Rome throws industry to the lions

Date: 22/03/01

By Peter Chapman

ALL roads may lead to Rome, but when it comes to a piece of draft EU legislation on cross-border legal disputes nicknamed 'Rome II', industry rebels are plotting to ambush Justice and Home Affairs chief António Vitorino en route.

Business groups ranging from advertisers to bankers and publishers are sounding the alarm as Vitorino prepares to unveil his blueprint next month. If the Portuguese Commissioner makes it past their roadblock, firms say his measures could scupper the EU's fragile single market.

Christened Rome II because it builds on an existing contract-law agreement among European countries known as the Rome Convention, the plan would establish a framework to determine which country's laws should apply when there is a private, non-contractual dispute involving parties from more than one member state.

For example, whose laws should take precedence when a Dutch tourist buys some food in France that was made in Germany but he doesn't eat it until he gets to Luxembourg, where he falls ill, eventually requiring him to visit a doctor when he gets home to the Netherlands?

"It is basically a rule that says what the law is when there is a toss up," says Lionel Stanbrook, director of the Rome II Group, a new lobby set up to fight Vitorino on the issue.

Stanbrook and his allies fear that the coin will land on the wrong side.

For example, in cases in which a company is being sued, judges would be able to insist on using the laws "where the damage takes detrimental effect" - typically where the consumer lives. Crucially, for business, this means the laws of the land where the firm is based would not be applied.

This approach is welcomed by the European Consumers Association (BEUC), which argues that buyers are most familiar with their own national laws and would be confused - and put off - if they were entitled to less protection just because they bought products from a foreign trader.

But industry claims that the ensuing legal uncertainty would make it nearly impossible for companies to offer their goods or services across the Union, even though the EU has put in place a legal framework of single market rules designed to ensure they can do just that.

Laws such as the 'television without frontiers', electronic signatures and e-commerce directives are designed so that companies can sell their products anywhere in the Union provided they meet the legal requirements of laws in their own country.

But the pro-business lobby argues that Rome II would leave them wide-open to lawsuits brought by foreign consumers for breaches of their own local laws - effectively throwing them to the lions.

Advertisers are especially concerned. Stephan Loerke, director of European Affairs for the World Federation of Advertisers, says firms could find themselves in court for breaking foreign laws such as Germany's 'unfair competition' rules that penalise companies advertising special offers such as two-for-the-price-of-one discounts.

It is one thing, claims Loerke, for companies to have to fight a legal battle in a foreign court, as another EU regulation (see below) adopted last year would require. But it is quite another to make sure you do not fall foul of the myriad of national rules and regulations in place across the Union.

"This is a large threat for the industry," Loerke says. "What we are really fighting for is that there is a clear understanding that Rome II would not have an impact on the EU's single market legislation. Otherwise, all that we have achieved would be in tatters."

Wim Mijs, vice president of ABN-Amro, says banks such as the Dutch giant with representative offices across the Union would escape relatively lightly. Complaints would be dealt with by local managers or lawyers with relatively few problems. But, claims Mijs, the bank fears Rome II could be enough to frighten off small-company clients considering doing business over the Internet, at a time when the fledgling e-commerce market is faltering. Those who stayed online would risk financial ruin from foreign claims.

"I have a friend who has a business selling spare parts for MG cars," Mijs says. "But the market in the Netherlands is saturated. For many traders, like him, the only way to expand their business is over the Internet. If big business is held liable, it will survive. If my friend is in a court case brought by a customer in Greece, he is broke."

Mijs claims such dangers highlight the importance of recent efforts to set up out-of-court dispute resolution systems.

But if small companies are in the firing line, publishers and TV companies fear they could be worst hit.

Angela Mills, director of the European Publishers' Council, fears Vitorino's proposals could result in complainants using the laws of individual countries anywhere that a publication or broadcast is received and alleged damage is 'felt'. She says this could leave the industry wide open to defamation claims in various member states.

That would force newspapers and magazines to employ teams of lawyers to vet their content to ensure it does not fall foul of laws in countries where they are not even trying to attract readers - a huge effort because national rules vary greatly.

"As far as the press is concerned, one of the worst aspects of this is that people will be able to take injunctions to prevent publication," adds Mills. "That has a real chilling effect on freedom of the press."

Leonello Gabrici, a spokesman for Vitorino, says it is premature for industry to rubbish the Green Paper before it had even been launched.

"How can they complain against a Green Paper that is actually meant to start the debate with industry? It seems a bit too much of a preventative action," he says. "Industry is worried that it might face the local law. But that is exactly what is happening at the moment. If in the e-commerce directive, for example, the judge has no answer to a specific problem then he or she is faced with no alternative."

Behind the scenes, a row is brewing in the Commission over the same issues before Vitorino's plan sees the light of day - a fact that cynics claim shows a lack of coordination in single market issues.

Backing the justice and home affairs chief are the Commission's legal service, headed by President Romano Prodi, and David Byrne, the EU's respected consumer affairs chief. But some departments are trying to change the wording before it is unveiled.

The Commission's single market directorate-general wants to ensure the proposal offers reassurances that single market directives are not superseded by Rome II when the Green Paper is turned into concrete rules. Business-friendly Commissioner Erkki Liikanen's information society department is also on the attack.

He won't be alone. Industry is already on the march - not to Rome, but to Brussels.

Major feature on the Rome II proposals.