Seanad Éireann debate -
Thursday, 15 Nov 1990

Vol. 126 No. 11

Contractual Obligations (Applicable Law) Bill, 1990: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister of State at the Department of Transport and Tourism (Mr. Lyons)

The purpose of the Contractual Obligations (Applicable Law) Bill, 1990, is to give the force of law to two EC Conventions. The first is the 1980 Rome Convention on the law applicable to contractual obligations, and the second — the 1984 Accession Convention — provides for the accession of Greece to the 1980 Convention.

Before going into any detail on the Bill or the conventions I think it would be useful if I put this measure in context and explained its importance. This Bill deals with a specific area of our private international law; that is, which country's law should be applicable in deciding a dispute involving a contract with an international element. In the case of litigation concerning an international contract three key issues arise. They are which country's courts will have jurisdiction to try the dispute; what law will those courts apply where there is a choice between the laws of the different countries involved; and will the the resulting judgment be enforceable in other states?

Two of these issues, that is, jurisdiction and enforcement, are already dealt with in the 1968 EC Judgments Convention which was brought into force in Ireland by the Jurisdiction of Courts and Enforcement of Judgments (European Communities) Act, 1988. It is the remaining issue, that of the applicable law, which this Bill, and the conventions it will bring into force, addresses. I must emphasise that although an international contractual dispute might fall to be tried in Ireland by virtue of the provisions of the EC Judgments Convention, that does not necessarily mean that Irish law would be applied. Another law connected with the dispute might be the appropriate law to determine the dispute. This distinction between jurisdiction and applicable law can be overlooked thus giving rise to misunderstandings.

As will be evident to those who have studied the Bill and the conventions, this area of the law is complex and technical. Nevertheless it is an area of considerable importance. We are all aware of how vital international trade is to our economy. A high proportion of economic activity in this country relates to the import and export of goods or services. Behind these transactions lie some form of contract. As the trade is international there is an inevitable interaction between the legal system in Ireland and in the countries with which we do business. In addition, if international trade is to flourish it needs a suitable legal framework to underpin it. That is what the 1980 convention and this Bill is about. The 1980 convention provides a modern and clear code of rules in an area where our existing law is currently unclear and uncertain. The Bill by giving effect to the 1980 convention will facilitate the growth of our international trade. It is a practical measure which will be of real benifit to Irish business people entering into contracts with an international element.

The implementation of the 1980 convention is also of importance in the context of our membership of the European Communities. The Commission of the European Communities, and in particular the directorate dealing with the Internal Market have taken the view that the lack of uniform rules in this area was impeding the free movement of persons, goods and capital among the member states. They favour its early implementation in all member states. I might make the point at this juncture that, while the 1980 convention is a Community convention, the rules laid down in the convention will be applicable even if the law to be applied is not that of a member state of the European Communities.

The convention has not yet entered into force for any of the member states of the Community. It requires ratification by seven member states to bring it into force in those states which have ratified it. To date, six states have ratified and I understand that the United Kingdom will do so shortly with the result that the convention will enter into force in those states in early 1991. I would hope that this Bill will get a speedy passage through both Houses of the Oireachtas so that we will keep in step with our EC partners.

The Bill has four sections and four Schedules. Section 1 and section 4 are straightforward procedural provisions. Section 2 gives both conventions the force of the law in the State. The 1980 convention contains the rules to determine which country's law will be applicable in a choice of law situation. The 1984 convention provides for the accession of Greece and makes the Greek text of the 1980 convention equally authentic with the other seven language texts.

Members of the House will note that subsection (2) of section 2 provides that Article 7 (1) of the 1980 convention will not have the force of law in the State. The convention itself allows states not to apply Article 7 (1) and we propose to avail ourselves of this option for reasons which I shall make clear when I turn to the main provisions of the convention.

Section 3 of the Bill relates to the interpretation of the conventions. There are two matters involved here. The first relates to the interpretation of the conventions by the Court of Justice of the European Communities. In December 1988 the twelve member states agreed that powers should be conferred on the Court of Justice to interpret the 1980 convention as an aid to the uniform interpretation of the convention throughout the Community. This was done by means of a protocol to the 1980 convention. Since the protocol would empower the Court of Justice to give rulings which would be binding on the courts of the contracting states, it is not possible under the Constitution for Ireland to ratify this Protocol. Accession to the 1980 convention or the protocol is not necessitated by the obligations of our membership of the European Communities and, therefore, is not covered by the terms of the constitutional amendment — now Article 29.4.3 of the Constitution — which inter alia enabled our courts to be bound by interpretative decisions of the Court of Justice on the EC Treaty and the 1968 Judgments Convention. Therefore, while decisions given by the Court of Justice on the interpretation of the 1980 convention will not be binding on the Irish courts, they are decisions which the Irish courts may consider in interpreting the convention. Section 3 (1) (a) provides accordingly that judicial notice shall be taken of such interpretative decisions.

The second matter covered by section 3 is the official report on the 1980 convention by Professors Giuliano and Lagarde. It is standard practice when an international convention is being drawn up for a report to be prepared by persons involved in the drafting explaining the intentions of the drafters. Section 3 provides that judicial notice shall be taken of the report and that the courts shall have discretion to decide what weight they shall give to the report when interpreting the convention. There is a similar provision in section 4 of the Jurisdiction of Courts and Enforcement of Judgments (European Communities) Act, 1988, in relation to the reports on the 1968 Brussels Convention.

I turn now to the 1980 convention. I will not go through the convention in detail now. What I propose to do is to deal with the main features of the convention.

