Rome I Regulation - Law Applicable to Contractual Obligations (Private International Law)

of the Treaty (2), Whereas the following: (

• 1)

  The Community has set itself the objective of maintaining and developing an area of freedom, security and justice. For the progressive establishment of that area, the Community must adopt measures in the field of judicial cooperation in civil matters having cross-border implications, to the extent necessary for the proper functioning of the internal market. (

• 2)

  In accordance with what is established in article 65, letter b), of the Treaty, those measures must include those that promote the compatibility of the rules applicable in the Member States on conflicts of laws and jurisdiction. (

• 3)

  The European Council, at its meeting held in Tampere on 15 and 16 October 1999, endorsed the principle of mutual recognition of judicial decisions and other decisions of judicial authorities as the cornerstone of judicial cooperation in civil matters and invited the Council and the Commission to adopt a programme of measures for the implementation of that principle. (

• 4)

  On 30 November 2000, the Council adopted a common programme of the Commission and the Council of measures for the implementation of the principle of mutual recognition of judicial decisions in civil and commercial matters (3). The programme defines the measures relating to the harmonization of conflict of laws rules as those that facilitate mutual recognition of judicial decisions. (

• 5)

  The Hague programme (4), adopted by the European Council on 5 November 2004, urged to continue working actively on the conflict of laws rules relating to obligations arising from contracts (Rome I). (

• 6)

  The proper functioning of the internal market requires, in order to promote the predictability of the outcome of litigations, legal certainty as to the applicable law and the free circulation of judicial decisions, that the conflict of laws rules in force in the Member States designate the same national law irrespective of the country of the court before which the dispute has been brought. (

• 7)

  The material scope and the provisions of this Regulation must ensure consistency with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction, recognition and enforcement of judgments in civil and commercial matters (5) (Brussels I), and Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II) (6). (

• 8)

  Family relationships must encompass parentage, marriage, affinity and collateral family. The reference in

article 1, section 2, to relationships with effects analogous to marriage and other family relationships must be interpreted in accordance with the legislation of the Member State in which the matter is submitted to the court. (9) Obligations arising from bills of exchange, cheques and promissory notes, as well as from other negotiable instruments must also cover bills of lading to the extent that the obligations arising from those latter instruments derive from their negotiable character. (10) Obligations arising from dealings prior to the conclusion of a contract are regulated by

of Regulation (EC) No 864/2007. Consequently, those obligations must be excluded from the scope of this Regulation. (11) The freedom of the parties to choose the applicable law must be one of the keys to the system of conflict of laws rules in the matter of contractual obligations. (12) An agreement between the parties to confer on one or more courts of a Member State exclusive jurisdiction to settle disputes linked to a contract is one of the factors to be taken into account when determining whether the choice of law is clearly expressed in the terms of the contract. (13) This Regulation does not prevent the parties from incorporating by reference into their contract a non-state law or an international convention. L 177/6 ES Official Journal of the European Union 4.7.2008 (

• 1)

  OJ C 318 of 23.12.2006, p. 56. (

• 2)

  Opinion of the European Parliament of 29 November 2007 (not yet published in the Official Journal) and Council Decision of 5 June 2008. (

• 3)

  OJ C 12 of 15.1.2001, p. 1. (

• 4)

  OJ C 53 of 3.3.2005, p. 1. (

• 5)

  OJ L 12 of 16.1.2001, p. 1. Regulation as last amended by Regulation (EC) No 1791/2006 (OJ L 363 of 20.12.2006, p. 1). (

• 6)

  OJ L 199 of 31.7.2007, p. 40.

