.

From the perspective of the conflict rules of substantive labour law used to indicate the relevant national labour laws governing labour relations of obligations, the Rome

Convention applying to contractual relations does not matter. The Convention allows to exclude other legal relationships that are not obligatory in nature from the conflict of law rules laid down in this Convention. This exclusion is essential for regulating the methods of identification of the relevant national labour laws, which are used to regulate the conflict of legal systems used in individual countries to identify the relevant provisions of the

contractual obligations. For this reason, in social relations governed by the substantive provisions of national labour law, the Rome Convention (“Rome 1”) does not apply in matters relating to regulating the capacity of obligatory labour relations and the parties’

liability for unlawful acts (accidents at work, illegal collective shares, strikes or lockouts).

Conflict of the substantive labour law standards used in different countries is governed by the determinants listed in the European Parliament and the Council of the European Communities No. 864/2007 dated July 11, 2007 on the law applicable to non-contractual obligations (“Rome 2”). [footnote 60 ] In the literature on private international law it is noted that the Rome Convention does not contain a legal definition of a contractual obligation.

[footnote 61 ] It also highlights that some of the commitments to which the Rome Convention does not apply, are contractual obligations in their character (Article 1,

paragraph 2, points “a”-“b”). It is true that Article 1, paragraph 2, point “b” of the analysed Convention excludes obligations arising not from contracts but from unilateral actions, such as gifts, for example, or inheritance distribution. Conflict of laws governed by the Rome Convention also do not apply to arbitration agreements and agreements on valid jurisdictions (Article 1, paragraph 2, point “d”). Excluding arbitration decisions from the regulating scope of the Convention was based on the argument that all matters relating to disputes with contractual relations are procedural in nature.

Meanwhile, the Rome Convention sets out methods for the selection or designation of standards applicable to substantive law. In addition, techniques for determining the definition of procedural rules used to resolve disputes between the parties to contractual relations with a foreign element, is closely connected with the public policy clause in the Member States rather than the freedom of parties to choose the national system of substantive law applicable to disputes.

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According to M. Giuliano and P. Legarde, meriti courts have a duty to assess the decisions taken by the contractual relations with a foreign element for selecting an appropriate authority competent to hear disputes under the provisions of the forum, rather than

procedural standards selected by the parties. Given the far- reaching differences between national regulations on dealing with an indication of the competent body for settling

disputes between the parties to contractual relations with a foreign element is not possible to establish uniform legal rules. [footnote 62 ] Thus the inclusion into the Rome Convention matters arising from contracts, would be in conflict with its primary goal – unification of the rules governing the resolution of a conflict of substantive law relating to contractual

obligations. In addition, the rights of the parties to choose an arbitration court or tribunal competent to hear contested cases, are governed by the provisions of other international conventions.

Conflicts of procedural norms of labour law are presented in the last chapter of the book.

The committee which prepared the draft of the Rome Convention was not unanimous in its perceptions on issues relating to the regulation on contracts entered into by parties in matters relating to defining the characteristics of arbitration bodies. Cited were the arguments for the application of conflict of law rules relating to contractual obligations to contracts entered into by the parties to submit disputes for settlement of the arbitration.

One of them pointed to the similarity of these contracts to other obligation agreements.

The second was largely a formality. It was emphasised that some international conventions governing conflicts of norms of procedural law, in which the rights of the parties were governed by contractual relations with a foreign element to submit disputes to a chosen court do not apply to arbitration bodies. In addition, it was pointed out that not all Member States of the European Communities have ratified the international conventions to regulate conflict of procedural law in cases of disputes relating to the contractual relations with a foreign element.

Finally it was stressed that international conventions governing conflicts of norms of procedural law are not generally applicable in the sense in which these words were used in Article 1, paragraph 1 of the Rome Convention. [footnote 63 ] Arguments for

encompassing contracts were mainly raised by representatives of the UK. Representatives of France and Germany were against the use of the Rome Convention in respect of

contracts and the determination of arbitration bodies. They believed that the multiplication of legal regulations in matters relating to the resolution of a conflict of procedural law is not conducive to transparency in international trade law.

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It was argued that the principle of the “closest tie” between the rules of substantive law and procedural law, used to settle disputes in obligatory contract relationships heard by the courts, cannot be used to submit such disputes to international arbitration bodies.

Since the committee adopted as a fundamental principle of legislative work the full compliance of opinion on matters relating to conflict of law rules regulating the national substantive laws on matters relating to contractual obligations, therefore, in Article 1, paragraph 1, point “d” of the Rome Convention, it was decided that both provisions for arbitration and jurisdiction bodies resolving contractual disputes are excluded from the scope of the Convention. Commenting on the decision, M. Giuliano and P. Lagarde stressed that the exclusion from the scope of regulation of the Rome Convention of

clauses reserving the submission of such disputes and where such clauses are treated as an integral component of a contract, has no legal consequences for matters relating to the conflict rules laid down in the convention analysed in relation to the other provisions of the contract obligations. [footnote 64 ] In matters of obligatory labour relations involving an international element to the dispute against these contracts are subject to the Member States labour courts, or courts – in the first instance – conciliatory bodies organised and administered by the state authorities.

In Poland, disputes concerning worker claims may be heard by a conciliation committee if a request for the hearing of such is made by an entity authorised to initiate such

proceedings. In the UK and France in the courts of first instance of labour relations, disputes are resolved by the conciliation (Justice of the Peace/Juge de Paix) – Industrial

proceedings. In the UK and France in the courts of first instance of labour relations, disputes are resolved by the conciliation (Justice of the Peace/Juge de Paix) – Industrial