HL Deb 12 December 1989 vol 513 cc1257-73

5.45 p.m.

The Lord Advocate (Lord Fraser of Carmyllie)

My Lords, I beg to move that this Bill be now read a second time. I cannot pretend that it will arouse as much interest as other legal Bills this session. Its subject matter is technical, perhaps even esoteric. Nevertheless, I believe that it is a worthwhile measure and, I hope, an uncontroversial one.

The Bill incorporates into United Kingdom law a convention between member states of the European Community on the law applicable to contractual obligations which was opened for signature in Rome in 1980 and signed on behalf of the United Kingdom in December 1981. All nine states which belonged to the Community in 1989 have signed the convention, and Greece has now also signed it. The Greek accession to the Rome Convention is contained in the Luxembourg Convention of April 1984 and the Bill enables the United Kingdom also to give effect to that convention.

Your Lordships may wonder why it has taken so long for the United Kingdom to ratify the Rome Convention of 1980. The answer lies principally in the need to work out what powers the European Court of Justice should have to interpret the convention. A compromise was eventually reached in December 1988, when two protocols were signed in Brussels conferring jurisdiction similar to that which the European Court has under the European Judgments Convention. The need for a second protocol arose out of constitutional difficulties of the Irish Republic. The Bill gives effect to the first, substantive protocol, but there is no need for it to give effect to the second.

For the Rome Convention to come into force, seven of the nine countries which originally signed it must ratify it. Six have so far ratified, leaving ourselves, the Irish Republic and the Netherlands.

The purpose of the Rome Convention is to lay down rules to determine which law is to apply to a contract which has connections with two or more countries. It does not affect the substance of our law of contract, but merely enables the courts to decide, in the first place, whether that law applies or not. Nor, indeed, will it involve any substantial changes in our existing rules for determining the applicable law, since the two basic principles laid down by the convention accord with present United Kingdom law.

The Bill puts the rules on a firm statutory basis. It clarifies certain matters which have hitherto been unclear, and by introducing harmonised rules it will make life easier for businessmen and their legal advisers. As long ago as 1969 the Director General for the Internal Market, Mr. Vogelaar, said: The lack of unified rules of conflict definitely impedes the free movement of persons, goods, services and capital among the member states". As we approach the creation of the single market, the Bill will bring a valuable degree of harmony in an area of law which is by no means free from difficulties.

I should like to take this opportunity to thank two of the United Kingdom's negotiating team, Dr. Peter North and Professor Sandy Anton, and also Mr. Anthony Diamond QC, all of whom have assisted the Government in the preparation of the Bill.

The central provision of the Bill is to be found in Clause 2(1), which gives to the Rome Convention, the Luxembourg Convention and the Brussels Protocol the force of law in the United Kingdom. In other words, those three agreements will, if the Bill is passed, become part of our statute law and, once the Act is brought into force, will replace the existing common law rules. I should make it clear at this stage that the Bill is to apply throughout the United Kingdom. It will also apply to contracts with connections between different parts of the United Kingdom but with no other foreign element.

The English texts of the three agreements are set out in the first three schedules to the Bill. Although some of their provisions are purely administrative, I believe that it will be helpful for practitioners and others to have the full texts easily available in this way.

In the Bill we are exercising the right which is granted by Article 22 of the Rome Convention not to incorporate two particular provisions of that convention into our law. The first relates to "mandatory rules", which are rules which cannot be derogated from by contract. Article 7(1) permits the application of the mandatory rules of any country which has a connection with the contract, although the contract is to be governed primarily by another law. I believe that that point might concern the noble Lord, Lord Mishcon. Perhaps I may explain to him that, in our view, if we were to introduce that, it would detract from the principles of certainty and uniformity which the convention otherwise seeks to promote.

The second provision which we intend not to apply is in Article 10(1)(e), which refers questions about the nullity of contracts to the convention. Under both English and Scottish law, such questions do not form part of the law of contract, but of the law of restitution or recompense.

Clause 3 of the Bill provides that, when interpreting the conventions, the courts of the United Kingdom are to follow any relevant decisions of the European Court and any principles laid down by it. It also permits reference to be made to the official commentary on the Rome Convention. I should explain that the negotiators of the member states were able to revise the commentary and that our own negotiating team put forward revisions in the hope that it would be admissible in legal proceedings in this country. A similar provision, which may be known to some noble Lords, is to be found in the Civil Jurisdiction and Judgements Act 1982.

Clause 4 enables Her Majesty to make an Order in Council modifying any statutory provision in consequence of any revision of the conventions. An obvious example would be the addition of a reference in the Brussels Protocol to the courts of Spain and Portugal if those countries were in due course to ratify the Rome Convention.