At one stage it was intended that the convention would govern choice of law in the area of torts as well as contracts. However, it became apparent that it would be difficult to reach agreement on rules in the torts area and so it was decided to concentrate, initially in any event, on contract law. Even then certain types of contracts are excluded from the convention by Article 1 for a variety of reasons. Rights in property arising from a matrimonial relationship are excluded because it is a family law matter and not appropriate for inclusion in a convention dealing primarily with commercial law principles. Another example of an exclusion is in the area of insurance contracts. Insurance contracts where the risk is situated in the Community are excluded because special choice of law rules appropriate to them were being drawn up to form the basis of a separate EC instrument. Overall, however, this convention will apply to the generality of commercial contracts.

The two basic rules of the convention are set out in Articles 3 and 4. The first, contained in Article 3, is that parties to a contract are free to choose whichever law they wish to govern their contract. The law chosen does not have to be related to the contract. For example, two Irish people entering into a contract to be performed here could conceivably decide to choose a law other than Irish law to govern their contract. This reflects the existing law in Ireland. The Supreme Court in 1988 accepted that parties are free to choose the law they wish to govern their contract even to the extent of choosing a law wholly unconnected with the contract.

If the law governing the contract has not been chosen by the parties the second basic rule, contained in Article 4, applies. The purpose of this rule is to determine the applicable law in the absence of choice. It provides that where no choice has been made the contract will be governed by the law of the country with which it is most closely connected. This reflects existing Irish law which is to the effect that in the absence of choice a contract is to be governed by the system of law which has the closest and most real connection with the contract and transaction.

How does one decide which country has the closest connection with a contract? The convention provides in Article 4 for a series of presumptions to be used to determine the country with the closest connection. Under existing law the court has to look at all the factors involved to determine which system of law has the closest connection with a contract. The convention rules should provide greater certainty, although in most cases they will produce the same result as would be achieved under the present law.

These two basic rules are supplemented by other rules dealing with specific issues. Like the EC Judgments Convention, this convention contains special provisions, which have no equivalent in present Irish law, to protect the weaker parties to certain consumer and employment contracts. These provisions are contained in Articles 5 and 6 respectively.

The consumer contracts in question relate generally to the situation where the supplier of the goods or services or the supplier of credit for the purchase of such goods or services has sought out the consumer across national frontiers — for example, by advertising or direct mailing. The convention in keeping with the general principle of freedom of choice enables the supplier and the consumer to agree a choice of law but any such choice cannot deprive the consumer of the protection of the mandatory rules — which are defined in the convention as rules that cannot be departed from by contract — of his own country. Such mandatory rules will be found in the consumer legislation of each member state of the Community, including Ireland.

If there is no choice of law in a consumer transaction of the type in question then, provided the supplier has taken the initiative, the contract as a whole will be governed by the law of the habitual residence of the consumer and the mandatory rules of that jurisdiction will apply automatically.

Similar rules apply in the case of a choice of law by the parties to an individual contract of employment. Where there is no choice then the law that will normally apply will be the law of the country where the employee habitually carries out his work or, if he does not habitually carry out his work in any one country, the law of the place of business through which he was recruited.

I have already mentioned mandatory rules in the case of certain consumer and employment contracts. There are a number of other provisions in the convention concerning mandatory rules. As I have explained, a mandatory rule is a rule of law which cannot be derogated from by contract. In giving parties to a contract wide freedom to choose which law should govern their contract there is a danger that this freedom could be abused to avoid the application of a mandatory rule of a country which has a legitimate interest in the matter. The approach taken in the convention to resolve this problem is to allow freedom of choice but to make that freedom subject to the application of relevant mandatory rules. In addition to the specific instances of consumer and employment contracts, the mandatory rules of a country are applicable where all the elements relevant to the contract are connected with that country but the law of another country has been chosen to govern the contract. This is provided for in Article 3 (3) of the convention. Under Article 7 (2) the mandatory rules of the country where the case is being tried are always applicable irrespective of the law otherwise applicable to the contract.

Controversy surrounds the remaining provision in the convention — Article 7 (1) — which deals with mandatory rules. Article 7 (1) provides that courts shall have discretion to apply the mandatory rules of another country with which the contract has a close connection. Objections were made to the inclusion of this provision in the convention on the basis that it would place a too onerous task on national courts and would create uncertainty. For that reason, although the provision was maintained in the convention, member states may, under Article 22, enter a reservation against its application. It is proposed that Ireland should avail itself of the reservation as have Germany, Luxembourg and the United Kingdom and the Bill proposes accordingly.

The difficulty with Article 7 (1) is its vagueness and the uncertainty that would result from its application. In a contract involving a number of countries it may be impossible to predict in advance which countries might be considered to have a close connection with the transaction — close connection not being defined in the convention. It might also be impossible to predict whether a court would apply the mandatory rules, if any, of that country. This would make it extremely difficult for Irish companies entering into international contracts to be advised fully in advance on the implications of a contract or the likely outcome in the case of a dispute.

I might mention that the views of the Law Society and certain academics expert in this field were sought on this issue and they were strongly in favour of entering a reservation regarding Article 7 (1).

This Bill is of crucial importance to the business community and will have implications for all those involved in the drawing up of international contracts. It will clarify many of the areas of our law which are presently unclear as well as providing a modern up-to-date code of law which will be in full harmony with the laws of our Community partners in this area.

I am conscious that this is a very technical Bill. It is also a Bill which I think should not and hopefully will not be noncontroversial. I look forward to hearing the contributions of Senators.

I commend the Bill to the House.

Professor Raftery

I welcome this Bill. I do not intend to talk very long about it. I will leave the technical matters of the Bill — as the Minister rightly said, it is a very technical Bill — to my legal colleagues, Senator Cosgrave and Senator Kennedy.

