UK companies that enter into cross-border European contracts after 17 December 2009 will have to specify which country’s laws should govern any contractual disputes that arise between them and their customers.

From that date, a new legal regime will apply called Rome I. This sets out rules for identifying the appropriate jurisdiction to govern dealings with overseas companies. UK consumers buying goods or services from abroad are also covered. Contracts made before 17 December did not need to include an express choice of law clause and these will continue to be governed by the previous legislation, The 1980 Rome Convention.

Rome I sets out clearer rules than the 1980 Rome Convention and includes e-commerce transactions. Otherwise, the two are not dramatically different. Other areas of commercial activity that are specifically mentioned in Rome I are insurance, financial services, timeshare properties, contracts of carriage, and employment contracts.

Company directors should therefore ensure that both the country of jurisdiction and of ‘habitual residence’ are defined in all contracts in order to ensure clarity and cut down on potential legal costs.