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«Russia and the World Community’s Respond to a Challenge of Instability of Economic and Legal Systems Materials of the International Scientific-practical Conference ...»

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In other words: we should weaken rules that shelter the board and executives from “willful ignorance” liability. And in addition we might legislate criminal penalties on the board, executives, and traders for taking on risks, or allowing risks to be taken on, that endanger the firm and/or the financial system.

The harmonization of choice of law rules of private international law Introduction This paper discusses issues of private international law from a European perspective. It mainly introduces the convergence of European choice of law rules belonging to the legal system of the European Union. Private international law deals with legal relationships between private persons, natural or legal, arising out of situations having a significant connection or connections to more than one country. Private international law covers three basic types of rules: jurisdictional rules (which country’s courts can hear a case);

choice of law rules (which country’s law will the court which hears the case apply); rules relating to the recognition and enforcement of judgments of foreign courts (when will a court in one country enforce the decision of a court in another country).

Whenever a private law issue must be solved in an international context the question arises which substantive rule of decision should be selected. There is no world-wide system of private international law and the choice of law rules (or conflict of law rules) vary from State to State. 25 Each State has its own choice of law rules for deciding which system of law will apply to cases having a foreign element and the courts of each State apply their own national choice of law rules. Since the concept of applicable law varied from one Member State of the European Union to another, the adoption of common Union-wide choice of law rules was important for the development of unified private international law in the European Union and integration of the legal systems of Member States.

This paper belongs to the research project VEGA no. 1/1083/12 “Selected aspects of the European Private International Law development“.

De Boer, Th. M. 2009. The purpose of uniform choice-of-law rules: The Rome II Regulation. Netherlands International Law Review, Volume 56, Issue 3, December 2009. p. 301.

Over the past decade, building common European private international law rules has become a primary goal for Union institutions.

Under the original Treaty establishing the European Economic Community (EEC Treaty), 26 the former Community 27 did not have direct competence in the field of private international law. The work on harmonisation in this area was achieved by conventions 28 agreed upon by all Member States pursuant to the ex Article 220 of the EEC Treaty 29. The Maastricht Treaty 30 established an intergovernmental competence of the Union in Justice and Home Affairs matters, including judicial cooperation in civil matters 31, which made up the so-called third pillar of the European Union. 32 Later the Amsterdam Treaty 33 opened up new perspectives for the European legislation of private international law rules.

There was created the concept of an “area of freedom, security and justice” and competence in the field of judicial cooperation in civil matters was transferred from the former third pillar of the European Union to the first pillar, which thus afforded the Union institutions the competence to legislate in the area of private international law. Ex Article 65 of the EC Treaty authorised to adopt measures in the field of judicial cooperation in civil matters having cross-border implications, in so far as necessary for the proper functioning of the internal market, including measures promoting the compatibility of the rules applicable in the Member States concerning the conflict of laws and of jurisdiction. Since the Amsterdam Treaty, new regulations covering the law applicable to contractual and non-contractual obligations and maintenance obligations, had been adopted.

The Lisbon Treaty 34 opened the way towards deeper integration and cooperation in the field of private international law in the European Union. The previous legal framework was replaced with Title V “Area of freedom, security and justice” of the Treaty on the Functioning of the European Union (TFEU). 35 While Treaty establishing the European Economic Community was signed on 25 March 1957 and entered into force on 1 January 1958. The Maastricht Treaty renamed the EEC Treaty to the Treaty establishing the European Community (EC Treaty).

Under the Lisbon Treaty the European Community no longer exists under this name but has been replaced and succeeded by the European Union.

For example the Convention on the law applicable to contractual obligations (Rome Convention). It was signed in Rome on 19 June 1980 and entered into force on 1 April 1991.

“Member States shall, so far as is necessary, enter into negotiations with each other with a view to securing for the benefit of their nationals … the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals and of arbitration awards.” Treaty on European Union (TEU), informally called the Maastricht Treaty, was signed on 7 February and entered into force on 1 November 1993.

According to the ex Article K.1 of the Treaty on European Union, judicial cooperation in civil matters belonged to the list of matters of common interests of Member States „for the purposes of achieving the objectives of the Union, in particular the free movement of persons, and without prejudice to the powers of the European Community“.

