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Exporters face new regulations

03 Jun 2011

Businesses which trade overseas are being warned to check the small print following the introduction of new regulations for transactions between European Union countries.

The Rome 1 Regulation has been introduced to clear up any confusion over which country’s laws will apply to a contract where the buyer and seller are in different countries. Businesses trading over the internet need to be particularly careful.

Jonathan Waters, a Partner in the corporate team at Hay & Kilner Solicitors believes this presents a potential minefield for UK businesses, since the laws of two countries may be very different when applied to a contract.

For business to business contracts, parties can continue to agree and stipulate which country’s laws will apply. If no governing law is specified, however, the Regulation provides rules for deciding which law applies.

In the case of selling to consumers in other countries, although the contract can identify the law that is to apply, there are now certain circumstances where consumers will be able to claim all the consumer protections given to them by the law of their home country.

Under the new law, this local consumer protection will apply if the seller has commercial activities in the consumer’s home country or if the seller directs its commercial activities to that country, for example by offering a French or German version of its website content.

This means that businesses may find themselves dealing with completely different requirements to comply with local law, and in many instances those could be much tougher. For example, in some countries supplying defective goods may incur a penalty as well as replacement of the goods.

Jonathan Waters, who has helped many of Hay & Kilner’s business clients to protect their interests, commented:

“The Rome 1 Regulation makes it even more important to ensure that the governing law is expressly stated in any contract. For any business to business relationships clearly written contracts will cover the issues posed by Rome 1. Businesses with international sales to individuals, for example over the internet, are however seriously affected by this.

“We believe a large number of businesses selling online will be caught by the new definition. If they are, then they have some stark choices to make if they want to avoid being caught out by the local laws of another country. In practical terms, this means obtaining legal advice on the consumer laws of each country, and then deciding whether to continue trading with consumers in those countries.”

For further information, please contact Jonathan Waters on 0191 232 8345 or email jonathan.waters@hay-kilner.co.uk

Please note:
This article is not legal advice; it is intended to provide information of general interest about current legal issues. Please contact us to discuss how the contents of the article may affect you.