Rome Regulations. Commentary. Gralf-Peter Calliess. Second Edition. Edited by

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1 Rome Regulations Commentary Second Edition Edited by Gralf-Peter Calliess

2 Published by: Kluwer Law International PO Box AH Alphen aan den Rijn The Netherlands Website: Sold and distributed in North, Central and South America by: Aspen Publishers, Inc McKinney Circle Frederick, MD United States of America Sold and distributed in all other countries by: Turpin Distribution Services Ltd Stratton Business Park Pegasus Drive, Biggleswade Bedfordshire SG18 8TQ United Kingdom Printed on acid-free paper. ISBN Kluwer Law International BV, The Netherlands All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the publisher. Permission to use this content must be obtained from the copyright owner. Please apply to: Permissions Department, Wolters Kluwer Legal, 76 Ninth Avenue, 7th Floor, New York, NY , USA. [email protected] Printed and Bound by CPI Group (UK) Ltd, Croydon, CR0 4YY. Suggested citation: Gebauer, Art. 4, in Calliess (ed.) Rome Regulations (2nd. ed 2015), mn. 5

3 ARTICLE 5 CONTRACTS OF CARRIAGE (1) To the extent that the law applicable to a contract for the carriage of goods has not been chosen in accordance with Article 3, the law applicable shall be the law of the country of habitual residence of the carrier, provided that the place of receipt or the place of delivery or the habitual residence of the consignor is also situated in that country. If those requirements are not met, the law of the country where the place of delivery as agreed by the parties is situated shall apply. (2) To the extent that the law applicable to a contract for the carriage of passengers has not been chosen by the parties in accordance with the second subparagraph, the law applicable shall be the law of the country where the passenger has his habitual residence, provided that either the place of departure or the place of destination is situated in that country. If these requirements are not met, the law of the country where the carrier has his habitual residence shall apply. The parties may choose as the law applicable to a contract for the carriage of passengers in accordance with Article 3 only the law of the country where: (a) (b) (c) (d) (e) the passenger has his habitual residence; or the carrier has his habitual residence; or the carrier has his place of central administration; or the place of departure is situated; or the place of destination is situated. (3) Where it is clear from all the circumstances of the case that the contract, in the absence of a choice of law, is manifestly more closely connected with a country other than that indicated in paragraph 1 or 2, the law of that other country shall apply. Overview I. Purpose II. Scope of Application 1. Notion of Contract for the Carriage of Goods or Passengers 2. Precedence of Other Provisions for Carriage of Goods 3. Precedence of Other Provisions for Carriage of Passengers III. Legislative History 1. Article 4 Rome Convention 2. Article 4(l)(c) of the Proposal for a Regulation IV. Content 1. Article 5(1) Carriage of Goods 2. Article 5(2) Carriage of Passengers 3. Article 5(3) Escape Clause (Principle of Closest Connection) Schulze 127

4 Article 5 Contracts of Carriage I. Purpose The purpose behind Article 5 has been to create proper conflict of laws rules for contracts of carriage in order to outline the importance of these contracts. 1 Article 5 shall provide a flexible but more predictable choice of law system for contracts of carriage. 2 However, with Article 5(1), no change in substance is intended as compared to Article 4(4) of the Rome Convention, which already refers to the contracts for the carriage of goods. 3 The main connecting factor is the law of the country of habitual residence of the carrier, if another relevant element is also situated there (paragraph 1 section 1). Otherwise, the law of the place of delivery as agreed by the parties will apply (paragraph 1 section 2). That subsidiary conflict-of-laws rule in paragraph 1 section 2 is rather new. In this part of the provision the connecting factor is no longer the closest connection, but the place of delivery 4 (but see also (paragraph 4)). The conflict-of-laws rule relating to contracts for the carriage of passengers (Article 5(2)) is new as compared to Article 4 Rome Convention. The main connecting factor is the law of the country where the passenger has his habitual residence, if either the place of departure or the place of destination is situated in that country. Otherwise, the law of the country where the carrier has his habitual residence shall apply. The connecting principle set out in paragraph 1 with two combined connecting elements and a subsidiary conflict-of-laws rule is extended to the carriage of passengers. With the main connecting factor to the law of the country where the passenger has his habitual residence, paragraph 2 contains an element protecting the weaker party. Article 5(2) is nevertheless not a part of consumer law (cf. Article 6(4) lit. b) 5 and the limitation of the party autonomy won t protect the passenger in realty, for instance where the contract of carriage designates the law of carrier as applicable law. In most cases the carrier s standard terms will designate the carrier s law and not the law of the passenger. The contract may lawfully derogate from any mandatory provisions in the law of the country where the passenger has his habitual residence (cf. Article 9). A choice of law for the carriage of goods in accordance with Article 3 and for the carriage of passengers under the restriction of paragraph 2 section 2 takes precedence 1. Cheshire/North/Fawcett, Private International Law (14th ed. 2008), 727; R. Wagner, Neue kollisionsrechtliche Vorschriften für Beförderungsverträge in der Rom I-Verordnung, TranspR 2008, 221, 222; for contracts of passengers there seems to be the further purpose to avoid an application of consumer law set out in Art. 6 Regulation. 2. Nielsen, The Regulation and Contracts of Carriage, in Regulation The Law Applicable to Contractual Obligations in Europe (Ferrari and Leible eds, 2009), 99, Cf. Recital (22). That shall promote legal security; cf. Report on the Proposal for a Regulation of the European Parliament and of the Council on the law applicable to contractual obligations (), European Parliament, Committee on Legal Affairs, Rapporteur Cristian Dumitrescu, 21 November 2007, (A /2007). 4. Cf. Nielsen, The Regulation and Contracts of Carriage, 99, 106; with crit. remarks also Mankowski, Neues aus Europa zum Internationalen Privatrecht für Transportverträge: Art. 5 Rom I VO, TranspR 2008, 339, 347; Azzi, La loi applicable à défaut de choix selon les articles 4 et 5 du règlement, D. 2008, 2169, 2171 s.; Boskovic, La protection de la partie faible dans le règlement, D. 2008, 2175, Cf. Recital (23) and (32). 128 Schulze

5 Contracts of Carriage Article 5 over the objective connection pursuant to Article 5. The freedom of choice of law is widely granted; however, this bears the consequence of a lower protection of the weaker party (see paragraph 2 section 2(b): choice of the law of the country where the carrier has his habitual residence ). 6 The carrier may choose the law of the place of his habitual residence (his central administration or principal place of business, Article 19) to make sure that one carriage through several states, where passengers get on and leave a train or a bus, will be governed by one law. 7 Article 5 paragraph 1 for contracts for the carriage of goods and paragraph 2 for contracts for the carriage of passengers set up combination-based choice of law rules in accordance with the principle of the closest connection of the respective contract. Therefore the national rules of law other than that of private international law shall apply (Article 20 Exclusion of renovi). Article 5(1) and (2) are strict choice of law rules instead of presumptions in the former Article 4 paragraph 4 of Rome Convention. Nevertheless Article 5 paragraph 3 contains an exception. If the contract is manifestly more closely connected with a country other than that of paragraph 1 or 2, this law shall apply (so-called escape clause, paragraph 3). 8 EU legislation takes precedence over Article 5 particularly with regard to uniform provisions of substance (cf. Article 23, mn. 18 et seq. and infra 34 et seq.). The political process behind is based on the European Transport Policy (ETP) set out in a White Paper in For the future development the Commission has launched a process to a second white paper in 2010 which will set out the policy measures to be adopted in the next decade As part of this process, a reflection was carried out on socio-economic trends and future challenges for transport. The result is summarized in a Communication from the Commission adopted on 17 June II. Scope of Application Article 5 covers contracts for the carriage of goods (paragraph 1) as well as for the carriage of passengers (paragraph 2) on all kinds of transport routes (sea, air and land, including rail and road) and with any transport vehicles (e.g., ship, aircraft, 6 6. Mankowski, Die Rom I Verordnung Änderungen im europäischen IPR für Schuldverträge, IHR 2008, 133,140; Nieleon, The Regulation and Contracts of Carriage, 99, Wagner, TranspR 2008, 221, 223; LG München I 12 O 7134/11 ( ), BeckRS 2011, Cf. Thorn, Art. 5 Rom I, in Palandt, Bürgerliches Gesetzbuch (Palandt ed., 74nd ed. 2015), para. 1 (totally new conception); A. Staudinger, Art. 5 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht (Ferrari et al. eds, 2nd ed. 2011), para. 4; Leible, Art. 5 Rom I-VO, in NomosKommentar BGB Vol. 6 (Mansel and Hüßtege eds, 2014), para. 25; Rauscher/Thorn, EuZPR/EuIPR (Rauscher ed., 2011) Art. 5 para COM(2001) 370. This program was updated in the mid-term review of 2006, COM(2006) COM(2009) 279 final: A sustainable future for transport: Towards an integrated, technology led and user friendly system. Further details will be available on DG TREN s website: (last accessed: 1 August 2013). Schulze 129

6 Article 5 Contracts of Carriage 7 8 helicopter, bus, train). It is also applicable to the multimodal transport of goods 11 as far as the contract is not covered by uniform laws. 12 Excluded from the scope of application are obligations arising under bills of exchange, cheques and promissory notes and other negotiable instruments to the extent that the obligations under such other negotiable instruments arise out of their negotiable character (Article 1(2)(d)). There is no change intended as compared to Article 1(2)(c) of the Rome Convention. Recital 9 13 adds that the exclusion also covers bills of lading to the extent that the obligations under the bill of lading arise out of its negotiable character. 14 The former doctrine that applied the conflict-of-laws rules of the Rome Convention to bills of lading as well 15 is thus overruled. 16 It is necessary to apply a technical uniform meaning in all Member States to the notions negotiable instrument and negotiable character as a property right of goods. 17 A sea waybill as a descriptive transport document does not fall under the exclusion of Article 1(2)(d). 18 Arbitration. The choice of law rules set out in Article 5 are substituted by the national and international arbitration regime such as the lex arbitrii, including UNCI- TRAL s Model Law of 21 June 1985 as amended in 2006 and UNCITRAL s New York Convention of 10 June 1958 on the recognition and Enforcement of Foreign Arbitral Awards Cf. Martiny, Art. 5 Rom I-VO, in Münchener Kommentar zum BGB Vol. 10 (Säcker and Rixecker eds, 6th ed. 2015), para. 8; Leible, Art. 5 Rom I-VO, in NomosKommentar BGB, para. 13; A. Staudinger, Art. 5 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 75; Rauscher/Thorn, EuZPR/EuIPR, Art. 5 para. 33; sceptical: Drews, Der multimodale Transport eine Bestandsaufnahme, TranspR 2010, 327, 335; see for further details regarding the contract of multimodal transport in German law: Schmid, Multimodalvertrag, in Handbuch des Transportrechts (Knorre, Denuth and Schmid eds, 2008), 129 et seq. 12. Cf. Jayme/Nordmeier, Multimodaler Transport, IPRax 2008, 503 et seq.; BGH, I ZR 181/05 (17 July 2008), NJW 2008, 2782 (the multimodal transport is not covered by CMR); note Ramming, Keine Anwendung der CMR auf Teilstrecken einer Multimodal-Beförderung, NJW 2009, 414. For further details about the handling of 452 a HGB (liability under the hypothetical law of the section) in German Law, Shariatmadari, Das IPR der Multimodal-Beförderung (unter Einschluss einer Seestrecke), TranspR 2010, 275, Recital 9 reads: Obligations under bills of exchange, cheques and promissory notes and other negotiable instruments should also cover bills of lading to the extent that the obligations under the bill of lading arise out of its negotiable character. 14. The bill of lading is an acknowledgment by a carrier that he has received the goods for shipment. If the bill of lading is negotiable, which frequently will be the case, it controls possession of the goods and is thereby a document in financing the movement of commodities and merchandise. In some jurisdictions the bill of lading is regarded as the contract of carriage itself whereas in other jurisdictions the bill of lading is merely an evidence of the existence of a contract of carriage; Schultsz, in Contract Conflicts (North ed., 1982), 188 et seq. 15. Cheshire/North/Fawcett, Private International Law, 548; Court of Appeal [1993] 2 Lloyd s Rep. 542, 547 The Future Express. 16. For the exclusion of bills of lading already, BGHZ 99, 207, 210; Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht (1995), 90 and 134 et seq. 17. Already under the Rome Convention Plender/Wilderspin, The Rome Convention on the Choice of Law for Contracts (2nd ed. 2001), paras 6 29; Mankowski, Konnossemente und die Rom I VO, TranspR 2008, 417, Mankowski, TranspR 2008, 417, 420 except it is expressly stipulated that they are not negotiable. 19. Nieleon, The Regulation and Contracts of Carriage, 99, Schulze

7 Contracts of Carriage Article 5 1. Notion of Contract for the Carriage of Goods or Passengers. The Regulation defines neither contracts for the carriage of goods nor contracts for the carriage of passengers. These contracts fall within the broad definition of contracts for services and hence are governed by Article 5(1)(b) of the Brussels I Regulation. 20 Unlike under the Rome Convention, 21 under the Regulation it is necessary to apply a uniform meaning to the notions contract for the carriage of goods 22 and contract for the carriage of passengers in all Member States. a. A Contract for the Carriage of Goods contains any legally enforceable agreement having as its main purpose the carriage of goods. 23 That means a contract in which a carrier undertakes to carry goods from one place to another. 24 Recital 22 clarifies that also charter parties and other contracts are included to the extent that their contractual substance is carriage. 25 Thus, Recital 22 reads as follows: 9 10 As regards the interpretation of contracts for the carriage of goods, no change in substance is intended with respect to Article 4(4), third sentence, of the Rome Convention. Consequently, single-voyage charter parties and other contracts the main purpose of which is the carriage of goods should be treated as contracts for the carriage of goods. In the interpretation of CJEU Article 5(1) applies to a charter party, other than a single voyage charter-party, only when the main purpose of the contract is not merely to make available means of transport, but the actual carriage of goods. 26 aa. A Charter-Party is the contract between the owner of a transport vehicle and the charterer for the use of it. 27 There are in principle two methods of charter-parties: The forum at the place of performance will be relevant; cf. Mankowski, Art. 5 Brussel I Regulation, in European Commentaries on Private International Law (Magnus and Mankowski eds, 2nd ed. 2012), para Definition made by the law (including the private international law) of the forum, cf. Plender/Wilderspin, The Rome Convention on the Choice of Law for Contracts, paras 6 29, 131 with ref. to the jurisprudence. 22. Plender/Wilderspin, The European Private International Law of Obligations (3rd ed. 2009), paras 8 13; Mankowski, TranspR 2008, 417, Plender/Wilderspin, The European Private International Law of Obligations, paras 8 14; Leible, Art. 5 Rom I-VO, in NomosKommentar BGB, para. 12; A. Staudinger, Art. 5 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 20; Rauscher/Thorn, EuZPR/EuIPR, Art. 5 para It seems not necessary that the obligation to carry will be assumed only against payment, but cf., e.g., the definition given in Art. 1 N 1 of The United Nations Convention on Contracts for the International Carriage of Goods wholly or partly by sea 2008 (Rotterdam Rules): against the payment of freight. 25. Cf. Giuliano-Lagarde report, Art. 4 para. 5. For example removal contracts even if the entrepreneur has further obligations as solely to carry the furniture, cf. Martiny, Art. 5 Rom I-VO, in Münchener Kommentar zum BGB, para. 12. Contracts for which the carriage of goods is only an accessory obligation were not covered by Art. 5, cf. Cachard, De Genève à Rome! Clunet 136 (2009) Cf. for the interpretation of Art. 4(4) of the Rome Convention CJEU Case 133/08 ( ) ICF v. Balkenende and MIC, para. 37 (EuZW 2009, 822 = IPRax 2010, 236). 27. Cf. for definition CJEU Case 133/08 ( ) ICF v. Balkenende and MIC, para. 35 (EuZW 2009, 822 = IPRax 2010, 236) (The owner makes the means of transport available to the charterer). Schulze 131

8 Article 5 Contracts of Carriage voyage charter and time charter. Under a voyage charter in the realm of sea transport a vessel is chartered for a one-way voyage between specific ports with a specified cargo at a negotiated rate of freight. There are single voyage charter-parties (contracts by which a vessel is chartered for a single trip), consecutive voyage charters (contracts by which a vessel is chartered for a series of specified voyages) and multi-voyage charters (contracts by which a vessel is chartered for several trips), which all fall within the scope of Article 5(1). 28 Furthermore, quantity (freight) contracts 29 (contracts concluded between the shipper and ship operator under which the latter undertakes to carry specified quantities of a bulk commodity on a particular route or routes over a given period of time, using ships of his own choice that are not necessarily specified in the contract 30 ) as well as removal contracts 31 will be acknowledged as such other contracts (Recital 22) within the scope of Article 5(1). 32 bb. The time charter as a time-limited rent of the hauling equipment does not fall under Article Under a time charter, the charterer hires the ship for a stated period of time. 34 Generally, there are two subtypes of time charter, called bareboat charter Dicey/Morris/Collins, Conflict of Laws (Collins ed., 15th ed. 2012), paras et seq.; Kaye, The New Private International Law of Contract of the European Community (1993), 200; Ramming, Die neue Rom I Verordnung und die Rechtsverhältnisse der Schifffahrt, HambSchRZ 2009, 21, 27 et seq.; Leible, Art. 5 Rom I-VO, in NomosKommentar BGB, para. 15; Martiny, Art. 5 Rom I-VO, in Münchener Kommentar zum BGB, para. 10; Magnus, Art. 5 Rom I-VO, Staudingers Kommentar zum BGB (Magnus ed., 14th ed. 2011), para. 103; contrary view: Schultsz, Contract Conflicts, 193 et seq.; von Hoffmann, Art. 28 EGBGB, in Soergel, Bürgerliches Gesetzbuch Vol. 10 (Kegel ed., 12th ed. 1996), para. 443 deny the application of Art. 4(4) of the Rome Convention for other than single voyage charter parties and will apply Art. 4(2) of the Rome Convention. 29. Dicey/Morris/Collins, Conflict of Laws, para ; Kaye, The New Private International Law of Contract of the European Community, 200; Mankowski, Seefrachtverträge, in Internationales Vertragsrecht (Reithmann and Martiny eds, 7th ed. 2010), para. 2963; Magnus, Art. 5 Rom I-VO, in Staudingers Kommentar, para. 102; contrary von Hoffmann, Art. 28 EGBGB, in Soergel, Bürgerliches Gesetzbuch Vol. 10, para Cf. Schultsz, Contract Conflicts, 192; Magnus, Art. 5 Rom I-VO, in Staudingers Kommentar, para. 102; Dicey/Morris/Collins, Conflict of Laws, para ; Freight contracts can represent agreements, such as time charters, voyage charters, or contracts of affreightment. 31. Martiny, Art. 5 Rom I-VO, in Münchener Kommentar zum BGB, para. 12; Leible, Art. 5 Rom I-VO, in NomosKommentar BGB, para. 12; A. Staudinger, Art. 5 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 20; see also Häußer, Das IPR des Stückgutfrachtvertrages, TranspR 2010, 246 who discusses a quantity contract with different places of receipt or / and delivery (254). 32. Nielsen, The Regulation and Contracts of Carriage, 99, Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht, 90 and 95; Schultsz, Contract Conflicts, 198; contrary Dicey/Morris/Collins, Conflict of Laws, para ; Kaye, The New Private International Law of Contract of the European Community, The shipowner is paid charter hire on a per day basis for a certain period of time whereas he is responsible for providing the crew and paying the operating costs. The charter-parties can also be arranged on a lump-sum charter basis. The loaded quantities are not of concern for this charter, but only the space of the ship, i.e., made available to the charterer. 35. Under a bareboat charter the shipowner delivers the vessel to the charterer for the agreed period of time without crew and captain. 132 Schulze