The pillar structure of the European Union was legally introduced by the Maastricht Treaty and was formally abandoned by the Lisbon Treaty. The European Union consisted of three pillars: the European Communities (first pillar), the Common Foreign and Security Policy (second pillar) and cooperation in the fields of Justice and Home Affairs (third pillar).

Amsterdam Treaty was signed on 2 October 1997 and entered into force on 1 May 1999.

Lisbon Treaty was signed on 13 December 2007 and entered into force on 1 December 2009.

Lisbon Treaty renamed the EC Treaty to the Treaty on the Functioning of the European Union.

ex Article 65 of the EC Treaty required that any measures in the field of judicial cooperation in civil matters having cross-border implications had to assist with the proper functioning of the internal market, the Lisbon Treaty modified this requirement. According to the new Article 81 of the TFEU, the European Union institutions may adopt such measures “particularly when necessary for the proper functioning of the internal market”, it means the internal market criterion is no longer absolute requirement. The list of areas of potential action also includes the adoption of measures aimed at ensuring compatibility of Member States' rules on jurisdiction and conflicts of law.

Up to the present day, as part of ongoing efforts by the European Union to create a genuine European area of freedom, security and justice, the Union has adopted several legal instruments which deal with issues of applicable law for cases having a foreign element. The application of these legal instruments is restricted to situations involving a conflict of laws it means situation linked to at least two different States. They lay down uniform rules to determine which national law should apply to issues in cases with an international dimension. They do not apply to what is called a purely domestic situation having connecting factors with one single country.

In the recent years, the choice of law rules have been developed and harmonized in the European Union legislation in the form of regulations. The term “harmonisation“ is commonly used to denote all efforts to achieve an approximation of the laws of the European Union Member States, either by directives or regulations. Since a regulation does not leave any room for different implementations, it results in the creation of uniform law. So far, all measures promoting the compatibility of the rules concerning the conict of laws were geared to unication rather than harmonization. 36 Due to their self-executing nature, the regulations dealing with issues of applicable law can be seen as a single set of uniform rules which apply directly to Member States and replace their domestic law in those situations where there is a conflict of law. The rules are a coordinated whole and aim to synchronise the laws applicable to legal relationships irrespective of the country of the court in which an action is brought.

Although regulations in general are binding and directly applicable in all European Union Member States without any further transformation needed, this is not true of regulations based on Title V “Area of freedom, security and justice“ of the TFEU. Special arrangements (opt outs) enable some Member States in relation to Title V, namely, Denmark, Ireland and the United Kingdom to remain outside Title V but allow the latter two to opt in to individual measures adopted under Title V. It means such regulations do not automatically apply to these three Member States.

Adopted documents An important step in the development of unified private international law in the European Union was the adoption of uniform European conflict of law rules De Boer, Th. M. 2009. The purpose of uniform choice-of-law rules: The Rome II Regulation. Netherlands International Law Review, Volume 56, Issue 3, December 2009. p. 299.

governing the process by which the law applicable to contractual and to noncontractual obligations is selected.

The Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome 37 I Regulation) harmonises the rules of conflict of laws applicable to contracts in civil and commercial matters. By way of background, the Rome I Regulation has reformed and replaced the 1980 Rome Convention in the Member States of the European Union. Besides the change of legal nature into a Union instrument, the original intention was to take advantage of this transformation in order to modernise some of its provisions. 38 With this document significant parts of the private international law relevant to international business transactions have been unified within Member States of the European Union except Denmark. 39 The Rome I Regulation has universal application because it also applies in case the law of a Non-Member State is made applicable. The regulation applies to contracts concluded after 17 December 2009. In principle Rome I Regulation endeavours to establish clear cut rules on the applicable law. Legal certainty is expressly labelled to be the general objective of the regulation. Conflict of law rules are shaped to be highly foreseeable and this goal is reached first by allowing parties to choose the applicable law, and second by fixing the relevant criterion on which to rely for a comprehensive catalogue of contracts.

International contracts under Rome I Regulation are preferentially governed by the law chosen by the parties. The parties' freedom to choose the applicable law is one of the cornerstones of the system of conflict of law rules in matters of contractual obligations. The freedom available to the parties is considerable:

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