I now turn to that convention. Its first two articles form Title I relating to the scope of the Convention. The convention applies to contracts involving a choice between the laws of different countries. The law applicable to a contract, as determined by the convention, need not be that of a contracting state. Certain matters, however, are excluded from its scope, including most contracts of insurance, which are, or are about to be, covered by other Community directives, contracts which are more appropriate to be dealt with under family law or under company law, arbitration agreements and agreements on the choice of court, and obligations arising under bills of exchange, cheques and other negotiable instruments.

Title II, the uniform rules, consists of Articles 3 to 22, The two fundamental principles are to be found in Articles 3 and 4. The first is that the parties to a contract are free to choose which country's law is to govern it. The second is that, if they do not make a choice, the contract will be governed by the law of the country with which it is most closely connected. There are certain presumptions as to which country is most closely connected with a contract, although those presumptions are rebuttable when all the circumstances surrounding the contract point to it being more closely connected with another country. I should mention one presumption, which is that the closest connection will be with the country where the party who is to effect, the characteristic performance of the contract has its principal place of business, habitual residence or central administration. This is a novel concept in most member states, including our own.

Articles 5 and 6 make special provision for certain consumer contracts and employment contracts. Their aim is to ensure that, where there are mandatory rules in the law of the country of a consumer's or employee's habitual residence which are designed to protect him, he is not to be deprived of such protection by the choice of another country's law to govern the contract. The provisions relating to consumer contract complement those which we already have in the Unfair Contract Terms Act 1977 and will operate alongside them. Article 6 contains rules for determining the applicable law of an employment contract in the absence of a choice by the parties, but it is unlikely that those rules will often lead to the application of a law other than that of the forum. Our courts will therefore continue to be able to apply the mandatory rules contained in the Employment Protection (Consolidation) Act 1978.

I have already referred to Article 7(1), which the United Kingdom intends not to apply. Article 7(2), on the other hand, is a well-established rule in the field of the conflict of laws. It permits the court which is hearing a case to apply those rules of its own country's law which cannot be avoided by choosing a different law to govern a contract.

It is not necessary to go through every article in the convention, but there are some others to which I should briefly like to draw your Lordships' attention. Our own rules on material and formal validity of contracts are not entirely clear. Articles 8 and 9 correspond with what is generally agreed to be the position here and will, I trust, bring certainty for the first time.

By Article 10(1), the law which governs a contract also governs the limitation of actions relating to the contract. Until recently English law was different since it treated limitation as a procedural matter to be governed by the law of the forum and not by the law of the contract. That rule was criticised and was changed by the Foreign Limitation Periods Act 1984. English law now accords with the convention.

Article 16 preserves the overriding effect of public policy. The convention will apply in a contracting state only to contracts made after the date on which the convention has come into force for that state. It does not operate retrospectively. Articles 20 and 21 provide that the convention is not to have precedence over European Community treaties or other international conventions.

I should finally mention the Brussels Protocol. That provides that particular courts in contracting states may request the European Court of Justice to give a preliminary ruling on a question concerning the interpretation of the Rome Convention, the Luxembourg Convention or the protocol itself, if the court considers such a ruling to be necessary to enable it to decide a case pending before it. In the case of the United Kingdom, the courts are the House of Lords and other courts from which no further appeal is possible, and courts sitting in an appellate capacity.

I believe that the effect of the Bill will be to put our rules in this area of the law on a clear statutory basis, as part of a beneficial exercise in harmonisation with our partners in the European Community. I ask this House to give the Bill a Second Reading. I beg to move.

Moved, That the Bill be now read a second time.—(Lord Fraser of Carmyllie.)

5.57 p.m.

Lord Mishcon

My Lords, the House will be grateful to the noble and learned Lord for the lucidity of his explanation of, as I believe he said, this exotic but not exciting Bill. We should also admire his courage, because I have an idea that he has a bad throat. It was therefore very gallant of him to make his explantion as long as he did, and we appreciate that. I should also like to thank him and the Government for their helpful attitude in attaching to the Bill, by way of schedules, the three conventions concerned. As he rightly said, that is a great deal of use to practitioners and is a healthy example to follow in the future.

However, there is one aspect which is not quite so helpful. I hope that it will not be regularly imported into our statutes, although I know that it is difficult when dealing with international matters. Perhaps I may draw the noble and learned Lord's attention to Clause 3(3)—one of our statutes—which states: The report on the Rome Convention by Professor Mario Giuliano —who I am sure is a most learned gentleman— and Professor Paul Lagarde"— who I am sure is equally a most learned gentleman— may be considered in ascertaining the meaning or effect of any provision of that Convention". That is extremely novel from our point of view, especially when one makes a court the interpreter of what the convention means and one then has someone's opinion on which one has not had a chance to make a submission—

A noble Lord

Are they still alive?