I cannot over-emphasise the importance of this Bill. For a community, for a country to survive in a harmonious fashion, it is necessary that we have laws that we respect and uphold. It is clear, as the Minister said, that we are going to have more disputes between companies and individuals internationally as a result of the growth in business which will arise and is arising from our increased participation in the economic life of the Community and in the freedom of movement of goods, services, people and capital. It is quite clear, therefore, that in order to have some kind of order in our business and in our relationships we must have harmonisation of our laws. This is what the principle point in this Bill is all about.

I am very pleased to note that in December 1988 the Twelve member states agreed that the powers should be conferred on the Court of Justice to interpret the 1980 convention as an aid to the uniform interpretation of the convention throughout the Community. I am disappointed, however, that we still do not have the seven member countries ratifying this convention. The Minister is confident that we will have the seventh shortly, in the United Kingdom. I hope he is right. Certainly, present indications from that country about falling into line with anything in the Community are not very good. Let us hope that he is right.

As I have said, it is essential for a community, for a country, to have laws that are harmonious, harmonised and, about all, respected. In that regard I would say it is essential that the legislators in the first instance respect the laws. It is very difficult to expect the private citizen of the country to uphold and respect the laws if the legislators who draw up the law themselves are not good respectors of the law. Indeed, I regret to say that too often we, the legislators, do not set a good example in this regard. I regret also to say that the Government of our country have given a very bad example by in the first instance in 1987 introducing a law which they knew was against Community law imposing the 48 hour restriction on travellers going outside of the State. At that time I took grave exception to the change. I made that known in the European Parliament and as a result the Government were taken to the Court of Justice in Luxembourg. They were, as many of us anticipated, found to be in breach of the law. That is fair enough, but what is not right is that after they had been found to be guilty of breaking international law they still continue to ignore the findings of the court.

I understand the reason the Government did it in the first instance. If they knew, and I believe they knew they were breaking the law, they felt it would take a long time for the court to deal with it and they felt they would get a bit of a rest by it in terms of the amount of goods crossing the Border. Of course, that was a nonsense. As it is patently clear now. At the time I pointed out that we were selling twice as much in Northern Ireland as they were buying here. If they retaliated we would be the main losers. I pointed out that it was ironical that the Government or the party that always boasted about getting rid of the Border were now reinforcing it. Furthermore, I pointed out that if items as large and as loud and smelly as pigs and cattle were being smuggled across the Border, how in Heaven's name could we stop the smuggling of items as small, as valuable and as silent as whiskey, tobacco, electronic goods and so on? Of course, we could not and we did not.

The ESRI report showed nearly 12 or 15 months after the introduction of the restriction that there was no significant decrease in the flow of goods from the North to the South. There are very easy ways of establishing certain items of how much went one way or the other. Because there are only two bonded warehouses in this country, for instance, for whiskey — one in Northern Ireland and one in Southern Ireland, we know from the records how much is released from these two bonded warehouses. We know from these records that probably two out of three bottles of whiskey sold in the South are smuggled from the North having been made in the South in the first instance.

The point is that the real beneficiaries of that kind of smart-alec legislation to get over a problem of where our VAT rates were too high were the smugglers who, by and large, were terrorists. The real losers were the citizens. The point is that if we do not as legislators and if we do not as a Government respect the law that we introduce, how can we expect the ordinary citizen to respect the law? We introduce the law; we must set an example by respecting it.

I welcome this Bill. I leave the technical aspects to my legal colleagues, but I would urge this House to give it a quick passage, because, in order for us to benefit from the economic gains we can have and will have from increased trade with the Community, we must have harmonious and harmonised laws governing this trade, governing the movement of people, goods, capital and services.

Mr. Mullooly

I welcome the opportunity to make a short contribution to Second Stage debate on this Bill. The explanatory memorandum circulated with the Bill informs us that the purpose of the Contractual Obligations (Applicable Law) Bill, 1990 is to give legal effect to two European Community conventions namely the 1980 Convention on the Law Applicable to Contractual Obligations and the 1984 Accession Convention which provides for the accession of Greece to the 1980 convention. The Bill provides that both conventions will have the force of law in this State.

This is a significant Bill because the area of law with which it deals is of considerable importance to all Irish business interests who are involved in international trade and commerce. It is an area of private international law which is not well defined in Ireland and which was, heretofore, surrounded by a considerable degree of uncertainty. The main benefit of this Bill will be the replacement of the existing uncertainty with a coherent and comprehensive set of rules.

Since Ireland joined the European Community there has been a substantial growth in our international trade. This development has increased and underlined the need for major changes in our existing private international law in the civil and commercial sphere. The 1980 convention, therefore, has a particular benefit for Ireland. The Bill before the House, taken together with the 1988 Jurisdiction of Courts and Enforcement of Judgements, European Communities Act, in so far as that Act deals with contractual relationships, will provide us with a modern code of private international law in the area of contract law will facilitate our international trade.

The 1980 convention resulted from a recognition that the harmonisation of national rules of conflict would facilitate the workings of the Common Market. It had become increasingly evident that the escalating development of economic links within the Community would considerably increase the number of cases in which questions of applicable law would arise.

There would be a growing number of cases in which the courts would have to decide which country's laws would be applicable. If this situation were allowed to continue it is obvious that there would be a great degree of uncertainty in the whole area of legal relationships between contracting parties in the different member states. The 1980 convention addressed this problem by harmonising the rules of conflict in the various member states.

The central notion of a contract as a legally binding promise is easy to understand. However, the range of conduct covered by the notion of a contract can be extremely wide. There may, for example, be a contract for the sale of land or of a television set. There may also be a contract of employment or a contract for the carriage of goods or persons. Some contracts may be between large corporations and others may be between the members of the same family.

