Verbatim report of proceedings

Thursday, 29 November 2007 - Brussels

5. Law applicable to contractual obligations (Rome I) (debate)

  President. − The next item is the report (A6-0450/2007) by Mr Dumitrescu, on behalf of the Committee on Legal Affairs, on the law applicable to contractual obligations (Rome 1).

  Franco Frattini, Member of the Commission. − (FR) Mr President, I am delighted that the negotiations have produced such an excellent outcome. We support the compromise that is currently on the table. If you give your approval, ladies and gentlemen, we will be bringing the curtain down on two years of discussions that have clearly shown just how important this subject is for the European judicial area and the internal market. I would particularly like to congratulate the rapporteur, Mr Dumitrescu, whose efficient approach has been so helpful in achieving a successful outcome here, and also the shadow rapporteurs from all the political groups.

2007 has, I believe, been an important year for the Community harmonisation of private international law in the field of civil and commercial obligations. The Brussels I Regulation on jurisdiction, which covers both contracts and torts/delicts, will now be supplemented by the Rome II Regulation on the law applicable to torts/delicts, which resulted in the first conciliation procedure in the ‘justice and security’ sector in May this year, and by the Rome I Regulation.

The compromise found for Article 5 represents a step forward for consumers. The article is also compatible with the Brussels I Regulation, under which a consumer may not be prosecuted before courts other than those of his country of residence. I would also confirm that the Commission has undertaken to submit to the co-legislator, as part of the report on the application of the Rome I Regulation, studies on two important issues on which the compromise was unable to harmonise rules at Community level: the assignment of claims and insurance contracts. Here, appropriate measures are to be taken later, if they prove necessary. The general report will also cover Article 5 on consumer contracts, and particularly whether it is consistent with the rules of private international law applicable to consumer contracts. I would point out, however, that the report will not deal with substantive consumer law.

As regards insurance contracts, both the Commission and the Council have felt it necessary to issue a statement spelling out that the inclusion of special rules in the Rome I Regulation must not delay work on the Solvency II proposal. Parliament may also support this statement if it wishes.

To highlight its right of initiative in the area of external competences, the Commission has, as you know, issued a second statement, on recital 16b. I would point out that we intend to propose a horizontal mechanism allowing the Member States to conclude bilateral agreements with third countries in areas where there are Community responsibilities. The Commission has nevertheless accepted recital 16b to avoid preventing agreement at first reading.

Lastly, I would like to point out that we share Parliament’s views on the importance of alternative methods for resolving disputes concerning contracts concluded over the internet. This is why we have actively promoted the development of such methods, through the mediation directive and by setting up a European network to help consumers wishing to bring extra-judicial proceedings in another Member State.

I therefore hope that Parliament will today confirm the agreement negotiated with the Council so as to enable the Council to adopt Parliament’s amendments at its meeting next week on 6 and 7 December 2007.

  Cristian Dumitrescu, rapporteur. − (FR) Mr President, Mr President-in-Office, Commissioner, ladies and gentlemen, today we are about to vote on a second private international law instrument, the future regulation on the law applicable to contractual obligations, which is that rare thing in Community law: a document on a purely legal issue.

Despite its technical nature, however, this regulation is hugely relevant for Europe’s citizens. Contractual law lies at the heart of all economic and social life, and in the Single Market contracts increasingly tend to be between actors resident in different Member States. This is why this instrument, which lays down uniform rules on the law applicable, is so important. The solutions ultimately adopted in the amendments we have put before you for the vote are the result of cordial, ambitious and innovative cooperation with the shadow rapporteurs Mr Gauzès, Mrs Wallis and Mrs Frassoni, and with the Portuguese Presidency and the political group coordinators in the Committee on Legal Affairs, Mr Medina Ortega and Mr Lehne. I also owe an enormous debt of gratitude to Mrs Maria Berger, who preceded me as rapporteur.

At the beginning the problems seemed insurmountable, particularly for an MEP from one of the newest Member States. I must point out that in seeking to replace the Rome Convention on the law applicable to contractual obligations, the European Commission claimed, perhaps rather naively, to be trying to communitise an existing instrument, whereas it was actually making radical changes. This led to widespread criticism that the Commission had failed in its duty to carry out an impact assessment.