Lord Mishcon

—almost binding the court and parties. Indeed the intervention that has just been made makes we wonder whether the precedent is not extraordinary. One has incorporated into a Bill which we are asked to pass the names of two individuals regardless of what may happen to them. I am perfectly prepared to believe that the two professors will not only live to a ripe old age—which I hope they will—but will never find that their opinions are doubted before their demise. However, if doubts are cast upon them, how odd it will be that we have enshrined into a statute their two names, saying that interpretation is to be guided by their opinions.

I pass to another point. I am sure that this is my fault, but my only excuse for raising this point is that I gave the noble and learned Lord notice of the fact that I intended to do so. It relates to the two exceptions which we have made to the convention. I do not query the Article 7 exception, but I do query the one contained in Article 10, which is headed "Scope of the applicable law". Subparagraph (e) speaks of: the consequences of nullity of the contract". I am sure that it is my fault for not understanding this, but we have in our law of contract the situation in which, for example, where public policy has been breached, the contract is void—not voidable, but void. If a state which is the state whose law is to govern the situation in regard to interpretation and the consequences of a contract has a law of public policy which makes the contract null and void, the consequences of that must obviously be ruled on by the law of that country. I therefore do not understand the reason for "the consequences of nullity of the contract" being excepted.

I ask myself—I am afraid I cannot give the answer and therefore have to ask the noble and learned Lord or, if I have taken him by surprise, I shall be perfectly happy to receive the courtesy of a letter afterwards—whether, if one has the nullity of the contract being decided by a court of the country whose jurisdiction and whose law is to be applicable, to leave it at the nullity decision and not be able to deal with the consequences of the nullity does not leave a void. It is a void which at the moment I am unable to fill. I am sure the noble and learned Lord will either help me on that or tell me if he wants to consider the matter further. As I said, I have not given him very much notice of the point.

My next observation is in regard to what was said about the subject not being exciting, as the noble and learned Lord commented. There is one bit of excitement which the United Kingdom can enjoy. As I understand it, seven of the nine states have to ratify before this convention becomes effective. Six have done so. The only three remaining are ourselves, the Irish Republic and the Netherlands. I beg of the United Kingdom to dash into the place of number seven and therefore be responsible for the convention becoming effective, thereby beating Ireland and the Netherlands. I understand that the Netherlands comes into another battle with the United Kingdom very soon in the world of soccer. I can only hope that that game will take place as peacefully as will the United Kingdom becoming the seventh party to ratify this convention and therefore bringing into effect this very desirable international matter of interpretation and jurisdiction.

6.04 p.m.

Lord Lloyd of Kilgerran

My Lords, it certainly appears from the most helpful introduction to the Second Reading of this Bill by the noble and learned Lord the Lord Advocate that there has been much international horse-dealing as to what its contents should be, if that is not too coarse a phrase to raise at this time. The object of the Bill is to enable the UK to ratify the Rome Convention, which was opened to signature by EC member states as long ago as 1980 and was signed by the UK in 1981.

The noble and learned Lord the Lord Advocate has mentioned that there has been a long delay, but I am sure that this delay has been brought to an end by the infusion into the European Court of my friend the right honourable Sir Gordon Slynn, who felt that at last the day had come when the UK should give an indication. However, I must say, prima facie, this Bill does not seem to me to carry forward any useful practical matters to assist those like myself who, for many years, have been dealing with this question of conflict of laws.

I should like to express my thanks to Maire Harman of the Lord Chancellor's Department for supplying me with such comprehensive notes, comments and assurances. I feel I must have regard to them, emanating as they do from the Lord Chancellor's Department. I should also like to congratulate, as has the noble Lord, Lord Mishcon, the draftsman of this Bill upon having included copies of the various protocols, conventions and schedules to the Bill to prevent practitioners like myself having to scuttle around to find these conventions in other sources.

I am also grateful to Maire Harman for the use of her words: The rectification of the convention will lead to few significant changes in existing UK law". I am not sure what that phrase in her notes means. I am not sure what are the "few significant changes" that she has in mind. I had a very interesting time dealing with what is known as the conflict of laws in international matters relating to intellectual property, but Maire Harman goes on to say, in paragraph 3 of the introduction to her notes—and I console myself with what she says—that: the two basic principles in the Rome Convention accord with those at present applicable under United Kingdom law. First, that the parties to the contract may choose which country's law is to govern it and, secondly, that in the absence of such a choice the contract is to be governed by the law of the country with which"— and I emphasise these words— it is most closely connected". There is the difficulty. In view of the great advances in technology, what are now the countries with which parties are most closely connected in relation to contracts? I shall return to that matter a little later.

