Choice of law/forum shopping
Choice of law/forum shopping
September 22, 2023
Offers on the internet, especially in online shops, can usually be accessed worldwide and contracts between parties in different countries are the order of the day. However, if problems arise, for example because the goods are defective or consumers* want to invoke the right of withdrawal, the question quickly arises as to which law the contract is to be assessed. In its general terms and conditions, the supplier will usually declare the applicability of "its law", i.e. the law of the country in which it has its registered office. However, this is not effective without further ado, especially vis-à-vis consumers.
In this respect, the so-called Rome I Regulation for cross-border contracts ((EC) No. 593/2008), which has been in force since 17 December 2009, is decisive. It applies directly in the EU Member States (with the exception of Denmark) and is also consulted in part, mutatis mutandis, for cross-border traffic within the EU.
In principle, the parties are free to choose the law applicable to their contract (Art. 3 Rome I Regulation). This can be done through individual negotiation or unilaterally through GTCs. However, there are limits to the extent that, if all elements of the facts are located in one state at the time of the choice of law, the choice of law cannot deviate from the law of that state.
If no choice or agreement on the applicable law has been made, the applicable law is determined according to Art. 4 Rome I Regulation. There, paragraph 1 differentiates between different types of contracts and, in case of doubt, paragraph 2 refers to the law of the country in which the provider of the characteristic service has his habitual residence. Roughly speaking, the so-called principle of origin applies here as well, i.e. as a rule the law of the place where the provider of the main service (e.g. the seller or service provider) or the place where the subject matter of the contract is located (e.g. real estate) is applicable. The mere fact that the offer can and will be taken up by a customer from another state does not mean that the customer can invoke the legal system of "his state".
Exceptionally, however, according to Art. 4(3) Rome I Regulation, the so-called law of the closest connection takes precedence, if the contract has closer connections with another state than the one determined according to paragraph 1 or 2. Whether such a close connection to another contract exists must always be assessed in the individual case by way of an overall consideration. In the case of a notarisation, for example, connecting factors may be the country of notarisation, the language and the currency or the choice of lawyers from a certain state. Even the indication of a sham establishment, for example on a website, can lead to the contracting party being able to rely on the law of that state. On the whole, however, restraint in assuming the close connection is advisable.
As in the German legal system, consumer protection is also established as an important principle in the Rome I Regulation, which is decisively expressed in Art. 6 Rome I Regulation.
A consumer contract is assumed if a natural person, for a purpose which cannot be attributed to his or her professional or commercial activity ("consumer"), has concluded a contract with another person acting in the exercise of his or her professional or commercial activity ("trader"). The consumer should benefit from special protection in this constellation due to his inexperience in business in contrast to the entrepreneur. This is done, for example, by granting a right of withdrawal, easier termination options, information and notice obligations for entrepreneurs or protection against automatically extended terms and excessive liability limitations. Many consumer protection rules are based on EU provisions and are therefore the same across Europe if they are based on regulations, or similar if they have been transposed into national law.
No choice of law
If the parties have not decided on the applicable law, the law of the country in which the consumer has his habitual residence (the nationality of the consumer is irrelevant) is applicable according to Art. 6(1) Rome I Regulation, provided that
- the trader also conducts his business in that state, or
- the trader is established and operates in another country (country of origin) but "directs" his activities to the country of the consumer (or to several other countries).
When such an orientation is given must also be assessed in this context within the framework of an overall assessment. The accessibility of a website alone is in any case not sufficient, as already stated in the Joint Declaration of the Council and the Commission on Art. 15 and 73 of Regulation 44/2001. The following indications, which case law has developed in connection with the choice of language for mandatory particulars (LINK), also apply here:
- international character of the activity
- indication of directions to the own seat from the addressed country
- locations or service centres in the addressed country
- Potential customers in the addressed country are explicitly addressed and solicited, e.g. by means of advertising e-mails or advertisements online or on site.
- Use of the language and/or currency of the addressed state on the website with the possibility of booking and booking confirmation in this other language,
- possibility of sending to the addressed state
- Indication of telephone number, address or other means of contact on site in the addressed state
- Registration of the domain name of the website registered under the top-level domain of the addressed state, e.g. ".fr" for France
- Spending on an internet referencing service to facilitate access to the website for consumers in the addressed state
- Mentioning an international clientele composed of customers residing in different states.
The aim is to protect the consumer. However, this protective purpose has its limits and only applies to the extent that it is reasonable for the trader because he has deliberately chosen to operate in a foreign market.
If the requirements of Art. 6(1)(a) or (b) are not met and the parties have not made a choice of law, Art. 4 of the Rome I Regulation, i.e. the applicability of the law of the country of the provider of the main service, also applies to contracts with consumers.
Choice of law
According to Art. 6(2) Rome I Regulation, however, a choice of law within the meaning of Art. 3 Rome I Regulation can also be made for consumer contracts, as long as this does not lead to the exclusion of consumer-protecting provisions. Such a choice of law is likely to be the rule, since entrepreneurs determine the applicable law in their general terms and conditions by default. Whether this stipulation is always effective is another question. In any case, even in the case of a choice of law, consumers may always invoke the mandatory consumer protection law of the state in which they usually reside. Domestic law thus always determines the minimum level of consumer protection for consumers.
A consumer with habitual residence in France orders goods from a German online shop and has them sent to France. In the general terms and conditions of the online shop, the validity of German law is chosen. In this case, German law applies to the contract, but mandatory French consumer protection rules must be observed. If no choice of law has been made, but the German online shop has specifically oriented its activities to the French market, French law applies in its entirety. If there is neither a choice of law nor a focus on the French market, German law remains applicable.
What you should do
Entrepreneurs who offer their goods and services to an international customer base via the internet are usually well advised to include a choice of law clause in their GTCs, taking into account the mandatory consumer protection rules. Otherwise, there is a risk that the clause as a whole will be invalid. We will be happy to assist you in drafting such a clause.
If you urgently want to avoid a possible applicability of foreign law, you should also make sure when designing your own online offer that it is not too explicitly aimed at the customers of a foreign market, but rather avoid doing anything to give the impression that the offer is also aimed at customers from other states.
Ultimately, an overall assessment and evaluation of the individual case are always required. If you - whether as a consumer or entrepreneur - have questions or concerns regarding the applicable law, we will be happy to assist you in word and deed.