  (14) If the Community adopts, in an appropriate legal instrument, rules of substantive contract law, including general conditions, this instrument may provide that the parties may choose to apply such rules. (15) When, at the moment of choice, all other relevant elements of the situation are located in a country other than the one whose law is chosen, the choice of law must not prevent the application of the provisions of the law of that country which cannot be excluded by agreement. This rule must apply independently of whether the choice of law is accompanied by the choice of a court. While it is not intended to make substantial changes to article 3, section 3, of the 1980 Convention on the law applicable to contractual obligations (1) (Rome Convention), the wording of this Regulation is adapted as far as possible to article 14 of Regulation (EC) No 864/2007. (16) In order to contribute to the general objective of this Regulation which is legal certainty in the European judicial area, the conflict of laws rules must present a high degree of predictability. Nevertheless, the judge must have a margin of appreciation in order to determine the law which presents the closest links with the situation. (17) With regard to the applicable law in the absence of a choice, the concepts of "provision of services" and "sale of goods" must be interpreted in the same way as when applying article 5 of Regulation (EC) No 44/2001, to the extent that the sale of goods and provision of services are covered by that Regulation. Although franchising and distribution contracts are service contracts, they are subject to specific rules. (18) With regard to the applicable law in the absence of a choice, multilateral systems must be those in which negotiations are conducted, such as regulated markets or multilateral trading systems mentioned in article 4 of Directive 2004/39/CE of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (2), whether or not they are based on a central counterparty. (19) In the absence of a choice of law, the applicable law must be determined in accordance with the rule specified for the particular type of contract. If the contract cannot be classified as one of the specific types, or if its elements correspond to more than one of the specified types, it must be governed by the law of the country where the party that is to effect the performance characteristic of the contract has its habitual residence. In the case of a contract whose subject matter is a set of rights and obligations that can be classified as corresponding to more than one of the specified types of contract, the performance characteristic of the contract must be determined on the basis of its centre of gravity. (20) If the contract presents manifestly closer links with a country other than the one indicated in article 4, sections 1 or 2, an escape clause must provide that the law of that other country shall apply. In determining that country, account shall be taken, inter alia, of whether the contract in question has a very close relationship with another contract or contracts. (21) In the absence of a choice, where the applicable law cannot be determined on the basis that the contract can be classified as one of the specified types or as the law of the country where the party that is to effect the performance characteristic of the contract has its habitual residence, the contract must be governed by the law of the country with which it is most closely connected. In determining that country, account shall be taken, inter alia, of whether the contract in question has a very close relationship with another contract or contracts. (22) With regard to the interpretation of contracts for the carriage of goods, no substantial modification is intended with respect to article 4, section 4, third sentence, of the Rome Convention. Therefore, contracts of charterparty for a single voyage or other contracts whose main object is to effect the carriage of goods shall be considered as contracts for the carriage of goods. For the purposes of this Regulation, the term "shipper" shall refer to any person who has concluded a carriage contract with the carrier and the term "carrier" shall refer to the party to the contract which undertakes to effect the carriage of goods, whether or not it carries out the transport itself. (23) As regards contracts concluded with parties considered weaker, it is appropriate to protect them by means of conflict of laws rules more favourable to their interests than the general rules. (24) More specifically, in the case of consumer contracts, the conflict of laws rule must make it possible to reduce the costs for the settlement of disputes which are often of small value, and to take into account the evolution of long-distance marketing techniques. Consistency with Regulation (EC) No 44/2001 requires, on the one hand, that reference be made to "directed activity" as a condition for the application of the consumer protection rule and, on the other hand, that this concept be subject to a harmonious interpretation in Regulation (EC) No 44/2001 and in this Regulation, it being specified that a joint declaration by the Council and the Commission on article 15 of Regulation (EC) No 44/2001 specifies that for

article 15, section 1, letter c), to be applicable "it is not sufficient for a business to direct its activities towards the Member State of the consumer's domicile, or towards several Member States including that Member State, but the business must also have concluded a contract in the framework of such activities". This declaration also recalls that "the mere fact that a website is accessible is not sufficient for article 15 to apply, even if that website invites the conclusion of distance contracts and if such a contract is indeed concluded by whatever means. In this respect, the language or currency used by a website is not a relevant element". (25) Consumers must be protected by the provisions of the country of their habitual residence which cannot be excluded by agreement, provided that the contract has been concluded in the framework of the commercial or professional activities carried out by the professional in that country. The same protection must be ensured if, although the professional does not exercise its commercial or professional activities in the country of the consumer's habitual residence, it directs its activities by whatever means to that country or to several countries, including that of the consumer, and the contract is concluded in the framework of these activities. (26) For the purposes of this Regulation, financial services such as services and investment activities and ancillary services provided by a professional to a consumer, as mentioned in sections A and B of Annex I to Directive 2004/39/CE and contracts for the sale of units in collective investment undertakings, whether or not they fall within the scope of Council Directive 85/611/CEE of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to certain undertakings for collective investment in transferable securities (UCITS) (1), must be subject to article 6 of this Regulation. Consequently, where reference is made to the terms and conditions governing the issue, public offer or public offers for sale of transferable securities, and to the subscription and redemption of units in collective investment undertakings, these references must include all aspects that are binding on the issuer or the offeror, but not those aspects related to the provision of financial services. (27) Several exceptions must be made to the general conflict of laws rule applicable to consumer contracts. Under one of these exceptions, the general rule must not apply to contracts the subject matter of which is a real property right or the lease of immovable property, except contracts relating to the right of use of immovable property on a timeshare basis in accordance with the definition of Directive 94/47/CE of the European Parliament and of the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right of use of an immovable property on a timeshare basis (2). (28) It is important to ensure that the rights and obligations constituting a financial instrument do not fall within the scope of the general rule applicable to consumer contracts, as this could result in different laws having to be applied to each of the instruments issued, which would consequently alter their nature and prevent fungible trading and offering. In addition, whenever those instruments are issued or offered, the contractual relationship established between the issuer or the offeror and the consumer must not necessarily be subject to the mandatory application of the law of the consumer's country of habitual residence, as it is necessary to ensure uniformity in the terms and conditions of an issue or an offering. The same principle must apply to multilateral systems referred to in

