COMMISSION OPINION of 17 March 1980 concerning the draft Convention on the law applicable to contractual obligations (80/383/EEC)

I

The Convention on the law applicable to contractual obligations was prepared between 1969 and 1979 by experts from the Governments of the Member States and from the Commission of the European Communities in consultation with the Council and the Commission. It is to be signed in 1980 by the plenipotentiaries of the Member States meeting within the Council.

The draft is the first step towards unification and codification of general rules of conflict in the field of civil law in the Community. Unification will make it easier to determine the law applicable and will increase legal certainty. It should also ensure that all courts in the Community always apply the same substantive law to the same matter in dispute between the same parties. Where the parties are free to choose between courts in different Member States, their choice should not influence the law applicable to the action, and this should operate to prevent forum shopping. The Convention is a logical complement to the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters (the Judgments Convention) (1) and to the Convention of Accession of 9 October 1978 (2) of the Kingdom of Denmark, of Ireland and of the United Kingdom of Great Britain and Northern Ireland to the Convention of 27 September 1968.

II

The Convention has a very wide scope of application in view of the fact that the courts of the Contracting States will always have to apply it whenever they have to decide what substantive law is applicable in an individual case, whether the choice is between the laws of several Contracting States or of several non-contracting States or of both Contracting and non-contracting States.

The uniform conflict rules created by the Convention cover in principle all types of contract. They are supplemented by special rules of conflict for certain types of contract which are contained in the Convention itself, e.g. the rules relating to contracts of carriage, or which have been adopted, or will later be adopted in Community legal instruments or in bilateral or multilateral international treaties.

The content of the Convention takes full account of the legal principles prevailing in the Member States. It has regard to developments which have taken place in case-law, legal theory and law reform in the Contracting States and outside them.

The basic rule is that the parties may themselves select the substantive law applicable to their contract except where all the elements relevant to the situation are connected with one country only. In that case, the fact that a foreign law has been chosen will not result in the exclusion of the mandatory rules of the law of that country.

If the parties have not made a choice of law, the contract is as a general rule governed by the law of the country with which it is most closely connected. There is a rebuttable presumption that this is the country where the party who is to perform the obligation which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence or, in the case of a legal person, its central administration.

III

The Commission welcomes the proposed unification of rules in the field of private international law and endorses the principles embodied in the Convention. It regrets, however, the fact that it has not been possible in this Convention, which is the first on private international law, to cover non-contractual obligations as well. Cases will in fact frequently occur where not only contractual but also non-contractual claims form the subject-matter of the same action. Other cases will turn on the question whether a claim is to be considered as contractual or non-contractual (delictual or quais-delictual). The application of the Convention in its present form may therefore result in the situation in which if an action is brought in one (1) OJ No L 304, 30.10.1978, p. 77 (which gives the text as amended by the Convention of Accession next referred to). (2) OJ No L 304, 30.10.1978, p. 1. Contracting State it will be decided in accordance with the rules contained in the Convention, whereas if it is brought in another Contracting State it will be decided in accordance with the conflicts rules of the lex fori which have not yet been unified. This shortcoming is, however, not so serious that the Commission would wish to oppose signature of the Convention as it stands.

IV

Much more important, however, is the fact that in a number of respects the Convention does not fully succeed in creating a set of rules common to all the Member States: 1. Entry into force in all Member States is not guaranteed. Five ratifications will be sufficient for it to enter into force (Article 28).

2. It has not been concluded for an unlimited period. Its duration may be restricted to 10 years by denunciation (Article 29).

3. Uniform interpretation of the Convention is likewise not guaranteed since the Member States have so far been unable to agree on the incorporation in the Convention, or in a Protocol corresponding to the Protocol of 3 June 1971 on the interpretation of the Judgments Convention (1), of a provision based on Article 177 of the EEC Treaty. The inclusion of such a provision would confer jurisdiction on the Court of Justice of the European Communities to give preliminary rulings concerning the interpretation of the Convention.

The defects mentioned at 1 and 2 above might have the effect of preventing the creation and maintenance of a unified juridical area within the Community. They are both fundamental defects, as a result of which the Convention cannot contribute, or can contribute only temporarily, to the functioning of the common market. Another consequence is that the rights and obligations of nationals of the Member States in intra-Community and international trade and legal transactions will continue to be dissimilar. Forum shopping will still be possible. The Convention no longer has any semblance of being a "Community convention". The close connection with the Judgments Convention does in fact require that the territorial scope of both conventions be the same.

The Convention will likewise have to be applicable in all Member States if uniform interpretation by the Court of Justice is to be guaranteed. It is of course not inconceivable, nor impossible, that the Court would interpret legal instruments that are in force only in some Member States. Nevertheless, the Community's supreme judicial authority should be able, when interpreting a rule of law, to take into account the legal position in all Member States. It is debatable whether this is still possible where a rule does not apply in all those States.

Above all, however, the absence of provisions guaranteeing uniform interpretation and conferring judisdiction for that purpose on the Court of Justice is a totally unacceptable omission in a set of legal rules which aim among other things at uniform application and development of the uniform rules now prepared. It is precisely because of its numerous framework provisions and the imprecision of many of the legal concepts employed that this Convention needs to be interpreted in a uniform manner. Past experience with other conventions has shown that, without the intervention of the Court of Justice, the same text is inevitably interpreted after a short space of time in different ways by the courts of the individual Contracting States.

The Commission has therefore repeatedly stated through its representatives that it considers the insertion of a provision based on Article 177 of the EEC Treaty to be necessary in order to guarantee uniformity of interpretation and application from the moment the Convention enters into force.

The Commission would be willing to accept that the matter be dealt with by means of a Protocol on interpretation, along the lines of the Protocol dated 3 June 1971, so that at least some national courts are empowered, or are placed under the obligation, to refer questions of interpretation to the Court of Justice for a preliminary ruling.

The Commission would not consider it satisfactory, however, that no obligation to refer to the Court of Justice be placed on national courts from whose judgments no further appeal lies under national law ; nor would it be satisfactory that those courts be allowed discretion to determine whether they refer questions of interpretation to the Court of Justice. Consistency of case-law and uniform application of the law cannot be achieved in all Contracting States unless those courts are bound to refer to the Court of Justice. This is the only way of ensuring that the law contained in the Convention, which is a law common to all the Contracting States, is not fragmented as a result of divergent interpretation by the national courts.

(1) OJ No L 304, 30.10.1978, p. 97 (text as amended by the Convention of Accession). A restriction of the jurisdiction of the Court of Justice to the giving of rulings on questions of interpretation "in the interests of the law", which have no effect on the judgments which gave rise to the reference to the Court, would, in the Commission's opinion, be completely inadequate.

V

For these reasons, the Commission delivers the following opinion pursuant to the Treaty establishing the European Economic Community, and in particular the second indent of Article 155 thereof: 1. The Commission favours the signature and ratification of the Convention on the law applicable to contractual obligations by all Member States of the European Communities, on condition that the Governments of the Member States at least express their willingness in a joint declaration made at the time of signature of the Convention to negotiate forthwith a Protocol conferring on the Court of Justice of the European Communities powers which guarantee the uniform interpretation and application of the Convention in all Member States.

2. In the absence of such a declaration, the Commission will feel free to propose that the Council adopt a legal instrument based on the EEC Treaty to attain the desired unification of private international law and thereby eliminate the defects mentioned at IV above.

3. This opinion is addressed to the Member States.

Done at Brussels, 17 March 1980.

For the Commission

Étienne DAVIGNON

Member of the Commission