9 Contracts of Carriage Article 5 and demise charter. 36 Neither the demise charter nor the bareboat charter under which the charterer mans and equips the vessel on its own motion 37 falls under Article Since the preponderant aspect is the hire of the ship rather than the carriage of goods, these charters are subject to Article 4(2). The characteristic performance is the delivery of the ship by the shipowner so that the law of the country of the habitual residence of the shipowner will be applicable. Also beyond the scope of Article 5 falls the cross charter-party 39 (which is a charter-party only applicable to container shipping aiming at a reciprocal exchange of container places on vessels within a shipowners consortium). b. The notion contracts for the carriage of passengers denotes any legally enforceable agreement having as its main purpose the carriage of passengers. 40 That means a contract in which a carrier undertakes to carry passengers against payment from one place to another. 41 A contract for the carriage of passengers concluded between a consumer and a professional will also be governed by Article 5. Article 5 has priority over Article 6. Contracts of carriage concluded with consumers are governed by Article 5 even if the contract as such would be covered by Article 6 ( Without prejudice to Art. 5 ). Due to the particular nature of contracts for carriage, Article 5 should ensure an adequate level of protection for passengers. 42 Consumer conflict law, as set out in Article 6, only applies to contracts of carriage relating to package travel within the meaning of Directive 90/314/EEC on Package Travel, Package Holidays and Package Tours (see Article 6(4)(b)). Package Tours mean contracts that, for an inclusive price, provide for a combination of travel and accommodation. 43 They are covered by Article 6 if the requirements of Article 6(1) are met. 44 For this type of consumer contracts the choice of law is considerably restricted A demise charter differs from the bareboat charter in a way that a so-called managementagreement-clause is contained in the charter pursuant to which the shipowner on behalf of the charterer shall man and equip the vessel. In return, the shipowner is rewarded a management fee. 37. Cf. Schultsz, Contract Conflicts, 191; Magnus, Art. 5 Rom I-VO, Staudingers Kommentar, para Cf. Schultsz, Contract Conflicts, 191; Magnus, Art. 5 Rom I-VO, Staudingers Kommentar, para. 100; Leible, Art. 5 Rom I-VO, in NomosKommentar BGB, para. 15; Rauscher/Thorn, EuZPR/EuIPR, Art. 5 para Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht, 116; Magnus, Art. 5 Rom I-VO, in Staudingers Kommentar, para Collateral obligations, such as providing food and beverages, do not alter the actual character of the contract being a contract of carriage. 41. The contract of carriage may be for reward or free of charge, cf., e.g., the definition given in Art. 3 N 8 of Regulation (EC) No 1371/2007 of the European Parliament and of the Council of 23 Oct on rail passenger s rights and obligations, OJ L 315/14, 3 December Cf. Recital 32: Owing to the particular nature of contracts of carriage and insurance contracts, specific provisions should ensure an adequate level of protection of passengers and policy holders. Therefore, Art. 6 should not apply in the context of those particular contracts. 43. For ex. the travel contract for a Cruise Liner, cf. Führich, Reiserecht (6th ed. 2010), 40 n See also Rauscher/Thorn, EuZPR/EuIPR, Art. 5 para Package Tours contracts on which Art. 6(1) territorially do not apply will be covered by Art. 5(2) and (3); cf. Thorn, Art. 5 Rom I, in Palandt, Bürgerliches Gesetzbuch, para. 3; Leible, Art. 5 Rom Schulze 133

10 Article 5 Contracts of Carriage (see Article 6(2) section 2) and the connecting factor without a choice is the habitual residence of the passenger (see Article 6(1)). Due to the international character of carriage in general, the law of transport is extensively regulated and therefore harmonized by uniform law whether by international conventions or by acts of European legislation. Within their scope these international conventions enjoy precedence according to Article 25, as do acts of European legislation according to Article Only for the remaining gaps Article 5 will apply. 46 Consequently the application of Article 5 depends on the scope of application of these Conventions Precedence of Other Provisions for the Carriage of Goods. Article 5 is to be displaced by the following international conventions (cf. Article 25) or EU legislation (cf Article 23). Hence, the choice of law rules for contracts of carriage in only apply to the extent a convention does not cover the contract of carriage or only covers it partly. Such a convention takes precedence where proceedings are brought is a Contracting Party to the convention in question, and to the exent the convention regulates choice of law issues either by setting up a choice of law rule or by providing a uniform provision of substance. 48 a. Carriage of Goods by Sea. The applicable conventions are the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, Brussels 1924 (the Hague Rules ), the Brussels Protocol amending the Hague Rules relating to Bills of Lading, 1968 (the Hague-Visby Rules ), and the United Nations Convention on the Carriage of Goods by Sea, 1978 (the Hamburg Rules ). The United Nations Convention on Contracts for the International Carriage of Goods wholly or partly by sea 2008 ( the Rotterdam Rules ) establishes a broad range of provisions and will create legal certainty but is not still in force. In relation to inland waterways, there is also the Budapest Convention on the Contract for the Carriage of Goods by Inland Waterway, 2000 (the CMNI ). aa. The intention of the Hague Rules 49 was to unify certain rules of law related to bills of lading and to establish standard basic obligations and responsibilities of the shipper and ocean-carrier for goods covered under a bill of lading. All bills of lading I-VO, in NomosKommentar BGB, para. 9; A. Staudinger, Art. 5 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para Cf. further Recital 41: Respect for international commitments entered into by the Member States means that this Regulation should not affect international conventions to which one or more Member States are parties at the time when this Regulation is adopted. To make the rules more accessible, the Commission should publish the list of the relevant conventions in the Official Journal of the European Union on the basis of information supplied by the Member States. 46. R. Wagner, Normenkonflikte zwischen den EG-Verordnungen Brussel I, Rom I und Rom II und transportrechtlichen Rechtsinstrumenten, TranspR 2009, 103, 105; Martiny, Art. 5 Rom I-VO, in Münchener Kommentar zum BGB, para Wagner, TranspR 2009, 103, 105. In detail on the relation and the conflicts between the uniformed material transport laws, see ibid. 48. Cf. Nielsen, The Regulation and Contracts of Carriage, 99, 103; cf. in the view of German Law, R. Wagner, TranspR 2009, 103, 106 et seq.; especially for the carriage of goods and passengers by sea cf. Ramming, HambSchRZ 2009, 21, (last accessed: 22 September 2014). 134 Schulze

11 Contracts of Carriage Article 5 covered by the Hague Rules are subject to standard clauses defining the risks assumed by the carrier, which are absolute and cannot be altered by contrary agreement, and the immunities the carrier can enjoy, unless the parties agree otherwise. In general, clauses relieving the carrier from liability for negligence in loading, handling, stowing, keeping, carrying and discharging the goods or clauses that diminish his obligation to equip a seaworthy vessel are declared null and void. 50 However, the carrier is relieved from liability for negligence in navigation or the management of the ship and from absolute warranty of seaworthiness. bb. The Hague-Visby Rules 51 are a set of international rules for the carriage of goods by sea that increase a surface transport carrier s liability limit and include containerized cargo under their provisions. 52 In view of the disparity in bargaining positions between the carrier and the shipper, the Hague-Visby Rules make special provisions protecting the shipper from being exploited by the carrier. 53 The Rules apply to all contracts of carriage of goods covered by a bill of lading or any other document of the title that relates to the carriage of goods by sea where the port of shipment is a port within a contracting state. Where the bill of lading contains the Rules themselves or incorporates the legislation of any State that gives effect to them, the Hague-Visby Rules will also apply. The Hague-Visby Rules apply to charter-parties (Article 1(a)) in terms of a time charter. 54 cc. The Hamburg Rules 55 shall replace the existing Hague Rules and the Hague- Visby Rules in the Contracting States. However, the Hamburg Rules do not apply to charter-parties. 56 According to Article 2, the provisions of the Hamburg Rules: are applicable to all contracts of carriage by sea between two different States, if [t]he port of loading or the port of discharge as provided for in the contract of carriage by sea is located in a Contracting State, or [o]ne of the optional ports of 50. Art. 3(8) Hague Rules reads [a]ny clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connexion with, goods arising from negligence, fault, or failure in the duties and obligations provided in this Article or lessening such liability otherwise than as provided in this Convention, shall be null and void and of no effect (last accessed: 1 August 2013). See also Protocol (the SDR Protocol ) conven/sdrprotocol1979.html (last accessed: 22 September 2014), amending the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading of 25 August 1924 (The Hague Rules), as amended by the Protocol of 23 February 1968 (Visby Rules), Brussels Article 2 Hague Rules reads [s]ubject to the provisions of Art. 6, under every contract of carriage of goods by sea the carrier, in relation to the loading, handling, stowage, carriage, custody, care and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities hereinafter set forth. 53. Articles IV and V of the Hague Visby Rules. 54. Cf. mn (last accessed: 22 September 2014). 56. Art. 2(3) Hamburg Rules states that provisions of this Convention are not applicable to charter-parties. However, where a bill of lading is issued pursuant to a charter-party, the provisions of the Convention apply to such a bill of lading if it governs the relation between the carrier and the holder of the bill of lading, not being the charterer. Schulze 135

12 Article 5 Contracts of Carriage discharge provided for in the contract of carriage by sea is the actual port of discharge and such port is located in a Contracting State, or [t]he bill of lading or other document evidencing the contract of carriage by sea is issued in a Contracting State, or [t]he bill of lading or other document evidencing the contract the legislation of any State giving effect to them are to govern the contract Article 2(2) of the Convention notes that the Convention is applicable without regard to the nationality of the ship, the carrier, the actual carrier, the shipper, the consignee or any other interested person. dd. The United Nations Convention on Contracts for the International Carriage of Goods wholly or partly by sea 2008 (Rotterdam Rules) 57 provides uniform rules governing the rights and obligations of shippers, carriers and consignees under a contract for door-to-door carriage that includes an international sea leg. Adopted by the General Assembly on 11 December 2008, the Convention establishes a modern alternative to the earlier conventions (see above aa. cc). The Rotterdam Rules provide shippers and carriers with a binding and balanced universal regime to support the operation of maritime contracts of carriage that may involve other modes of transport. 58 The convention is not still in force. Entry into force will be given one year after the Convention has been ratified by 20 Contracting States after the date of deposit (Article 94 Rotterdam Rules). 59 ee. The CMNI 60 is an agreement that establishes uniform rules concerning contracts for the carriage of goods by inland waterway. The CMNI serves to harmonize legal regimes with a view to the development of transport as proposed by Member States of the Central Commission for the Navigation of the Rhine (the CCNR ) and the Danube Commission in collaboration with the United Nations Economic Commission for Europe (the UN/ECE ). 61 Pursuant to Article 2(1), the CMNI: is applicable to any contract of carriage according to which the port of loading or the place of taking over of the goods and the port of discharge or the place of delivery of the goods are located in two different States of which at least one is a State Party to this Convention. If the contract stipulates a choice of several ports of discharge or 57. Adopted by the UN on 11 December 2008, Text cf. uncitral_texts/transport_goods/2008rotterdam_rules.html (last accessed: 17 Octobert 2013); Carr/Kidner, International Trade Law Statutes and Conventions, (6th ed. 2010), 760 et seq. 58. Cf. to the Report of Working Group III (Transport Law) on the work of its twenty-first session (14-25 January 2008), Transport.html (last accessed: 22 September 2014). 59. Already 21 States have signed the Convention in September and October 2009, see the status (last accessed: 22 September 2014). 60. The abbreviation CMNI derives from its French title Convention de Budapest relative au contrat de transport de marchandises en navigation intérieure. Text cf. /trans/main/sc3/cmniconf/cmni.english.pdf (last accessed: 22 September 2014). 61. The CMNI was adopted by the Diplomatic Conference organized jointly by CCNR, the Danube Commission and UN/ECE, held in Budapest from 25 September to 3 October 2000 and entered into force on 1 March Schulze

13 Contracts of Carriage Article 5 places of delivery, the port of discharge or the place of delivery to which the goods have actually been delivered shall determine the choice. As a result, Article 2(2) of the Convention provides that the Convention is applicable if the purpose of the contract of carriage is the carriage of goods, without transshipment, both on inland waterways and in waters to which maritime regulations apply, under the conditions set out in paragraph 1, unless: (a) a maritime bill of lading has been issued in accordance with the maritime law applicable, or (b) the distance to be travelled in waters to which maritime regulations apply is the greater. 62 b. Carriage of Goods by Air. The Convention for the Unification of Certain Rules relating to International Carriage by Air, 1929 (the Warsaw Convention ) was intended to minimize the conflicts arising in respect of contracts for the carriage by air. The original version of the Convention was amended by the Hague Protocol in 1955, supplemented in 1961 by the Guadalajara Convention and further amended in 1971 by the Guatemala City Protocol. Not every party of the Warsaw Convention has accepted the 1955 or the 1971 amendment-protocol; nor is a party that accepts either protocol required to denounce the treaty which the protocol amends. The result is that there are in fact three separate treaties with a number of states being parties to more than one: Warsaw, Warsaw-Hague, and Warsaw-Hague-Guatemala City. aa. The Warsaw Convention 63 in its original version of 1929 amended by the Hague Protocol is applicable to all international carriage of persons, luggage or goods performed by aircraft for reward as well as for gratuitous carriage (Article 1(1)). For the purposes of the convention, international basically means that the departure and the place of the carriage s destination are situated within two different High Contracting Parties. 65 bb. The Guadalajara Convention mainly harmonizes the rules for the airfreight forwarder within the scope of the Warsaw Convention, whereas the Guatemala City Protocol alters and amends its liability rules. The Montreal Additional Protocols No 1-4, also refer to the carrier s liability in case of default on contract For further details, Hacksteiner, Implementation des Budapester Übereinkommens über den Vertrag für die Güterbeförderung in der Binnenschifffahrt (CMNI), TranspR 2009, 145 et seq.; for commentary see also Koller, Transportrecht Kommentar (8th ed. 2013), 1459 et seq. 63. In detail concerning the Warsaw Convention and its amendments Diederiks Verschoor/Butler, An Introduction to Air Law (8th ed. 2006); Goldhirsch, The Warsaw Convention Annotated A Legal Handbook (2nd ed. 2000). For commentary see also Koller, Transportrecht Kommentar (6th ed. 2007), 1486 et seq. and 1620 et seq (last accessed: 22 September 2014); for commentary see also Koller, Transportrecht Kommentar (6th ed. 2007), 1486 et seq. 65. For the scope and definitions of the Convention, see Arts 1 et seq ntion.1961/portrait.pdf (last accessed: 22 September 2014) trait.pdf (last accessed: 22 September 2014). For commentary, see also Koller, Transportrecht Kommentar (6th ed. 2007), 1641 et seq. 68. For the text of the Additional Protocols No 1 4, see transport.and.carriage.of.goods.html (last accessed: 22 September 2014). Schulze 137

14 Article 5 Contracts of Carriage cc. The endeavours of reforming the Warsaw Convention finally led to the Convention for the Unification of Certain Rules for the International Carriage by Air, Montreal 1999 (the Montreal Convention ). 69 It is applicable to the international carriage of persons, baggage or cargo by aircraft for reward and applies equally to gratuitous carriage by aircraft performed by an air transport undertaking, according to Article 1(1) of the Convention. As far as States have not yet ratified the Montreal Convention 1999, the Warsaw Convention remains applicable among its contracting states. c. Carriage of Goods by Rail. The law governing the international carriage of goods by railway has been codified in a number of international conventions. These are frequently referred to as the Berne Conventions. 70 The conventions apply whenever goods have been consigned under a through-consignment note for the carriage over the territories of at least two contracting states and certain specified lines. The International Convention concerning the Carriage of Goods by Rail ( CIM ) 71 was revised at least by the Intergovernmental Organization for International Carriage by Rail ( OTIF ) 72 with the Protocol of amending COTIF in COTIF. 75 This Protocol entered into force on 1 July There are some further uniform regulations as the Regulation concerning the International Carriage of Dangerous Goods by Rail ( RID ), 77 the Uniform Rules concerning Contracts of Use of Vehicles in International Rail Traffic ( CUV ), 78 the Uniform Rules concerning Contracts of Use of 69. On this Cheng, A New Era in the Law of International Carriage by Air From Warsaw (1929) to Montreal (1999), ICLQ 53 (2004), 833; for commentary, see also Koller, Transportrecht Kommentar (8th ed. 2013), 1215 et seq. 70. The first international convention concerning the carriage of goods by rail was concluded in Berne in 1890 and came into operation in After World War I this Convention was replaced by a new convention concluded in 1924, which was again amended by a convention signed in Rome in This in turn has been replaced after World War II by the Berne Convention A new convention was signed in Berne in 1961 and came into operation in CIM-1999-e.PDF (last accessed: 22 September 2014). For commentary see also Koller, Transportrecht Kommentar (8th ed. 2013, 1349 et seq. 72. The abbreviation OTIF derives from its French title Organisation intergouvernementale pour les transports internationaux ferroviaires. OTIF are based in Berne/Switzerland. 73. The Protocol of 1999 is the so-titled Vilnius Protocol, which was signed upon the closing of the Fifth General Assembly on 3 Jun For further details, read the Central Office Report on the Revision of the Convention concerning International Carriage by Rail (COTIF) of 9 May 1980 and Explanatory Reports on the texts adopted by the Fifth General Assembly. 74. The abbreviation COTIF derives from its French title Convention relative aux transports internationaux ferroviaires, (last accessed: 22 September 2014). Read more details about COTIF in the article of Mankowski, Entwicklungen im Internationalen Privatund Prozessrecht für Transportverträge in Abkommen und speziellen EG-Verordnungen, TranspR 2008, TIF_1999_01_01_2011_d.pdf (last accessed: 22 September 2014). 76. See also the CIM/SMGS Consignment Note of 1 September 2006 (updated to 1 January 2010): Manual from the International Rail Transport Committee for the cooperation between railways in the CIM and the SMGS area, (last accessed: 22 September 2014) e.PDF (last accessed: 22 September 2014) ru-cuv-e.pdf (last accessed: 16 January 2015). 138 Schulze

15 Contracts of Carriage Article 5 Infrastructure in International Rail Traffic ( CUI ), 79 the Uniform Rules concerning the Validation of Technical Standards and the Adoption of Uniform Technical Prescriptions Applicable to Railway Material Intended to be used in International Traffic ( APTU ), 80 and finally the Uniform Rules concerning Technical Admission of Railway Material used in International Traffic ( ATMF ). 81 A special EU legislation for the carriage of goods by rail did not exist. 82 d. Carriage of Goods by Road. The Convention on the Contract for the International Carriage of Goods by Road, Geneva 1956 ( CMR ) 83 and the Protocol to the Convention on the Contract for the International Carriage of Goods by Road, of as well as the Additional Protocol concerning the electronic consignment note of generally apply to international carriages of goods by road in motor vehicles for reward if the place of taking over the goods and the place designated for delivery, as specified in the contract, are situated in two different countries, of which at least one is a contracting country (Article 1(1) of the Convention). It also applies if part of the journey is by sea, rail, inland waterways or air, provided that the goods are not unloaded from the vehicle (Article 2 of the Convention). 86 The CMR is not a comprehensive codification of transport law. As a consequence, it occasionally refers to national law for several aspects. 87 Issues not referred to by the CMR or outside the scope of CMR 88 are subject to the national rules of conflict of laws and the Regulation CUI-1999-e.PDF (last accessed: 22 September 2014) APTU-1999-e.PDF (last accessed: 22 September 2014) ATMF-1999-e.PDF (last accessed: 22 September 2014). 82. For the relation between COTIF Law and EC law see the International Rail Transport Committee study on COTIF law and EC law relating to international carriage by rail: areas of conflict and options for solutions, 5 April 2006, CIT (Ed.), Berne (last accessed: 22 September 2014). For commentary see Hill/Messent, CMR: Contracts for the International Carriage of Goods by Road (3rd ed. 2000); cf. Koller, Transportrecht Kommentar (8th ed. 2013), 921 et seq. For a full text of the Convention see (last accessed: 22 September 2014) (last accessed: 22 September 2014). There is also the Additional Protocol to the CMR concerning the electronic consignment note (the e-cmr ), (last accessed: 22 September 2014). 85. Additional Protocol to the Convention on the Contract for the International Carriage of Goods by Road concerning the electronic consignment note of 2008, cf. Carr/Kidner (ed. 2010), International Trade Law Statutes and Conventions , 757 et seq. 86. For further details see Arts 1 et seq. 87. See Arts 5, 16(5), 20(IV), 29 and 31(1), 32(3) and 39(IV). 88. BGH, I ZR 70/06 (20 November 2008), BeckRS 2009, (notion of carrier contract); BGH, I ZR 181/05 (17 July 2008), NJW 2008, 2782 (the multimodal transport is not covered by CMR), note Ramming, NJW 2009, See Wagner, TranspR 2009, 103, 105; Martiny, Art. 5 Rom I-VO, in Münchener Kommentar, para. 49; Leible, Art. 5 Rom I-VO, in NomosKommentar BGB, para. 27; Rauscher/Thorn, EuZPR/EuIPR, Art. 5 para. 42. Schulze 139