article 4, section 1, letter h), in order to ensure that the law of the consumer's country of habitual residence does not interfere with the rules applicable to contracts concluded within the framework of those systems or with the operator of those systems. (29) For the purposes of this Regulation, the references to the rights and obligations constituting the general conditions governing the issue, public offers for sale or public offers for acquisition of transferable securities, and the references to the subscription and redemption of units in collective investment undertakings must include the conditions governing, inter alia, the allocation of transferable securities or units, the rights in the event of oversubscription, the revocation rights and similar matters in the context of the offer, as well as those matters mentioned in articles 10, 11, 12 and 13, thus ensuring that all the important contractual aspects of an offering that are binding on the issuer or the offeror are governed by a single law. (30) For the purposes of this Regulation, financial instruments and transferable securities shall mean those instruments mentioned in article 4 of Directive 2004/39/CE. (31) The provisions of this Regulation must be understood without prejudice to the operation of a formal agreement established as a system pursuant to article 2, letter a), of Directive 98/26/CE of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (3). (32) Because of the special characteristics of contracts of carriage and insurance contracts, an adequate level of protection for passengers and policyholders must be ensured through specific provisions. Therefore, article 6 must not apply in the context of these specific contracts. (33) When an insurance contract that does not cover a major risk covers several risks of which at least one is situated in a Member State and at least one is situated in a third country, the special provisions of this Regulation relating to insurance contracts must apply only to the risk or risks in the Member State or in the Member States in question. (34) The rule on the individual employment contract must not prejudice the application of the mandatory rules of the country where the worker is posted, in accordance with Directive 96/71/CE of the European Parliament and of the Council of 16 December 1996 on the posting of workers in the framework of the provision of services (4). L 177/8 ES Official Journal of the European Union 4.7.2008 (

• 1)

  OJ L 375 of 31.12.1985, p. 3. Directive as last amended by Directive 2008/18/CE of the European Parliament and of the Council (OJ L 76 of 19.3.2008, p. 42). (

• 2)

  OJ L 280 of 29.10.1994, p. 83. (

• 3)

  OJ L 166 of 11.6.1998, p. 45. (

• 4)

  OJ L 18 of 21.1.1997, p. 1.

  (35) Workers must not be deprived of the protection afforded to them by provisions which cannot be excluded by agreement or which can be excluded only in their favour. (36) With regard to individual employment contracts, the performance of work in another country is considered temporary when the worker is assumed to resume work in the country of origin after carrying out his task abroad. The conclusion of a new employment contract with the original employer or with an employer which is a member of the same group of undertakings as the original employer must not exclude the possibility that the worker is considered to be performing work in another country temporarily. (37) Considerations of public policy justify, in exceptional circumstances, the recourse by the courts of the Member States to exceptions based on public policy and overriding mandatory provisions. The concept of "overriding mandatory provisions" must be distinguished from the expression "provisions which cannot be excluded by agreement" and must be interpreted in a more restrictive manner. (38) In the context of a voluntary assignment of a credit, the term "relationships" must clarify that article 14, section 1, also applies to the real law aspects of an assignment of a credit between assignor and assignee in those legal systems where such aspects are treated separately from those relating to the law of obligations. However, the term "relationships" must not be understood as referring to any relationship between assignor and assignee that may exist. In particular, it must not cover preliminary questions relating to a voluntary assignment of a credit or to a conventional subrogation. The term must be strictly limited to those aspects directly relevant to the voluntary assignment of a credit or to the conventional subrogation in question. (39) Legal certainty requires that a clear definition of habitual residence be established, in particular for companies and associations or legal persons. Unlike article 60, section 1, of Regulation (EC) No 44/2001, which proposes three criteria, the conflict of laws rule must be limited to a single criterion; otherwise, the parties would not be able to foresee the law applicable to their situation. (40) Situations must be avoided in which there is a scattering of conflict of laws rules among several instruments, as well as differences between those rules. This Regulation, however, must not exclude the possibility of including conflict of laws rules relating to contractual obligations in provisions of Community law in relation to specific matters. This Regulation is understood without prejudice to the application of other instruments which establish provisions intended to contribute to the proper functioning of the internal market, to the extent that they cannot be applied together with the law designated by this Regulation. The application of the provisions of applicable law determined by this Regulation must not affect the freedom of movement of goods and services governed by Community instruments, such as Directive 2000/31/CE of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce on the internal market (E-commerce Directive) (1). (41) Respect for the international commitments entered into by the Member States implies that this Regulation is understood without prejudice to international conventions to which one or more Member States are parties at the time of the adoption of this Regulation. In order to make the rules more accessible, the Commission must publish a list of the relevant conventions in the Official Journal of the European Union on the basis of information transmitted by the Member States. (42) The Commission shall present a proposal to the European Parliament and to the Council on the procedures and conditions under which the Member States would be authorised, in particular and exceptional cases, to negotiate and conclude, on their own behalf, agreements with third countries on sectoral matters, which include provisions on the law applicable to contractual obligations. (43) Since the objective of this Regulation cannot be sufficiently achieved by the Member States and, consequently, by reason of the dimensions and effects of this Regulation, it can be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity enshrined in