The phrase is very difficult to construe with regard to the field of intellectual property and especially the transfer of technology in this age of technological developments, as I shall mention later. I have already personally apologised to the noble and learned Lord the Lord Advocate for raising points about which I have not given him notice. However, if he were to assure me—even at this late stage—that all is well in this Bill so far as Scottish law is concerned, I might perhaps be tempted to sit down.

Nevertheless I, like the noble Lord, Lord Mishcon, am anxious about the exclusion in Clause 2 relating to Article 7(1) of the Rome Convention. I understand that the UK representatives required the limitation in order to avoid uncertainties and potential conflicts which make it difficult to predict the legal effect of a transaction. Apparently all the other states agreed to the insertion of this provision. However, as a lawyer concerned with the uncertainties of conflicts of laws in presentations to courts all over the Commonwealth, I cannot understand why the UK has once again decided to go it alone to exclude Article 7(1). I agree that Article 7(1) is somewhat verbose. However, as practitioners in the field most of us are accustomed to verbose matters in the question of conflict of law.

Out of courtesy to the noble and learned Lord the Lord Advocate, I should mention that as the term "UK" in this field includes Scotland, for once we have different laws arising between Scotland and the remainder of the UK. Therefore I am sure that Article 19 of the Rome Convention will please and placate the noble and learned Lord the Lord Advocate and the noble and learned Lord who sits on the Woolsack.

Like the noble Lord, Lord Mishcon, I could not appreciate why Article 10(1)(e) of the Rome Convention dealing with nullity questions should not have the force of law. However, the noble Lord, Lord Mishcon, has elaborated that point and I accept his presentation of his approach to the matter. I am not acquainted with the subtleties of the law of nullity which apparently may arise in circumstances that I do not know. I again cannot understand why the delegates of the UK contingent decided to go it alone.

Perhaps I may refer to Schedule 1 to the Bill. Paragraph 2 of Article 1 of the Rome Convention sets out eight sub-paragraphs covering large areas of law where the Rome Convention shall not apply. The noble and learned Lord the Lord Advocate referred briefly to some of the matters therein stated. They cover large sections of the law. For instance, paragraph 2(d) excludes from the Rome Convention arbitration agreements to which this Bill applies. Paragraph 2(e) excludes, questions governed by the law of companies and other bodies corporate or unincorporate". It then qualifies and indicates the interest relation to companies corporate or unincorporate that it should apply.

The paragraph states: such as the creation, by registration or otherwise". I am told that the Bill is to introduce certainties. But does "or otherwise" include merger and takeover questions? Are they to be excluded; or are the Takeover Panel's actions in this country to be excluded under the operation of the Rome Convention? In my view, paragraph 2(e) covers a vast area of the law and is full of uncertainties which ought to be resolved. Paragraph 2(d) and (e) seem to me to require further clarification.

There has been a rapid advance in technology since 1980 when the Rome Convention was put forward for signature. I speak as a member of the Parliamentary Information Technology Committee, and I am still its honorary secretary. I speak also as chairman of the Foundation of Science and Technology (which I was supposed to be chairing half an hour ago in the Royal Society). I suggest that the clause should be added to in order to exclude also all matters relating to intellectual properties. In her address at the 50th anniversary of the Parliamentary and Scientific Committee in the Royal Gallery last week, the Prime Minister mentioned that universities ought to pay more attention in their courses on law to the pitfalls of patent law. It seems to me therefore that it would be appropriate to exclude from the Rome Convention all matters relating to intellectual property.

I pray in aid of that rather compendious assertion a reference under research and development in Article 24, Title VI, of the Single European Act. I apologise to the noble and learned Lord for not having brought this point to his attention. The section is headed Research and technological development. It is Article 130F. It states in a mandatory way that, The Community's aim shall be to strengthen the scientific and technological basis of European industry and to encourage it to become more competitive at international level". Paragraph 3 states: In the achievement of these aims, special account shall be taken of the connection between the common research and technological development effort, the establishment of the internal market and the implementation of common policies, particularly as regards competition and trade". From my reading of the Bill, it seems that so far as concerns UK law that aspect of the importance of developments in this country has not been fully appreciated. I therefore refer again to Article 6 of the Rome Convention. It is entitled Individual employment contracts. In modern days in Europe one finds consultants employed on research and development by several companies in different countries. Therefore Article 6 seems to me to be very much out of date when it states: A contract of employment shall, in the absence of choice in accordance with Article 3, —that is to say that they have decided what law should apply— be governed:

  1. (a) by the law of the country in which the employee habitually carries out his work in performance of the contract, even if he is temporarily employed in another country; or
  2. (b) if the employer does not habitually carry out his work in any one country by the law of the country in which the place of business through which he was engaged is situated".
In deciding important questions relating to employees' contracts the Rome Convention is completely out of date and out of feeling with the modern approach so necessary in European co-operation on research and development.