16 Article 5 Contracts of Carriage The European Agreement Concerning the International Carriage of Dangerous Goods by Road, Geneva 1957 (ADR) 90 took effect on 29 January The agreement was modified in New York on 21 August A set of new amendments entered into force on 1 January 2009 and as from 1. January 2013 a restructured ADR is applicable. 91 The ADR applies when dangerous goods are internationally carried on roads in at least two Member States. e. Carriage of Goods by Multimodal Transport. Multimodal transport means the carriage of goods by at least two different modes of transport. The United Nations Convention on International Multimodal Transport of Goods, Geneva includes all contracts of multimodal transport between places in two States, if either the place for the taking in charge of the goods by the transport-operator as provided for in the multimodal transport contract or the place for the delivery of the goods is located in a Contracting State (Article 2 of the Convention). The convention did not attract the necessary number of ratifications and has not entered into force Precedence of Other Provisions for the Carriage of Passengers. Article 5 is to be displaced by the following international conventions (cf. Article 25) or EU legislation (cf. Article 23). Consequently, the application of Article 5 depends on the scope of application of these conventions. Only for the remaining gaps Article 5 will apply. 94 a. Carriage of Passengers by Sea. With regard to the carriage of passengers by sea, the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, and its Protocol of 1976, 96 the Protocol of and the Protocol of are worth mentioning as well as the forthcoming EU legislation. aa. The Athens Convention is designed to consolidate and harmonize two earlier Brussels Conventions adopted in 1961 and 1967 dealing with passengers and luggage. The Convention establishes a regime of liability for damages suffered by passengers carried on a seagoing vessel. It declares a carrier liable for damage or loss suffered by a passenger if the incident causing the damage occurred in the course of the carriage (last accessed: 22 September 2014). See Schrötter, Der Gefahrgut-Transport im nationalen und internationalen Recht Das Recht der Beförderung gefährlicher Güter im Überblick, NJW 1982, (last accessed: 22 September 2014) (last accessed: 22 September 2014). 93. In 1992 a set of standard contractual terms was prepared for incorporation into commercial contracts (UNCTAD/ICC Rules for Multimodal Transport Documents, ICC No. 481). However, as these Rules are contractual in nature, they are by definition subject to any applicable mandatory law and are thus not part of preceding international uniform law in the sence of Art Wagner, TranspR 2009, 103, 105; Martiny, Art. 5 Rom I-VO, in Münchener Kommentar zum BGB, para (last accessed: 22 September 2014) (last accessed: 22 September 2014) (last accessed: 22 September 2014) (last accessed: 22 September 2014). 140 Schulze

17 Contracts of Carriage Article 5 and was due to the fault or negligence of the carrier. Pursuant to Article 2(1) the Convention is applicable to any international carriage if: (a) the ship is flying the flag of or is registered in a State Party to this Convention, or (b) the contract of carriage has been made in a State Party to this Convention, or (c) the place of departure or destination, according to the contract of carriage, is in a State Party to this Convention. Furthermore, pursuant to Article 2(2) the Convention shall not apply when the carriage is subject, under any other international convention concerning the carriage of passengers or luggage by another mode of transport, to a civil liability regime under the provisions of such convention, in so far as those provisions have mandatory application to carriage by sea. bb. The 2002 Protocol to the Athens Convention limits the liability depending on whether the loss or damage occurred in respect of cabin luggage, of a vehicle and/or luggage carried in or on it, or in respect of other luggage. The Protocol introduces compulsory insurance to cover passengers on ships and raises the limits of liability. The Protocol further includes an opt-out clause, enabling State Parties to retain or introduce higher limits of liability (or unlimited liability) in the case of carriers who are subject to the jurisdiction of their courts. The protocol is not still in force. 99 cc. Regulation (2009/392/EC) 100 on the Liability of carriers of passengers by sea in the event of accidents incorporates the provisions of the Athens Protocol into EU law (annex I). It is to apply these provisions also for national and international maritime transport within the Community. 101 The Regulation is entered into force on 31 December Reference will made also to the forthcoming EU legislation in this field. 103 b. Carriage of Passengers by Air. The carriage of passengers by air has become subject of harmonization tendencies to a great extent. In addition to international treaties it is also regulated by acts of European legislation. 104 aa. Correspondingly to the carriage of goods, the Warsaw Convention 1929, Hague Protocol 1955, Guadalajara Convention 1966, Guatemala City Protocol 1971 and Entry into force will be given 12 months after the Protocol has been accepted by 10 Contracting States OJ L 131/44 of 28 May Cf. Hoffmann/Kirchner, Europarechtliche Unfallhaftung und Versicherungspflicht der Anbieter von Seereisen, EuZW 2013, See Art. 12 and Recital (2) of the Regulation which points out that the Union and its Member States are in the process of deciding whether to accede to or ratify the Athens Protocol See White Paper: Roadmap to a Single European Transport Area Towards a competitive and resource efficient transport system, of 28 March 2011, COM(2011) 144 final; further the Proposal for a Regulation of the European Parliament and of the Council concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) N 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws of 4 December 2008, COM(2008) 816 final The existing EU legislation covering air passengers rights [paras 43, 44] will be completed and improved in the next years. The commission has therefore launched a public consultation until 1 March 2010: _questionnaire.pdf (last accessed: 1 August 2013). Schulze 141

18 Article 5 Contracts of Carriage Montreal Additional Protocol No. 1-4 of 1975 are likewise applicable to the carriage of passengers within their respective scope. 105 bb. As the Montreal Convention 1999 has been ratified by States, it is applicable to the carriage of passengers within its scope, 106 since it applies also besides the EU regulations. 107 cc. Regulation (1997/2027/EC) 108 on Air Carrier Liability in the Event of Accidents lays down the obligations of Union air carriers in relation to liability in the event of accidents to passengers. The Regulation also clarifies some insurance requirements and sets down requirements on information to be provided by air carriers established outside the Community that operate to, from or within the Community, Article 1 of the Regulation. 109 Regulation (1997/2027/EC) was adjusted to the liability rules of the Montreal Convention 1999 by Regulation (2002/889/EC). 110 In its revised version the Regulation refers to the Montreal Convention 1999 stating that the carrier s liability in respect of passengers and their baggage shall be governed by all provisions of the Montreal Convention relevant to such liability, (Article 1 no. 4.1). 111 dd. Regulation (2004/261/EC) 112 on Common Rules on Compensation and Assistance to Passengers in the Event of Denied Boarding and of Cancellation or Long Delay of Flights replaces Regulation (1991/295/EEC). 113 It goes further than its predecessor by not only stating rights for the passengers in case of denied boarding (Article 2 Regulation (1991/295/EEC) but likewise in case of flight cancellation 114 or delay of flight, 115 Article 1 of the Regulation. 116 The Regulation applies to passengers departing from an airport located in the territory of a Member State to which the treaty applies as well as to passengers departing from an airport in a third country to an airport situated in the territory of a Member State, if the operating air carrier of the flight concerned is a Community carrier, unless the passengers received benefits or compensation and were given assistance in that third country (Article 3 of the Regulation). Further rights 105. On these conventions see paras 26 et seq On this convention see para For example: CJEU Case 549/07 (22 December 2008) Wallentin Hermann v. Alitalia, paras 15 seq OJ L 285/1 of October In detail Stefula, Völkerrechtswidrigkeit der EG-Lufthaftungsverordnung?, TranspR 2000, 399; Ruhwedel, Verordnung (EG) Nr. 2027/97 des Rates über die Haftung von Luftfahrtunternehmen bei Unfällen vom 9 October 1997, TranspR 1998, 13; Mühlbauer, Die Verbesserung des Schutzes der Fluggäste durch die EG-Verordnung 2027/97 vom 9 October 1977, VersR 1998, OJ L 140/2 of 30 May Schollmeyer, Die Harmonisierung des Haftungsrechts im Luftverkehr zwischen Warschau, Montreal und Brüssel, IPRax 2004, 78, OJ L 46/1 of 17 February OJ L 36/5 of 8 February Cf. CJEU Case 549/07 (22 December 2008) Walentin Herrmann v. Alitalia, paras 15 et seq Cf. CJEU Case 402/07 (19 November 2009) Sturgeon v. Condor and Case 432/07 (19 November 2009) Böck v. Air France paras 22 et seq. (minimum three hours of delay) In detail Tonner, Fluggastrechte und der EuGH, VuR 2009, 209; Staudinger/Schmidt-Bendun, Neuregelung über Ausgleichs- und Unterstützungsleistungen für Fluggäste, NJW 2004, Schulze

19 Contracts of Carriage Article 5 will be given by Regulation (2006/1107/EC) concerning the rights of disabled persons and persons with reduced mobility when travelling by air of 5 July c. Carriage of Passengers by Rail. aa. The International Convention concerning the Carriage of Passengers and Luggage by Rail ( CIV ) 118 is still applicable. Correspondingly to the carriage of goods, the COTIF is likewise applicable to the carriage of passengers within its scope. 120 bb. Regulation (2007/1371/EC) 121 on Rail Passengers Rights and Obligations applies pursuant to its Article 2 to all rail journeys and services throughout the Community provided by one or more railway undertakings licensed in accordance with Directive 95/18/EC on the Licensing of Railway Undertakings (2). However, it does not apply to railway undertakings and transport services that are not licensed under Directive 95/18/EC. On the entry into force of this Regulation, Articles 9, 11, 12, 19, 20(1) and 26 shall apply to all rail passenger services throughout the Community. With the exception of the provisions set out in paragraph 3, a Member State may grant an exemption for a period no longer than five years, which may be renewed twice for a maximum period of five years on each occasion, from the application of the provisions of this Regulation to domestic rail passenger services. The Regulation establishes in Article 2 rules regarding, inter alia, the information to be provided by railway undertakings; the conclusion of transport contracts; the issuing of tickets and the implementation of a computerized information and reservation system for rail transport ; the liability of railway undertakings, their insurance obligations for passengers and their luggage; the obligations of railway undertakings to passengers in cases of delay; the protection of, and assistance to, disabled persons and persons with reduced mobility travelling by rail and general rules on enforcement. d. Carriage of Passengers by Road. The Convention on the Contract for International Carriage of Passengers and Luggage by Road, Geneva 1973 ( CVR ) 122 applies to contracts for the carriage of passengers and their luggage by road when the carriage takes place in the territory of more than one State and at least the place of departure or the place of destination shall be situated on the territory of a contracting state (Article OJ L 204/1 of 26 July CIV-1999-e.PDF (last accessed: 22 September 2014) The abbreviation COTIF derives from its French title Convention relative aux transports internationaux ferroviaires, (last accessed: 1 August 2013). Read more details about COTIF in the article of Mankowski, TranspR 2008, For details see Hanqin, Transboundary Damages in International Law, Regulation (EC) No 1371/2007 of the European Parliament and of the Council of 23 October 2007 on rail passenger s rights and obligations, OJ L 315/14 of 3 December (last accessed: 22 September 2014). See as well the Protocol to the Convention on the Contract for the International Carriage of Passengers and Luggage by Road, of 5 Jul. 1978, pdf (last accessed: 22 September 2014). Schulze 143

20 Article 5 Contracts of Carriage 1(1) of the Convention). 123 Reference will be made also to the forthcoming EU legislation for bus and coach transport. 124 III. Legislative History Article 4 Rome Convention. As mentioned above, the origin of Article 5 concerning the carriage of goods is Article 4(4) Rome Convention of This latter provision reads as follows: (4) A contract for the carriage of goods shall not be subject to the presumption in paragraph 2. In such a contract if the country in which, at the time the contract is concluded, the carrier has his principal place of business is also the country in which the place of loading or the place of discharge or the principal place of business of the consignor is situated, it shall be presumed that the contract is most closely connected with that country. In applying this paragraph single voyage charter-parties and other contracts the main purpose of which is the carriage of goods shall be treated as contracts for the carriage of goods. The connecting principle for contracts for the carriage of goods was established having regard to the peculiarities of this type of transport. 125 The sole connecting factor to the principal place of business of the carrier seemed to be too weak as presumption for the most closely connected country Article 4(2) and (1) Rome Convention and would give an incentive to the carrier undertaking to move into flag-of-convenience countries (Billigflaggenstaat). 126 The principal place of business of the carrier is now part of the definition of the habitual residence defined in Article 19 Regulation. Article 5(1) section 1 of the Regulation which is now a strict choice of law rule shall be interpreted in the same manner as the former presumptions in Article 4(4) of the Rome Convention to the extent that the wording of both articles and their context are identical For further definitions of the terms carrier, passenger and vehicle in means of the convention see Art. 1(2) The Council reached a political agreement on 11 December 2009, Doc /09 with amendments for the Proposal for a Regulation of the European Parliament and of the Council on the rights of passengers in bus and coach transport and amending Regulation (EC) N 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws of 4 December 2008, COM(2008) 817 final. The proposed Regulation contains provisions on liability in the event of death or injury of passengers and loss of or damage to their luggage, automatic solutions when travel is interrupted, treatment of complaints and means of redress, passenger information and other initiatives. Furthermore, it lays down rules on information and assistance to disabled persons and persons with reduced mobility (PRMs) Cf. Giuliano-Lagarde report, Art. 4 para Cf. critical Mankowski, TranspR 2008, 339, 342 et seq Cf. CJEU Case 533/07 (23 April 2009) Falco Privatstiftung and Rabitsch v. Weller-Lindhorst, para. 52 (Brussels I Regulation and the former Brussels Convention); Bitter, Auslegungszusammenhang zwischen der Brüssel I Verordnung und der künftigen Rom I Verordnung, IPRax 2008, 96, 100; see also Recital (7) of the Regulation for a consistent interpretation of the regulations Brussels I, Rom I and Rom II: The substantive scope and the provisions of this 144 Schulze

21 Contracts of Carriage Article 5 Under the Rome Convention, the carriage of passengers was subject to the general presumption in Article 4(2) Rome Convention. Sole reference was made to the law of the country of the carrier s principal place of business as that of principal performer. This avoided the application of several different laws for passengers who were on the same journey. 128 Article 4(1), (2) and (5) Rome Convention read as follows: 49 (1) To the extent that the law applicable to the contract has not been chosen in accordance with Article 3, the contract shall be governed by the law of the country with which it is most closely connected. Nevertheless, a separable part of the contract which has a closer connection with another country may by way of exception be governed by the law of that other country. (2) Subject to the provisions of paragraph 5 of this Article, it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a body corporate or unincorporate, its central administration. However, if the contract is entered into in the course of that party s trade or profession, that country shall be the country in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated. (5) Paragraph 2 shall not apply if the characteristic performance cannot be determined, and the presumptions in paragraphs 2, 3 and 4 shall be disregarded if it appears from the circumstances as a whole that the contract is more closely connected with another country. 2. Article 4(1)(c) of the Proposal for a Regulation. The Proposal of the Commission 129 makes no difference between contracts for the carriage of goods and contracts for the carriage of passengers. The Proposal would have integrated the contracts for the carriage in a general rule for the applicable law in absence of choice, Article 4(1)(c), which states that a contract of carriage shall be governed by the law of the country in which the carrier has his habitual residence. This general rule, whereby the applicable law is the law of the place where the carrier as the party performing the service characterizing the contract has his habitual residence, was converted from a mere presumption into a fixed and strict choice of law rule. The exception clause according to Article 4(5) Rome Convention has been deleted. The rules applicable in the absence of a choice of law should be as precise and foreseeable as possible so that the parties can decide whether to exercise their choice. This should maximize certainty, predictability and uniformity of results, regardless of 50 Regulation should be consistent with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) and Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (I) Kaye, The New Private International Law of Contract of the European Community, Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (), 15 December 2005, COM(2005) 650 final. Schulze 145

22 Article 5 Contracts of Carriage 51 forum. 130 On the other hand, the habitual residence of the carrier might have been a too rigid connecting factor for all circumstances. 131 The step back to the connection principles set out in Article 5(1) and (2) was the result of the Draft Report by Dumitrescu for the Committee on Legal Affairs of the European Parliament in August IV. Content Article 5(1) Carriage of Goods. The applicable law can be determined in four steps: 1. There is no choice-of-law agreement in accordance to Article The main connecting factor is the law of the country of habitual residence of the carrier, if one of the following three elements is also situated in that country: place of receipt, place of delivery or the habitual residence of the consignor (paragraph 1 section 1). 3. If none of the required contact elements are satisfied, there is no substantial connection to that country. In this case the court refers to the law of the place of delivery as agreed by the parties (paragraph 1 section 2). 4. Nevertheless, the presumption is rebuttable under Article 5(3) if the contract is manifestly more closely connected with another country. 5. If the parties have not forseen the place of delivery in the contract, there is lack of regulation. In this case the court refers to the law of the closest connection, Article 5(3) by analogy. 133 There are no amendments intended as compared to the Rome Convention, which relate to the freedom of choice of law for the contracts for the carriage of goods. Party autonomy is permitted almost unrestricted for contracts of goods. The only limitation is Article 3(3) and (4). Furthermore the parties have to choose a particular state law. 134 Article 3, which is expressly mentioned in Article 5(1) section 1, outlines that by the parties choice, the law applicable for the contract in whole or part of it is selected (Article 3(1) section 2). The contractual liability of the carrier for loss or damage of 130. Stone, EU Private International Law. Harmonization of Laws 2008, Cf. Ferrari, Objektive Anknüpfung, in Ein neues Vertragsrecht für Europa Der Vorschlag für eine Rom I-Verordnung (Ferrari and Leible eds, 2007), 84 et seq Proposal for an Art. 4 a, cf. European Parliament, Committee on Legal Affairs, Compromise Amendments 2-44, Draft Report Cristian Dumitrescu, Proposal for a regulation of the European Parliament and of the Council on the law applicable to contractual obligations (), 28 August 2007 (PE ); cf. with further details Mankowski, TranspR 2008, 339 et seq. and 345 et seq See para. 60. Thorn, Art. 5 Rom I, in Palandt, Bürgerliches Gesetzbuch, para. 7; (For his former dissenting opinion (Art. 4 (4) by analogy) see Rauscher/Thorn, EuZPR/EuIPR, Art. 5 para. 40); Contrary A. Staudinger, Art. 5 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 40 (Art. 4(2)) Therefore not only private rules like, e.g., the Principles of European Contract Law (PECL) are excluded but also to international Conventions as such like, e.g., the CMNI. Cf. Ramming, HambSchRZ 2009, 21, Schulze