of the Treaty. In accordance with the principle of proportionality laid down in that article, this Regulation does not go beyond what is necessary to achieve that objective. (44) In accordance with article 3 of the Protocol on the position of the United Kingdom and Ireland attached to the Treaty on European Union and to the Treaty establishing the European Community, Ireland has notified its wish to participate in the adoption and application of this Regulation. (45) In accordance with articles 1 and 2 of the Protocol on the position of the United Kingdom and Ireland attached to the Treaty on European Union and to the Treaty establishing the European Community, and without prejudice to article 4 of the same, the United Kingdom does not participate in the adoption of this Regulation and is therefore not bound by it nor subject to its application. (46) In accordance with articles 1 and 2 of the Protocol on the position of Denmark attached to the Treaty on European Union and to the Treaty establishing the European Community, Denmark does not participate in the adoption of this Regulation and is therefore not bound by it nor subject to its application. 4.7.2008 ES Official Journal of the European Union L 177/9 (1) OJ L 178 of 17.7.2000, p. 1.

THIS REGULATION HAS BEEN ADOPTED: CHAPTER I SCOPE OF APPLICATION

Material scope 1. This Regulation shall apply to contractual obligations in civil and commercial matters in situations which involve a conflict of laws. It shall not apply, in particular, to fiscal, customs and administrative matters. 2. The following shall be excluded from the scope of this Regulation:

• a)

  the status and legal capacity of natural persons, without prejudice to the provisions of article 13;

• b)

  obligations arising from family relationships and from relationships which the law applicable to them treats as having comparable effects, including the obligation of maintenance;

• c)

  obligations arising from matrimonial property regimes, from property regimes arising from relationships which the law applicable to them treats as having comparable effects to marriage, and from wills and succession;

• d)

  obligations arising from bills of exchange, cheques and promissory notes, as well as from other negotiable instruments to the extent that the obligations arising from these latter instruments derive from their negotiable character;

• e)

  arbitration agreements and agreements on the choice of court;

• f)

  questions governed by the law of companies, associations and other legal persons relating to questions such as the creation, by registration or otherwise, the capacity, the internal organization and the dissolution of companies, associations and other legal persons, as well as the personal liability of members and managers as such towards the obligations of the company or other legal persons;

• g)

  the power of an intermediary to bind a third party, or the power of an organ to bind a company, association or legal person;

• h)

  the creation of trusts, the relationships between settlors, trustees and beneficiaries;

• i)

  obligations arising from dealings prior to the conclusion of a contract;

• j)

  insurance contracts arising from operations carried out by organizations other than those referred to in article 2 of Directive 2002/83/CE of the European Parliament and of the Council of 5 November 2002 on life assurance (1), and which have as their object the provision of benefits to employees or self-employed workers who are members of an undertaking or group of undertakings, a professional activity or group of professional activities, in the event of death, survival, cessation or reduction of activity, occupational disease or industrial accident. 3. This Regulation shall not apply to evidence and procedure, without prejudice to article 18. 4. For the purposes of this Regulation, "Member State" shall mean all Member States to which this Regulation applies. However, in article 3, section 4, and in article 7, the term "Member State" shall designate all Member States.