Two or three years ago I had a case concerning an employee who was not closely concerned with Swedish industry but was encouraged to try to achieve a better award for any innovations he had produced under his contract with many firms. In our view the Swedish law can be understood more clearly as to what award is available without a lot of fuss for an employee who seeks an award. The question therefore arose: where was the place of business at which he was engaged? He was engaged by several companies. Was he habitually carrying on his work in a certain place? Of course he was not. He was wandering from time to time and he could not say where he was habitually concerned with.

Therefore when he asked for my advice I said to him, "Find out what they are going to give you. Ask them to increase it just a little more and accept that, and don't fuss around for the courts to decide what might happen in about three or four years' time if you cannot settle". It comes to a matter of common sense these days. I suggest therefore that intellectual property matters raise such complexities that they might also be excluded from the Rome Convention under paragraph 2.

I was a little surprised, if I may say so with great respect, that the noble and learned Lord did not refer to Clause 6 of the Bill, which says: This Act binds the Crown". Why was it necessary to put in this matter in relation to at any rate a quasi-international Bill of this kind? There are not many crowns about in this world. From a serious point of view, surely the Crown is now involved through its various departments with a lot of serious matters of research involving secrecy. Why should this Bill deliberately be set down to bind the Crown?

I feel sure that there must be some kind of fundamental legal question. To use a word that the noble Lord, Lord Mishcon, introduced quite early in his speech, there must be something exotic about this factor that leads, first of all, to the noble and learned Lord not mentioning Clause 6, and the fact that it says that it binds the Crown.

Lord Mishcon

My Lords, I think I used the word "esoteric", but I may be wrong.

Lord Lloyd of Kilgerran

My Lords, I am sorry, but I did not gather what the noble Lord said. I am sure that it was erudite and exotic, but I did not hear what he said. If he would like to repeat it I will sit down so that he can make it clear to me.

Schedule 4 rather excited me. It refers to the Patents Act 1977. At once I thought, "Here we are on good, common ground about the Patents Act 1977", on which I had the privilege and honour of occupying quite a great deal of your Lordships' time. But it only introduces a small but relevant amendment to Section 82 of the Patents Act 1977.

Section 82 of the Patents Act 1977 is merely one section in Part II of that Act which deals with the, Jurisdiction to determine questions as to right to a patent". It contains a lot of other sections that, frankly, I do not understand very clearly even today.

Therefore I hesitate to ask the noble and learned Lord why they have picked out Section 82 in relation to this matter.

Section 82 deals with all kinds of conventions. If I may give away my case and perhaps give a point, with great presumption, that may help the noble and learned Lord when replying to me, it may be that he will invoke Article 20 of the Rome Convention and say that there is precedence of Community law and therefore all is well with the Patents Act 1977; or he may also quote Article 21—"Relationship with other conventions". It says: This Convention shall not prejudice the application of international conventions to which a Contracting State is, or becomes, a party. The patent system is of course in a jungle at the present time with its European patents, its Community patents, and nobody really knows which way to go in this matter. Nevertheless, I am sure that the noble and learned Lord, with his great experience in these matters of general law, will be able to put me right.

In conclusion, I echo what the noble Lord, Lord Mishcon, said. Clause 3 of the Bill is entitled "Interpretation". The practice of the courts, at least when I was practising, was that they would not take much notice of any reading from a textbook unless the writer of the textbook was dead. It was not an authority until the writer of the textbook was dead. I had the privilege of producing a textbook—it was the third edition of Halsbury's Trade Marks and Designs—and often an opponent would, with great glee, open up his copy of that to quote it against me.

It was always a great pleasure to me, particularly when it happened in the Court of Appeal, when my opponent was told that he could not use that, however persuasive it was, because so far the author was in our presence and therefore under the ordinary ritual could not be considered to be authority in that sense. That may be so, but I merely echo the words of the noble Lord, Lord Mishcon, that it is surprising that Clause 3 should suggest that a court should have regard to some effusion from two however distinguished persons.