Before I look at Article 5, which was the biggest problem we had to solve, I will briefly describe the main points we have achieved. The crux of this regulation lies not in Article 5, but in Article 3, which sets out the basic principle that the parties are independent, and Article 4, which contains the rules on the law applicable in cases where the parties have not chosen which should apply. The Council has followed the approach adopted by the Legal Affairs Committee here. It has to be said that Parliament and the Council took the lead in this codecision procedure by extending the scope of the future regulation to include insurance and carriage of goods contracts and by clarifying the rules on overriding mandatory provisions and mandatory rules.

Returning now to the contentious question of Article 5, it has to be said that Parliament won an outright victory here, reflecting the close and friendly cooperation between the rapporteur and shadow rapporteurs. The problem was that the Commission proposal departed from the Rome Convention by saying that, apart from certain exceptions, it is the law of the consumer that should apply to contracts between consumers and professionals. The problem with this version of Article 5 proposed by the Commission was that traders, particularly electronic traders, would have had to draw up terms and conditions tailor-made for each EU Member State. This would have been impossible for small and medium-sized businesses, which do not have the same resources as the big multinationals, and the result would have been an enormous barrier for SMEs wanting to conduct e-commerce within the Single Market. The rapporteur is all too aware that SMEs are the driving-force behind Europe’s economy and create jobs and innovation. The smaller Member States were also worried that they would be excluded from the e-commerce market.

The solution adopted in the end was to return to a simplified version of Article 5 of the Rome Convention. The new Article 5 sets out the principle that the law of the consumer should apply, but allows the parties to choose the law applicable. In practice, given that most contracts between consumers and professionals are standard, take-it-or-leave-it contracts, this means that traders will make their law applicable. However, since Article 5 provides that the choice of law is subject to the mandatory rules of the consumer’s country of residence, it offers a solution that is very much in consumers’ favour. The new Article 5 that we are proposing therefore provides a win-win solution in which the consumer is guaranteed maximum protection and SMEs will be free to offer their goods and services on the internet on the basis of contracts governed by their own law.

Lastly, I must draw your attention to a short recital which provides that the Community may, in future, adopt standard terms and conditions for electronic contracts between consumers and professionals. The final major step forward is the inclusion of insurance contracts, which has been the subject of lengthy negotiations between the Member States – Commissioner Frattini referred to this – and the inclusion of contracts for the carriage of goods.

The last thing I absolutely have to mention is that the UK, which had initially decided not to be involved in the adoption of the regulation following its reservations about the Rome Convention, has now apparently decided to take part after all, in the light of the wording produced by the negotiations.

We therefore commend this text to the House. In our view it constitutes a very positive result for consumers and businesses, and is an eloquent demonstration of the highly effective contribution that Parliament can make in the codecision procedure, even on very tricky issues such as this.

The Council President has assured us that if the amendments in the first group on the voting list are adopted, we will have agreement at first reading. That would be an outstanding and unexpected success for Parliament and the Presidency, and as the rapporteur from a new Member State, Romania, I am delighted to have played my small part. As I reach the end of my term of office as a Romanian MEP, I have to say that I am also very proud.

  President. − I would like to take this opportunity, Mr Dumitrescu, to wish you every success and happiness in your pursuits when you eventually leave the seat which you have occupied with such dignity all these months.

  Klaus-Heiner Lehne, on behalf of the PPE-DE Group. – (DE) Mr President, ladies and gentlemen, the PPE-DE Group is content with the outcome of this process. This is primarily due to the fact that the rapporteur, by dint of consummate bargaining skill, great patience and dogged persistence, managed to negotiate and seal a compromise which the entire Committee on Legal Affairs was ultimately able to endorse. May I therefore express my very special thanks to our rapporteur.

It was clearly evident from the outcome that patience had been the best policy. Rather than take snap decisions at a single reading, it was right to opt for further negotiations with the Council and the Commission, because this was precisely the sort of matter that lent itself to treatment at one reading with a view to resolving all the complex issues rather than burning the midnight oil two years hence at meetings of the Conciliation Committee, which would have had to discuss the same problems we are examining today.

