Since 17 December 2009, the EU Regulation (EC) No 893/2009 on the Law Applicable to Contractual Obligations (“Rome I Regulation”) is directly applicable in the Republic of Cyprus, and all other Members states of EU, except from Denmark.
The main principles contained in the Rome I Regulation, are the followings:
1) The freedom of the parties to choose the applicable law is secured, subject to certain express limitations, contained in the said regulation.
The party’s autonomy in choosing the law, is generally restricted by the application of the overriding mandatory provision of the law of the forum, or the public policy of the forum.
2) The law chosen by the parties will govern issues, such as interpretation, performance etc., of a contract.
3) The choice of applicable law must be made expressly, or must be clearly evidenced by the terms of the contract, or the circumstances of the case.
4) The parties can choose the law applicable to the whole, or part of the contract.
5) There is no need for the existence of connection between the applicable law and the country, whose law has been chosen, but the contracting parties cannot exclude, or limit the application of mandatory provisions of the law of a particular country, which cannot be derogated by an agreement, including applicable provisions of the European Union legislation.
6) If the parties do not choose the law applicable to their contract, then the applicable law will be determined by the application of the rules set out in Article 4 of the Rome I Regulation, which provide inter alia the following:
6.1. A contract of the sale of goods will be governed, by the law of the country, where the seller is habitually resident;
6.2. A contract for the provision of services will be governed, by the law of the country, where the service provider is habitually resident.
6.3. A contract concerning a right in rem in immovable property, or to a tenancy of immovable property, will be governed by the law of the country, where the property is situated.
6.4. A franchise contract or a distribution contract will be governed by the law of the country, where the franchisee or distributor is habitually resident.
6.5. A contract for the sale of goods by auction will be governed by the law of the country, where the auction takes place.
6.6. Contracts which contain elements covered by more than one category, will be governed by the law of the country, where the party required to effect the characteristic performance of the contract, has his habitual residence.
6.7. Where from all the circumstances of the case, it is clear that the contract is manifestly more closely connected with a different country from the one indicated by applying the rules set out above, then the law of that country will apply.
6.8. In all cases which don’t fall within the ambit of the rules, the contract will be governed by the law of the country, with which it is most closely connected (i.e. degree of court’s discretion to determine the above issue).
7) Rome I Regulation expressly provides specific rules for the following contracts:
7.1 Contracts for the carriage of goods: – the law of the country of habitual residence of carrier.
7.2 Contracts for the carriage of passengers: – The place where the passenger or the carrier have their habitual residence or where the place of departure or destination is situated.
7.3 Consumer contracts: – There are “consumer friendly” rules – Any choice of law shall not violate mandatory provisions of legislation of the country, where the parties have their habitual residence – In the absence of express choice of law, is the law of the country, where the consumer resides.
7.4 Individual Employment Contracts: - There are “employee friendly” rules – Any choice of law shall not violate the mandatory provisions of legislation of the country, where the employee habitually carries out his work.
7.5 Insurance contracts: - Different rules apply depending, whether the insurance contract covers a large risk or not etc.
8) Rome I Regulation imposes general restrictions on the right of parties to choose the applicable law of their contracts, when there is a violation of the public policy of the forum, or violation of mandatory provisions of the legislation of the forum.
This Memo contains only a summary of the most important rules contained in the Rome I Regulation.
For further information on this topic please contact Mr. Soteris Pittas at SOTERIS PITTAS & CO LLC, by telephone (+357 25 028460) or by fax (+357 25 028461) or by e-mail ([email protected]).
The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.