The average domestic contract between persons within the same jurisdiction in general presents little difficulty. In an action, on the foot of such a contract, the Irish court will deal with the matter by applying Irish law. For example, if the action concerns whether a valid contract exists the Irish court will examine such concepts as offer and acceptance, consideration moving between the parties and the intention to create legal relations.

Much more difficult, however, are contracts with a foreign element. For example there could be a contract between an Irish businessman and a German businessman negotiated and made in Italy to be performed in France. In the case of such a contract the question of what law should govern the contract would arise in the case of a dispute. Should it be Irish law or German law or should it be Italian law because the contract was negotiated and completed in Italy? Perhaps it should be French law because performance was to take place in France. Each of these systems of law would look at contractual matters differently.

It is important, therefore, to be able to say with some degree of certainty what system of law will govern a contract. This is of considerable importance to all sections of the Irish business community involved in international trade and commerce. The importance of certainty in the choice of law is not, however, confined to the business community, it is important to the consumer who purchases imported goods and to the employee who signs a contract to work abroad or to work here for a foreign company.

The present law in this area as far as Ireland is concerned is, as I stated, very unclear. Because of the fact that the question of applicable law has seldom been raised in Irish courts in disputes involving Irish parties and parties of other nationalities. There is a great deal of uncertainty in relation to what position the Irish courts would take on such issues.

It was considered at one time that the law which should apply was the law of the place of contracting. However, the difficulties in this choice of law quickly became apparent. The place of contracting could be fradulently selected to suit one of the parties involved. Alternatively, the place of contracting might be fortuitous and have no real connection with the contract. The courts have also considered that the applicable law should be the law of the place of performance, that is, the place where the contract is to be carried out but, of course, the place of performance offered no solution whereas in the case of a bilateral contract each party was to perform in a different country.

In more recent times the courts have held that the applicable law is the proper law of the contract, that is, the law which had the closest and most real connection with the contract. This law gradually evolved to include two central features. The first of these gave priority to the parties own choice of what law should govern the contract. Alternatively, where such a choice did not exist the law which should govern the contract was identified by having regard to all the circumstances of the case.

The question of whether the party should have complete freedom to choose any law they wish has always been a matter of considerable controversy. Again, this question is addressed in the 1980 convention. The freedom to specify the law applicable to a contract is enshrined in the convention. However, this freedom of choice may be affected by the application in certain circumstances of the mandatory laws of a system other than that chosen. This provision will ensure protection for individuals in the case of certain consumer and employment contracts.

This Bill, in giving effect to the 1980 convention, reaffirms our Government's commitment to a more unified Europe. Unifying the law facilitates the replacement of the existing rules of private international law by a more coherent and comphrehensive set of rules. By harmonising the rules of conflict the Bill, in giving effect to the convention, will reduce forum shopping and will give greater legal certainty to all parties in legal relationships. Parties to international contracts will be allowed the maximum freedom of choice in relation to whichever countries' laws they consider to be appropriate. This freedom of choice is qualified only to the extent that certain mandatory rules will remain operable.

The scope of the convention is wide. Under Article 2 it is to have world wide effect. It will apply to all contract cases having a foreign element irrespective of whether they have any connection with the European Community. However, as the Minister stated, certain matters are excluded from the scope of the convention. These are listed in Article 1, and include contractual matters relating to wills and succession and questions involving the status or legal capacity of natural persons.

Article 3 provides that the parties are free to choose the governing law. This choice need not be expressed, but it must be determined with reasonable certainty. Article 4 provides that in the absence of choice of contract is governed by the law of the country with which it is most closely connected. This is rebuttably presumed to be the country where performance is supposed to take place. This doctrine of characteristic performance is derived from Swiss law. This is, in some respects, similar to existing Irish law. Many of the articles of the convention are similar to Irish law. Like the Brussels Convention on Jurisdiction and the Enforcement of Judgments this convention contains special provisions which have no equivalent in Irish law. These will protect the weaker parties and consumer in employment contracts. The convention, in keeping with the general principle of freedom of choice, enables supplier and consumer to agree a choice of law but this agreement will not deprive the consumer of the protection of the mandatory rules of his or her own jurisdiction. For instance, in the case of an Irish consumer the protection of the Sale of Goods and Supply of Services Act, 1980, will obtain.

In the Bill the Minister has very wisely entered a reservation under Article 22 of the convention in respect of Article 7 (1). Article 7 (1) permits the court to give effect to the mandatory rules of some other third country with which the contract has a close connection. While this provision would no doubt reduce forum shopping, its practical implementation would be difficult. It would also introduce an element of uncertainty in cases of dispute which would make it extremely difficult for any Irish company entering into an international contract to be fully advised on the implications of such a contract. This provision was the most controversial provision of the convention. As the Minister stated, reservations have also been entered by some of the other parties to the convention, namely, Germany, Luxembourg and the United Kingdom.

The enactment of this legislation will ensure that Ireland will have a modern code of private international law in the area of contract law, which will facilitate our international trade. Accordingly, I welcome the Bill and thank the Minister for introducing it in Seanad Eireann.

Dr. Upton

At the outset I welcome the introduction of this Bill. As the Minister said in his opening remarks, the purpose of the Bill is to approve the Rome Convention of 1980. That convention regulates conflicts between Irish law and foreign law in relation to a contract. It provides rules for determining which country's law is applicable to an international contract. In as far as it does this, it is welcome enough.

