Thinking ahead - Rome II from the banker's perspective

• Commercial parties should consider using a more sophisticated choice of law agreements to reduce the potentially adverse impacts of Rome II. For example, a governing law clause may say: "This Agreement, and any issues or disputes arising out of or in connection with it (whether such disputes are contractual or non-contractual in nature, such as claims in tort, for breach of statute or regulation, or otherwise) is governed by, and shall be construed in accordance with, English law".
• Businesses engaged in cross-border transactions should review their positions well in advance of January 2009.
• Any clause governing non-contractual obligations should be considered in conjunction with the choice of jurisdiction selected. It is possible for the courts of England & Wales to have jurisdiction to hear a dispute but apply the laws of France if that is the law selected by the parties. Such instances are likely to add to the costs of any legal proceedings as well as uncertainty as to the eventual outcome. Aligning the choice of law and jurisdiction clauses is usually preferable.
• Carefully consider what law you want applied before agreeing the governing law clause covering non-contractual obligations. This step is now even more important as it appears that under Rome II the amount of damages will be determined by the applicable law.

However, please note that certain finance transactions are not affected by Rome II. These include:

• Non-contractual obligations arising under bills of exchange, cheques and promissory notes and other negotiable instruments (to the extent the obligations under such other instruments arise out of their negotiable character). Eurobonds are a good example;
• Non-contractual disputes arising out of the law relating to companies or other bodies corporate or unincorporated, such as winding up, personal liability of officers, and personal liability for auditors;
• Non-contractual disputes arising out of the relations between the trustees, beneficiaries and settlor of trusts established voluntarily, such as those between a bondholder and the trustee of the bond issue, or those between a security trustee and the banks.

To find out more about Rome II, see our analysis.