Introduction
The 1980 Convention on the Law Applicable to Contractual Obligations (the Rome Convention) is an EU provision establishing uniform rules concerning the law applicable to contracts. In December 2005, the European Commission presented a proposal to transpose the 1980 Rome Convention into an EU regulation, entitled the ‘Regulation on the law applicable to contractual obligations’ (Rome I).
Currently, the rules on the choice of law for insurance contracts are set out in the Second Non-Life Directive and the Life Directive, if the insured risk is situated in the EU. The Rome Convention applies to reinsurance contracts and to insurance of risks situated outside the EU.
Initially, when drafted, Rome I excluded insurance and reinsurance, however, insurance was later added before the regulations were finalised. Rome I consolidates the existing rules on choice of law for insurance contracts contained in the insurance directives and the Rome Convention into a single instrument, however, reinsurance remains outside of the scope of the Regulation. Essentially, it leaves existing rules on the choice of law for insurance contracts as they are.
Key issues
Under Rome I there is free choice of law for the insurance of large risks, other than life insurance, whether or not the risk is situated in a Member State. If the applicable law has not been chosen by the parties, the insurance contract will be governed by the law of the country where the insurer has his habitual residence. Where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with another country, the law of that other country will apply.
For insurance contracts covering mass risks situated in a Member State, the following laws may be chosen by the parties:
- The law of any Member State where the risk is situated at the time of conclusion of the contract.
- The law of the country where the insured has his habitual residence.
- Where the insured of a contract pursues a commercial or industrial activity or a liberal profession and the insurance contract covers two or more risks which relate to those activities and are situated in different Member States, the law of any of the Member States concerned or the law of the country of habitual residence of the insured.
- In the case of life assurance, the law of the Member State of which the insured is a national.
- For insurance contracts covering risks limited to events occurring in one Member State other than the Member State where the risk is situated, the law of that Member State.
Where, in the cases set out in the first three bullet points above, the Member States referred to grant greater freedom of choice of the law applicable to the insurance contract, the parties may take advantage of that freedom. Regulation 4, of the UK regulations implementing Rome I, allows parties to contracts insuring mass risks greater freedom of choice of law where the risk is situated in the UK.
Where the law applicable has not been chosen by the parties of a mass risk, the contract will be governed by the law of the Member State in which the risk is situated at the time of conclusion of the contract.
For compulsory classes of insurance, where the law of the Member State in which the risk is situated and the law of the Member State imposing the obligation to take out insurance contradict each other, the latter shall prevail. A Member State may lay down that the insurance contract shall be governed by the law of the Member State that imposes the obligation to take out insurance.
Implementation
Rome I came into force on 17 December 2009.
Neither the Rome Convention nor the Rome I Regulation apply to Denmark. However, the Solvency II Framework Directive contains the same provisions in a form that will apply to Denmark.
The Ministry of Justice conducted a consultation process on whether the UK should opt-in to the Regulation in June 2008. Lloyd’s responded in favour of opting-in, as a single, comprehensive system will facilitate the conduct of cross-border trade. The overwhelming majority of responses were in favour. The UK government notified the European Commission and Council of its desire to opt-in on 23 July 2008. The Commission adopted a decision to extend the application of the Regulation to the UK on 22 December 2008 and this was made official on 16 January 2009.
Further information
Download agreed text of the Rome I Regulation as at 1 April 2008
Newsletter article ‘Rome I in Britain’ was published in International Regulatory Update - summer 2008 edition.