In discussing the Bill it is appropriate at the outset to pay tribute to the role of Mr. Justice Brian Walsh who was a member of the international committee which drew up the convention which we are approving today. It is a shame the Government have taken so long to bring to fruition the walk which Mr. Justice Walsh began so many years ago. Indeed, perhaps the Government might wish to explain the rather extraordinarily long delay in bringing this legislation before the House.

Ireland signed the Rome Convention in 1980 and it has taken ten years for this legislation to arrive. The delay is difficult to understand because the drafting of this Bill was not a complex task. The Bill has only four sections with the convention text contained in a Schedule. As the explanatory memorandum to the Bill openly admits, there are six to seven other European countries whose Legislatures have beaten us in introducing similar legislation. Once again it seems that we are falling behind Europe in updating our legislation to fulfil our obligations as part of the European Community.

It is interesting to ask if the Government would have bothered to reform the legislation at all if it were not for the pressures which are being exerted on us from Europe. My suspicion is that they would not. This legislation is fairly typical of a series of differing types of legislation which have come before the House this year, all ultimately at the instigation of the European Community. The similar type Bills which have come arising from our obligations in Europe include the Carriage of Goods Bill, the Radiological Protection Bill, the Sea Pollution Bill, the International Development Association Bill and the new Bill on child abduction.

The bankruptcy of the Government's legislation programme in relation to contract law is illustrated in this Bill. This Bill deals with a very small area of contract law. Other aspects of contract law for the most part have been left to the courts to interpret. Do the Government propose to introduce comprehensive legislation relating to contract law in the near future?

There is another aspect of the Bill which is referred to in the Schedule, and that is its constitutional implications. If I remember correctly, there is in paragraph 26 of the explanatory memorandum, a reference to constitutional issues. There we are told that, for constitutional reasons, the Bill leaves the interpretation of the international convention to the Irish courts and does not allow the European Court to make rulings which will be binding on Irish courts. I suppose you could argue that this may or may not be desirable, but usually one would expect that legislation which has international implications arising from Europe might be interpreted by an international court. Maybe the Minister would fill us in on the constitutional factors and issues which give rise to this provision in the Bill. It would be very interesting to hear his views on that and it would also be very interesting if he could make available the advice of the Attorney General on this very important matter.

There are one or two minor points in the Bill to which I want to refer. The first is the length of the Title — the Contractual Obligations (Appicable Law) Bill. Why could it not be called simply, Contracts (Applicable Law) Bill? Maybe the Minister would give us an explanation why it is necessary to use those extra words. With Senator Fallon, I think I am one of a very small minority here who believe in vigorous editing: I suspect I may be in a minority of one in this belief. As I said, I would welcome the Minister explaining the basis for the Long Title.

Why did the Minister not include the list of signatories to the convention? This might be interesting from historical point of view. Maybe on Committee Stage the Minister might be prepared to include the list of signatories to the convention. I understand that the Minister for Foreign Affairs, Deputy Collins, was a signatory and for simple historical reasons it might be desirable if that could be included in the Schedule.

Overall, the Labour Party welcome the Bill. We are disappointed it has taken so long for it to arrive in the House. It is a minor measure but nonetheless a welcome one.

Mr. Mooney

In welcoming the Bill, it is important to put on record that this is yet another piece of legislation reflecting the Government's commitment to closer harmony in a variety of areas within the European Community. While I suppose my friend and colleague, Senator Upton, has to justify his position on the Opposition benches, it is somewhat churlish of him to suggest that the Government are being dragged, kicking and screaming, into the legislative areas. After all, in 1987 we debated in this House the Single European Act and the obligations deriving from that Act that directives from Europe would be an ongoing process in the legislative framework leading up to the eventual cohesion of the market. The House is discussing the possibility of full economic and monetary union. In the context of the Government's wish to play their full role in European affairs this legislation fits in with that objective.

I might also draw attention to the remarks by my distinguished colleague Professor Raftery who objected strenuously to the introduction of the 24 hour law in the context of the freedom of goods and services. I do not think any of us, consumers or legislators, would have welcomed with open arms that legislation.

I must confess, I was surprised to learn Professor Raftery had raised the matter in the European Parliament and had, by implication, criticised the Government for their decision. Perhaps Senator Raftery, who was spending most of his time in Europe at that time and also — here I chose my words extremely carefully — because of his geographical location, coming from County Cork, was not aware that in the period leading up to the initiation of the 48 hour rule large sections of this country, even from as far south as Cork city, were hiring buses, coaches and trains to cross the Border. The haemorrhage in financial terms to the economy of this part of Ireland was so severe that action had to be taken. It was not action taken in isolation by an Irish Government. Indeed, one of our fellow European members, Denmark, who have similar difficulties with their citizens flying over the border into Germany to buy cheaper consumer goods took action.

Media hype, and a psychological impact, created a myth about a wide variety of goods available across the Border, suggesting that they were cheaper than the South, led to this exodus. It is interesting that, since the introduction of the 48 hour rule, this type of consumer smuggling has all but been eliminated. I do, of course, take Professor Raftery's point in relation to smuggling in the agriculture sector.

It is important to put on record that we should not be criticised for this particular law in a European context. Surveys have proven that this country, and its citizens, are in the forefront of encouraging closer cohesion between the European partners. We welcome, enthusiastically, the development of consumer laws and of life in general moving towards a Europe speaking with one voice with member states retaining their independence of thought.

This legislation is an indication yet again of a general coming together. I am pleased that it clarifies the legal situation for Ireland and Irish business. Ireland has an export driven economy. We would not survive without oversees markets. Since our accession to the European Community in 1972 the country's exports to our European partners, excluding the UK, have risen considerably. In 1972, and leading up to accession, more than two-thirds of our exports were with our nearest neighbour, Great Britain.