As I see it, Article 5 is the core of this regulation, and we are delighted that we have managed to alter the substance of Article 5 to reflect the original intention of the Rome Convention, namely to balance the interests of consumers with those of providers. Had the Commission’s proposal been approved, we know that it would have had quite serious repercussions on e-commerce and on small and medium-sized businesses, and this would have impacted adversely on the supply of goods and services to consumers.

We have constantly criticised the fact that the Commission, in spite of the Interinstitutional Agreement of December 2003, has failed to carry out an impact assessment in this case. We confidently assume, however, that this is the last such omission and that the same mistake will not be repeated in future legislative proposals from the Commission.

Lastly, I merely wish to observe that the whole debate about consumer contracts, about the country-of-destination principle and the country-of-origin principle and about the relationship between providers or suppliers and consumers has only reinforced Parliament’s repeated message that, in the long run, we need an optional instrument for the law of contract governing cross-border trade, and we are pleased that this requirement is set out in the recitals of the motion for a resolution before us.

  Manuel Medina Ortega, on behalf of the PSE Group. – (ES) Mr President, I believe that this is a good example of the proper functioning of the European institutions. Despite our institutional complexity, the Parliament, the Commission and the Council are all working well on this matter and I hope that, with a satisfactory vote at this Parliamentary session, we can achieve a resolution at first reading, without any further delay.

I am grateful to Mr Frattini for facilitating the outcome and to the rapporteur for all his hard work in arriving at this agreement.

As has been said more than once, the focus of our discussions here has been Article 5, which relates to the protection of consumer rights. In contractual matters, the consumer is not in a situation of equality; normally he is at a disadvantage. To give a simple example, take a person who has to sign a car rental contract at an airport: the consumer is not able to read the content of the contract, he is unaware of the law to which the contract is subject and, unless he has legal protection he is completely in the hands of the person offering the contract.

This proposal for a regulation aims, without sacrificing the principles governing choice of the applicable law, to secure a system of protection for the consumer and this is now reflected in the formula – suggested by the Council – whereby the choice of law may not entail for the consumer the loss of the protection provided under the inalienable contractual provisions of the law which, in the absence of choice, would have been applicable under paragraph 1.

Generally speaking, the main problem here in the European Union is the lack of harmonisation of substantive law. These formulae applying the law of conflict are merely subsidiary formulae and we hope that the Commission will pursue its legislative drive by proposing texts offering the consumer material protection which is uniform throughout the European Union, thereby removing the need to resort to these complicated conflict-of-law provisions.

  Katalin Lévai (PSE). – (HU) Thank you very much, Mr President. Commissioner, ladies and gentlemen, this document before us is of great significance from an economic, social and political point of view, and its main objective was to harmonise the content of the Brussels I Regulation and the legislative work connected with Rome II, creating appropriate balance between the two. A good compromise solution has emerged, as we have also heard from the remarks by our fellow Members, and this is indeed due to the fact that there has been exemplary cooperation between the Council, the Commission and the European Parliament. The Union has taken as its objective the creation of an area based on freedom, security and the rule of law, and this requires the compromise solutions we see here, and it signifies serious progress for consumers. A consumer may only be brought for court proceedings in his home country, so this kind of solution for contractual law, which is so important for economic life, points the way forward whatever happens. Thank you very much.

  Andrzej Jan Szejna (PSE). – (PL) Mr President, may I begin by thanking the rapporteur for his contribution to the drafting of a regulation that is so important for the future of the European Union. We must remember that the Rome Convention is the only legal instrument in the field of international private law at Community level that is currently in the form of an international treaty.

The Convention needs amending to take account of the current and future needs of the European Union’s internal market. For that reason too, the proposed regulation is politically highly sensitive, especially in terms of the protection of consumers and the possibilities for small and medium-sized enterprises to offer products and services via the internet.

The report before us strikes a compromise between providing possibilities for consumer protection and facilitating the activities of small and medium-sized enterprises on the EU common market. It also broaches the important issue of the standardisation of clauses in contracts covering transactions conducted via the internet. I agree that the European Commission had to take appropriate action in this field. It has done so, and I welcome the compromise that has been reached. I wish to congratulate the rapporteur once again and to support adoption of the regulation.

  President. − The debate is closed.

The vote will take place at 11 a.m.

(The sitting was suspended at 10.50 a.m. and resumed at 11 a.m.).

IN THE CHAIR: MR ONESTA
Vice-President