Universal application The law designated by this Regulation shall apply even if it is not the law of a Member State. CHAPTER II UNIFORM RULES

Freedom of choice 1. A contract shall be governed by the law chosen by the parties. The choice must be expressed expressly or result unequivocally from the terms of the contract or from the circumstances of the case. By this choice, the parties may designate the law applicable to the whole or to part only of the contract. 2. The parties may, at any time, agree that the contract is to be governed by a law other than that which previously governed it, whether pursuant to an earlier choice made in accordance with this article or under the other provisions of this Regulation. Any change as to the determination of the law applicable to the contract that is effected after the conclusion of the contract shall not affect the validity as to form of the contract under

article 11, nor shall it affect the rights of third parties. 3. When all other elements relevant to the situation are located, at the time of the choice, in a country other than the country whose law is chosen, the choice of the parties shall not prejudice the application of the provisions of the law of that other country which cannot be derogated from by agreement. 4. When all other elements relevant to the situation, at the time of the choice, are located in one or several Member States, the choice by the parties of a law which is not the law of a Member State shall be understood without prejudice to the application of the provisions of Community law, where appropriate, as applied in the Member State of the forum, which cannot be derogated from by agreement. 5. The existence and validity of the consent of the parties as to the choice of applicable law shall be governed by the provisions laid down in articles 10, 11 and 13.

Law applicable in the absence of a choice 1. In the absence of a choice made in accordance with the provisions of article 3, and without prejudice to articles 5 to 8, the law applicable to a contract shall be determined as follows:

• a)

  a contract for the sale of goods shall be governed by the law of the country where the seller has its habitual residence;

• b)

  a contract for the provision of services shall be governed by the law of the country where the service provider has its habitual residence;

• c)

  a contract relating to a real property right or the lease of immovable property shall be governed by the law of the country where the property is situated;

• d)

  notwithstanding the provisions of letter c), the lease of immovable property concluded for the temporary personal use of the tenant for a maximum period of six consecutive months shall be governed by the law of the country where the owner has its habitual residence, provided the tenant is a natural person and has its habitual residence in the same country;

• e)

  a franchising contract shall be governed by the law of the country where the franchisee has its habitual residence;

• f)

  a distribution contract shall be governed by the law of the country where the distributor has its habitual residence;

• g)

  a contract for the sale of goods by auction shall be governed by the law of the country where the auction takes place, if that place can be determined;

• h)

  a contract concluded within a multilateral system which brings together or allows the bringing together of multiple third-party buying and selling interests in financial instruments as defined by the first indent of article 4, section 1, point 17, of Directive 2004/39/CE, in accordance with non-discretionary rules and governed by a single law, shall be governed by that law. 2. When a contract is not covered by section 1 or where the elements of the contract are covered by more than one of the points a) to h) of section 1, the contract shall be governed by the law of the country where the party which is to effect the performance characteristic of the contract has its habitual residence. 3. Where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than that indicated in sections 1 or 2, the law of that other country shall apply. 4. Where the law applicable cannot be determined pursuant to sections 1 or 2, the contract shall be governed by the law of the country with which it is most closely connected.

Contracts of carriage 1. In the absence of a choice of law applicable to a contract for the carriage of goods in accordance with article 3, the applicable law shall be the law of the country where the carrier has its habitual residence, provided that the place of receipt or the place of delivery, or the habitual residence of the consignor, is also situated in that country. If this requirement is not fulfilled, the law of the country where the place of delivery agreed by the parties is situated shall apply. 2. In the absence of a choice by the parties of the law applicable to a contract for the carriage of passengers in accordance with the second paragraph, the contract shall be governed by the law of the country where the passenger has its habitual residence, provided that the place of departure or the place of destination is also situated in that country. If this requirement is not fulfilled, the law of the country where the carrier has its habitual residence shall apply. The parties may choose the law applicable to a contract for the carriage of passengers, in accordance with article 3, only as the law of the country in which: a) the passenger has its habitual residence, or b) the carrier has its habitual residence, or c) the carrier has its place of central administration, or d) the place of departure is situated, or e) the place of destination is situated. 3. Where it is clear from all the circumstances of the case that the contract, in the absence of a choice of law, is manifestly more closely connected with a country other than that indicated in sections 1 or 2, the law of that other country shall apply.

Contracts of consumer protection 1. Without prejudice to articles 5 and 7, a contract concluded by a natural person for a purpose which can be regarded as being outside his trade, business or profession ("the consumer") with another person acting in the exercise of his trade, business or profession ("the professional") shall be governed by the law of the country in which the consumer has his habitual residence, provided that the professional: a) pursues his commercial or professional activities in the country in which the consumer has his habitual residence, or b) by any means, directs such activities to that country or to several countries including that country, and the contract falls within the scope of such activities. 2. Notwithstanding section 1, the parties may choose the law applicable to a contract that fulfils the requirements of section 1, in accordance with article 3. However, such a choice may not result, for the consumer, in the loss of the protection afforded to him by those provisions which cannot be derogated from by agreement under the law which, in the absence of a choice, would be applicable by virtue of section 1. 3. If the requirements in points a) and b) of section 1 are not fulfilled, the law applicable to a contract between a consumer and a professional shall be determined in accordance with articles 3 and 4. 4. Sections 1 and 2 shall not apply to the following contracts:

• a)

  contracts for the provision of services where the services are to be supplied to the consumer exclusively in a country other than that in which the consumer has his habitual residence;

• b)

  contracts of carriage other than contracts relating to package travel within the meaning of Council Directive 90/314/CEE of 13 June 1990 on package travel, package holidays and package tours (1);

• c)

  contracts which have as their object a right in rem in immovable property or a tenancy of immovable property, except in so far as they concern rights of use of immovable property on a timeshare basis within the meaning of Directive 94/47/CE;

• d)

  rights and obligations which constitute a financial instrument and rights and obligations which constitute the terms and conditions governing the issue, the public offer or the public offer for sale of transferable securities, and the subscription and redemption of units in collective investment undertakings, unless they constitute the provision of a financial service;

• e)

  contracts concluded within a system referred to in article 4, section 1, letter h).

Insurance contracts 1. This article shall apply to contracts referred to in section 2, irrespective of whether the risk is located in a Member State or not, and to all other insurance contracts covering risks located in the territory of the Member States. It shall not apply to reinsurance contracts. 2. Any insurance contract covering a large risk within the meaning of article 5, letter d), of Council Directive 73/239/CEE of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life insurance (2), shall be governed by the law chosen by the parties in accordance with article 3 of this Regulation. In so far as the applicable law has not been chosen by the parties, the insurance contract shall be governed by the law of the country in which the insurer has its habitual residence. Where it is clear from all the circumstances that the contract is manifestly more closely connected with another country, the law of that other country shall apply. 3. For an insurance contract other than one covered by section 2, the parties may choose the law applicable in accordance with article 3, only as the law of one of the following countries:

• a)

  the Member State in which the risk is situated at the time of conclusion of the contract;

• b)

  the country where the policyholder has his habitual residence;

• c)

  in the case of life insurance, the Member State of which the policyholder is a national;

• d)

  for insurance contracts covering risks limited to events that are accident-related and which occur in a Member State other than the Member State in which the risk is situated, the law of that other Member State;

• e)

  where the policyholder of an insurance contract covered by this section pursues a commercial or industrial activity or a liberal profession and the insurance contract covers two or more risks relating to those activities and located in different Member States, the law of any of those Member States or the law of the country where the policyholder has his habitual residence. In the cases referred to in points a), b) or e), if the Member States referred to in those points allow greater freedom in the choice of law applicable to an insurance contract, the parties may make use of that freedom. In so far as the applicable law has not been chosen by the parties in accordance with this section, the contract shall be governed by the law of the Member State in which the risk is situated at the time of conclusion of the contract. 4. The following additional rules shall apply to insurance contracts covering risks in respect of which a Member State imposes an obligation to take out insurance:

  • a)

    an insurance contract only satisfies the obligation if it complies with the specific requirements laid down by the Member State imposing the obligation. Where there is a conflict between the law of the Member State in which the risk is situated and the law of the Member State imposing the obligation to take out insurance, in the case of compulsory insurance, the latter shall prevail;

  • b)

    notwithstanding sections 2 and 3, a Member State may provide that insurance contracts shall be governed by the law of the Member State imposing the obligation to take out insurance. 5. For the purposes of section 3, third paragraph, and section 4, where the contract covers risks situated in more than one Member State, the contract shall be treated as a series of contracts, each covering only one Member State. 6. For the purposes of this article, the country in which the risk is situated shall be determined in accordance with article 2, letter d), of Council Directive 88/357/CEE of 22 June 1988 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life insurance, which lays down the conditions to facilitate the effective exercise of the freedom to provide services (1), and, in the case of life insurance, the country in which the risk is situated shall be the country of commitment within the meaning of article 1, section 1, letter g), of Directive 2002/83/CE.

Individual employment contracts 1. An individual employment contract shall be governed by the law chosen by the parties in accordance with article 3. However, such a choice may not have the result of depriving the worker of the protection afforded to him by the provisions that cannot be derogated from by agreement under the law that, in the absence of a choice, would be applicable pursuant to sections 2, 3 and 4 of this article. 2. In the absence of choice of the law applicable to an individual employment contract, the contract shall be governed by the law of the country in which the worker habitually carries out his work in performance of the contract. It shall not be considered that the worker habitually carries out his work in another country if he is temporarily employed in another country. 3. Where the applicable law cannot be determined pursuant to section 2, the contract shall be governed by the law of the country in which the place of business through which the worker was engaged is situated. 4. Where it appears from the circumstances as a whole that the contract is more closely connected with another country, the law of that other country shall apply.

