Posts Tagged 1980 Rome Convention on the law applicable to contractual obligations
Unamar: Better get those travaux préparatoires out. The ECJ does not rule out gold-plating as being ‘mandatory rules’ however the final judgment is up to the forum. Legality of arbitration rules undecided.
The facts of the case were as follows: in 2005, Unamar, as commercial agent, and NMB, as principal, concluded a commercial agency agreement for the operation of NMB’s container liner shipping service. The agreement was for a one-year term and was renewed annually until 31 December 2008. It provided that it was to be governed by Bulgarian law and that any dispute relating to the agreement was to be determined by arbitration in Bulgaria. On 19 December 2008, NMB informed its agents that it was obliged, for financial reasons, to terminate their contractual relationship. The agency contract concluded with Unamar was extended only until 31 March 2009.
Unamar brought an action on 25 February 2009 before the Antwerp Commercial Court for an order that NMB pay various forms of compensation provided for under the Law on commercial agency contracts. NMB in turn brought an action against Unamar for payment of outstanding freight.
In the proceedings brought by Unamar, NMB raised a plea of inadmissibility alleging that the Belgian court did not have jurisdiction to hear the dispute before it because there was an arbitration clause in the commercial agency contract. By judgment of 12 May 2009, after joining the cases referred to it by each of the parties, the court ruled that NMB’s plea of lack of jurisdiction was unfounded. As regards the applicable law in the two disputes brought before it, that court ruled, inter alia, that Article 27 of the Belgian Law on commercial agency contracts was a unilateral conflict-of-law rule which was directly applicable as a ‘mandatory rule’ and which thus rendered the choice of foreign law ineffective.
Appeal brought the case in judicial review before the ECJ. The Court did not rule on the issue of jurisdiction, given that the Hof van Cassatie had not raised this in its request. This means that the debate on whether Belgian’s trumping of foreign arbitration in cases such as these continues to be unresolved.
According to NMB, the application of the Law on commercial agency contracts to the dispute in the main proceedings cannot be considered to be ‘mandatory’ within the meaning of Article 7(2) of the Rome Convention, given that the dispute concerns a matter covered by Directive 86/653 and the law chosen by the parties is precisely the law of another Member State which has also transposed that Directive into its national law. Thus, according to NMB, the principles of the freedom of contract of the parties and legal certainty preclude the rejection of Bulgarian law in favour of Belgian law.
The Court emphasises the harmonising purpose of the commercial agency contracts Directive. It also highlights that the wording of Article 7(2) of the Rome Convention does not expressly lay down any particular condition for the application of the mandatory rules of the law of the forum. However the ECJ then insists (at 46) that the possibility of pleading the existence of mandatory rules under Article 7(2) of the Rome Convention does not affect the obligation of the Member States to ensure the conformity of those rules with EU law. The considerations underlying such national legislation can be taken into account by EU law only in terms of the exceptions to EU freedoms expressly provided for by the Treaty and, where appropriate, on the ground that they constitute overriding reasons relating to the public interest (reference is made to Arblade). The classification of national provisions by a Member State as public order legislation applies to national provisions compliance with which has been deemed to be so crucial for the protection of the political, social or economic order in the Member State concerned as to require compliance therewith by all persons present on the national territory of that Member State and all legal relationships within that State.
The plea relating to the existence of a ‘mandatory rule’ within the meaning of the legislation of the Member State concerned, as referred to in Article 7(2) of the Rome Convention, must therefore be interpreted strictly: for otherwise it risks upsetting the core rule of that Convention, which is parties’ freedom to choose applicable law.
The Court finally holds that it is for the Belgian court,
‘in the course of its assessment of whether the national law which it proposes to substitute for that expressly chosen by the parties to the contract is a ‘mandatory rule’, to take account not only of the exact terms of that law, but also of its general structure and of all the circumstances in which that law was adopted in order to determine whether it is mandatory in nature in so far as it appears that the legislature adopted it in order to protect an interest judged to be essential by the Member State concerned. As the Commission pointed out, such a case might be one where the transposition in the Member State of the forum, by extending the scope of a directive or by choosing to make wider use of the discretion afforded by that directive, offers greater protection to commercial agents by virtue of the particular interest which the Member State pays to that category of nationals.‘ (at 50)
The Court then distinguishes Ingmar, in which the law which was rejected was the law of a third country, while in Unamar, the law which was to be rejected in favour of the law of the forum was that of another Member State which, according to all those intervening and in the opinion of the referring court, had correctly transposed Directive 86/653.
The Court concludes ‘Articles 3 and 7(2) of the Rome Convention must be interpreted as meaning that the law of a Member State of the European Union which meets the minimum protection requirements laid down by Directive 86/653 and which has been chosen by the parties to a commercial agency contract may be rejected by the court of another Member State before which the case has been brought in favour of the law of the forum, owing to the mandatory nature, in the legal order of that Member State, of the rules governing the situation of self-employed commercial agents only if the court before which the case has been brought finds, on the basis of a detailed assessment, that, in the course of that transposition, the legislature of the State of the forum held it to be crucial, in the legal order concerned, to grant the commercial agent protection going beyond that provided for by the directive, taking account in that regard of the nature and of the objective of such mandatory provisions.‘ (emphasis added)
The Courts instructions are therefore clear: there is a strong presumption against mandatory law, in light of the correct implementation by Bulgaria; and the national court has to conduct a proper review of the preparatory works of the relevant Belgian Act which transposed the Directive. Discussions in Belgian scholarship reveal that there is no clear view on the exact nature of the ‘mandatory’ character of the gold-plated provisions.
The ECJ does also refer in passing to the Rome Regulation. This Regulation introduces two types of mandatory provisions: simple ‘mandatory’ ones, with reference to national as well as to EU law and with specific reference to gold-plating for the latter; and ‘overriding mandatory’ ones, with reference to the Arblade criteria but no reference to gold-plating.
It is not therefore entirely certain what the precedent value is of Unamar viz the future application of the Regulation, neither is it in my view what the Hof van Cassatie’s research of the travaux préparatoires of the 1995 Act will reveal.
1980 Rome Convention on the law applicable to contractual obligations, applicable law, Arbitration, Case C-184/12, CJEU, COJ, Commercial agents directive, Contracts, Court of Justice, Directive 86/653, ECJ, Hof van Cassatie, Kompetenz kompetenz, lex fori, Lois de police, New York Convention, Overriding mandatory law, Rome Convention, Rome I, Rome I regulation, Unamar, United Antwerp Maritime Agencies (Unamar) NV v Navigation Maritime Bulgare
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