Rome II - Thinking ahead

Simple choice of law clauses in commercial contracts often set out what law should be applied by the courts when interpreting the contract. That law will usually apply to the resolution of contractual disputes.

A typical clause might say "This Agreement shall be governed by and construed in accordance with English law". However, what about the law governing non-contractual obligations? If you don't agree what law is to apply, the Rome II Regulation, which comes into force in January 2009, will impose a particular law upon you, and it may not be the one you want!

The basic principle of Rome II is that the applicable law for the resolution of non-contractual disputes arising out of a tort will be the law of the country in which the damage occurs, wherever that might be. In product liability cases the starting point will be that the applicable law is that of the country in which the person sustaining the damage had his or her habitual residence when the damage occurred, if the product was marketed in that country. Suppliers to the US will need to be particularly careful to avoid the applicability of US law relating to the award of damages.

Now is the time to take advantage of the provisions of Rome II, which allows parties (subject as always to some limitations) to agree in advance the law they want applied to non-contractual obligations. We have produced some action points for you to consider and an analysis of Rome II and its implications.