However, the situation has altered considerably in the intervening period in that there has been a general reduction in dependence on the UK market with a resultant increase in exports to our other European partners.

As an export driven economy, an increasing number of industries and business people are spending more time within the European Community, excluding Great Britain, on business dealings. It is, therefore, essential that laws governing contracts as they apply in the business sector primarily and secondly, in the consumer area, are clarified to the point that there should be no doubt whenever any Irish business enters into contracts with our European neighbours, that in the event of default or legal difficulties arising over contracts that they will have a legal redress which will not be complicated by adherence to national laws. In that context this legislation is, as the Minister and other speakers have pointed out, essential to the continuing well-oiled export machine that this country has built up in recent years.

I am interested to know — perhaps the Minister will dwell on this to some small extent — whether he sees any difficulties arising where Irish businesses attempt to initiate contracts with the emerging democracies of Eastern Europe. I had the privilege to be a member of a parliamentary delegation to Poland last month where Ireland has established its first Embassy and where our first Irish Ambassador, Mr. Richard O'Brien, is in residence. I was pleased to learn that Córas Tráchtála are moving to open up the Polish and Eastern European markets.

It is important that the House should realise that those emerging democracies in the main are economically devastated relative to the prosperity of Western Europe. While they have substantial populations — for example, in Poland it is in the order of 40 million to 50 million people — the consumer purchasing power is very limited. However, this is but temporary. The European Community, including Ireland, are taking steps to move towards economic parity which, obviously, will be a long haul but, eventually, will be achieved.

I welcome the initiative of the Government in opening up lines of communication both at diplomatic level and, through Córas Tráchtála, at a business level. Obviously, these initiatives will encourage an increasing number of Irish business people to seek out these markets. I am interested to know if the Minister has any thoughts on that.

I presume, from my reading of the Bill, that the choice of law where a dispute may arise will protect any business enterprise here who fail to get compensation for goods that may have gone astray or who fail to receive a payment which seems to be the biggest difficulty as hard currency is a scarce commodity in these East European countries.

Eastern Europe, obviously will grow in importance over the next couple of decades. From my interpretation of the Bill, and the Minister's Second Stage speech, it seems that this general tightening up of the law on business contracts will have a beneficial effect and will be a further protection for business people working and dealing in Eastern Europe.

The legislation gives further protection to the consumer. Specifically, I am glad the Government have addressed the difficulty that has arisen with Article 7 (1). The Minister said reservations will be entered in relation to this. That is again an indication of the importance of maintaining a watch on legislation from Europe in order to protect the consumer at every level. As we become more and more open with the opening up of the market, the free movement of goods, services and people it is essential that legislation is enacted that protects all European citizens at consumer level in their cross-border dealings. Because of the travel and the geography involved, it is not always possible for a consumer to claim compensation. This country sadly has witnessed a people haemorrhage in the last decade. The area covered by this new legislation on employers' contracts is also to be welcomed. An increasing number of our citizens choose to work and live abroad and are turning their faces towards Europe rather than the traditional environments of America and the United Kingdom.

I was surprised to learn recently that in Munich there are several thousand Irish people domiciled in that southern German city quite a long distance away from Ireland, yet obviously doing well. This seems to be an increasing trend with the free movement of goods, people and services. Our well-trained and well-educated Irish population may choose to go to Europe, particularly the younger members of our population. They will choose to go to continental Europe, hopefully in the short term, to acquire expertise and then return home bringing that experise here for the benefit of this country. Indeed, quite a number of them are doing that. Therefore, where the legislation addresses itself to the tightening up and clarification of the law in relation to employer contracts it is to be welcomed.

Overall, like my colleagues, I welcome this piece of legislation as yet again an important milestone in the evolvement of the communities of Europe into a cohesive factor where laws governing the activities of individuals in businesses and large corporations will be closely monitored and the protection will ultimately be for the betterment of all the citizens of the community. Like the Minister, I commend the Bill to the House.

Mr. Cosgrave

I too, welcome the opportunity to contribute briefly in relation to the Bill before the House. In the light of an evolving Europe and coming to 1992, Ireland is going to have quite a significant contribution to make. I am not saying it is the present Minister who is to blame for the long delay in bringing the legislation forward. I hope this is not going to be indicative of the attitude which may prevail in relation to how we approach 1992. My worry is that we are within a year of 1992 and we do not appear to be fully ready. I am afraid that Ireland will get left behind. We will only react when it is upon us. We will be asking why we were not better prepared. Other countries may be better prepared than we are though I hope that that will not be the case. There is some anxiety as to whether we are making adequate preparations for 1992. I would like to ask the Minister when it is proposed that we sign the convention? Will it be when this legislation is passed? I would be interested to know how long it has been since other countries have signed the convention and why we are so late in doing so. I see that six have signed so far — Belgium, Denmark, France, Germany, Italy and Luxembourg. It is understood that the United Kingdom are expected to ratify it shortly. There may be good reasons for the delay on our part. If we are talking in terms of getting ready for 1992, in order to gain the benefit of one market and the benefit of the opportunities which that will present we should be better prepared than we have been in the past.

I listened with interest to what Senator Mooney said in relation to the whole question of cross-Border shopping. I would accept and support him in the opinion that while there has been difficulty with the 48 hour rule, it certainly solved some problems. We all hope that people would be patriotic and buy goods down here but that would be easier if the goods here were a bit cheaper. The reality is that for certain goods, particularly petrol, liquor and electrical goods, people go over the Border to buy. The gap in price is far too large between North and South for the same article. Most of the Members here would agree with that.

