Sarah Green column
Jan 23 2007 By Sarah Green, The Journal
Beware - New cross-border trade laws proposed by Brussels will bog companies down in a legal quagmire, damage online businesses and undermine the UK's financial services sector.
The CBI has called on EU policy-makers to urgently review contract legislation known as Rome I before it goes to the European Parliament for debate this week.
Under the proposals a UK firm selling goods and services across the EU would no longer be broadly governed by English law: it would have to navigate up to 27 different legal regimes - or, more likely, opt not to do business outside the UK.
Financial and legal services firms will lose the right to decide which country's law applies to a contract with a foreign company. In the event of a dispute a court could over-ride the companies' choice and rule that a different legal system applies.
The proposed legislation was sold as a simple legal tidying-up exercise when the European Commission embarked on the process but it will produce substantive new law and turn accepted cross-border trade principles on their head. Yet the EC has not carried out any regulatory impact assessment.
Businesses will have three choices: spend time and money getting to grips with the varied and conflicting legal regimes of each member state they trade with; chance their arm that their processes will meet the required standards; or, most worryingly, stop trading with some countries altogether.
A London firm, for example, which now sells its products to a customer in Rome under English law would find itself liable under Italian law for any complaint. Any court case would be held in an Italian court with the proceedings in Italian. The same would apply to every EU country the firm accepted an order from.
London's financial services firms will also be hit. Under existing law, companies can designate a legal regime to apply to a contract with another company - but the proposals will remove this right. Instead, a court will be able to over-ride the companies and specify a different legal regime if a judge decides it is more appropriate.
Firms, especially smaller ones or those who trade online, will find it so daunting they could opt not to do business in the EU. This will lessen consumer choice, reduce competition and hold back company growth.Yet Brussels appears to be happy to sleep-walk into this nightmare. These proposals need urgent and substantive review.