Lord Howie of Troon

My Lords, before the noble Lord sits down, perhaps I may ask whether he recalls our debates on the copyright Act 1988. I am sure that he does. At that time a Bill came before this House in a form which required something like 1,200 amendments from this House after the Committee stage. Would he join me in hoping that the Government have paid more attention to the drafting of this measure than they did to that one? Otherwise, let me say that there will be another 1,200 amendments to this Bill.

Lord Lloyd of Kilgerran

My Lords, I am grateful to the noble Lord for his most helpful intervention. I well recollect the copyright Bill 1988. However, copyright is included in the generic—rather pompous—term "intellectual property". I felt therefore—the noble Lord has supported my view—that intellectual property matters should be excluded from the Rome Convention and should join this large area of exclusion under paragraph 2.

6.28 p.m.

Lord Simon of Glaisdale

My Lords, I apologise for not having put down my name to speak. However, I hope that I may be allowed to sidle into the gap to ask one or two questions of which I have given notice to the noble and learned Lord. First, I should like to raise two matters of which I have not given him notice but which arise from the two speeches that have preceded mine. The first is: which should come first, ratification or legislation? I always understood that our understanding of international law was that, having ratified, we must legislate. I therefore agreed with the noble Lord, Lord Mishcon, that there was nothing to stop us now ratifying well in advance of this legislation passing.

The other matter was the point raised by the noble Lord, Lord Lloyd; namely, why does this statute say that the Crown is bound? I always understood that at least in English law— and the noble and learned Lord, who will deal with the Scottish law in any event, can correct me if I am wrong—a statute does not bind the Crown unless it is expressly stated to do so. It seems to me that the draftsman is entirely right and not open to criticism.

The first point of which I have given notice to the noble and learned Lord arises from Clause 3(3). I am afraid that I do not agree with the noble Lord, Lord Mishcon. The subsection states that a commentary on the convention may be considered in ascertaining its meaning and effect. I venture to emphasise the words "may" and "considered". I rather thought that the noble Lord was conjuring up hobgoblins when he fancied the appearance of a change of opinion or even the death of the person whose commentary is made admissible. However, I go further. Having made the provision in the body of one of our statutes, I should like it to be far more general.

The point arises in a case called Black-Clausen v. Papierwerke where it does not fall to a necessary decision. In that case a Bill dealing again with international law had been drafted by a high-powered committee which gave a commentary on it. The commentary made the decision on what it meant clear beyond any doubt. There was a difference of opinion in your Lordships' Appellate Committee as to whether we could look at that. I am bound to say that it seemed quite absurd and obscurantist not to look at something which was so obviously relevant and persuasive. Practically every Session the Law Commission drafts a Bill and makes a commentary upon it. I ask why, particularly now that there is this precedent, should we not consider the commentary. I ask whether the rules should not be clarified now in the light of the right provision in Clause 3(3).

The other matter with which I want to deal is Article 4(1). That deals with the choice of law as to contract. It says what is certainly consonant with present English law—that in default of agreement otherwise by the parties, the law to govern the contract shall be the law of the country with which the contract is most closely associated. I doubt whether anyone would quarrel with that. As I understand it, that is our own present law.

Article 1(2)(c) excludes various contracts from that provision. The only one to which I wish to refer is marriage. It seems to me, on social and juristic grounds, to make entire sense to say that the essential nature of marriage and its essential validity, apart from forms and ceremonies, shall be governed by the law of the country with which the marriage is most closely associated. I raise the matter because the Law Commission in a recent paper was hesitant if not adverse in its attitude. I ask now, in the light of this provision, whether that opinion of the Law Commission should not be re-examined.

The last point I wish to make concerns the style of drafting of the convention. It seems to me quite admirably clear and simple. Why cannot we have our own statutes drafted in the same way.

6.35 p.m.

Lord Wilberforce

My Lords, I also ask indulgence from the noble and learned Lord for entering the debate at this stage. My excuse must lie in the helter-skelter nature of legislation nowadays presented to us. It comes so thick and fast that it is almost impossible to be on top of it. That will also justify the somewhat unprepared and disjointed character of some of the remarks I wish to make.

I am not enamoured as to the prospect of legislating on questions of private international law. That has grown up flexibly through the judges over the years. And the judges have done a fairly good job. When those matters are put into a statute, they are frozen into the text of the statute. It may be that the statute does not have it right. However, here we are. We are asked to legislate in order to incorporate the convention.

I do not personally feel it necessary to comment on the terms of the convention, as some noble Lords have done. We are stuck with the convention: we either ratify it or do not ratify it. It cannot be amended by discussion in committee. We either have to accept it or not. I find that the convention contains a certain number of novelties. The noble and learned Lord referred to one about characteristics. Article 8(2) is another. There are others which are quite new and possibly quite good. However, it does not seem to me profitable or useful to have discussed them in relation to this Bill.

