MEPs support EU rules on commercial disputes

Small businesses have expressed fears that the introduction of harmonised EU rules on the choice of jurisdiction in cross-border disputes will hinder growth and jobs as compliance with 27 consumer laws would be too costly.

The European Parliament’s Legal Affairs Committee approved, on 19 November 2007, the Rome I regulation, which is designed to improve the mutual recognition and enforcement of court judgements on civil and commercial disputes in all EU member states. 

The regulation, proposed by the Commission in 2005, is an attempt to update the Convention on the law applicable to contractual obligations (Rome Convention), in force since 1991. One of its most debated topics is the application of the ‘country-of-destination’ rules.

The current Rome Convention allows the signatories to a contract to choose the law applicable to all or part of the contract and select the court which will have jurisdiction over disputes. Rome I would, however, install EU-wide rules to govern the choice of the applicable law. It proposes that the laws of the country in which the supplier or the consumer is based apply to contractual agreements, whereas the current rules state that the law in the consumer’s country of residence only applies under certain conditions. 

MEPs argued that, in case of a contract between a professional and a consumer, the latter should be advantaged by the court’s choice, and that in the event of a dispute, the applicable law should be the law of the consumer’s country of residence. According to parliament, “if citizens are free to choose the court where they can make their claim, they cannot simply choose the courts of one member state rather than another just because the law is more favourable to their cause there (a practice known as ‘forum-shopping’).” 

As this jurisdiction would concern all contracts relating to e-commerce, businesses throughout the EU fear online traders would need to comply with 27 different sets of consumer law. Small businesses in particular have raised concern over the potential costs of compliance with the strict consumer country principle, which, according to the European Small Business Alliance (ESBA), “will act as a deterrent to SMEs to engage in cross-border e-commerce and will limit European growth and jobs”. 

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