Following our post on the note from the Luxembourg delegation relating to consumer contracts, a number of new interesting documents on the Rome I Proposal have been made publicly available on the Register of the Council.

Here’s a brief presentation:

– doc. n. 8022/07 ADD 1 REV 1 of 13 April 2007, containing a “compromise package” prepared by the German Presidency for the JHA Council session of 19-20 April 2007 (see our related post on the Council conclusions). The text focuses on Articles 3 (Freedom of choice), 4 (Applicable law in the absence of choice) and 6 (Individual employment contracts). Art. 7 on contracts concluded by an agent is deleted; other important issues, such as contracts of carriage (art. 4a), consumer contracts (art. 5), insurance contracts (art. 5a) and overriding mandatory provisions (art. 8 ) do not form part of the compromise;

– doc. n. 8935/1/07 REV 1 of 4 May 2007, on insurance contracts. The document provides a draft text of Art. 5a, taking into account the comments submitted in March by the Member States delegations (docs. 6847/07 and ADD 1 to 12, not accessible to the public);

– doc. n. 7418/07 of 15 March 2007, from the Services of the Commission to the Council’s Committee on Civil Law Matters, dealing with certain financial aspects relating to the application of Articles 4 and 5. The document is divided in two parts: the first one addresses the conflict rule on contracts concluded at a financial market (Art. 4(1)(j1)), that was introduced by the Finnish presidency (see doc. n. 16353/06 of 12 December 2006) and confirmed by the German Presidency (see the French text of doc. n. 6953/07 of 2 March 2007), stressing the importance of a specific provision on stock exchange transactions:

The reason for including a specific provision for trading systems relates, in particular, to the fact that regulated markets, multilateral trading facilities and other similar trading systems need to operate under a single law. It is essential that all transactions are carried out in accordance with the governing law of the system. The application of a single governing law is an intrinsic feature of organised multilateral trading systems and necessary for legal certainty for the market participants.

These transactions concluded within such a trading system include contracts of buying, selling, lending and other such dealings in financial instruments. Contracts for the provision of services between a financial intermediary and a client are not concluded within these trading systems.

The transactions in question are closely connected to the market concerned and it is appropriate and, indeed, necessary that the same law governs them irrespective of the nature of the parties to the transactions (consumer/professional) and the place where the parties have their habitual residence. Any other result would mean that the systems could not operate.

Problems arising from the definition of “financial market” are then addressed, in the light of the Directive 2004/39/EC (MiFID – Markets in Financial Instruments Directive), and an improved draft of the provision is proposed:

[T]he use of the term “financial market” in this provision leads to undesirable uncertainty. There is no definition of this concept in any community instrument. The term is used in the particular context of Article 9 of the Insolvency Regulation but it is not defined. In the framework of a general conflict of law rule in Rome I this expression would lack precision and create legal uncertainty. Given the extreme diversity and complexity of the financial sector activities, there is a need to define all relevant concepts used.

Taking into account the universal scope of application of Rome I (Art. 2), the definition of markets and trading systems by reference to the EU regulatory categories in Directive 2004/39/EC (MiFID) has been avoided. This is because cross-reference to the MiFID concepts would limit the provisions to an EU context. Instead, the proposed draft contains a functional description of multilateral system that uses the common elements of the definitions of regulated market and multilateral trading facility in MiFID, together with the condition that such systems should be subject to a single governing law. This description will cover all the equivalent non-EU trading facilities that need to be caught.

The second part deals with possible overlaps between the scope of application of the protective rule on consumer contracts (Art. 5 of the Rome I Proposal) and the legal regime of financial instruments (rights and obligations which comprise a financial instrument, contracts to subscribe for or purchase a new issue of transferable securities, contracts concluded within the type of system falling within the scope of the above mentioned Article 4(1)(j1)):

All these issues are not covered by Art. 5 of the Rome Convention as that Article only applies to contracts for the provision of services and sale of goods. The questions […] only arise due to the enlarged scope of Article 5 of the Rome I proposal.

The proposed text does not exclude contracts for the provision of financial services generally nor does it exclude contracts for the sale of shares and bonds concluded outside the systems referred to in the draft Art. 4(1)(j1).