There are taxation and excise duty reasons, but the reality is that some goods are dearer down here. We should try to improve the tax system. I would ask the Minister here to implore his colleagues to make every effort to do that as quickly as possible. He certainly would have the support of us all. I know it is not a simple solution. If it was that easy, Fine Gael would have done it when we were in Government or the Fianna Fáil side would already have done it. We are all aware that total reform of taxation is necessary. People want to make their wages go further, particularly at Christmas. The 48 hour rule may have worked but the point remains that the gap in prices of certain goods as between here and Northern Ireland is too great. One can only hope that with the reform and harmonisation of our tax laws, improvements will be brought about after 1992.

This Bill deals mainly with technical aspects particularly in relation to commercial contracts. With, we would hope, expanded business contracts and links, and the import and export levels we can expect in the years ahead, it is important that rights, responsibilities and obligations are enforceable and can be effected under contracts. In the light of our expanding business markets, it is important that Irish people have their rights with regard to contracts in other countries. If Irish contractors are defaulting or making difficulties in relation to contracts or agreements abroad it will be up to members of other States to enforce their rights against Irish people. If it is sauce for the goose, it will be sauce for the gander. If commercial life is to be expanded with a greater flow of goods it is important that there is the mechanism to ensure that people will be able to insist on their rights. Does the Minister envisage many difficulties in relation to the question of where cases will be heard? Will there be difficulties with language barriers and foreign documents in deciding where a case will be heard? In certain cases, the law may decide that cases may be tried under Irish law or French law or some other country's law.

Can the Minister give an assurance that there will not be undue difficulties for people in bringing these actions? Obviously, this could happen with laws changing and a European dimension to it. Speaking, if you like, against the legal profession, it should be made easy and reasonable for ordinary individuals to bring actions under this Bill. There are difficulties with certain people trying to take actions. There are difficulties of service of documents. All these matters should be looked at so that these difficulties can be easily resolved. At times there are difficulties between company law and contract law as to whom to sue and where to sue. I would ask the Minister, when replying to give an indication of how he sees the difficulties being overcome.

I support, in principle, the measures contained in this Bill. It is to be hoped that full discussion will take place in relation to various matters under the various articles. I note the Minister has said that Ireland is going to exercise its reservation under article 7. This is something the Law Society have suggested. It is to be hoped that under this Bill people's rights under commercial contracts will now be given greater safeguards and greater security than before.

Mr. Foley

I welcome the opportunity to make a few brief comments on this important Bill. The purpose of the Bill is to enable Ireland to ratify the EC Convention on the Law applicable to Contractual Obligations opened for signature in Rome on 19 June 1980 and the Convention on the Accession of the Hellenic Republic to the 1980 convention signed in Luxembourg on 10 April 1984.

Since our entry to the EC we have seen tremendous growth in international trade in regard to Ireland. This has brought about the need for changes in our existing national and international laws in the civil and commercial context. The Minister referred to the fact that when we have studied the Bill and the conventions we can see that this area of the law is complex and technical. Be that as it may, it is an area of considerable importance. We are aware of how important international trade is to our economy. A major proportion of economic activity in this country relates to the import and export of goods and services. In these transactions we have a contract. As the trade is international there is an inevitable interaction between the legal system in Ireland and the country with which we do business. In addition, if internationl trade is to flourish it needs a simple legal framework to underpin it. That is what this Bill is all about. That is what the 1980 convention also indicates.

The Bill, as already stated by other speakers, is most important for business people and major companies involved in international contracts. We have seen over the past number of years where many companies sought clarification on points of law with regard to such international contracts. This Bill sets out the position very clearly, especially where points of our law were not clear and were in conflict with some of our Community partners. We will now have a most up to date code of law which will benefit all concerned. This is of tremendous importance to the Irish business sector involved in international trade and commerce. The principle of it is that parties involved in international contracts will be allowed to choose whichever country's laws they think will be most appropriate.

I welcome that where parties to a contract omit to specify which country will govern these contracts the courts will apply a series of presumptions to decide the issue. Special protection is provided in the case of certain consumer and individual employment contracts.

The convention has not yet entered into force for any of the member states of the Community. I understand it requires ratification by seven member states to bring it into force in those states which have ratified it. To date, six states have ratified it and I believe the United Kingdom will do so shortly with the result that the convention will enter into force in these states in early 1991.

I would hope that we can accede to the Minister's request that this Bill will get a speedy passage through this House. I welcome the Bill and I commend it to the House.

Professor Conroy

I would like to make a few comments on this Bill. First, it is an important Bill with considerable obligations and implications for law in this country. There are implications of various sorts, but they certainly will be of great importance for business and for the financial implications of international trading. In relation to its size, Ireland is probably involved in international trade to a greater extent than any other member of the Common Market. This is an important Bill but at present, we are discussing it effectively in the absence of the media. I have no doubt that, from time to time, there will be cases arising from this that will be on the front pages in all our newspapers in the coming years.

To take some simple examples: we have an Irish company exporting goods to Italy. The goods are being exported by truck travelling through the United Kingdom, perhaps, through France and possibly Switzerland on the way to Italy, and something happens that consignment. This may or may not be covered by a specific contract between the parties as to where any dispute is going to be discussed in law. That may simplify the matter although, as this Bill suggests and reminds us, there are mandatory matters which a contract between the two different parties cannot exclude. The mandatory matters might apply in either country or in the countries through which those particular goods are traversing. If, as frequently happens in business, there is not a specific written contract between the two parties, then it may, indeed, be extraordinarily difficult to decide under whose law the matter will be judged. This Bill helps considerably to clarify that situation. I have given the simple example of exporting goods in a lorry but it could equally apply to far bigger transactions. This will have great relevance to an individual carrier working his own lorry and carrying goods or to some multinational corporation.