23 Contracts of Carriage Article 5 goods, for example, may be governed by another law than the rest of the contract. 135 The matter of severability (depeçage) in relation to a contract is only allowed for a choice of law. The objective connection does not permit severance by the court. 136 Furthermore, there remains the right to change the choice of law at any time for the contracts of carriage. 137 The applicable law designated by Article 5 have to decide whether general terms and provisions are part of the contract and whether several clauses are valid or not. 138 The statute includes as well the compensation for damage due to non-performance. 139 The right to forbearance in accordance to unfair competition law is a question of tort law and will be governed by I. 140 The Regulation provides no definition of a contract for the carriage of goods. Differently from the Rome Convention 141 pursuant to the Regulation it is necessary to apply a uniform meaning of the notion contract for the carriage of goods equally to all Member States. 142 An autonomous definition of this type of contract has not yet been developed. Contrary to the carrier, no obligation is imposed on the forwarding agent to perform the carriage himself. Indeed, he merely has to organize the carriage and to forward the goods via carrier. 143 a. Carrier. Recital 22 section 2 points out that: for the purposes of this Regulation the term the carrier should refer to the party to the contract who undertakes to carry the goods, whether or not he performs the carriage himself. The Recital repeats the explication of the Giuliano-Lagarde report for the Rome Convention. However, in contracts for carriage a person who is obliged to carry goods for another does not need to carry them himself but can confer this to a person who is not a party to the contract. 144 It seems ambiguous whether a carrier shall have a contractual obligation to perform the carriage himself. Effectively, the forwarding 135. Cf. for further details Ramming, HambSchRZ 2009, 21, 25 et seq Other than under Art. 4(1) 2nd sentence of the Rome Convention, see CJEU Case 133/08 (6 October 2009) ICF v. Balkenende and MIC, paras 41 et seq. (EuZW 20009, 822 = IPRax 2010, 236) (The Hoge Raad Ned. Jur Nr. 181 has referred to three of five questions concerning aspects of the severance set out in Art. 4(1) Rome Convention to the European Court of Justice for a Preliminary Ruling according to Art. 234 EC; Opinion of the Advocate General Bot, C-133/08 from 19 May 2009);.cf. Looschelders LMK 2009, ; Rammeloo, Chartervertrag cum annexis Art. 4 Abs. 2, 4 und 5 EVÜ, IPRax 2010, Wagner, TranspR 2008, 221, BGH, Xa ZR 5/09 (29 April 2010), NJW 2010, 1958 para. 17 (consumer law: cross-ticketing) and Xa ZR 68/09 (20 May 2010), NJW 2010, 2719 para. 22 (consumer law: additional fees) BGH, X ZR 128/11 (28 August 2012), NJW 2013, 378 para. 34 (consumer law: package Tour) OLG Frankfurt a.m., 16 U 86/12 (28 February 2013), NJW-RR 2013, 829 para. 19 (consumer law: cross-ticketing) Definition made by the law (including the private international law) of the forum, cf. Plender/Wilderspin, The Rome Convention on the Choice of Law for Contracts, paras 6-29 with ref. to the jurisprudence Already under the Rome Convention, Plender/Wilderspin, The Rome Convention on the Choice of Law for Contracts, 132; Mankowski, TranspR 2008, 417, Cf. Koller, Transportrecht Kommentar (8th ed. 2013), Einl. para Cf. Giuliano-Lagarde report, 1980, O J. C 282/1 (Annex IV), 54. Schulze 147

24 Article 5 Contracts of Carriage 57 agent, who does not have such an obligation, will nevertheless be treated like a carrier in the sense of Article 5(1). 145 This broader interpretation reflects the prevailing opinion in the German 146 and English 147 legal literature regarding Article 4(4) of the Rome Convention. Contrarily, the forwarding agent is only held to be a carrier if he is imposed by an obligation to perform the carriage himself. 148 b. Consignor. The Recital 22 section 2 reads: For the purposes of this Regulation the term consignor should refer to any person who enters into a contract of carriage with the carrier. The Recital notes that consignor refers only to the person entering into the contract of carriage with the carrier. The person who actual delivers the goods to the carrier cannot be considered as consignor. The contractual partner may be, for example, the seller of the goods. The forwarding agent who acts in his own name and on behalf of the contracting party will also be considered as consignor. 149 c. Place of Receipt. The place of receipt is determined by the terms agreed in the contracts and not a question of facts. Hence, the place of receipt is the agreed place where the carrier took the goods to carry (place of departure) 150, which might be changed thereafter by the parties consent. 151 The relevant moment for determining the place of receipt is the time the contract was concluded (for the habitual residence, see Article 19(3)). 152 d. Place of Delivery. The place of delivery, too, is to be determined by the terms of the contract. The place of delivery, as mentioned in paragraph 1, 1st sentence and in paragraph 1 2nd sentence, is the place where the carrier has to deliver the goods in 145. Clausnitzer/Woopen, Internationale Vertragsgestaltung Die neue EG-Verordnung für grenzüberschreitende Verträge (Rom I VO), BB 2008, 1798, Rugullis, Die objektive Anknüpfung von internationalen Speditionsverträgen, TranspR 2006, 380; A. Staudinger, Art. 5 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 20; Thorn, Art. 5 Rom I, in Palandt, Bürgerliches Gesetzbuch, para. 6; Spickhoff, in: Bamberger/Roth (3rd ed. 2012), Art. 5 Rom I, para 3; Koller, Transportrecht Kommentar (8th ed. 2013), Einl. para. 4; von Hoffmann, Art. 28 EGBGB, in Soergel, Bürgerliches Gesetzbuch Vol. 10, para Dicey/Morris/Collins, Conflict of Laws, para The specific performance is not the carriage but a service under Art. 4(1)(b). The consumer provision Art. 6(4)(b) applies. Cf. Martiny, Art. 5 Rom I-VO, in Münchener Kommentar zum BGB, para. 43; A. Staudinger, Art. 5 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 76; Magnus, Art. 5 Rom I-VO, Staudingers Kommentar, para. 202; Rauscher/Thorn, EuZPR/EuIPR, Art. 5 para 28; A. Staudinger, Das Transportrechtsreformgesetz und seine Bedeutung für das Internationale Privatrecht, IPRax 2001, 183, Art. 4(4) of the Rome Convention means in that case already the contracting party cf. Plender/Wilderspin, The Rome Convention on the Choice of Law for Contracts, para. 6 31; contrary Kaye, The New Private International Law of Contract of the European Community, 201; Dicey/Morris/Collins, Conflict fo Laws, para The wording of para. 2, 1st sentence has the same meaning (as well as the former notion in the Rome Convention: place of loading), cf. Mankowski, TranspR 2008, 339, von Hoffmann, Art. 28 EGBGB, in Soergel, Bürgerliches Gesetzbuch Vol. 10, para. 436; Leible, Art. 5 Rom I-VO, in NomosKommentar BGB, para Cf. for the place of loading and the place of discharge Giuliano-Lagarde report, Art. 4 para Schulze

25 Contracts of Carriage Article 5 accordance to the contract (place of destination) 153. There is no impact if the real place of delivery does not conform to the agreed place. However, the place of delivery might be changed by subsequent agreement. 154 The applicable law in accordance to paragraph 1 section 2, the law of the country where the agreed place of delivery is situated, derives not from a choice of law, but is the legal consequence of the contractual term regarding the place of delivery. The application of Article 5(1) 2nd sentence will further be problematic under two aspects. Problems will arise in a case with various deliveries in several states. All deliveries are subject to the same contract of carriage with the consequence that the contract might be governed by all the state laws concerned. 155 The place of delivery as the connecting factor might likely be unjust and cost-demanding in such a case. The Parties are advised to agree on the law applicable. 156 Another problem arise if the parties have not agreed on the place of delivery, but left that question to be decided by the law governing the contract of carriage. The wording of Article 5(1) 2nd sentence seems to be clear. Without such an agreement, which might be concluded by the conduct of the parties, the provision does not apply. The contract might be governed by Article 4(2) 157 or in accordance to the principle of the closest connection (Article 4(4) or Article 5(3) by analogy). 158 The decision to create with Article 5 a proper law rule for the contracts of carriage argues for the latter solution and the application of Article 5(3) by analogy. If the parties have not agreed on the place of delivery it seems to be more appropriate that the court has to identify the country that has the closest connection to the respective contract. e. Habitual Residence of the Carrier. Article 19(1) defines in a uniform manner that the habitual residence of companies and other bodies, corporate or unincorporated, shall be the place of their central administration, which is the principal place where commercial operations are carried out (real management and control). The habitual residence of a natural person acting in the course of his business activity is his principal place of business (Article 19(1)). Where the contract is concluded in the course of the Martiny, Art. 5 Rom I-VO, in Münchener Kommentar zum BGB, para. 21. Leible, Art. 5 Rom I-VO, in NomosKommentar BGB, para. 22; A. Staudinger, Art. 5 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 31; Rauscher/Thorn, EuZPR/EuIPR, Art. 5 para Kaye, The New Private International Law of Contract of the European Community, 201 denies a subsequent change for the place of loading in Art. 4(4) Rome Convention It seems to be appropriate to create a proper rule in such a case. For example to refer to the law of the main place of delivery or, if, e.g., impossible, to refer to the first place of delivery Cf. Nielsen The Regulation and Contracts of Carriage, 99, Art. 4(2) leads, in general, to the application of the carrier s law. The same solution is adopted in Art. 5(2), 2nd sentence for contracts of carriage of passengers; cf. Nielsen, in: Regulation and Contracts of Carriage, 99, 107; Spickhoff, in: Bamberger/Roth, Art. 5 Rom I, para. 6; Hohloch, Anh. III Art. 26 EGBGB Art. 5 Rom I, in Erman, Bürgerliches Gesetzbuch (Westermann ed., 14th ed. 2014) Art. 5 Rom I, para Ramming, HambSchRZ 2009, 21, 25 and Leible, Art. 5 Rom I-VO, in NomosKommentar BGB, para. 24 (Art. 4(4) by analogy); Thorn, Art. 5 Rom I, in Palandt, Bürgerliches Gesetzbuch, para. 7 (Art. 5(3) by analogy). With the same result BGH, I ZR 88/07 (22 October 2009) NJW RR 2010, 548 para. 26 (Art. 28(1) EGBGB). Schulze 149

26 Article 5 Contracts of Carriage operations of a branch, agency or any other establishment, or if, under the contract, performance is the responsibility of such a branch, agency or establishment, the place where the branch, agency or any other establishment is located shall be treated as the place of habitual residence (Article 19(2)). This definition is likely to apply when determining the habitual residence of the consignor under Article 5(1) and the passenger under Article 5(2). The relevant point in time to determine the habitual residence of the carrier shall be the time of the conclusion of the contract (Article 19(3)). 2. Article 5(2) Carriage of Passengers. Under Article 5(2), the applicable law will also be determined in four steps: There is no choice of law agreement in accordance to Article 3 (one of the laws listed in Article 5(2) section 3). 2. The main connecting factor is the law of the country of the passenger s habitual residence, if one of the following two elements is also situated in that country: place of departure or the place of destination (paragraph 2 section 1). 3. If both required contact elements are lacking there is no substantial connection to that country. In this case, the court refers to the law of habitual residence of the carrier (paragraph 2 section 2). 4. Nevertheless, the presumption is rebuttable under Article 5(3) if the contract is manifestly more closely connected with another country. a. Choice of Law. In contrast to Article 6(2) section 2, the choice of law is only restricted in the number of laws that may be chosen by the parties (sections 3(a) (e)). They can choose only the law of the country where: (a) (b) (c) (d) (e) the passenger has his habitual residence; or the carrier has his habitual residence; or the carrier has his place of central administration; or the place of departure is situated; or the place of destination is situated. 66 Article 3, which is expressly mentioned in Article 5(1) section 1, outlines that by the parties choice, the law applicable for the contract in whole or part is selected (Article 3(1) section 2). 159 The contractual liability of the carrier to cover damages of the passenger might be governed by another law than the rest of the contract. The choice of law pursuant to (c), the law where the carrier has his place of central administration, is only then of relevance, if the habitual residence of the carrier (b) changes to the place where the branch, agency or any other establishment is located 159. Wagner, TranspR 2008, 221, Schulze

27 Contracts of Carriage Article 5 (Article 19(2)). In such a case EU consumer law might be applicable in accordance to Article 46 lit. b EGBGB 160. b. The Regulation provides no definition of a contract for the carriage of passengers. Under the Rome Convention, 161 the Regulation does not provide an autonomous definition of this type of contract. 162 The notion includes any legally enforceable agreement having as its main purpose the carriage of passengers. 163 c. Carrier. A carrier is a person who undertakes to carry a natural person. d. Passenger. Passenger refers, first of all, only to natural persons and, second, only to persons who are party to the contract of carriage. Problems arise if the person who actually travels is not a contractual party, such as in the case of a voyager who is an employee of the undertaking or who is invited by the party to the contract of carriage. In this situation, it is neither possible to apply the law of the habitual residence of the actual voyager nor the law of the habitual residence of the contractual party. 164 In this event, the law of the carrier s habitual residence is applicable (paragraph 2 section 2). e. Place of Departure and Place of Destination are the places where the journey begins and ends in accordance to the contract between the carrier and the passengers. Apparently, neither the vehicle s starting point nor the ending point is of importance. 165 It is a question determined by the terms agreed in the contract and not a question of facts. 166 The first step of a journey is relevant to determine the place of departure. 167 The relevant point in time to determine the place of receipt is again the time of the conclusion of the contract. 3. Article 5(3) Escape Clause (Principle of Closest Connection). The provisions in Article 5(1) and (2) section were overruled by Article 5(3) if it is clear from all the circumstances of the case that the contract is manifestly more closely connected with another country, even though the collateral connecting elements set out in paragraph 1 section 1 or paragraph 2 section 1 are met. The meaning of Article 5(3) is identical with Article 4(3) for the general rule for the applicable law in the absence of a choice For example LG München I 12 O 7134/11 (19 April 2011), BeckRS 2011, Definition made by the law (including the private international law) of the forum, cf. Plender/Wilderspin, The Rome Convention on the Choice of Law for Contracts, paras 6 29 with ref. to the jurisprudence Mankowski, TranspR 2008, 417, Collateral obligations, such as providing food and beverages, do not alter the actual character of the contract being a contract of carriage Cf. Mankowski, TranspR 2008, 339, Cf. Mankowski, TranspR 2008, 339, 348; contrary Clausnitzer/Woopen, BB 2008, 1798, Cf. Recital 22, 1st and 3rd sentences; Mankowski, TranspR 2008, 339, 347; for the place of loading and the place of discharge under Art. 4(4) of the Rome Convention, cf. Dicey/Morris/Collins, Conflict of Laws, para ; Giuliano-Lagarde report, Art. 4 para. 5; Schultsz, Contract Conflicts, 196; Mankowski, Allgemeines zu Beförderungsverträgen, in Internationales Vertragsrecht, para. 2588; Magnus, Art. 5 Rom I-VO, in Staudingers Kommentar, para BGH, X ZR 128/11 (28 August 2012), NJW 2013, 378 para. 34 (first flight) It seems to be clear that section 2 of Art. 5(2) (choice of law in contracts for the carriage of passengers) were not overruled by Art. 5(3). The wording of Art. 5(3) is perhaps not concise in that point. But see Azzi, La loi applicable à défaut de choix selon les articles 4 et 5 du règlement, D. 2008, 2169, Schulze 151

28 Article 5 Contracts of Carriage and in general also to Article 4(5) Rome Convention. 169 These articles must be interpreted consistently Recital 20 concerning escape clauses refers, inter alia, to Article 5(3). It states: Where the contract is manifestly more closely connected with a country other than that indicated in Article 4(1) or (2), an escape clause should provide that the law of that other country is to apply. In order to determine that country, account should be taken, inter alia, of whether the contract in question has a very close relationship with another contract or contracts. Article 5(3) is a get-out clause that has to be interpreted restrictively. The connecting factors deriving from paragraphs 1 and 2 are strong, since there has to be crystal-clear evidence pointing toward another country, 171 such as where the establishment of the undertaking responsible for making the carriage available is situated in a country other than that in which the place of receipt, place of delivery and the habitual residence of the other contracting party is located. 172 The court has to identify the country that has a manifestly closer connection to the respective contract. Thereby, several aspects can be taken into account. Those aspects might be the place where the contract was concluded, the place of its performance, the place of residence of the parties or the object of the contract. Other criteria, like the flag or the registration of the vessel, can be also considered in the process of determining the applicable law of the contract. Nonetheless, they are of minor importance. 173 All aspects must be evaluated by the court. The court may disregard the connecting factors set out in Article 5(1) and (2) if they do not identify the country with which the contract 169. As is apparent from the wording (manifestly) and the objective of Art. 5(3) that clause has to be interpreted more restrictive than Art. 4(5) of the Rome Convention. For the explanation of Art. 4(5) Rome Convention see further Kaye, The New Private International Law of Contract of the European Community, 186. Art. 5(3) might be applicable in a case with various deliveries in different states when the parties have their habitual residence not in the same state, cf. Thorn, Art. 5 Rom I, in Palandt, Bürgerliches Gesetzbuch, para See also Recital 7 of the Regulation for a consistent interpretation of the regulations Brussels I, Rom I and Rom II: The substantive scope and the provisions of this Regulation should be consistent with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) and Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (I) The former so called strong presumption theory is now the basis of Art. 5(3), cf. Mankowski, TranspR 2008, 339, 351; see for the two different approaches to Art. 4(5) of the Rome Convention, the strong and the weak presumption, Clarkson/Hill, The Conflict of Laws (Clarkson and Hill eds, 4th ed. 2011), 223 et seq CJEU Case 133/08 (6 October 2009) ICF v. Balkenende and MIC (EuZW 2009, 822 = IPRax 2010, 236) preliminary ruling on questions referred by the Hoge Raad Ned. Jur Nr. 181, see Opinion of the Advocate General Bot, C 133/08 ICF v. Balkenende and MIC from 19 May 2009; see also Hoge Raad, Ned. Jur Nr. 750 Nouvelle Papeteries de l Aa SA v. BV Machinefabrike BOA; Court of Appeal [2002] 1 WLR 3059 Ennstone Building Products Ltd v. Stanger Ltd Keene LJ (rebuttable only in case of clear evidence) Stone, EU Private International Law. Harmonization of Laws, 289 (does not appear to be of much importance). See for other criteria of minor importance, A. Staudinger, Art. 5 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para Schulze

29 Contracts of Carriage Article 5 is most closely connected. 174 Where it is clear from the circumstances as a whole that the contract is manifestly more closely connected with a country other than that determined by Article 5(1) or (2) the law of that country will apply. 175 The country with the greatest number of localizing elements and the best quality (most significant factors in determining the country with which the contract is connected) lead the court toward a place of convergence, the former so-called centre of gravity of the contract, 176 which has to be manifestly 177 more closely connected with the other country. With respect to overriding mandatory rules, see Article CJEU Case 133/08 (6 October 2009) ICF v. Balkenende and MIC, para. 60 (EuZW 2009, 822 = IPRax 2010, 236) CJEU Case 133/08 (6 October 2009) ICF v. Balkenende and MIC, para. 64 (EuZW 2009, 822 = IPRax 2010, 236) Cf. Clarkson/Hill, The Conflict of Laws, 227 et seq Therefore the less restrictive understanding of Art. 4(5) of the Rome Convention by CJEU Case 133/08 (6 October 2009) ICF v. Balkenende and MIC, paras 53 et seq. (EuZW 2009, 822 = IPRax 2010, 236) cannot easily be conferred to Art. 5(3); cf. Looschelders LMK 2009, ; Rammeloo, Chartervertrag cum annexis Art. 4 Abs. 2, 4 und 5 EVÜ, IPRax 2010, 215, 218. Schulze 153