As regards financial instruments, on the assumption that the exclusion from the scope of the Rome I proposal of financial instrument under Art. 1(2)(d) may not be exhaustive it is absolutely necessary to provide for this exclusion since without it the actual nature of a financial instrument – the rights and obligations that constitute its essence – could change by virtue of the application of Article 5. […]

Without an amendment to this effect, the actual nature of a financial instrument and the rules of law governing it could be various and unpredictable and would depend on the habitual residence of the person holding it. This question should not be confused with contracts for the provision of financial services. For example, when a bank sells to a consumer shares from company x it is providing a financial service. The consumer friendly rule of Article 5 of the proposal will naturally continue to apply to all these contracts that were already covered by Article 5 of the Rome Convention.

As regards the subscription for shares and units in collective investment schemes, and purchase of new issues of debt, it is important that the issuer in relation to a single issue is not faced with a risk of application of multiple laws depending on the habitual residences of investors. This would effectively prevent cross-border retail offerings of shares, debt, etc. Contractual rights and obligations in relation to the subscription for or purchase of new issues of transferable securities will not necessarily be covered by the narrowly focussed exclusion discussed above for contracts which comprise financial instruments. […]

Thus, on the assumption and to the extent that this issue is not excluded entirely from the scope of the Regulation by virtue of Art. 1(2)(f) (exclusion of contracts governed by company law) it is necessary to ensure in relation to contracts of subscription for or purchase of a new issue of shares, bonds and other transferable securities that Article 5 does not apply.

As a last point, the Services of the Commission point out another possible inconsistency between Art. 5 of the Rome I Proposal and the MiFID Directive (2004/39/EC), as regards individual investors who act as “professional clients” under Annex II to the Directive, but may be still considered as consumers for the purposes of the protective conflict rule:

Finally, the Committee may wish to consider an amendment to the text or at least a recital in order to clarify that individuals who ‘opt up’ to professional status under MiFID should not be treated as consumers for the purposes of Art. 5. Annex II to MiFID allows clients of investment firms, who would otherwise be classified as “retail clients” to be treated as “professional” clients if they meet specified conditions aimed at establishing that that client is financially sophisticated and experienced in investment. However, such clients may be considered to fall within the category of “consumers” for the purposes of Art. 5. The point is important since firms would be most unlikely to let sophisticated individuals opt up to professional status if Art. 5 were to apply to their dealings, and accordingly the objectives of the MiFID in this respect would be thwarted.

In Impulsora Turistica de Occidente v. Transat Tours Canada Inc. (available here) the Supreme Court of Canada has, in brief reasons, dismissed an appeal from the Quebec Court of Appeal.  Transat sued four Mexican companies in Quebec, seeking an extraterritorial injunction against them.  The companies successfully resisted the injunction and also convinced the judge at first instance to conclude both that Quebec lacked jurisdiction and that in any event Mexico was the more appropriate forum.  On appeal, now confirmed by the Supreme Court of Canada, the decision on jurisdiction was reversed.  The Quebec court had jurisdiction and no stay of proceedings was warranted.

The court held Quebec had jurisdiction even in respect of a request for purely extraterritorial relief.  The court was able to consider granting injunctive relief against defendants who were not within the province.

The court also held that Mexico was not the more appropriate forum, in part based on a jurisdiction clause in the contract between Transat and one of the four Mexican companies.

It is somewhat unusual for the Supreme Court of Canada to grant leave to hear a case and then render only brief unanimous reasons adopting the reasoning of the court below.

Since Transat did not appeal the initial denial of its motion for an injunction, its success on appeal resulted in the case being returned to the Superior Court for possible further proceedings.

A note from the Luxembourg delegation on the Proposal for a Regulation on the law applicable to contractual obligations (“Rome I“) which has appeared on the agenda for the Competitiveness Council meeting on 21 and 22 May 2007 deals rather critically with Article 5 of the planned regulation.

Here an excerpt:

The Luxembourg Government is very concerned about the negative impact on competitiveness of the instruments of private international law which are currently being converted into Community instruments. In particular, it would like to draw the attention of the Competitiveness Council to the proposal for a Regulation on the law applicable to contractual obligations (“Rome I”, 6935/07), which is currently under discussion in the Justice and Home Affairs Council.

Article 5 of the proposal has the effect, in certain cases, of depriving the parties of the freedom to choose the law applicable to business-to-consumer cross-border contracts. This changes the current situation under the Rome Convention, which lays down different protective rules and reflects a fair balance between the needs of businesses and those of consumers. This substantial change would have warranted an impact assessment by the Commission. However, the economic impact of this proposal has not been evaluated. Its consequences for the internal market and for consumers have not been analysed.

