On 17 June 2008 the EU adopted Regulation 593/2008 which harmonises the rules concerning the law applicable to contractual obligations (to be known as "Rome I").

The regulation, building on the fundamental principle that the governing law of a contract is that agreed by the contracting parties, will provide businesses and consumers  of the European Union the security to enter into a contract in the knowledge that courts in all EU Member States will apply the same law in case of a contractual disputes.

In turn, this will facilitate the mutual recognition of court decisions in the European Union. The Rome I Regulation, which will apply to contracts concluded after its date of application (17 December 2009), will ensure a proper balance between the interests of the various parties involved in a cross-border dispute by identifying the law which is most appropriate.

For instance the Regulation seeks to clarify the applicable law when a consumer buys a product on the internet from a company located in another Member State.

The initial proposal for the Regulation of 2005 had been deemed against the interest of UK businesses. Following an updated version of the proposed Regulation and a consultation exercise from the Ministry of Justice this summer, the UK has now started the negotiations to implement the legislation by the end of 2009.