30 ARTICLE 10 CONSENT AND MATERIAL VALIDITY (1) The existence and validity of a contract, or of any term of a contract, shall be determined by the law which would govern it under this Regulation if the contract or term were valid. (2) Nevertheless, a party, in order to establish that he did not consent, may rely upon the law of the country in which he has his habitual residence if it appears from the circumstances that it would not be reasonable to determine the effect of his conduct in accordance with the law specified in paragraph 1. Overview I. Purpose II. Scope of Application 1. General Remarks 2. Article 10(1) Existence and Validity of the Contract 3. Article 10(2) Protection Clause III. Legislative History IV. Content 1. Article 10(1) and Article 3(5) Putative Applicable Law and Choice of Law 2. Article 10(2) Confidence Protection and Negative Freedom of Contract 1 2 I. Purpose The purpose of Article 10 is to create a uniform treatment of all aspects of the formation of the contract. Assuming that the putative applicable law shall determine the existence and validity of a contract, the same law will be applicable for its interpretation and the juridical consequences (cf. Article 12). The aim is to create a uniform lex contractus 1 and to avoid a severance (dépeçage), which would lead to different applicable laws governing the separated contract terms. Article 10(2) is a special rule that relates only to the contractual consent as a part of the existence of a contract mentioned in paragraph 1. The purpose of paragraph 2 is to protect the (negative) freedom of contract through the right not to enter into a 1. Hausmann, Art. 10 Rom I-VO, in Staudinger Kommentar zum Bürgerlichen Gesetzbuch (Magnus ed., revised edition 2011), para. 1; Spickhoff, in Kommentar zum Bürgerlichen Gesetzbuch (Bamberger and Roth eds, 3rd ed. 2012), Art. 10 Rom I, para. 2; Leible, Art. 10 Rom I-VO, in NomosKommentar BGB Vol. 6 (Mansel and Hüßtege eds, 2013), para. 1; Ferrari, Art. 10 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht (Ferrari, Kieninger, Mankowski et al. eds, 2nd ed. 2012), para. 2 (Einheitsstatut); Spellenberg, Art. 10 Rom I-VO, in Münchener Kommentar zum BGB Vol. 10 (Säcker and Rixecker eds, 6th ed. 2015), para. 6; Rauscher/Freitag, EuZPR/EuIPR (Rauscher ed., 2011), Art. 10, para. 1 (einheitliches Vertragsstatut). 262 Schulze

31 Consent and Material Validity Article 10 contract 2 under the specific provisions of private international law. In international cases it would be unfair to deem someone to have consented when his actions (or silence) would not have this effect under that person s own law if he relies upon that law. 3 Paragraph 2 presumes that a person will be familiar with and able to be advised upon the law of the country in which he has his habitual residence. 4 That law applies under the further condition that this appears reasonable in all circumstances. II. Scope of Application 1. General Remarks. The Regulation gives no definition either for the contract or for the terms existence, validity or consent. Under the Regulation it is necessary to apply a uniform meaning of these notions equally to all Member States. 5 The matters for application of a uniform and autonomous law are, for example, the question whether a particular obligation is to be characterized as contractual or whether any kind of agreement is a contract. For the understanding of Article 10, reference will be made to the definitions for the European Private Law set out in the Draft Common Frame of Reference (DCFR). 6 One of its politically accepted functions is to be an instrument for the development of a coherent terminology. 7 Article 10 covers every type of contract understood as an agreement, which is intended to create obligations in a binding legal relationship or to have some other legal Art. 10(2) is an indirect application of the fundamental principle of freedom of the parties to enter into contract; see further Wicker/Sautonie-Laguionie/Bujoli, Guiding Principles of European Contract Law, in European Contract Law, Materials for the Common Frame of Reference (Fauvarque-Cosson and Mazeaud eds, 2008), 423 et seq.; under German law cf. Staudinger, Art. 10 Rom I-VO, in Handkommentar zum Bürgerlichen Gesetzbuch (Schulze, Dörner and Ebert eds, 8th ed. 2014), para. 6; Looschelders, Art. 31 EGBGB, Internationales Privatrecht Kommentar (Looschelders ed., 2004), para. 14; Ferrari, Art. 10 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para Morris/McClean/Ruiz Abou-Nigm, The Conflict of Laws (Morris ed., 8th ed. 2012), paras , See annotations to Art. 19 and para. 37, infra. 5. Cf. Lehmann, Der Anwendungsbereich der Rom I Verordnung Vertragsbegriff und vorvertragliche Rechtsverhältnisse, in Ein neues Vertragsrecht für Europa Der Vorschlag für eine Rom I-Verordnung (Ferrari and Leible eds, 2007), paras 17, 20; already to the Rome Convention Plender/Wilderspin, The Rome Convention on the Choice of Law for Contracts (Wilderspin ed., 2nd ed. 2001), para , 206; other opinion Kaye, The New Private International Law of Contract of the European Community (Kaye ed., 1993), 273 (lex fori). 6. Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition, (v. Bar, Clive, Schulte-Nölke et al. eds, 2009), Model Rules Book II: Contracts and other juridical acts, 183 et seq. 7. See for the political progress Council , Doc /09, Annex: The Stockholm Programme, 33, 3.4.2: The European Council reaffirms that the common frame of reference for European contract law should be a non-binding set of fundamental principles, definitions and model rules to be used by the lawmakers at Union level to ensure greater coherence and quality in the lawmaking process; cf. further the Second Progress Report from the Commission on The Common Frame of Reference, COM(2007) 447 final: CFR is intended to be a toolbox or a handbook for the Commission and the EU legislator to be used when revising existing and preparing new legislation in the area of contract law The Commission considers the CFR a better regulation instrument with the purpose of ensuring consistency and good quality of EC legislation in the area of contract law. It would be used to provide clear definitions of legal terms, fundamental principles and coherent modern rules. Schulze 263

32 Article 10 Consent and Material Validity effect. The contract will be a bilateral or a multilateral one. 8 Unilateral acts will be included to the extent that they are part of the formation making in the pre-contractual time phase, like offer and acceptance. 9 The scope of Article 10 must be extended by Article 3(5) to cover the existence and validity of the parties consent to a choice-of-law clause. As is mentioned in the Giuliano-Lagarde report for the Rome Convention, 10 the word term shall cover cases in which there is a dispute as to the validity of a term of the contract, such as a choice-of-law clause. Hence, the presumptive law has also to decide about the existence and the validity of such a clause. 11 The scope of the Regulation excludes choice-of-forum agreements and arbitration clauses (Article 1 (2) (e)). As far as Article 23 of the Brussel I Regulation is applicable for choice of forum clauses it takes precedence over any national law. Art. 23 regulates finally and conclusively questions of international jurisdiction agreements. 12 Beyond, the existence (consent) and material validity of a choice-of-forum clause and of an arbitration clause depend on the law that would govern the contract. The Regulation will be applicable by analogy in so far. 13 The status of legal capacity of the contractual partners, either of individuals or of companies and other bodies, corporate or incorporate, will be excluded from the scope of application (Article 1 (2)(a) and (f)). This will be governed by the proper conflictof-laws rules of the forum. 14 Article 13 sets out a single exception clause to protect the other contractual party under certain circumstances. No change is intended as compared with Article 1(2)(a) and (e), 11 of the Rome Convention. The wording of Article 10(1) is identical with Article 8(1) of the Rome Convention, and also with Article 10(2), no change in substance is intended as compared to Article 8(2) of the Convention. That intention reflects that the Convention proved its worth, 8. For that definition see Art. II.-1: 101 DCFR Outline Edition, 183 and Annex, Definitions: Contract, 549; for a similar functional definition, see Lehmann, Anwendungsbereich, 17, 28 et seq. 9. Cf. Kaye, The New Private International Law, 271 with ref. to Giuliano-Lagarde report, 1980, OJC 282/1 (Annex IV), Cf. Giuliano-Lagarde report, Art. 8, para Cf. Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 10, para Cf. Magnus/Mankowski, Brussels I Regulation (2007), Art. 23, paras 14 and Cf. Rauscher/von Hein, EuZPR/EuIPR (2011), Art. 1, paras 39 and 40; Collier, Conflict of Laws (Collier ed., 4th ed. 2013), 296; Cheshire/North/Fawcett, Private International Law (Fawcett, Carruthers and North eds, 14th ed. 2008), 745; v. Hoffmann, Art. 31 EGBGB, in Soergel Kommentar zum Bürgerlichen Gesetzbuch (Kegel ed., 12th ed. 1996), para. 4 (by analogy); Thorn, Termingeschäfte an Auslandsbörsen und internationale Schiedsgerichtsbarkeit, IPRax 1997, 98, In German international private law, e.g., individuals were treated in accordance with the law of their nationality (Art. 7 para. 1 of the Einführungsgesetz zum Bürgerlichen Gesetzbuch (EGBGB), cf. Schulze, Art. 7 EGBGB, in Anwaltskommentar zum BGB, Vol. 1 (Heidel et al. eds, 2nd ed. 2012) para. 2) or the law of the country of the corporate domicile of the company (cf. Kindler, Internationales Gesellschaftsrecht, in Münchener Kommentar zum BGB Vol. 11 (Säcker and Rixecker eds, 5th ed. 2010), paras 420 et seq.). See also Hohloch, Anh. III Art. 26 EGBGB, Art. 10 Rom I, in Erman, Bürgerliches Gesetzbuch (Westermann ed., 14th ed. 2014), para. 3; Leible, Art. 10 Rom I-VO, in NomosKommentar BGB, para. 4; Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 10, para Schulze

33 Consent and Material Validity Article 10 and there was no need for change. 15 As was set out by the CJEU for the interpretation of the Brussels I Regulation in relation to the prior Brussels Convention, these articles must be interpreted consistently. 16 As mentioned above, the existence and the material validity is related to law matters that are also treated in the principles, definitions and model rules of European Private Law set out in the DCFR. 17 Recital 14, which opens the choice of law to other future legal instruments adopted by the Union, will be relevant, in that future case, also for those matters Article 10(1) Existence and Validity of the Contract. The differentiation between the existence and material validity in Article 10(1) is of practical relevance only for Article 10(2), which is solely related to consent as a prerequisite for the contract s existence. a. Existence means the conditions for the formation of a contract from an external point of view. Article 10 includes therefore the requirements for the conclusion of a contract like the intent to enter into a binding legal relationship and the reaching of a sufficient agreement. 19 Also the pre-contractual phase will be covered to the extent that a contract is later concluded. 20 aa. Formation of the Contract. (1) Offer and acceptance are the most relevant unilateral juridical acts to form a contract. 21 The putative applicable law determines whether the parties have reached an agreement by offer and acceptance. Article 10 embraces the whole process of conclusion of a contract. That includes all parties statements or conduct 22 with the intention to enter into a binding relationship. It further includes the question whether the contractual obligation has come into Mankowski, Die Rom I-Verordnung Änderungen im europäischen IPR für Schuldverträge, IHR (2008), 139, 149; Cheshire/North/Fawcett, Private International Law, CJEU 23 Apr. 2009, C-533/07 Falco Privatstiftung a. Rabitsch v. Weller-Lindhorst, n. 52; Bitter, Auslegungszusammenhang zwischen der Brüssel I-Verordnung und der künftigen Rom I- Verordnung, IPRax 2008, 96, 100; see also Recital 7 of the Regulation for a consistent interpretation of the regulations Brussels I, and I: The substantive scope and the provisions of this Regulation should be consistent with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) and Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II). 17. DCFR Outline Edition, 183 et seq. 18. Recital 14 reads: Should the Community adopt, in an appropriate legal instrument, rules of substantive contract law, including standard terms and conditions, such instrument may provide that the parties may choose to apply those rules. 19. Cf. Art. II.-4: 302 DCFR Outline Edition, 200, the intention is to be determined from the party s statement or conduct as they were reasonably understood by the person to whom it is addressed. 20. For action of liability see Art. 12(1) of the I Regulation (culpa in contrahendo) where reference is made to the (putative) applicable law of the (hypothetical) contract. 21. Other ways of conclusion will also be included. The process of conclusion of a contract can sometimes not be analysed in offer and acceptance. For example if a negotiated draft agreement will be signed by both parties, cf. Lando/Beale, Principles of European Contract Law, Part I (Lando and Beale eds, 2000), Commentary to Art. 2, 211, 208. The provisions for the formation by offer and acceptance then normally apply with appropriate adaptations, cf. Art. II.-4: 211 DCFR Outline Edition, For definition cf. DCFR Outline Edition, Annex, Definitions, 548: Conduct means voluntary behaviour of any kind, verbal or non-verbal: it includes a single act or a number of acts, Schulze 265

34 Article 10 Consent and Material Validity existence when there was a mistake of such a fundamental character as to prevent the contractual bond from being tied. 23 This is discussed as a consequence of fundamental lack of willpower 24 or as a joke. The presumptively applicable law decides the question whether the terms of the contract have been sufficiently defined by the parties as well as the consequences of a merger clause. 25 The putative applicable laws further have to determine whether a proposal amounts to an offer concerning the intention to create a contractual obligation as opposed to an invitation to render an offer (invitatio ad offerendum). Equally, the revocation of an offer is included, or the question whether an offer lapses by rejection. Embraced is, for example, also the question whether a contract has been formed if the letter of acceptance is lost in the post. 26 Furthermore, Article 10 applies to the formation of a contract by electronic means with all related e-commerce problems, such as, for example, the necessity of an acknowledgement of receipt, the possibility to correct input errors or the question whether a proposal on a website is a legally binding offer ad incertas personas or not. 27 Article 10 covers the question whether the creation of the contractual obligation depends on an element of consideration, 28 if it will not be considered as an element of form with the consequence that Article 11 would apply, 29 or whether an incomplete agreement has been subsequently completed by a further agreement. 30 The putative applicable law also addresses the legal effects of silence or inactivity of a person. The conduct 31 of the offeree may indicate tacit assent to the offer (but see behaviour of a negative or passive nature (such as accepting something without protest or not doing something) and behaviour of a continuing or intermittent nature (such as exercising control over something). 23. Cf. Mackender v. Feldia [1966] 3 All E.R. 847 at 849; Evens Marshall v. Bertola [1973] 1 All E. R. 992; Plender/Wilderspin, The European Private International Law of Obligations (3rd ed. 2009), , Fundamental lack of willpower, since the juridical act does not emerge (German: fehlendes Erklärungsbewußtsein); Spellenberg, Art. 10 Rom I-VO, in Münchener Kommentar, para. 22. The dispute in the German doctrine whether a (avoidable) contract will be reached in that case, Medicus, Allgemeiner Teil des Bürgerlichen Rechts (10th ed. 2010), paras 605 et seq.; for vitiated consent or intention, especially mistake, as questions of validity see para. 18, infra. 25. Cf. the definition in Art. II.-4: 104(1) DCFR Outline Edition: If a contract document contains an individually negotiated term stating that the document embodies all the terms of the contract. 26. Cf. Albeko Schuhmaschinen AG v. Kamborian Shoe Machine Co. Ltd. [1961] 111 L.J. 519; Stone, EU Private International Law Harmonization of Laws (Stone ed., 2008), 294; Dicey/Morris/Collins, The Conflict of Laws (Collins ed., 15th ed. 2012), para Hausmann, Art. 10 Rom I-VO, in Staudingers Kommentar, paras 16 et seq.; Spellenberg, Art. 10 Rom I-VO, in Münchener Kommentar, para. 25; Hohloch, Anh. III Art. 26 EGBGB, Art. 10 Rom I, in Erman, Bürgerliches Gesetzbuch, para Cheshire/North/Fawcett, Private International Law, 744; Dicey/Morris/Collins, Conflict of Laws, para ; Plender/Wilderspin, The European Private International Law of Obligations (3rd ed. 2009), ; Kaye, The New Private International, 205; Spickhoff, in Bamberger/Roth, Art. 10 Rom I, para. 4. Contrary Ferrari, Art. 10 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht (2nd ed. 2012), para. 9; Leible, Art. 10 Rom I-VO, in NomosKommentar BGB, para Cf. with concern made to the American Law under German international private law, Spellenberg, Art. 10 Rom I-VO, in Münchener Kommentar, para Cf. Egon Oldendorff v. Liberia Corp. [1995] 2 Lloyd s Rep For definition of the notion conduct, see fn. 22, supra. 266 Schulze

35 Consent and Material Validity Article 10 Article 10(2)). This determines also whether a contract has been validly formed if an offeror remains silent in the face of an acceptance that attempts to vary the terms of the original offer 32 (see mn. 33). bb. Incorporation. Article 10(1) covers the question of incorporation as a matter of existence of the contract. This may concern whether a contract has validly incorporated another document by reference 33 or the important question of a successful incorporation of standard terms, including the problem of a battle of forms 34 (see also mn. 30). Thus, the putative applicable law must address in which kind (e.g., plain and intelligible language) 35 and in which language a standard term is formulated. 36 However, the question whether a term forming part of standard terms is unfair (contrary to good faith and fair dealing) is a matter of material validity. b. Material Validity of the Contract. Validity of a contract or of any of its terms set out in Article 10(1) means, first of all, material validity as opposed to formal validity, which is addressed in Article 11. The latter covers particular requirements on external manifestation of expression of will, such as writing, signing and declaring under seal. Article 10(1) denotes the law, which determines whether a contract or a term of a contract, either forming part of standard terms or individually negotiated, is materially valid. aa. A consent may be invalidated by mistake, by fraudulent or non-fraudulent misrepresentation, by improper economic pressure, duress or threat. 37 In the German doctrine it is disputed whether these threats to consent go to the existence 38 or to the validity 39 of a contract, which would have as consequence an impact on the application of Article 10(2) Stone, EU Private International Law, 294; Staudinger, Art. 10 Rom I-VO, in Handkommentar zum BGB, para Stone, EU Private International Law, Cf., e.g., Art. II.-4: 209 DCFR Outline Edition. 35. A surprising provision will not be part of the contract under German law ( 305c (1) BGB), Lindacher, 305c BGB, in AGB-Recht Kommentar (Wolf, Lindacher and Pfeiffer eds, 6th ed. 2013), para. 4 (negative legal condition for incorporation). Such a provision may therefore a matter of existence. 36. Cf. Spellenberg, Art. 10 Rom I-VO, in Münchener Kommentar, paras 145 and 150 et seq.; Hausmann, Art. 10 Rom I-VO, in Staudingers Kommentar, para. 112; Hohloch, Anh. II Art. 26 EGBGB, Art. 10 Rom I, in Erman, Bürgerliches Gesetzbuch, para Lagarde, The Scope of the Applicable Law in the EEC Convention, in Contract Conflicts (North ed., 1982), 49, 50; Stone, EU Private International Law, 295; Cheshire/North/Fawcett, Private International Law, 745; Leible, Art. 10 Rom I-VO, in NomosKommentar BGB, para. 17; Hohloch, Anh.II Art. 26 EGBGB, Art. 10 Rom I, in Erman, Bürgerliches Gesetzbuch, para. 7; Ferrari, Art. 10 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 11; Spickhoff, in Bamberger/Roth, Art. 10 Rom I, para 5; Dicey/Morris/Collins, The Conflict of Laws (15th ed. 2012), para Thorn, Art. 10 Rom I, in Palandt, Bürgerliches Gesetzbuch (Palandt ed., 74th ed. 2015), para. 5; Kegel/Schurig, Internationales Privatrecht (Kegel and Schurig eds, 9th ed. 2004), 17(V)(l)(a), 614. In consequence Art. 10(2) includes these questions. 39. Also Hohloch, Anh. III Art. 26 EGBGB, Art. 10 Rom I, in Erman, Bürgerliches Gesetzbuch, para. 15; Spellenberg, Art. 10 Rom I-VO, in Münchener Kommentar, para. 208; Hausmann, Art. 10 Rom I-VO, in Staudingers Kommentar, para. 52; v. Hoffmann, Art. 28 EGBGB, in Soergel, Bürgerliches Gesetzbuch, para. 32; Staudinger, Art. 10 Rom I-VO, in Handkommentar zum BGB, para. 8; Looschelders, Art. 31 EGBGB, Internationales Privatrecht Kommentar, para. 20. For the English doctrine see 37, supra. Schulze 267

