Current state of play
- The Rome I Regulation sets out the rules that the English courts apply to determine which law applies to your contractual obligations. Under this Regulation, a contract is normally governed by the law chosen by the parties.
- However, your agreed choice of law can be displaced in the following situations:
- where there are mandatory legal rules in the place where the dispute is being heard, or in a country connected to the dispute (one example here would be laws on employee rights); and
- where some provisions of the law chosen by the parties are clearly incompatible with public policy in where the dispute is being heard (for example, where performance of an act would be illegal).
- Where the parties to an agreement have not expressed a choice, the Rome I Regulation sets out specific rules to determine the governing law for certain types of contract. In general, this will be the law of the country where the party who is to carry out the contract is habitually resident.
- The Rome II Regulation sets out the rules that the English courts apply to determine which law applies to your non-contractual obligations.
- Under this Regulation, the law that applies to non-contractual obligations is normally the law of the country where the damage occurs.
- You are also entitled to specify in your contracts the law that will govern non-contractual obligations.
What should I be thinking about now?
- What rules on the governing law might apply in the event of a Brexit? Will the choice of English law to govern my contracts still be valid? What about contractual provisions that say English law will govern non-contractual obligations as well?
- Will a choice of English law in an agreement still incorporate EU law following a Brexit? If not, will the choice of English law remain valid if a key provision of the contract derives from EU law?
- If do business from or with the EU, what should I do if I still wish EU-derived law to govern my contractual obligations? Should I consider adopting a governing law of a continuing member state of the EU?
The answers to many of these questions will depend upon the nature of a post-Brexit UK/EU relationship.