Overriding Mandatory Provisions. 1. An overriding mandatory provision is a provision the respect for which is regarded by a country as essential to safeguard its public interests, such as its political, social or economic organisation, to such an extent that it applies to all situations falling within its scope, regardless of the law otherwise applicable to the contract under this Regulation. 2. Nothing in this Regulation shall restrict the application of the overriding mandatory provisions of the law of the forum. 3. Effect may be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract are or are to be performed, insofar as those overriding mandatory provisions render the performance of the contract unlawful. In determining whether to give effect to these provisions, regard shall be had to their nature and objects and to the consequences of their application or non-application.

Consent and Material Validity. 1. The existence and validity of the contract, or of any term of it, shall be determined by the law which would govern it under this Regulation if the contract or term were valid. 2. Nevertheless, a party, in order to establish that it did not consent, may rely upon the law of the country in which it is habitually resident if it appears from the circumstances that it would not be reasonable to determine the effect of its behaviour according to the law provided for in paragraph 1.

Formal Validity. 1. A contract concluded between persons who, or whose agents, are in the same country at the time of conclusion of the contract is formally valid if it satisfies the formal requirements of the law which governs it in substance under this Regulation, or of the law of the country where it is concluded. 2. A contract concluded between persons who, or whose agents, are in different countries at the time of its conclusion is formally valid if it satisfies the formal requirements of the law which governs it in substance under this Regulation, or of the law of either of the countries where either of the parties or their agents are situated at the time of conclusion, or of the law of the country in which either of the parties had their habitual residence at that time. 3. A unilateral act relating to a contract is formally valid if it satisfies the formal requirements of the law which governs the contract in substance under this Regulation, or of the law of the country where the act was performed, or of the law of the country in which the person performing the act had their habitual residence at that time. 4. The provisions of paragraphs 1, 2 and 3 shall not apply to contracts covered by Article 6. The formal requirements of such contracts shall be governed by the law of the country in which the consumer is habitually resident. 5. Notwithstanding paragraphs 1 to 4, a contract the subject-matter of which is a right in real property or a tenancy of immovable property shall be subject, as regards its formal requirements, to the requirements of the law of the country where the property is situated, provided that, under the law of that country: a) those requirements are independent of the residence of the parties; and b) those requirements cannot be derogated from by agreement.

Scope of the Applicable Law. 1. The law applicable to the contract under this Regulation shall govern in particular:

• a)

  its interpretation;

• b)

  performance of the obligations it creates;

• c)

  within the limits of the powers conferred on the court by its procedural law, the consequences of a total or partial breach of obligations, including the assessment of damages insofar as it is governed by rules of law;

• d)

  the various ways of extinguishing obligations, and prescription and limitation of actions;

• e)

  the consequences of nullity of the contract. 2. In relation to the manner of performance and the steps to be taken in the event of defective performance, regard shall be had to the law of the country in which performance takes place.

Incapacity. As regards a contract concluded between persons who are in the same country, a natural person who is habitually resident in that country and who would not, under the law of that country, have the legal capacity to enter into the contract may invoke his incapacity resulting from the law of another country, provided that the other contracting party either knew or ought to have known that he was habitually resident in the country whose law governed his capacity and that, under that law, he lacked such capacity.

Assignment of Debts and Substitution of Creditor. 1. The relationship between assignor and assignee under a voluntary assignment of a right against a third party shall be governed by the law that applies to the contract between the assignor and assignee under this Regulation. 2. The law governing the assigned claim shall determine its assignability, the relationship between the assignee and the debtor, the conditions under which the assignment can be invoked against the debtor and any question whether the debtor's discharge of the obligation is effective. 3. For the purposes of this Article, assignment includes transfer of a right for security purposes and the transfer of rights by operation of law.

Legal Subrogation. Where a creditor has a contractual claim against a debtor, and a third party has an obligation to satisfy the creditor, or has in fact satisfied the creditor, in performance of that obligation, the law applicable to the third party's obligation shall determine whether and to what extent the third party is entitled to exercise against the debtor the rights which the creditor had against the debtor under the law governing their relationship.

Multiple Liabilities. Where a creditor has a right to claim against multiple debtors who are liable for the same claim and one of those debtors has already paid the claim in whole or in part, that debtor's right to recover contribution from the other debtors shall be governed by the law applicable to the obligation between that debtor and the creditor. The other debtors may rely on any defences they could set up against the creditor, to the extent permitted by the law governing their obligations to the creditor.