36 Article 10 Consent and Material Validity bb. A further aspect of material validity is illegality. 40 Illegality is, under the Rome Regulation, a matter of the applicable law, rather than that of the place of contracting or the place of performance. 41 Where it is alleged that the contract is void for illegality in accordance to, for example, the applicable English law, the English rule on supervening illegality will apply. The decision would be the same in an English court or if the place of performance was in England. There may also be overriding mandatory rules of the law of the forum or of the law of the country where the obligations arising out of the contract must be or have been performed, which renders the performance of the contract unlawful (see Article 9(2) and (3) section 1). Article 10(1) also governs the effects of invalidity. Where it is alleged that the contract is void for an infringement of exchange restrictions 42 or for the avoidance of a particular term, as, for example, an exemption clause 43 (partial invalidity or ineffectiveness), the putative applicable law will give answer. cc. The conditions according to which a party has the right to withdraw or to terminate a contract or to give a notice of avoidance (Anfechtung) and their legal consequences take part of the validity of the contract and will be contained by the putative lex contractus 44 This will also apply to the question whether a person is bound to respect the terms of a contract concluded between the preceding owner of a good and another person in the absence of any novation. 45 However, the effect of a novation to a contract is governed by the law applicable to the new contract Article 10(2) Protection Clause. The special rule of exception in Article 10(2) applies to consent as an element of the existence of the contract and not to questions of validity. It covers any issues of offer and acceptance except the material validity of consent (see mn ). Article 10(2) is solely related to the existence of the contract and cannot be extended by analogy to other matters of formation or validity, such as the right to withdraw 47 or elements of formal validity. 48 Paragraph 2 does not have a specific function to protect consumers Already to the Rome Convention Plender/Wilderspin, The Rome Convention on the Choice of Law for Contracts, 10-02, To the former English law see Morris/McClean/Ruiz Abou-Nigm, The Conflict of Laws, para , Cf. Kahler v. Midland Bank [1950] AC 24; Stone, EU Private International Law, Cf. Sayers v. International Drilling [1971] 3 All ER 163; Stone, EU Private International Law, Hausmann, Art. 31 EGBGB, in Staudingers Kommentar, para. 44; Staudinger, Art. 10 Rom I-VO, in Handkommentar zum BGB, para Seapremium Shipping Ltd v. Seaconsortium Ltd, ref. made by PlenderlWilderspin, The Rome Convention on the Choice of Law for Contracts, 10-03, 206, para Thorn, Art. 10 Rom I, in Palandt, para. 3; the novation substitutes the old contract by a new one. The annulment of the old contract is therefore a juridicial consequence of the new contract. 47. BGH 19 Mar. 1997, BGHZ 135, 124, 138 = NJW 1997, 1697, 1699; Thorn, Art. 10 Rom I, in Palandt, para. 5; Spickhoff, in Bamberger/Roth, Art. 10 Rom I, para. 14; Ferrari, Art. 10 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 18; Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 10, paras 16, Cheshire/North/Fawcett, Private International Law, 746; Hausmann, Art. 10 Rom I-VO, in Staudingers Kommentar, para. 45; Hohloch, Anh. III Art. 26 EGBGB, Art. 10 Rom I, in Erman, Bürgerliches Gesetzbuch, para. 17; Leible, Art. 10 Rom I-VO, in NomosKommentar BGB, para Hausmann, Art. 10 Rom I, in Staudingers Kommentar, para Schulze

37 Consent and Material Validity Article 10 III. Legislative History The origin of Article 10 lies in Article 8 Rome Convention of The wording of Article 10(1) is identical with Article 8(1) of the Rome Convention, and there is no change in substance intended in paragraph 2 of the two legal norms. Article 10 also remains unaltered as compared to the Proposal of the Commission, 50 which would have integrated the provisions as Article 9(1) and (2). 23 IV. Content 1. Article 10(1) and Article 3(5) Putative Applicable Law and Choice of Law. The existence (consent) and material validity of a contract, or any term of it, including a choice-of-law clause (cf. Article 3(5)), depend on the law that would govern the contract if it existed and was valid. The so-called bootstrap principle 51 denotes either the law of a country chosen by the parties in accordance to Article 3 or, in absence of choice, the objective applicable law determined by the conflict-of-laws rules set out in this Regulation. The Regulation ignores the logical problem behind that solution and lays down the rule that the putative applicable law governs these issues. 52 For consumer law contracts the special rules set out in Article 6 will apply. For individual employment contracts the rules in Article 8 of this Regulation apply to denote the putative lex contractus. 53 In choice-of-law cases the provisions that cannot be derogated from by agreement by virtue of the law that, in absence of choice, would have been applicable (Article 6(2) section 2 and Article 8(1) section 2), may also concern the existence and validity of a contract and will take part of the putative applicable law under Article 10. A Consumer will be protected against unclear choice-of-law clauses set out in standard terms by the law of his habitual residence. Hence for German consumers articles BGB are also applicable concerning the choice-of-law clause itself. 54 Furthermore, as far as existence and validity are concerned, overriding mandatory rules in accordance with Article 9 will take part of the putative applicable law Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (), 15 Dec. 2005, COM(2005) 650 final. 51. That means that the parties are able to pull themselves up by their own bootstraps, Cheshire/North/ Fawcett, Private International Law, 74; but also understood for the objective applicable law Kaye, The New Private International Law, 271; Plender/Wilderspin, The European Private International Law of Obligations, 6-050, Clarkson/Hill, The Conflict of Laws (Clarkson and Hill eds, 4th ed. 2011), 246: Questions of formation cannot be governed by the applicable law, for until such questions have been decided it is not clear that there is a contract at all. ; contrary Giuliano-Lagarde report, 1980, OJC 282/1 (Annex IV), 30: This is to avoid the circular argument that where there is a choice of the applicable law no law can be said to be applicable until the contract is found to be valid. 53. Art. 6 mainly refers to the law of the country of consumers habitual residence, meanwhile, Art. 8 mainly refers to the law of the country of the employee s place of work. 54. BGH I ZR 40/11 (19 July 2012), NJW 2013, 421, para. 33 (transparency); contrary Pfeiffer, LMK (2013), : The control of Art 6(2) are limited to the material law determined by Art. 3 and 10(1); unclear Thorn, Art. 6 Rom I, in Palandt, para. 8. For consumers in member states the Schulze 269

38 Article 10 Consent and Material Validity Article 3(5) expressly refers to Article 10, which allows that by the parties choice, the law applicable to the contract in whole or part is selected (Article 3(1) section 2). That applies also to matters of Article 10. For example, the formation of a contract may be governed by a different law than the consequences of the contract. 56 The matter of severability (depeçage) in relation to a contract is only allowed for a choice of law. The objective connection does not permit severance by the court. 57 Furthermore, there remains the right to change the choice of law for the contract at any time. 58 The application of Article 3(5) with its reference to Article 10 suggests that the existence of the alleged choice-of-law clause should be considered independently before the contract as a whole is examined. 59 The validity of a New York choice-of-law clause, for example, is as such governed by New York law. A clause providing for arbitration in England is validly incorporated into a contract governed by English law. 60 Problems arise in the case of negotiations involving a so-called battle of forms, when each party tries to push through its own standard terms. Where there has been no choice-of-law provision, the problem is solved by reference to the law that would govern the transaction by the objective rules of conflict set out mainly in Article 4 of the Regulation. 61 If only one party tries to impose a choice-of-law clause, then the chosen law will be the putative applicable law to decide whether he may succeed. But if both sets of terms contain choice-of-law clauses with different chosen laws, there is no chosen law in accordance with Article 3(5). The solution can be found in the rule that the standard terms form part of the contract to the extent that they are common in substance. 62 There is no consent in the choice-of-law question with the consequence that the objective rule of conflict must dictate which law would govern the transaction. 63 However, it also seems to be appropriate to determine first whether there is a contract on the terms of the first-issued form in accordance with the chosen law. Another consideration is whether there is a contract on the terms of the second-issued uniform material standard is set out in Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (transparency, Art. 5 ph. 1) which will be paramount to Art. 6 (Art. 23 Rom I). 55. Thorn, Art. 10 Rom I, in Palandt, para. 2; Hohloch, Anh. III Art. 26 EGBGB, Art. 10 Rom I, in Erman, Bürgerliches Gesetzbuch, para With reference to former Art. 8 Rome Convention, see Hausmann, Art. 10 Rom I-VO, in Staudingers Kommentar, paras 12 and Different regarding Art. 4(1)2 of the Rome Convention, see Hoge Raad Ned. Jur Nr. 181 (The Hoge Raad referred three of five questions concerning aspects of the severance set out in Art. 4(1) Rome Convention 1980 to the European Court of Justice for a Preliminary Ruling according to Art. 267 FEU; see as well the Opinion of the Advocate General Bot, C-133/08 ICF v. Balkenende and MIC from 19 May 2009). 58. Wagner, Neue kollisionsrechtliche Vorschriften für Beförderungsverträge in der Rom I- Verordnung, TranspR (2008), 221, Clarkson/Hill, The Conflict of Laws, Cf. Egon Oldendorff v. Liberia Corp. [1995] 2 Lloyd s Rep. 64; Cheshire/North/Fawcett, Private International Law, 744 et seq.; Dicey/Morris/Collins, Conflict of Laws, para Dicey/Morris/Collins, Conflict of Laws, para ; Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 10, para. 15; Dutta, Kollidierende Rechtswahlklauseln in allgemeinen Geschäftsbedingungen, ZVglRWiss 104 (2005), 461, That is also the solution in Art. II. 209(1) s. 2 DCFR Outline Edition. 63. Dicey/Morris/Collins, Conflict of Laws, para Schulze

39 Consent and Material Validity Article 10 form, taking similar account of its choice-of-law clause. If there is an inconsistency, the latter formed contract supersedes the earlier to the extent of the inconsistency Article 10(2) Confidence Protection and Negative Freedom of Contract. As already noted, the special rule of exception in Article 10(2) applies only to consent as an element of the existence of the contract, not to questions of validity (see paragraph 22). A party can rely on the absence of its consent under the law of the country of its habitual residence if this appears reasonable under all circumstances. The effect of Article 10(2) is that the contract will be deemed non-existent by reference to the law of habitual residence of the party denying that he consented. 65 In general, Article 10(2) will be applied with caution. 66 It is not applicable only in case of intransparency of a choice-of-law clause. 67 The Giuliano-Lagarde report for the Rome Convention already pointed out that the conduct of the protected party means any action and failure; it does not, therefore, relate solely to silence. 68 Offer and acceptance or other juridical acts with an impact to the existence of a contract (e.g., options) may be ascertained as implied from conduct as it were reasonably understood by the person to whom the act is addressed. 69 Problems arise with regard to the implications of conduct in the sense of silence by a party in receipt of an offer from another. Especially under German law, which may in a given case be the chosen or the ascertained objective applicable law (Article 10(1)), merchants will be taken to have accepted an offer they do not expressly reject, in particular where certain terms or conditions as well as standard terms are included in subsequent written confirmation of an oral contract (so-called commercial letter of confirmation ). 70 Furthermore, standard terms will be included by silence in some commercial branches in accordance with German law. A silent incorporation takes place by common practice in a specific branch Stone, EU Private International Law, 296; Spellenberg, Art. 10 Rom I-VO, in Münchener Kommentar, paras 164 et seq. 65. Thorn, Art. 10 Rom I, in Palandt, para. 4; Spellenberg, Art. 10 Rom I-VO, in Münchener Kommentar, para. 216; Leible, Art. 10 Rom I-VO, in NomosKommentar BGB, para Stone, EU Private International Law, 295; Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 10, para Pfeiffer, LMK (2013), ; cf. BGH I ZR 40/11 (19 July 2012), NJW (2013), 421, para. 33 (transparency). 68. Cf. Giuliano-Lagarde report, 1980, OJC 282/1 (Annex IV), 28; Ferrari, Art. 10 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 20; Hausmann, Art. 10 Rom I-VO, in Staudingers Kommentar, para. 47; Leible, Art. 10 Rom I-VO, in NomosKommentar BGB, para. 30; for definition of the notion conduct see fn. 22, supra; Dicey/Morris/Collins, Conflict of Laws, para For that definition see Art. II.-4: 302 DCFR Outline Edition; any action implying intention (e.g., receipt of the goods, part payment, signature on the bill), see Hausmann, Art. 10 Rom I-VO, in Staudingers Kommentar, para German: Kaufmännisches Bestätigungsschreiben; cf. Canaris, Handelsrecht (Canaris ed., 24th ed. 2006), 23 II, paras 9 et seq.; to the meaning of silence in German law generally, see Kramer, Vor 116 BGB, in Münchener Kommentar, paras 8 et seq.; for commercial matters see Hopt, Art. 346 HGB, in Kommentar zum Handelsgesetzbuch (Baumbach and Hopt eds, 36th ed. 2014), paras 25, 30 et seq. 71. Acknowledged for B-to-B transactions of banks, ports and airports, for the standard terms of bills of lading (carriage contracts) and for contracts with a forwarding agent (so-called ADSp); Pfeiffer, 305 BGB, in AGB-Recht Kommentar, paras 145 et seq. Schulze 271

40 Article 10 Consent and Material Validity (Branchenüblichkeit) 72 or by usages 73 (Handelsbräuche) 74. However, under English law a contract cannot be concluded by silence alone. 75 Paragraph 2 may, for example, apply where an English resident ignored an offer received from Germany and governed in accordance with paragraph 1 by German law under which silence was treated in the situation as consent. The application of the law under Article 10(1) could also operate unfairly where a person residing in England goes on holiday in a hotel in Switzerland, at which he receives an offer under German law to which he gives no reply. 76 The offeree should be protected by absence of consent under the law of the country of his own habitual residence with which he could be presumed to be familiar and able to be advised. 77 Also, the converse situation may appear. An offeror receiving no reply from the offeree could himself be prejudiced on selling goods to another, if the applicable law treats silence as acceptance. In this situation as well, the offeror may get help from Article 10(2). A dispute arises in German doctrine over whether a mistake due to a misunderstanding of a foreign language 78 falls within the scope of Article 10(2) 79 or not. 80 The situation seems to be similar to the implications of silence (see mn. 33). Under the restrictive conditions of the reasonableness test (see mn. 38), a party may invoke the provisions of the law of the country of his habitual residence 81 to show that he had no 72. Legal effect due to common usage (Rechtsgeltung kraft Verkehrssitte), BGH 4 Mar. 2004, IPRax 2005, 446, note Weller, Stillschweigende Einbeziehung der AGB-Banken im internationalen Geschäftsverkehr, IPRax 2005, 428, 430; BGH 26 Sep. 1989, BGHZ 108, 353, 362 = NJW 1990, 242, Acknowledged for the usage of a specific standard term set in timber trade (so called: Tegernseer Gebräuche), for German General Rules of Marine Insurance (Allgemeine Deutsche Seeversicherungsbedingungen, ADS) and for the Uniform Customs and Practice for Documentary Credits (Einheitlichen Richtlinien und Gebräuche für Dokumentenakkreditive, ERA), cf. Grüneberg, 305 BGB, in Palandt, para. 57; Schlosser, 305 BGB; in Staudingers Kommentar (amended 2013), para Set out in Art. 346 German commercial code (HGB), Hopt, Art. 346 HGB, in Kommentar zum Handelsgesetzbuch, para. 38; cf. for a definition of usage Art. II.-1: 104 DCFR Outline Edition: The parties are bound by usages that would be considered generally applicable by persons in the same situation as the parties, except where the application of such usage would be unreasonable; Canaris, Handelsrecht, 23 II, paras 9 et seq. 75. In England regarded as a settled law, cf. Plender/Wilderspin, The Rome Convention on the Choice of Law for Contracts, , 422 with reference to Felthouse v. Bindley [1862] 11 C.B. (N.S.) 869. Thereby an offer can be accepted by conduct, of which an eloquent silence may form part (ibid.). However, the German commercial letter of confirmation is not an exhaustive silence but rather an eloquent silence, Canaris, Handelsrecht, 23 II, paras 12 et seq. 76. Cf. Kaye, The New Private International Law, Cf. with reference to CISG, Piltz, Praktische Handreichung für die Gestaltung internationaler Kaufverträge. Vorteile des UN-Kaufrechts gegenüber nationalem Recht, NJW (2012), 3061, 3064 f. 78. In German doctrine so-called Sprachrisiko, since Jayme, Sprachrisiko und internationales Privatrecht beim Bankverkehr mit auslandischen Kunden, in FS Bärmann (Bökelmann, Henckel and Jahr eds, 1975), 509, 515; detailed Kling, Sprachrisiken im Privatrechtsverkehr, 2009, 7 et seq. 79. Hausmann, Art. 10 Rom I-VO, in Staudingers Kommentar, para. 115; Ferrari, Art. 10 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 39; Kling, Sprachrisiken im Privatrechtsverkehr, 132 et seq. 80. Spellenberg, Art. 10 Rom I-VO, in Münchener Kommentar, para. 55, 212; v. Hoffmann, Art. 28 EGBGB, in Soergel, Bürgerliches Gesetzbuch, para Such material law provisions were set out, e.g., in Art. II.-9: 402 DCFR, 224 and Art. II.-9: 109 DCFR, Schulze

41 Consent and Material Validity Article 10 incidental obligation to understand the contract or the standard terms in the language practised. Only the non-consenting party may invoke Article 10(2) to become free from a contractual binding (defence plea). He is not obliged to do so. Furthermore, only he has to rely on the law of its habitual residence. The other party cannot refer to that law to prove that the former did not consent. 82 If the putative lex contractus (Article 10(1)) cancels out an element necessary for the existence of a contract, nobody can refer to the law of its habitual residence to uphold contractual existence. The law of habitual residence can only be relied on to show that a party did not consent. The effect of Article 10(2) is entirely negative. 83 To establish his lack of consent, a person must prove that the law of the country of his habitual residence regards him as not having consented. That concerns individuals as well as companies. The notion of habitual residence for companies is defined in Article 19, which states that the habitual residence of companies and other bodies, corporate or unincorporated, shall be the place of their central administration that is, the principal place in which commercial operations are conducted (real management and control). The habitual residence of a natural person for acting in the course of his business activity is his principal place of business (Article 19(1)). Where the contract is concluded in the course of the operations of an establishment, the place where the establishment is located shall be treated as the place of habitual residence (Article 19(2)). The relevant point in time to determine the habitual residence of the carrier shall be the time of the conclusion of the contract (Article 19(3)). The court must decide whether the application of the law in accordance to paragraph 1 would not be reasonable from the circumstances. The concept of reasonableness is a policy decision in respect of the preceding circumstances. The judge must determine whether it would be reasonable to determine the effect of the conduct under the chosen or ascertained applicable law. Thus, the reasonableness test is open-textured. 84 The Regulation gives no guidance on how the test should be applied since the judge of the forum has a significant margin of appreciation. 85 All relevant aspects must be evaluated by the court. The circumstances to be taken into account include the parties previous practice inter se, their business relationship as well as the ordinary commercial expectations concerning provisions in such an international contract. 86 For example, the existence of a London arbitration clause cannot be ignored by a party under Japanese law if this is precisely the sort of clause that would be expected in an Cf. Kaye, The New Private International Law, 276; Collier, Conflict of Laws, 300; Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 10, para Cf. Giuliano-Lagarde report, 1980, OJC 282/1 (Annex IV), 28; Clarkson/Hill, The Conflict of Laws, Cf. Clarkson/Hill, Conflict of Laws, Cf. Plender/Wilderspin, The European Private Internationa Law of Obligations, , Cheshire/North/Fawcett, Private International Law, 745; Leible, Art. 10 Rom I-VO, in NomosKommentar BGB, paras 34 et seq; Ferrari, Art. 10 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 28; Spickhoff, in Bamberger/Roth, Art. 10 Rom I, para. 13; Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 10, para. 24. Schulze 273

