20 Sep International Trade and Rome Convention. “Haeger&Schmidt” case.

Currently, we live in a globalized economy, and huge companies have a global commercial strategy. That foreign element in commercial relations forces us to consider three issues when facing any assumption: What is the competent court? What is the applicable law? and which circumstances can have extraterritorial effectiveness?

The Rome I Regulation answers these questions from a neoliberal perspective and it is going to give us the keys to solve a mercantile contractual conflict in the european community. This means that it will be applied compulsory, without regard the nationality, domicile or habitual residence of the people that conclude a contract or the law finally applicable.

Its background is the old Convention of Rome of 1980, applicable to the International Obligations. But the new text introduces small variants and incorporates all the jurisprudence.

Rome I contributes to the proper functioning of the internal market by avoiding the undesirable consequence of the Forum Shopping mainly because it contains uniform conflict rules, equal for all the Member States of the European Union in terms of international contracts, thus favoring the predictability of the result of the litigation and because it enhances security in terms of the applicable law. So Law is the same, regardless of the Member State whose courts or authorities are aware of the matter or litigation.

All this provides legal stability to the contracting parts, which favors international recruitment because of freedom of movement of the European Union.

Article 3 of the Rome I Regulation establishes that the parties to an international contract can choose the applicable law. However, we must anticipate several requirements: the election must be clear, the election must be in favor of a state law and that the election by the parties of the law applicable to the contract must be the object of a legal transaction. Also, we must take into account the possibility that gives us the rule to carry out the fractionation of the contract.

In order to explain all these details we will focus on a specific case in which the Court of Justice of the European Union decided on the competence to hear a dispute related to goods transport.

This conflict occurred when a French company, through its French commissioner, contracted with a German company, the transport of a merchandise that was to be carried out by a German carrier hired by the German company.

The merchandise was going to be transported by river and when loading it in the hold of the boat it capsized it and sank, losing the merchandise.

Given these facts, the French company that had to receive the goods claimed compensation for damages both to its French commissioner and to the German company responsible for transport. And, in turn, the German company claimed compensation from the carrier hired for the order.

French courts declared itself competent to hear about the matter and resolved in favor of the company of its nationality, condemning the French commission and the German company to pay compensation for the loss of the goods. However, after having recourse  the French competence by the German company, the French court suspended the legal proceedings and showed the referred questions to the Court of Justice of the European Union :

Before determining which court would be competent, we have to decide whether we are facing a transportation contract or an agency contract to find out which court should know the issue.

Thus, the Court of Justice of the European Union has established that, if we are dealing with a contract for the transport of goods, it must know, as the Rome I Regulation says, the justice of the country where the carrier has its habitual residence In this case, Germany.

However, if we are dealing with a transport commission contract, article 4 of the legal text tells that it should be applied this rule: the competent court would be the country where the part, that must perform the contract, has its habitual residence. However, in this case, the service is the movement of goods, so the habitual residence of the carrier does not constitute an objective connection of the contract. In this way, the CJEU determines that the jurisdiction would be the courts of the country in which the contract presents the closest links.

Although, in case that the country in which the contract has the closest links is not the same country where the part that must perform the contract object has its habitual residence, the links between the contract and the contract must be assessed. The country where the provision of the service is made, including the existence of other satellite contracts derived from the main transportation commission contract.

Attending to  a conflict with such characteristics, we can conclude that there are multiple aspects to be taken into account for the determination of judicial competence, despite the fact that the Community legislation aims at uniformity of the regulation applicable to contractual obligations, regardless of the court that is to dictate the sentence. It has been tried, therefore, to raise legal security level, eliminating the most difficulties that derive from the quantity of norms.

While, in view of the above, it is necessary to highlight how convenient it is to include in the contract the applicable law, knowing the parts, in advance, the range of available choices and the consequences that may result, being a fundamental part of the negotiation process, so an adequate legal advice is required.

Inés Usón

Lawyer

Estela Baztán

Lawyer

Raquel Escolano

Lawyer