Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), was published in the Official Journal of the European Union on 4 July 2008
If, as treasurer, you were to put forward a project which would absorb an enormous amount of management time, but have no (other) effect, you might doubt if you would get the project approved.
The EU’s process requires production of an “impact assessment” for all proposed new or changed laws and regulations (see box below).
But the Justice and Home Affairs directorate of the European Commission claimed there would be no impact when they proposed converting the Rome I Convention between States governing the law applicable to contracts into an EU Regulation (why?). So, naturally, with no impact, there was no need to make an impact assessment.
As it turned out, the Directorate was in fact proposing to make some changes. Companies, particularly in financial agreements as treasurers know, need certainty of law, and this seemed seriously weakened, especially as interpretation would move to the European Court of Justice from the courts of the Member States. The UK (and Denmark) decided not to opt in to the proposed Rome I Regulation. Still the Commission did not produce an impact assessment.
Eventually after several of years of intensive work by the British Government and, in due course, by the European Parliament (and by various bodies, including the ACT) on behalf of potentially affected parties, the position of the Rome I Convention was retained and improved.
The ACT in June 2008 advised the Ministry of Justice that the UK should now opt in to the Rome I Regulation even though it retains some weaknesses of the Convention. There would be disadvantages in staying with the Convention if the rest of the EU moved to the Regulation.
Eventually, then, the main impact has been the cost of thousands of hours of expensive work by Ministers, civil servants, MEPs, representative bodies and many, many others, but otherwise, the impact will indeed be small. But much of the work would have been avoided if the Directorate had at the outset produced an impact assessment for comment – and listened when commentators explained the potentially disastrous cost of what they proposed.
The institutions of the EU must take note. There must be no new proposals for law or regulation without an impact assessment. After all, in the corporate world, how many projects get approval without an investment appraisal?