42 Article 10 Consent and Material Validity 36 international charter agreement. 87 However, a party who does not recognize that his partner has his habitual residence in a foreign country since the law of that country will apply may reasonably be protected by his own law if he acts without negligence. 88 For internet based distance contracts the application of foreign law is foreseeable. 89 The standard of care, which could reasonably be expected in the circumstances from a contractual party, must be ascertained case by case. Hence, that party would not be heard if an international jurisdiction clause has been individually negotiated, 90 nor if the contract was concluded in the country of the other party 91 or in a third state. 92 The experience of a party in commercial matters will also be considered. 93 In a current trade relation, each party normally knows that a foreign law will apply, so that a mistake about the legal consequences of their conduct seems to be avoidable. Unreasonableness must be proved by the party who wishes to displace Article 10(1). That party also bears the onus of showing to the satisfaction of the judge that the terms of Article 10(2) have been met, including that it would not be reasonable to employ the putative applicable law. 94 Unreasonableness of reference to applicable law on consent needs not to be proved conclusively. All that is required is to be shown that this appears to be unreasonable Egon Oldendorff v. Liberia Corp. [1995] 2 Lloyd s Rep. 64; Cheshire/North/Fawcett, Private International Law, 746; Stone, EU Private International Law, Cf. Ferrari, Art. 10 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 25; Spellenberg, Art. 10 Rom I-VO, in Münchener Kommentar, paras 224 et seq.; Hausmann, Art. 10 Rom I-VO, in Staudingers Kommentar, para. 67; Leible, Art. Art. 10 Rom I-VO, in NomosKommentar BGB, para Rauscher/Freitag, EuZPR/EuIPR (2011), Art. 10, para Cf. Ferrari, Art. 10 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para Hausmann, Art. 10 Rom I-VO, in Staudingers Kommentar, para. 71; Leible, Art. 10 Rom I-VO, in NomosKommentar BGB, para. 37; contrary Spellenberg, Art. 10 Rom I-VO, in Münchener Kommentar, para Hausmann, Art. 10 Rom I-VO, in Staudingers Kommentar, para Staudinger, Art. 31 EGBGB, in Handkommentar zum BGB (Schulze, Dörner and Ebert eds, 6th ed. 2009), para Cf. Stone, EU Private International Law, 295; Plender/Wilderspin, The European Private International Law of Obligations, , Cf. Kaye, The New Private International Law, Schulze

43 ARTICLE 12 SCOPE OF THE LAW APPLICABLE (1) The law applicable to a contract by virtue of this Regulation shall govern in particular: (a) (b) (c) (d) (e) interpretation; performance; within the limits of the powers conferred on the court by its procedural law, the consequences of a total or partial breach of obligations, including the assessment of damages in so far as it is governed by rules of law; the various ways of extinguishing obligations, and prescription and limitation of actions; the consequences of nullity of the contract. (2) In relation to the manner of performance and the steps to be taken in the event of defective performance, regard shall be had to the law of the country in which performance takes place. Overview I. Purpose II. Scope of Application III. Legislative History IV. Content 1. Paragraph 1: Applicable Law 2. Paragraph 2: Manner of Performance of Obligations I. Purpose The purpose of Article 12 is to define the sphere of the applicable law under the Rome 1 I Regulation. That law shall govern, in particular, interpretation, performance, the consequences of breach, extinction of obligations and the consequences of nullity of contracts. For those matters, the same law will be applicable as for its existence and validity (cf. Article 10). This is to create a uniform lex contractus. 1 Article 12(2) is a special rule that relates solely to the manner of performance and the steps to be taken in the event of defective performance. It complements the regulation of the performance of a contract in paragraph 1(b) and allows a severance (dépeçage) with regard to the law of the real place of performance. The purpose of paragraph 2 is Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar zum Bürgerlichen Gesetzbuch (Magnus ed., revised edition 2011), para. 2 (Prinzip des einheitlichen Vertragsstatuts); Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar zum BGB Vol. 10 (Säcker and Rixecker eds, 6th ed. 2015), para. 3; Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht (Ferrari et al. eds, 2nd ed. 2012), para. 1; Rauscher/Freitag, EuZPR/EuIPR (Rauscher ed., 2011) Art. 12 para 1. Schulze 307

44 Article 12 Scope of the Law Applicable to avoid conflicts between the law applicable to the contract and the law of the country where the performance takes place. This special provision of private international law is not a conflict-of-laws rule in the classical sense but may have similar results ( regard shall be had to the law ) (see mn ). II. Scope of Application 3 4 The Regulation gives no definition either for the contract or for the terms listed in paragraph 1. That list of terms is not exhaustive as it is indicated by the words in particular (paragraph 1). Under the Regulation, it is necessary to apply a uniform meaning of these notions as the scope of application is equal for all Member States. 2 For the understanding of Article 12, reference will be made to the definitions for the European Private Law set out in the Draft Common Frame of Reference (DCFR). 3 One of its politically accepted functions is to be an instrument for the development of a coherent terminology. 4 Thus, Article 12 covers every type of contract that is qualified to be a contract under the Regulation. That means an agreement intended to create obligations in a binding legal relationship or to have some other legal effect. The contract can be a bilateral or a multilateral one 5 and may be valid or not. 6 Unilateral acts as well as the conduct of 2. Cf. Lehmann, Der Anwendungsbereich der Rom I Verordnung Vertragsbegriff und vorvertragliche Rechtsverhältnisse, in Ein neues Vertragsrecht für Europa Der Vorschlag für eine Rom I-Verordnung (Ferrari and Leible eds, 2007), 17, 20; already to the Rome Convention Plender/Wilderspin, The Rome Convention on the Choice of Law for Contracts (2nd ed. 2001), 10 02; other opinion Kaye, The New PIL of Contract of the European Community (1993), 273 (lex fori). 3. Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Interim Outline Edition (von Bar, Clive and Schulte-Nölke eds, 2008), Book II, 183 et seq. 4. See for the political progress Council 2 December 2009, Doc /09, Annex: The Stockholm Programme, 33, 3.4.2: The European Council reaffirms that the common frame of reference for European contract law should be a non-binding set of fundamental principles, definitions and model rules to be used by the lawmakers at Union level to ensure greater coherence and quality in the lawmaking process; cf. further the Second Progress Report from the Commission on The Common Frame of Reference, COM(2007) 447 final: CFR is intended to be a toolbox or a handbook for the Commission and the EU legislator to be used when revising existing and preparing new legislation in the area of contract law The Commission considers the CFR a better regulation instrument with the purpose of ensuring consistency and good quality of EU legislation in the area of contract law. It would be used to provide clear definitions of legal terms, fundamental principles and coherent modern rules ; see also Zoll, The Draft Common Frame of Reference as an Instrument of the Autonomous Qualification in the Context of the Regulation, in Regulation The Law Applicable to Contractual Obligations in Europe (Ferrari and Leible eds, 2009), 17 et seq. 5. For that definition see Art. II. 1: 101 DCFR Outline Edition, 183 and Annex, Definitions: Contract, 549; for a similar functional definition see Lehmann, Anwendungsbereich, 17, 28 et seq. 6. Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, paras 10 and 77; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para Schulze

45 Scope of the Law Applicable Article 12 a party to the contract will also be included to the extent that they have a relevant relation to the contract. 7 The liability for faults in the pre-contractual time phase (culpa in contrahendo) is qualified as a matter of non-contractual liability. 8 Recital 10 clarifies that these questions are covered by the I Regulation and therefore fall out of the scope of the Regulation. Thus, Recital 10 reads as follows: Obligations arising out of dealings prior of the conclusion of the contract are covered by Article 12 of Regulation (EC) No 864/2007. Such obligations should therefore be excluded from the scope of this Regulation. The scope of Article 12 also covers choice-of-law clauses. As the Giuliano-Lagarde report for the Rome Convention notes, 9 the word term shall cover cases in which there is a dispute about the validity of a term of the contract, such as a choice-of-law clause. Hence, the applicable law also dictates the interpretation and effects of such a clause. Only the questions as to whether there is a choice of law and which law is chosen by the parties are to be answered by the law of the forum. 10 Where the applicable law is severable under Article 3, the law governing the obligation upon which the plaintiff s action is based must be taken to be the one that is applicable according to Article 12(1). If two claims are involved and if these are subject to separate applicable laws, it is possible to proceed only with those that are not time-barred according to the relevant applicable law. 11 Article 12 does not govern the matters of consent and material validity covered by Article Article 1(2) lists matters that are excluded from the scope of the Regulation. Because Article 12 does not govern these aspects namely the question of legal and contractual representation (Article 1(2)(g)) and capacity (Article 1(2)(a) and (f)) the status of legal capacity of the contractual partners, either of individuals or of companies and other bodies, will be excluded from the scope of application. These questions concern the consequences of a lack of capacity and must be answered by the proper conflictof-laws rules of the forum. 13 Article 13 of the Regulation gives a single exception clause Leible, Art. 12 Rom I-VO, in NomosKommentar BGB Vol. 6 (Mansel and Hüßtege eds, 2013), para. 8; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para. 8; Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para Martiny, Art. 1 Rom I-VO, in Münchener Kommentar, paras 10 and 71; Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 35; Rauscher/Freitag, EuZPR/EuIPR (2011) Art. 12 para 3. For the former discussion about this issue under the Rome Convention, see Spellenberg, Art. 32 EGBGB, in Münchener Kommentar zum BGB Vol. 10 (Rebmann, Säcker and Rixecker eds, 4th ed. 2006), paras 58 et seq.; Leible, Art. 32 EGBGB, in Anwaltskommentar zum BGB Vol. 1 (Heidel et al. eds, 2005), paras 24 et seq. 9. Cf. Giuliano-Lagarde report, Art. 8 para Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 7; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para. 8; Spickhoff, Art. 12 Rom I-VO, in Kommentar zum BGB Vol. 3 (Bamberger and Roth eds, 3rd ed. 2012), para Stone, EU PIL. Harmonization of Laws (2008), Thorn, Art. 12 Rom I, in Palandt, Bürgerliches Gesetzbuch (Palandt ed., 74nd ed. 2015), para. 2; Hohloch, Anh III Art 26 EGBGB Art. 12 Rom I, in Erman, Bürgerliches Gesetzbuch (Westermann ed., 14th ed. 2014), para Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, para. 11; Hohloch, Anh II Art 26 EGBGB Art. 12 Rom I, in Erman, Bürgerliches Gesetzbuch, para 3; in German international private law, Schulze 309

46 Article 12 Scope of the Law Applicable to protect the other contractual party under certain circumstances. No change is intended as compared to Article 1(2)(a) and (e), 11 of the Rome Convention. The provisions to protect consumers (Article 6(2) of the Regulation) and employees (Article 8(1)), which the parties cannot dispose of, will be applicable instead of the proper law of the contract. There may also be overriding mandatory rules of the law of the forum or of the law of the country where the obligations arise out of the contract (Article 9 of the Regulation). Such rules will supersede the proper law of the contract just as the rules of the public policy of the forum will (Article 21 of the Regulation). 14 The wording of Article 12 is identical with Article 10 of the Rome Convention. That reflects that the regulation proved its worth and that there was no need for a change. 15 Just as it was set out by CJEU for the interpretation of the Brussels I Regulation in relation to the prior Brussels Convention, these articles have to be interpreted as in the predecessor instrument. 16 As mentioned above, the scope of the applicable law is related to matters that are also treated in the principles, definitions and model Rules of European Private Law set out in the DCFR. 17 Recital 14, which opens the choice of law to other future legal instruments adopted by the Union, can be relevant for such future cases and their matters. 18 Contractual matters and claims under a future Common European Sales Law (CESL) 19 would also been covered by Art e.g., individuals were treated in accordance to the law of their nationality (Art. 7 para. 1 of the Einführungsgesetz zum Bürgerlichen Gesetzbuch (EGBGB), cf. Schulze, Art. 7 EGBGB, in Anwaltskommentar zum BGB Vol. 1 (Heidel et al. eds, 2nd ed. 2012) para. 2) or the law of the country of the corporate domicile of the company (cf. Kindler, Internationales Gesellschaftsrecht, in Münchener Kommentar zum BGB Vol. 11 (Rebmann, Säcker and Rixecker eds, 5th ed. 2010), paras 420 et seq.). 14. Harris, Mandatory Rules and Public Policy under the Regulation, in Regulation The Law Applicable to Contractual Obligations in Europe (Ferrari and Leible eds, 2009), 269 et seq.; Thorn, Art. 12 Rom I, in Palandt, para. 1; Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, para. 17; Hohloch, Anh III Art 26 EGBGB Art. 12 Rom I, in Erman, Bürgerliches Gesetzbuch, para Mankowski, Die Rom I-Verordnung Änderungen im europäischen IPR für Schuldverträge, IHR 2008, 139, 149; Cheshire/North/Fawcett, PIL (14th ed. 2008), CJEU Case 533/07 Falco Privatstiftung a. Rabitsch v. Weller-Lindhorst, para. 52; Bitter, Auslegungszusammenhang zwischen der Brüssel I-Verordnung und der künftigen Rom I-Verordnung, IPRax 2008, 96, 100; see also Recital 7 of the -Regulation for a consistent interpretation of the regulations Brussels I, Rom I and Rom II: The substantive scope and the provisions of this Regulation should be consistent with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) and Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (I) ; see also Pocar, Some Remarks on the Relationship between the and the Brussels I Regulations, in Regulation The Law Applicable to Contractual Obligations in Europe (Ferrari and Leible eds, 2009), 343 et seq. 17. DCFR Outline Edition, 183 et seq. 18. Recital 14 reads as follows: Should the Community adopt, in an appropriate legal instrument, rules of substantive contract law, including standard terms and conditions, such instrument may provide that the parties may choose to apply those rules. 19. Proposal for a Regulation of the European Parliament and of the council on a Common European Sales Law, (11 October 2011) COM (2011) 635 endg. Cf. R. Schulze (Ed.), Common European Sales Law (CESL) Commentary, Cf. Wendelstein, Ein gestörtes Zusammenspiel zwischen Europäischem IPR und dem GEK? Probleme der Vorschaltlösung, GPR 2013, 70, 71 et seq. 310 Schulze

47 Scope of the Law Applicable Article 12 As an exception clause (lex loci solutionis), Article 12(2) provides that in relation to the manner of performance, regard shall be had to the law of the country in which performance takes place (lex loci solutionis). Since that law does not necessarily apply, the judge may consider whether such law has any relevance to the manner in which the contract should be performed. 21 The special rule of exception in Article 12(2) applies solely to the manner of performance. The distinction between performance and manner of performance must be developed in the future in a uniform way. 22 Therefore, clarification must be awaited from the courts. 12 III. Legislative History The origin of Article 12 lies in Article 10 Rome Convention. The wording of Article 12 is identical with Article 10 of the Rome Convention. Article 12 also remains unaltered from the Proposal of the Commission, 23 which would have integrated the provisions as Article IV. Content 1. Paragraph 1: Applicable Law. The law applicable to the contract governs namely the terms listed in paragraph 1. That list is not exhaustive, which is expressed by the words in particular (paragraph 1). This wording implies that also unspecified matters will be embraced such as the effects of a contract, which includes the rights and obligations of the parties under the contract and the extent to which those rights and obligations affect third parties. 24 The listed matters falling within the scope of Article 12(1) are those generally known as substance or essential validity of contracts. The only exceptions are issues of formal validity (Article 11 of the Regulation) and incapacity (Article 1(2)(a) and (f)). Several aspects overlap with the specific categories listed in Article 12(1). There is, for example, the effect of a penalty clause that relates to the performance as well as to the consequence of breach. 25 The result remains the same; both questions will depend on the law governing the contract. a. Article 12(1)(a): Interpretation of a contract. The law applicable to the contract governs the interpretation of the contract as a whole as well as of its particular terms. To ascertain the parties intentions, reference will be made to the legal system under Plender/Wilderspin, The European Private International Law of Obligations (3rd ed. 2009), , 408 with ref. made to Giuliano-Lagarde report, Art. 10 para Under the Rome Convention it should to be drawn in accordance with the lex fori, cf. Plender/Wilderspin, The European Private International Law of Obligations, , Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (), 15 December 2005, COM (2005) 650 final. 24. Plender/Wilderspin, The European Private International Law of Obligations, , 398with ref. made to Court of Queen s Bench [1862] 2 B.&S. 11; 121 E.R. 978 Scott v. Pilkington. 25. Dicey/Morris/Collins, The Conflict of Laws (15th ed. 2012), para Schulze 311

48 Article 12 Scope of the Law Applicable which the parties have concluded their agreement. Ascertaining the true meaning of the parties wording is also a question of fact, 26 but the procedure and criteria are based on rules of law (e.g., under German law, sections 133, 157 BGB). If the governing law ascribes a particular meaning to particular words, the parties are bound by that meaning. Thus, the applicable law will dictate whether trade usages can be deemed incorporated in the contract for the purposes of its construction. 27 Furthermore, the applicable law guides whether usual business clauses, like freibleibend or Incoterms like fob or cif are part of the contract and how they are to be understood. 28 If the parties use terms in a foreign language or from the law other than the applicable law, the court must consider the meaning of the term in the used language or under the foreign legal system. 29 Interpretation also encompasses the determination of matters that may be taken into account in interpreting the contract. The burden of proof is also a question of the law applicable to the contract (cf. Articles 18 and 1(3)), whereas evidence and procedure are excluded from the scope of application. Any aspects that are held to be procedural in nature are excluded from the Regulation s scope and, consequently, from that of the applicable law thereunder. 30 Therefore, evidentiary rules and the rules of procedure will be governed by the law of the forum. There is no change applicable as compared to Article 1(2)(h) and Article 14 of the Rome Convention. Particular problems arise with regard to the interpretation of contractual obligations to pay money, such as the denomination of a specific currency of payment other than that of the country whose law is applicable. It seems appropriate to refer to the law of the money of account. 31 In a choice-of-law case the chosen law will also govern the issue of interpretation. The applicable law, chosen in accordance with Article 3 of the Regulation, must be applied for the interpretation of the contract. 32 But the parties are free to insert a construction clause in the contract ( This contract is to be construed according to English Law ) 33 or to choose a law solely for the question of interpretation of the contract (cf. Article 3(1) section 2 of the Regulation) Cheshire/North/Fawcett, PIL, Dicey/Morris/Collins, The Conflict of Laws, para Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 10; Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, para. 31; Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para BGH, II ZR 274/90, NJW-RR 1992, 423, 425; Thorn, Art. 12 Rom I, in Palandt, para. 4; Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 11; Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 9. Hohloch, Anh III Art 26 EGBGB Art. 12 Rom I, in Erman, Bürgerliches Gesetzbuch, para Already to the Rome Convention Kaye, The New Private International Law of Contract of the European Community, Plender/Wilderspin, The European Private International Law of Obligations, , Cheshire/North/Fawcett, PIL, Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, para. 25 notes that a construction clause has to be understood as a choice of law clause solely to the interpretation, since the parties chose another law for the proper contract. 34. Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 9 (selbständiges Auslegungsstatut). 312 Schulze

49 Scope of the Law Applicable Article 12 In German doctrine there is dispute over whether the applicable law of the contract also must be applied to the choice-of-law clause. 35 Some prefer the application of the law of the forum. 36 The situation seems to be similar to the questions of consent and validity of the contract (see Article 10(1) note 10 et seq.). The purpose of Article 10 and of Article 12 of the Regulation is to build up a uniform lex contractus to avoid several laws being applicable to one contract. Therefore, it seems to be appropriate to apply the proper law of the contract to the choice-of-law clause as well. b. Article 12(1)(b): Performance of obligations. The law applicable to the contract governs the performance of the obligations 37 arising from the contract. This encompasses the totality of the conditions for the fulfilment of an obligation resulting from the law or from the contract, except the question of the manner of its performance insofar as this is referred to in paragraph 2. As noted in the Giuliano-Lagarde report, the word performance covers the conditions in accordance with which is essential for the fulfilment of the obligation. 38 Thus, paragraph 1(b) embraces the standard, the exactness and the diligence with which the obligation must be performed, the conditions relating to the place and time of performance, the currency 39, the extent to which the obligation can be performed by another person and all questions relating to the form and the mode of fulfilment (joint and several obligations, alternative obligations, divisible and indivisible obligations, pecuniary obligations). 40 The proper law of the contract also dictates whether special commercial rules are applicable, such as, for example, under German commercial law the special provisions on the status of a businessman under the Handelsgesetzbuch (HGB). 41 Illegality of performance falls within the scope of paragraph 1(b), whereas questions affecting existence or validity of the contract are a matter of the putative applicable law under Article 10 of the Regulation. 42 Furthermore paragraph 1(b) includes all conditions relating to the discharge of the debtor, the appropriation of the payment and the receipt. The requirement of notice of Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 12; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para. 8; Thorn, Art. 3 Rom I, in Palandt, para. 6; Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para Spickhoff, Art. 12 Rom I-VO, in Bamberger/Roth, para For a uniform meaning of performance cf. Thorn, Art. 12 Rom I, in Palandt, para. 5. For a definition see DCFR Outline Edition, Annex, Definitions: performance, 561 (Performance, in relation to an obligation, is the doing by the debtor of what is to be done under the obligation or the not doing by the debtor of what is not to be done). 38. Cf. Giuliano-Lagarde report, Art. 10 para Diekmann/Bernauer, Mögliche Rechtsfolgen für vertragliche Verhältnisse bei einer Währungsumstellung eines Mitgliedstaates der EU, NZG 2012, 1172, 1176 (the possibilty to fulfil with a foreign currency); Dicey/Morris/Collins, Conflict of Laws, para Cf. Collier, Conflict of Laws, (3rd ed. 2001), 298; Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 13; Hohloch, Anh III Art 26 EGBGB Art. 12 Rom I, in Erman, Bürgerliches Gesetzbuch, para 7 et seq. 41. See 1 7 HGB; Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 14; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para. 60; contrary Thorn, Art. 7 EGBGB, in Palandt, para. 53; Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, para. 40 (law of the country of the place of the habitual residence of a person). 42. Cf. Queen s Bench Division (Commercial Court) [1989] 3 All ER 252 Libyan Arab Foreign Bank v. Bankers Trust Co. Schulze 313