Set-off. Where the right to set-off is not dependent on an agreement between the parties, set-off shall be governed by the law applicable to the obligation against which the right to set-off is being asserted.

Burden of Proof. 1. The law applicable to the contractual obligation under this Regulation shall govern the burden of proof insofar as the law of the forum does not govern it, as regards the matters of substance governed by that law, to the extent that that law contains rules which, in matters of contractual obligations, lay down presumptions of law or determine the burden of proof. 2. A contract or a unilateral act may be proved by any mode of proof recognised by the law of the forum or by any of the laws referred to in Article 11 under which that contract or act is formally valid, insofar as that mode of proof can be used before the court seised of the case.

Habitual Residence. 1. For the purposes of this Regulation, the habitual residence of companies and associations shall be the place of central administration. The habitual residence of a natural person acting in the course of a business or profession shall be the principal place of business. 2. Where the contract is concluded in the course of the operations of a branch, agency or other establishment, or if, under the contract, performance is the responsibility of such a branch, agency or establishment, the place where the branch, agency or other establishment is located shall be treated as the place of habitual residence. 3. Habitual residence is determined at the time of conclusion of the contract.

Exclusion of Renvoi. When this Regulation refers to the law of a country, it means the substantive law of that country, and not its rules of private international law.

Public Policy of the Forum. The application of a provision of the law of any country specified by this Regulation may be refused only if such application is manifestly incompatible with the public policy (ordre public) of the forum.

States with Multiple Legal Systems. 1. Where a State comprises several territorial units, each of which has its own rules of law in respect of contractual obligations, each territorial unit shall be considered as a country for the purposes of identifying the applicable law under this Regulation. 2. A State member in which different territorial units have their own rules of law in respect of contractual obligations shall not be required to apply this Regulation to conflicts of laws falling exclusively within such a State.

Relationship with Other Community Law Provisions. Except for Article 7, this Regulation shall not prejudice the application of provisions of Community law which, in relation to particular matters, lay down conflict-of-law rules relating to contractual obligations.

Relationship with the Rome Convention 1. This Regulation shall replace the Rome Convention of 1980 in the Member States, except as regards the territories of the Member States which are included in the territorial scope of that Convention and to which this Regulation does not apply by virtue of Article 299 of the Treaty. 2. Insofar as this Regulation replaces the provisions of the Rome Convention, any reference to that Convention shall be understood as referring to this Regulation.

Relationship with existing international conventions 1. This Regulation shall not affect the application of international conventions to which one or more Member States are parties at the time of the adoption of this Regulation and which regulate conflicts of laws in the field of contractual obligations. 2. However, as between Member States, this Regulation shall take precedence over conventions concluded exclusively between two or more Member States insofar as such conventions cover matters regulated by this Regulation.

List of conventions 1. By 17 June 2009 at the latest, the Member States shall notify to the Commission the conventions referred to in Article

, paragraph 1. After that date, the Member States shall notify to the Commission any denunciation of these conventions. 2. The Commission shall publish in the Official Journal of the European Union, within six months after receipt of the notifications referred to in paragraph 1:

• a)

  a list of the conventions referred to in paragraph 1;

• b)

  the denunciations referred to in paragraph 1.

Revision clause 1. By 17 June 2013 at the latest, the Commission shall submit to the European Parliament, the Council and the European Economic and Social Committee a report on the application of this Regulation. If necessary, the report shall be accompanied by proposals for amendments to this Regulation. That report shall include the following aspects: a) a study on the law applicable to insurance contracts and an assessment of the impact of the provisions which, where appropriate, are to be introduced, and b) an evaluation of the application of Article 6, in particular as regards the consistency of Community law in the field of consumer protection. 2. By 17 June 2010 at the latest, the Commission shall submit to the European Parliament, the Council and the European Economic and Social Committee a report on the effectiveness against third parties of an assignment or subrogation of a right and the priority of the assigned or subrogated right over a right of another person. The report shall be accompanied, where appropriate, by a proposal for amendment of this Regulation and an assessment of the impact of the provisions to be introduced.

Temporal application This Regulation shall apply to contracts concluded after 17 December 2009.

Entry into force and application This Regulation shall enter into force on the twentieth day following its publication in the Official Journal of the European Union. It shall apply as of 17 December 2009, except for Article

, which shall apply as of 17 June 2009. This Regulation shall be binding in all its elements and directly applicable in each Member State, in accordance with the Treaty establishing the European Community. Done at Strasbourg, 17 June 2008. For the European Parliament The President H.-G. PÖTTERING For the Council The President J. LENARČIČ