I have a rather more fundamental point which may be completely misconceived. If so the noble and learned Lord will tell me. It relates to the scope of the Bill which is intended to incorporate the convention. The convention is a Rome—a European—convention. It takes a little time to work that out, but it is quite clear from the explanatory memoranda. Article 28 says that it is open to signature by members of the European Community. Later on there is provision for reference to the European Court at Luxembourg. Therefore, it is clearly a convention entered into between the 12 members of the European Community. As such, it is a treaty between states and binds those states. However, we are not concerned with the binding effect on states but its effect in private law. With this sort of legislation, 'the problem is always to bridge the gap between the treaty obligation involving states, which is in the convention, and the private law result which we are trying to achieve through the Bill.

There is this difficulty. The convention applies as between the 12 members of the European Community when they ratify it. How does it become binding generally, or is it binding generally? I am rather perplexed. I look at the Long Title of the Bill which states: An Act to make provision as to the law applicable to contractual obligations in the case of conflict of laws". That is absolutely general and has no limitation to the European Community. Article 1 of the convention states: The rules of this Convention shall apply to contractual obligations in any situation involving a choice between the laws of different countries". That is made the law of this country by Clause 2 of the Bill.

Let us take the case of a contract entered into between an English company and an American company with a choice of law clause in it. Is this Bill to apply to it? Is it to introduce the rules of this convention? If so, why are they binding on an American business? If there is a contract between a Belgian company and a Norwegian company, possibly making it subject to Norwegian law, is that to be governed by the rules of this convention? I believe that there is a great difficulty in that respect. It is probably not intended that the Bill should be so wide. If the Bill is intending simply to make this law as between members of the European Community and people resident in the Community and carrying on business there, that is well and good and very useful.

There are many other conventions which apply only in the community. In that case surely we have to say so in the enacting clause of the Bill. I am not pressing this matter at the moment. The noble and learned Lord may not wish to answer the point at this stage. If there is any validity in it, then it can perfectly well be dealt with by a simple provision in the enacting part of the Bill saying that "this Act shall have the effect as between persons having habitual residence or carrying on business in any one of the member states".

That is, I suggest, an important point. I believe it is intended that the Act and the convention should have that effect, but in view of the absolute terms of the Long Title and of Article 1 of the convention, it is a point that deserves consideration.

Another small point I wish to raise concerns Article 7. I am very glad that we have excluded it from the application of the convention. I do not believe it is a case of the United Kingdom standing out alone. I know something about this. It has been the subject of intense debate—jurisprudential commentary and so on—and it is a very controversial matter. It bears every imprint of a compromise. The article begins by saying that, effect may be given to the mandatory rules … if and in so far as … those rules must be applied". It is a nonsense because it is a compromise. It is perfectly well provided for in Article 22 of the convention that we may make a reservation concerning it. I should be very surprised if other states did not do the same. Indeed I should be quite indignant if the United Kingdom had not reserved its position concerning that article.

I do not say anything about Article 10(1)(e) because the noble Lord, Lord Mishcon, has raised a question about it. I am sure that the noble and learned Lord will be able to answer it. I beg your Lordships' pardon in raising these points so late at night. Perhaps the noble and learned Lord will take them on board and deal with them as he thinks fit.

6.42 p.m.

Lord Fraser of Carmyllie

My Lords, I am grateful for the general welcome that has been given to the Bill. Having had some responsibility for draftsmanship I am astonished that from such noble and learned quarters there is some support for the simplicity and clarity of the drafting of a Bill that comes before your Lordships' House. For that we are clearly very grateful.

Some seven years ago in another place I had the unlucky task of explaining why Professor Schlosser and Herr Jenard had found themselves introduced into United Kingdom legislation through the Civil Jurisdiction and Judgments Act 1982 as it now is. I refer to Section 3(3) of that Act. So it is not the first time that we have resorted to this device. Indeed it has been a tendency of the courts of the United Kingdom to have regard to travail préparatoire and similar documents—increasingly so in recent years. It follows the pattern of the Jenard and Schlosser reports and their incorporation into our law as a source to which the courts may look. I hope that a proper construction of this Act will be useful in due course to the courts.

I take the point that the noble and learned Lord, Lord Simon, made concerning comparable commentaries that are provided in a purely domestic context by the Scottish Law Commission and the Law Commission for England and Wales. It may be as much a matter for the courts themselves to decide what they are prepared to look to as it is for me at this Dispatch Box to give an instruction to them as to what they might properly have regard to concerning the proper construction of statutues.