50 Article 12 Scope of the Law Applicable termination or rescission to be given to the party falls under the notion performance 43 as well as the contractual liability for third persons. 44 The interest of a contractual debt is a matter of performance under paragraph 1(b), whereas the right to interest on damages for breach of contract is a matter of consequences of the breach under paragraph 1(c). Both matters are covered by the proper law of the contract. Excuses for Non-performance such as the doctrines of force majeure or hardship are also matters for the proper law under paragraph 1(b), as well as rights to refuse the performance (right of retention, plea of non-performance). 45 However, the law of the place of performance may be invoked with regard to the manner of performance or to the specific steps to be taken. 46 Article 12(2) allows an exception for the lex loci solutionis under certain circumstances. If, for example, under a seller under a German contract undertakes to deliver goods to London during usual business hours, it would presumably be for the English law to state what business hours are usual; however, German law would determine whether nonperformance was excused by frustration or to what extent the seller was liable for defects in the goods delivered (Article 12(2), see mn ). The proper law of the contract is furthermore applicable to the question whether and when the risk passes. 47 c. Article 12(1)(c): Breach of Obligations Including the Assessment of Damages. The law applicable to the contract governs the consequences of total or partial failure to perform these obligations. The expression consequences of breach has to be understood widely 48 and therefore include contractually agreed as well as statutory/common law consequences for the breach of a contractual obligation. Contractually agreed consequences may encompass, for example, penalty clauses or fixed amounts of loss under certain circumstances 49 or agreed interest on account of delay. The general statutory/common law consequences of a breach of contract, in contrast, may include remedies like the right of price reduction, damages 50 and interest 51 or restitution. 52 The consequences for acquisition and loss of ownership of 43. Stone, EU Private International Law. Harmonization of Laws, Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 15; Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, para Magnus, Art. 12 Rom I-VO, in Staudingers Kommentars, para Dicey/Morris/Collins, The Conflict of Laws, para ; Morris/McClean/Ruiz Abou-Nigm, The Conflict of Laws (Morris ed., 8th ed. 2012), para , 372 with reference to English jurisprudence. 47. Thorn, Art. 12 Rom I, in Palandt, para. 5; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para Cheshire/North/Fawcett, PIL, Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 22; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, paras 88 et seq. 50. Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, para. 57; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para. 90; also the consequences of unlawful discrimination cf. Thorn, Art. 12 Rom I, in Palandt, para BGH, XA ZR 76/07 (12 November 2009), NJW 2010, 1070 para 17 (interest for late payment for which the Regulation (EC) No 261/2004 of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights contains no provision). 52. Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 15; Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, paras 49 et seq. 314 Schulze

51 Scope of the Law Applicable Article 12 goods are not comprised by the proper law of the contract under paragraph 1(c). This is a matter covered by the conflict-of-laws rules of the lex fori. 53 Paragraph 1(c) furthermore embraces not only the consequences but also the conditions of the breach of a contract. Thus, the conditions for the assumption of liability also fall under paragraph 1(c), whereas the question to whom the breach is attributable, the claim to terminate the contract for breach and also the question whether and under what circumstances a breach entitles the innocent party to repudiate or rescind the contract are matters of the lex contractus. 54 A court will not be required to make an order unknown to its legal system or to make an order that is regarded inappropriate by its procedures. English courts will therefore not be required to follow a foreign proper law in answering the question to what extent non-monetary remedies are possible. 55 As far as a tort liability matter is governed by the statute of contract (cf. Art. 4(3) and Art. 12(1) Rom II Regulation) claims for tortious damages are covered by para 1 (c). 56 The assessment of damages is also included to the extent that this is governed by rules of law and lies within the limits of the powers conferred upon the court by its procedural law. The remoteness of damage thus is be governed by the lex causae. 57 The amount of compensation, reduction to failure to mitigate a loss, requirement to pay a single lump sum rather than periodic payments, or the validity of a contractual provision for specified damages as well as the right to pay by instalments are questions of the applicable law under paragraph 1(c). Quantification is also to a large extent governed by the law applicable to the contract. This is because quantification of damage is mainly determined by the operation of legal rules, such as whether a loss of value is to be assessed in relation to market value or the time as to which loss is to be assessed 58 as well as the right to punitive damages. 59 Other procedural matters of quantification, such as the assessment or computation of damages that are not governed by rules of law, are governed by the lex fori Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para. 52 (lex rei sitae); Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 16; Rauscher/Freitag, EuZPR/EuIPR (2011) Art. 12 para Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, paras 72 et seq.; Thorn, Art. 12 Rom I, in Palandt, para. 7; Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para For example an order of specific performance because that would necessitate continuing judicial supervision, cf. Stone, EU PIL. Harmonization of Laws, 301; Morris/McClean/Ruiz Abou-Nigm, The Conflict of Laws, paras , 373; Dicey/Morris/Collins, Conflict of Laws, para ; Collier, Conflict of Laws, Cf. Rauscher/Freitag, EuZPR/EuIPR (2011) Art. 12 para Stone, EU Private International Law. Harmonization of Laws, 301; Plender/Wilderspin, The European Private International Law of Obligations, , 413; Dicey/Morris/Colins, Conflict of Laws, para Clarkson/Hill, The Conflict of Laws (Clarkson and Hill eds, 4th ed. 2011), Such provisions of the proper law of the contract will probably excluded through the public policy of the forum (cf. Art. 21 of the Regulation); see Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 25; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para. 87; Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 18; Hohloch, Anh III Art 26 EGBGB Art. 12 Rom I, in Erman, Bürgerliches Gesetzbuch, para Cf. Dicey/Morris/Collins, The Conflict of Laws, para ; Collier, Conflict of Laws, 299. For example, the estimation of a damage in accordance to 286, 287 ZPO, Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 24; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, Schulze 315

52 Article 12 Scope of the Law Applicable d. Article 12(1)(d) Various Ways of Extinguishing Obligations, and Prescription and Limitation of Actions. The law applicable to the contract governs all ways of extinguishing obligations, including their limitations. Extinction and prescription of obligations as well as limitation of actions or claims 61 are matters for the proper law of the contract. 62 Ways of extinction are the discharge of a contractual obligation by the case and the discharge by legislation. Examples for the prior are extinction of obligations by performance, by merger, by moratorium, by novation of obligation or transfer of contract 63 ; examples for the latter are extinction by outbreak of war or by supervening impossibility. 64 A solvent scheme of arrangement set out in part 26 of the British Companies Act 2006 liberate the debtor partly. 65 The contractual qualification of such a scheme is contested. 66 The scheme as a private instrument of the parties is covered by the proper law of the contract as far as the applicable law causes material conseqences like UK-Law. 67 It was generally held under the Rome Convention that the right to set-off 68 and its conditions were covered by the applicable law under Article 10(1)(d) of the Convention, although there was no explicit rule concerning set-off. Article 17 of the Regulation contains now a specific rule on the law applicable to set-off where the right to set-off is not agreed by the parties. That set-off by operation of law shall be governed by the law applicable to the claim against which the right to set-off is asserted (see Article 17) no matter whether the claim with which the set-off is exercised is also governed by that law. 69 There was full consensus in doctrinal literature that the law applicable to agreements concerning set-off should be the law governing the para. 95; Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 17; Rauscher/Freitag, EuZPR/EuIPR (2011) Art. 12 para Including doctrine of waiver, cf. Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, para. 73; Hohloch, Anh III Art 26 EGBGB Art. 12 Rom I, in Erman, Bürgerliches Gesetzbuch, para BGH, Xa ZR 61/09 (10 December 2009), NJW 2010, 1526 para. 18 (the proper law of the contract is also applicable for claims based on Art. 7 Regulation (EC) No 261/2004 of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights). 63. Selke, Die Anknüpfung der rechtsgeschäftlichen Vertragsübernahme, IPRax 2013, 205, 209 et seq. (the taking-over of the contract). 64. Cheshire/North/Fawcett, PIL, 757; Dicey/Morris/Collins, The Conflict of Laws, paras et seq.; Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para See sec. 895 et seq., cf. Mankowski, Die Anerkennung englischer Solvent Schemes of Arrangement in Deutschland, WM 2011, 1201, 1206 et seq. 66. Denied for example by Lüke/Scherz, Zu den Wirkungen eines Solvent Scheme of Arrangement in Deutschland, ZIP 2012, 1101, Cf. Mankowski, Die Anerkennung englischer Solvent Schemes of Arrangement in Deutschland, WM 2011, 1201, 1207; Paulus, Das englische Scheme of Arrangement ein neues Angebot auf dem Markt für außergerichtliche Restrukturierungen, ZIP 2011, 1077, 1082; restrictively Lüke/Scherz, Zu den Wirkungen eines Solvent Scheme of Arrangement in Deutschland, ZIP 2012, 1101, 1111 (only if english Law is applicable). 68. For a definition, see DCFR Outline Edition, Annex, Definitions: Set-off, Thorn, Art. 12 Rom I, in Palandt, para. 8; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, paras 103 et seq; Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 30; Rauscher/Freitag, EuZPR/EuIPR (2011) Art. 12 para. 26; Dicey/Morris/Collins, The Conflict of Laws, para Schulze

53 Scope of the Law Applicable Article 12 agreement itself. 70 Those agreements will be determined according to the general rules in Articles 3 and 4 of the Regulation. Hence, such an agreement will be covered by Article 12(1)(d) of the Regulation. Prescription, in relation to the right to performance of an obligation, is the legal effect whereby the lapse of a prescribed period of time entitles the debtor to refuse performance. 71 Prescription of obligations or of actions and the limitation of actions fall under paragraph 1(d). Thus, the applicable law governs the commencement, the computation, the extension (suspension, postponement of expiry, renewal of period) of prescription as well as the effects of prescription (right of the debtor to refuse performance, right to the creditor to keep hold of the performance). 72 Problems arise with regard to the qualification of prescription and limitation of action. Especially under English law, prescription and limitation of actions were matters of procedure and not of substance and thus were not part of the lex contractus. The lex fori is applicable. 73 However, it seems to be adequate that a foreign court treats the limitation period under the applicable English law as an aspect of substantive English law. The foreign Limitation Periods Act of 1984 provides, vice versa, that the limitation rules of lex causae are to be applied to actions in England. 74 The question whether a foreign judgment or other foreign procedural acts suspend the expiration of the period of prescription is a question of the interpretation of the applicable substantive law (so-called substitution). German doctrine acknowledges mainly the effect of suspension under the condition that the judgment will be recognized under German law. 75 e. Article 12(1)(e): Consequences of Nullity of a contract. The law applicable to the contract covers the legal consequences of the nullity of the contract. The principal objective of the provision is to deal with the restitution of benefits in the event of a finding that a contract is void under the applicable law. Systematically, the rights of restitution on contractual avoidance fall within the realm of quasi-contract rather than Hellner, Set-off, in Regulation The Law Applicable to Contractual Obligations in Europe (Ferrari and Leible eds, 2009), 251, 260 et seq. 71. For that definition see DCFR Outline Edition, Annex, Definitions: Prescription, Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 23; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, paras 124 et seq.; Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, paras 63 et seq.; Thorn, Art. 12 Rom I, in Palandt, para. 8; Hohloch, Anh III Art 26 EGBGB Art. 12 Rom I, in Erman, Bürgerliches Gesetzbuch, para. 14; Rauscher/Freitag, EuZPR/EuIPR (2011) Art. 12 para. 27; restrictively Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para Plender/Wilderspin, The European Private International Law of Obligations, , 417; Stone, EU Private International Law. Harmonization of Laws, The Regulation takes the position of English law in the Foreign Limitation Periods Act 1984, that the limitation rules of the lex causae govern, Morris/McClean/Ruiz Abou-Nigm, The Conflict of Laws, paras , 373; Plender/Wilderspin, The European Private International Law of Obligations, , 417; Stone, EU Private International Law. Harmonization of Laws, 308 with reference to the of the material of the Law Commission; Dicey/Morris/Collins, The Conflict of Laws, paras Thorn, Art. 12 Rom I, in Palandt, para. 8; without that condition Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 33; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, paras 126 et seq. Schulze 317

54 Article 12 Scope of the Law Applicable contract. 76 Nevertheless, the proper law of the contract is applicable under the Regulation to determine the consequences of nullity for all Member States 77 to avoid a severance of the applicable law for claims under the contract and for claims to reverse. The contract should be governed by one lex contractus until its end Paragraph 1(e) furthermore contains the contractual restitution on other grounds than avoidance, such as in case of non-performance. 79 The consequences of a lack of capacity will also be answered by the proper law of the contract. 80 The consequences of formal invalidity will be governed by the law applicable in accordance with Article 11 of the Regulation. 81 As far as a tort liability matter is governed by the statute of contract (cf. Art. 4(3) Rom II) claims for restitution / unjust enrichment are deemed to be included from para 1 (e) A particular aspect of nullity of the contract is nullity as consequence of illegality. 83 Illegality under the Rome Regulation is a matter of the applicable law, rather than that of the place of contracting or the place of performance. 84 Where it is alleged that the contract is void for illegality in accordance with, for example, the applicable English law, the English rule as to supervening illegality will apply. The decision would be the same in an English court or if the place of performance was in England. There may also be overriding mandatory rules of the law of the forum or of the law of the country where the obligations arising out of the contract have to be or have been performed that render the performance of the contract unlawful (see Articles 9(2) and (3) section 1). Illegality by the place of performance might supersede the proper law of the contract by way of mandatory rules (Article 9) or by way public policy (Article 21), which requires the court to treat a contract as illegal or at least unenforceable whatever the applicable law Paragraph 2: Manner of Performance of Obligations. Article 12(2) is an exception clause for the application of the lex loci solutionis. The manner of performance and the steps to be taken in the event of defective performance relate to 76. Stone, EU Private International Law. Harmonization of Laws, 309 et seq.; Dicey/Morris/Collins, The Conflict of Laws, paras The former provision for contracting states to reserve the right not to apply Art. 10(1)(e) (cf. Art. 22 (1)(b) of the Rome Convention: Italy and Great Britain) has been abolished. Reservations are incompatible with a Regulation, cf. Cheshire/North/Fawcett, PIL, 758; Stone, EU Private International Law. Harmonization of Laws, Leible, 12 Rom I-VO, in NomosKommentar BGB, para Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 27; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, paras 164 et seq.; Thorn, Art. 12 Rom I, in Palandt, para. 9; Hohloch, Anh III Art 26 EGBGB Art. 12 Rom I, in Erman, Bürgerliches Gesetzbuch, para. 15; Rauscher/Freitag, EuZPR/EuIPR (2011) Art. 12 para Contrary Thorn, Art. 12 Rom I, in Palandt, para. 9; Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para Article 11(1) of the Regulation ascribes the law that governs the contract in substance under this Regulation or the law of the country where it is concluded; see Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para Cf. Sendmeyer, Die Rückabwicklung nichtiger Verträge im Spannungsfeld zwischen Rom II-VO und Internationalem Vertragsrecht, IPRax 2010, 500, Already to the Rome Convention Plender/Wilderspin, The Rome Convention on the Choice of Law for Contracts, To the former English law see Morris/McClean/Ruiz Abou-Nigm, The Conflict of Laws, para , Schulze

55 Scope of the Law Applicable Article 12 the law of the country in which performance takes place. The Giuliano-Lagarde report for the Rome Convention already pointed out that the manner of performance of an obligation is not a precise term and does not give a strict definition of this concept. Under the Rome Convention, therefore, the lexi fori determines what is meant by that term; 85 meanwhile, under the Rome Regulation a uniform interpretation should be achieved. 86 Examples are the rules governing public holidays 87 or the manner in which goods are to be examined and the steps to be taken if they are refused. 88 Other examples involve minor details of performance such as the money of payment (unit of currency) 89 ; the kind of payment (cash, by cheque); date at which lay days begin to run; hours during which delivery may be tendered (normal business hours); and how to effect delivery alongside a steamer. 90 The need to obtain an export license and customs clearance belongs to the necessary steps of fulfilment and therefore falls under the lex loci solutionis as well. 91 The expression having regard to the law of the place of performance means that the court may consider whether such law has any relevance to the manner in which the contract should be performed and has discretion whether to apply it in whole or in part. 92 Such an interpretation does not exclude that the court has an obligation to refer to that law at some point. 93 The Giuliano-Lagarde report states that the court shall do justice between the parties. 94 Apart from this general guideline, the criteria for the exercise of discretion are unclear. Clarification must be awaited from the courts. The parties may choose solely with regard to the manner of performance a law other than that which is the applicable law of the contract. 95 Provisions of the law of the place Giuliano-Lagarde report, 1980, Art. 10 para Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 29; Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, para. 80; for a definition in accordance to the proper law of the contract Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para For a definition see DCFR Outline Edition, Annex, Definitions: Public holiday, 563 (any day designated as such in a list published in the official journal of the state). 88. Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, paras 84 et seq. 89. Diekmann/Bernauer, Mögliche Rechtsfolgen für vertragliche Verhältnisse bei einer Währungsumstellung eines Mitgliedstaates der EU, NZG 2012, 1172, 1178 (the possibilty to fulfil with a foreign currency). 90. Cheshire/North/Fawcett, PIL, 755; Dicey/Morris/Collins, The Conflict of Laws, paras Stone, EU Private International Law. Harmonization of Laws, 301 et seq.; Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, para Cf. Collier, Conflict of Laws, 298; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para. 179; Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para Stone, EU Private International Law. Harmonization of Laws, 303; Magnus, Art. 12 Rom I-VO, in Staudingers Kommentar, para. 93; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para Cf. Giuliano-Lagarde report, 1980, O.J. C 282/1 (Annex IV), 33; crit. Cheshire/North/Fawcett, PIL, 755; Morris/McClean/Ruiz Abou-Nigm, The Conflict of Laws, , Leible, Art. 12 Rom I-VO, in NomosKommentar BGB, para. 42; Ferrari, Art. 12 Rom I-VO, in Kommentar zum Internationalen Vertragsrecht, para. 33; Spellenberg, Art. 12 Rom I-VO, in Münchener Kommentar, para Schulze 319

56 Article 12 Scope of the Law Applicable of performance may also be applicable as overriding mandatory rules under Article 9(3). 96 The applicaton of Art. 12(2) may be excluded explicitly by agreement Cf. Thorn, Art. 12 Rom I, in Palandt, para. 1; with critical remarks Harris, Mandatory Rules and Public Policy under the Regulation, in: Regulation The Law Applicable to Contractual Obligations in Europe (Ferrari and Leible eds, 2009) 269, 330 et seq. 97. Piltz, Praktische Handreichung für die Gestaltung internationaler Kaufverträge. Vorteile des UN-kaufrechts gegenüber nationalem Recht, NJW 2012, 3061, 3064; recommended by Ostendorf, Die Wahl des auf internationale Wirtschaftsverträge anwendbaren Rechtsrahmens im Europäischen Kollisionsrecht: Rechtswahlklauseln 2.0, IHR 2012, 177, Schulze