It is interesting also that non-member states will be affected too. This is not just purely a European convention law, per se. It goes widely outside that. Yesterday we were discussing the economic and social business implications of political union, as well as the monetary situation. Over the next two or three years in financial and monetary terms the Twelve will come much closer together. Yet the laws of these states are extraordinarily diverse. In some of our discussions and, indeed, in the very excellent speech by the Minister, we are naturally looking at it from the point of view of law as it is evolved here. Even that can be complicated enough. There is mention that matrimonial property will be excluded.

When we were discussing the question of land property laws here we very quickly discovered that we were discussing the laws as expressed in this State since we attained independence. We were discussing the laws which applied to the United Kingdom between 1800 and 1922, the laws of the then Kingdom of Ireland prior to 1800, case law within this State and case law since 1922 in the United Kingdom. Of course, the courts here take into account the decisions of judges in the United Kingdom if those decisions relate to law which evolved or came into being before 1922 or which evolved from pre-1922 laws. It very rapidly became extraordinarily complicated. Yet, we were only dealing with the very simple situation of us and Britain.

We are going on to a very important, but very technical, aspect of law in contract obligations. We are now moving outside the relatively simple situation that exists between Britain and ourselves and going to the mainland of Europe where, of course, the basic law is totally different from Irish or British law. It is Napoleonic law. Their attitude towards contracts, the legal framework on which they are working and the interpretation of those laws is very different from the laws as we understand them here.

It is going to be a very important development. If we are truly merging in monetary terms, our currency, and our monetary policies with those of the other 11 member states, must relate to the underlying contractual and business law. I am delighted to see this Bill before us. I would not altogether agree that we are the last to introduce such a measure. We are, in fact, the sixth or seventh. A number of other countries still have to ratify it apart from ourselves. A great deal of law like this will need to come into effect if we are going to proceed towards EMU as we were discussing yesterday. I do not think we have fully taken on board that laws emanating from the Community are going to have an enormous impact not only on major international businesses but, in fact, on the ordinary citizen.

There are many other matters that I would like to go into. I hope to bring up some of them during Committee Stage. I am referring to such things as subrogation and Articles 15 and 16 which got little notice in the explanatory memorandum.

Minister of State at the Department of Tourism and Transport (Mr. Lyons)

First, I want to acknowledge the contributions by Senators. It is only right that I place on record my appreciation of the contributions of Senators Mullooly, Raftery, Upton, Mooney, Cosgrave, Foley and Conroy. I should acknowledge the interest shown in the legislation by other Senators who attended here and did not contribute. I should like to acknowledge the interest of Senators Ó Foighil, Farrell and Haughey. In the time available to me I will do my best to reply to the questions raised. Some of them will have to be referred to at a later stage.

Senator Raftery cast some doubt on the possibility of the 1980 convention coming into force shortly. The position is that only one further notification is required, as I indicated in my opening address. My understanding is that the United Kingdom, despite the doubts expressed by Senator Raftery, having passed the necessary legislation will deposit their instrument of ratification this month. My hope is that we will not be too long after that.

Senator Upton raised the question of the Title of the Bill and asked that the list of signatories be included in it. Very briefly, I would say that it is not the practice to include the list of signatories in a Bill. I suggest for the benefit of the Seanad that we should have the list of signatories of the convention. They are available, it the Senators are interested, in the versions published in the Official Journal 266, Volume 23 of 9 October 1980. It is not the usual practice to include lists of signatories in a Bill.

Senator Upton, of course, was correct in saying that the Minister, Deputy Gerard Collins, signed the convention on behalf of Ireland in 1980. The Senator went on then to complain about the ten year lapse. I do not wish to introduce a note of politics into this but Senator Upton should consider for a moment when he is making statements like that that we were not in power all the time between 1980 and 1990. I am very tempted to say that people in glasshouses should not throw stones. What were his party doing when they were in Government? I will leave it at that; I am sure he knows what I am talking about.

Senator Mooney asked about contracts with East European countries. The rules contained in the 1980 Convention will apply here in the case of disputes arising out of contracts with those countries. I cannot say, of course, what rules those countries might apply, but it is open to an Irish business person to choose the jurisdiction where any dispute will be litigated and also what law will apply. This is provided for in the Bill. The jurisdiction of courts, and employment of judgments, as I mentioned earlier, is covered in the European Communities Act, 1988.

Senator Cosgrave asked when would we be signing the convention. The position is that Ireland was one of the countries which signed the convention when it was opened for signature in 1980. The other nine member states signed at the same time or shortly afterwards. We will ratify the convention once this legislation has been passed by the Oireachtas. I would like to mention in passing the need for speed and urgency as expressed by Senators. We should not delay this legislation. That is a welcome view by the Senators.

Senator Cosgrave also asked where cases will be heard. That matter is covered by rules contained in the 1968 EC Judgments Convention which was given effect in Ireland by the 1988 Jurisdiction of Courts and Enforcement of Judgments Act. The matter is already covered comprehensively in our law. In regard to the service of documents, we signed the Hague Convention on the service abroad of documents in April. On commercial matters arrangements are now being made to enable Ireland to ratify that convention by means of a rule of court.

I again want to thank the Senators for their speedy treatment of this Stage of the Bill and for their contributions.

Question put and agreed to.

Acting Chairman

When is it proposed to take the next Stage?

Mr. Lyons

On 28 November 1990, subject to agreement between the Whips.

Committee Stage ordered for Wednesday, 28 November 1990.

Sitting suspended at 1 p.m. and resumed at 2 p.m.