A number of important matters have been raised. I am sure that noble Lords will appreciate that they are somewhat detailed. I hope therefore that I shall be forgiven if I do not cover all of them. I am also grateful to the noble and learned Lords, together with the noble Lord, Lord Mishcon, who indicated that they were not concerned about Article 7 and who appreciated that its incorporation into the United Kingdom would cause much greater difficulties than it would resolve. I hope that the noble Lord, Lord Lloyd, will appreciate that he is outnumbered on this aspect and that he will retreat gracefully.

I doubt whether I shall secure quite the same graceful retreat by either the noble Lord or the noble Lord, Lord Mishcon, in respect of Article 10(1)(e). I hoped that I had explained it. The article deals with the consequences of nullity of a contract. If incorporated, that would be included among the aspects of the contract which are to be governed by the law applicable had the contract been valid. I say this cautiously as a Scots lawyer. I understand that under English law the right to recover money paid under a void contract is part of the law of restitution and not of the law of contract. In Scotland it is certainly part of the law of recompense rather than of contract. In such circumstances it was considered inappropriate for it to be applied in the United Kingdom.

Lord Mishcon

My Lords, I am grateful to the noble and learned Lord for giving way. I do not intend that this matter should degenerate—I believe that is the right word—into a debate because he is being so kind in answering the questions. Is the Minister prepared to answer this question or to consider it: what is the point of a court deciding that there is a nullity or that a contract is void but being unable to deal with the consequences of that nullity? The answer may be that the court does not have jurisdiction over the consequences. That appears a very odd situation. I apologise if I am talking nonsense.

Lord Fraser of Carmylie

My Lords, there may be some confusion here. What we are seeking to determine is not which court should have jurisdiction but the law applicable to it. I accept that in certain circumstances, where the consequences of a void contract have to be considered, they may have to be considered in relation to another law. The narrower point that I am making concerns the convention and how it deals with contracts. The law in Scotland—and I believe also in England—deals with the consequences of a void contract as part of the law of restitution or recompense as the case may be, and not as a matter of contract. It may be as narrow a matter as that.

The noble and learned Lord, Lord Simon of Glaisdale, asked whether it was not more appropriate to proceed to ratification first and to follow that by legislation. While that is a course that has been followed it has not been invariable. It appears to me that the order we are following of signing the convention, introducing the legislation to allow the ratification and then ratifying is an appropriate order to follow.

I was asked by the noble and learned Lord why marriage was excepted. The emphasis of the convention here is on commercial and contractual matters. It may be that different considerations apply in relation to family matters. I believe that traditionally or customarily such issues have been dealt with in rather more specialised conventions such as the Hague Convention on trusts besides other conventions on matrimonial matters.

Lord Simon of Glaisdale

My Lords, it is perfectly true, as the noble and learned Lord said, that in substantive law the validity of marriage is otherwise dealt with, but it is in a high state of confusion. My point was: why not put it in order on the lines that this convention stipulates for commercial contracts?

Lord Fraser of Carmyllie

My Lords, I appreciate what the noble and learned Lord says. I hope that I have at least given him some indication of why a different view has been taken of it in this Bill.

The noble Lord, Lord Lloyd of Kilgerran, suggested that patents and intellectual property should be omitted. This is a Bill of fairly general scope. The convention was carefully negotiated. I was not aware that there had been any earlier representation that such a broad area of interest should be excluded. He also asked a question regarding the Patents Act 1977 on that part of the Bill which relates to consequential amendments. I fear that the noble Lord will have to look to the other consequential amendments and also forget the earlier legal language that he learnt of referring to "the proper law". If he looks to those amendments he will see that there is nothing mysterious going on here. In all the consequential amendments "the proper law of" has been deleted, and substituted therefore is "the law applicable to". There is nothing more complicated in it than that.

The noble and learned Lord, Lord Wilberforce, asked about scope. There are wide questions. In view of the time I wonder whether I may be allowed to write to the noble and learned Lord at a later stage to give him a full and proper answer.

I am grateful to the noble and learned Lord for his brief assertion with regard to Clause 6. He asked why the draftsman had made reference to the Crown. I was recently a litigant before your Lordships' House where the matter of the application of statutes to the Crown was considered. The successful outcome to that litigation would seem to indicate that the draftsman was correct in the approach that he has taken here.

I conclude by saying to the noble Lord, Lord Mishcon, that I was not surprised that he spotted with an eagle eye that it only required ourselves to ratify this convention to ensure that eventually it would take effect. Given the welcome there has been for the provision in this House this evening, I hope that it will make progress through both Houses without difficulty and that we can be united in achieving that single objective.

On Question, Bill read a second time, and committed to a Committee of the Whole House.