[…]

With a view to the Justice and Home Affairs Council meeting on 12 and 13 June 2007, it would be appropriate for the authorities concerned in all the Member States to be made aware of the negative consequences of this proposal for the internal market, for businesses and for European consumers. No decision should be taken which prejudices competition. In this context the Luxembourg delegation would recall the instruction given by the European Council in March 2003 that “the Competitiveness Council should be effectively consulted within the Council’s decision-making processes on proposals considered likely to have substantial effects on competitiveness”.

The complete note can be found here.

Many thanks to Dr. Jan von Hein, MPI Hamburg for the tip-off.

Following the agreement on a joint text of the Rome II Regulation reached in the first meeting of the Conciliation Committee, on 15 May (see our post here), Diana Wallis MEP, Rapporteur on Rome II in the European Parliament, has held a press conference to comment the successful outcome of the negotiations.

Excerpts from Mrs Wallis’ statements have been published on her website and on the website of her political group, ALDE (Alliance of Liberals and Democrats for Europe):

Speaking after last night’s Conciliation meeting between the three EU institutions to hammer out the final text on the Rome II Regulation (the law applicable to non-contractual obligations), the European Parliament’s Rapporteur, Diana Wallis MEP, proclaimed it ‘a first’ – in many senses.

Diana Wallis said, “This is the first time that the EU has put into a Regulation an extensive area of private international law where there was previously no pre-existing international Convention. It is the first time that the European Parliament has had co-decision in this area of civil law – moreover certainly a first in terms of conciliation. Also, a new experience for all the institutions involved in the process – the European Parliament has left its clear mark on the final text agreed last night.”

Diana Wallis was particularly pleased with the result on road traffic accidents, often involving personal injury – the most common and frequent form of tort (non-contractual obligation) that touches the lives of many citizens as they go about their business and leisure pursuits across Europe. She went to say, “The European Parliament has underlined the right of citizens to be fully reimbursed for their loss in such cases despite the national differences in compensation levels, whatever country they come from, whilst also extracting from the Commission a full study in the area by 2008 that ‘would pave the way for a Green paper’.”

“The European Parliament has also sought to introduce some further clarity into the fuzzy thinking as to the relationship between this Regulation relating to choice of law rules and other Internal Market instruments such as the e-commerce Directive. We have certainly ended in a better position than where we started from.”

Diana Wallis welcomed the fact that the Conciliation was also instructive in bringing together three different Commission departments around the table to support the same text in relation to a number of issues. “This coherent joint working across the area of civil and commercial law is to be much welcomed and better late than never.”

Finally Diana Wallis concluded that: “The European Parliament has left its imprint on several other issues, including party autonomy and flexibility to the general rule. It also insisted on several studies being undertaken by the Commission, notably on defamation and the treatment of foreign law, which may leave the way open for future legislation.”

Mrs Wallis’ focus on the role of the European Parliament in drafting legislation in the field of judicial cooperation in civil matters has been stressed several times (on Rome II, see our posts here and here), and it is particularly meaningful since at present she is perhaps the most influential MEP involved in the legislative process of EC private international law instruments: she is shadow rapporteur, appointed by the ALDE group, for Rome I, and draftswoman on the maintenance regulation (see her Draft opinion on the Commission’s proposal here).

As regards substantive law, she has been draftswoman for the Internal Market and Consumer Protection Committee (IMCO) for the opinion on the Commission Communication “European Contract Law and the revision of the acquis: the way forward”, and has prepared for the JURI Committee a Draft report with recommendations to the Commission on limitation periods in cross-border disputes involving injuries and fatal accidents.

An article by Symeon C. Symeonides (Willamette University College of Law, Salem, Oregon) on the life and work of Arthur Taylor von Mehren, who has passed away on January 16, 2006, has recently been published in English in the German law journal “Praxis des Internationalen Privat- und Verfahrensrechts” (IPRax 2007, 261).

Here is a short excerpt:

As noted by his colleagues, Arthur was a “pure scholar”, a “scholar’s scholar”, with “astonishing depth and range” and “a mind ever restless for new territory to explore.” His published work spans the entire field of comparative law, both public and private, all branches of private international law (jurisdiction, choice of law, and recognition of judgments), as well as international commercial arbitration. He authored or co-authored 210 publications: ten books, four monographs, 119 articles, 48 book reviews (the most unselfish form of scholarship), and 29 reports and other writings. Most of them were published in English, but several were published in French and German, which Arthur spoke fluently, as well as in Spanish, Italian and Japanese.