New rules provide confidence for cross-border trade
22 January 2009
The government has announced that it will implement a European Commission regulation that will provide confidence for cross-border trade.
Choice of law in contract affects all UK businesses entering into contracts with companies or consumers overseas, as well as UK consumers buying goods or services from abroad. With an increasing market in trade with countries overseas, it is important to the government that for traders, investors and consumers there are sound rules that allow people to have confidence in the legal effect of their contracts.
In April 2008, in launching a public consultation, the government announced new proposals brought forward by the European Commission in this area. The Rome I Regulation, which will replace the 1980 Rome Convention, will provide clarity over which law applies if a dispute arises over a contract made between people or businesses from different countries. This will allow cross-border trade to continue with confidence.
In July 2008, following consultation with UK stakeholders and the government's own analysis of the regulation, the UK decided to participate in the regulation. The European Commission adopted a decision to extend the application of the Rome I Regulation to the UK on 22 December 2008. The regulation, which will be binding across the UK, including Gibraltar, will come into force on 17 December 2009.
Announcing the UK's decision to participate in the regulation and the outcome of the consultation, Lord Bach, Parliamentary Under Secretary of State said:
'The decision to participate in the regulation follows the successful removal of the United Kingdom's major concerns surrounding the original Commission proposal during negotiations. The regulation now improves on the 1980 Rome Convention and will give greater certainty for business and consumers doing business in Europe.'
Notes to editors
- The 1980 Rome Convention was implemented into UK law by the Contracts (Applicable Law) Act 1990. It applies throughout the UK.
- The original Rome I Regulation was released by the European Commission in December 2005.
- The UK exercised its right not to participate in to the proposed Regulation in May 2006. This was only the second time that the UK had opted out of a Regulation under its Protocol to Title IV of the Treaty establishing the European Community.
- Negotiations on the Rome I Regulation ended with political agreement among Member States in December 2007. The final Regulation was adopted by the Council in June 2008.
- On 2 April 2008, the Ministry of Justice (with the devolved administrations), launched a public consultation exercise, seeking the views of UK business stakeholders on whether the UK should now participate in the Rome I Regulation.
- The consultation closed on 25 June 2008. The overwhelming response was acceptance of the Government's recommendation that the UK should now participate in Rome I.
- As a result, the UK notified the European Commission and the Council of the European Union of its wish to participate in the Regulation. Adoption of a decision by the Commission to extend the application of the Rome I Regulation to the UK was made on 22 December 2008.
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