Applicability of law in international contractual obligations

Nationalist MP Mario de Marco yesterday underlined the importance of a Bill before the House to ratify the Rome Convention on the law applicable to contractual obligations.

He said there were several situations where questions arose over which country's laws should apply.

For example, when a person in Malta bought a German computer on the basis of a catalogue issued in Italy and the computer was defective, which law would govern the sale, especially when the laws in the various countries were different and sometimes conflicting?

While it was true that the EU was trying to harmonise legislation, differences remained. Many people with limited resources gave up on seeking redress because of the incompatibility of legal systems.

The EU could not have a proper internal market without a common system which enabled its people to assert their rights not just in their own country but in all community territory.

The problem was that private international law was not international at all and there was lack of uniformity and, hence, legal uncertainty.

The 1980 Rome Convention sought to eliminate a situation where parties to a case shopped around for the jurisdiction which most suited them. Through the convention, EU member states had agreed on rules for the determination of which jurisdictions would apply in certain situations.

The Rome Convention had been preceded by the Brussels Convention which was based on the idea that the common market implied that a court judgment given in one country should be recognised and observed in another.

Dr de Marco said the rules of private international law were based on two important principles - proper law and the right of choice. The proper law principle provided that a case should be regulated by the legal system with which it had the closest connection. Thus, when a Maltese reached agreement with an Italian to import goods in Malta, that issue was most closely associated with Malta. If a Maltese went to Germany, bought a house there and commissioned a German contractor, any cases over the quality of the works had to be filed in Germany.

The right of choice principle was somewhat different as it was based on the fact that parties to a contract had the right to choose which legal system should govern their contract.

In the absence of such a choice having been specified, the Convention laid down that a contract should be regulated by the law of the country with which it had the closest link - the proper law, but a part of a contract which had a closer link with another country would be regulated by that country. This was not easy to establish.

The convention included particular safeguards for consumers and employees in that the choice of law by the parties could not deny consumers and employers mandatory legislation applicable to them.

Furthermore, the courts could not be asked to apply a legal system which went against the law and order of the country where that court was sitting. This meant that the right of public order was supreme.

Dr de Marco noted that there was lack of consistency in the application of the Convention because member states could make reservations.

Efforts were being made to update the Convention and the EU had issued a Green Paper to elicit suggestions for this purpose. It was being suggested that the Convention would feature a form of regulation applicable in all member states in order to avoid uncertainty where directives had to be applied.

The convention would undoubtedly be revised because when originally drafted in 1980 there was no e-commerce, for example, whereas now, most trade took place over the internet. Such technological advances had to be regulated and there was therefore rethinking of new areas which should be included in the Convention.

Concluding, Dr de Marco welcomed this Bill as a first step towards a code on private international law.

Labour MP Joe Brincat said that it was important for Malta to have a code of private international law. Apart from the areas covered by the convention, there were other delicate sectors which were not adequately covered by legislation.

In the absence of such legislation a judge had to decide on principles established by foreign laws, notably UK legislation.

He said that there were issues, such as personal status, which related to private international law but which were not covered by the Convention. Which law would Malta apply, for example, to decide whether a marriage was valid or not? There was a jurisprudence which laid down that this should be decided according to the country where the marriage took place, but then there were cases which held that the decision should be taken according to the country where the marriage contract was applied the most. But it would be wrong to have a person recognised as married in one country but not in another.

Would the marriage of a Maltese who was divorced and remarried in the UK be valid in Malta?

The Bill being debated covered only a small area; there were many other areas which needed to be better covered by legislation which was, as far as possible, uniformly applied by different countries.

Winding up, Parliamentary Secretary Carmelo Mifsud Bonnici welcomed the fact that MPs were in favour of having a code of private international law, a matter which the ministry was taking up.

It was true that there was debate on how the Convention could be updated and how it could be extended to obligations which were not contractual, such as obligations resulting from a traffic accident. There was no agreement yet but Malta could adopt some of the suggestions which were being made to the proposed new code.

Dr Mifsud Bonnici underlined the intention of the Ministry of Justice to continue to update the laws, including the laws of procedure. He said legislation adopted last year on official executive letters for the settlement of uncontested debt had given the people a faster mechanism for redress. Some 3,000 people had opted for this method since it was introduced. This meant 3,000 fewer cases before the courts.

In just the first two months of this year, the caseload at the Magistrates' Court had dropped by 14 per cent to 1,254 - 14 per cent less as a result of these amendments. In the Small Claims Tribunal, the number of cases had dropped by 29 per cent, from 2,317 at the beginning of the year, to 1,636 at the end of last month.

The Bill was later given a second reading.