Friday, 1 December 2017

Blog: The Rome I Regulation & Scottish consumer contracts

Here our Principal Solicitor, Mike Dailly, blogs on whether an English law governing clause can oust Scots law rights in consumer contracts in Scotland.

It is not uncommon for consumer contracts to contain a clause stipulating what law will apply to the agreement in the event of a legal dispute. These are known as governing law clauses.  But what happens if you live in Scotland – which has its own distinctive Roman law based legal system and jurisdiction - but your contract has a clause saying it is “governed by the law of England”?

For example you are ordinarily resident (domiciled) in Scotland but your credit card, loan agreement, or bank account says it is governed by the law of England?  This may seem academic for two obvious reasons. First, the Civil Jurisdiction and Judgments Act 1982 prevents a UK business raising court proceedings in England against a consumer domiciled in Scotland for consumer disputes. Second, most of modern consumer protection and financial services law is UK law (much of which derives from the implementation of EU Directives), so does it really matter if a consumer contract in Scotland has an English law governing clause?

Actually, yes it does matter. In short, because there are many historical and substantive differences in contract and debt law between England and Scotland. Moreover, these areas of law are devolved to the Scottish Parliament, and such distinctions have increased since 1999. To take but one example, from a court action I am currently dealing with at Govan Law Centre.

It is commonplace for international and domestic companies to purchase defaulting UK consumer credit debts from banks, and regulated credit card and loan providers. The purchaser buys the debt at a heavily discounted price, in exchange for assuming all of the risk in recovering some or all of the debt.

In my example case, a debt recovery company (“DRC”) bought a debt from MBNA (the bank that stood behind the Virgin credit card). The last payment from the consumer was in June 2012. The DRC buys the debt, and instruct Scottish solicitors who raise and intimate sheriff court proceedings in September this year.  The last acknowledgment of the debt was over 5 years ago, and as section 6 of the Prescription and Limitation (Scotland) Act 1973 creates a 5-year time bar for recovering such debts, you might think, the DRC is too late here. The court proceedings are incompetent, as the debt has prescribed under Scots law.

However, the consumer credit agreement contains an English governing law clause, and debts do not generally prescribe in English law for six years. Thus the DRC’s lawyers reasonably argue that as English law applies to this contract, the debt hasn’t prescribed in law. But does English law apply to a consumer contract where the consumer is habitually resident and domiciled in Scotland?

I think the answer may require an international paper chase, which goes something like this. The defender is a consumer and the credit agreement was a consumer contract for the purpose of the “Rome I Regulation”, Regulation (EC) No. 593/2008. Article 6 of the Rome I Regulation, provides as follows:

Article 6

Consumer contracts

1. Without prejudice to Articles 5 and 7, a contract concluded by a natural person for a purpose which can be regarded as being outside his trade or profession (the consumer) with another person acting in the exercise of his trade or profession (the professional) shall be governed by the law of the country where the consumer has his habitual residence, provided that the professional:

(a) pursues his commercial or professional activities in the country where the consumer has his habitual residence, or
(b) by any means, directs such activities to that country or to several countries including that country, 

and the contract falls within the scope of such activities.

2. Notwithstanding paragraph 1, the parties may choose the law applicable to a contract which fulfils the requirements of paragraph 1, in accordance with Article 3. Such a choice may not, however, have the result of depriving the consumer of the protection afforded to him by provisions that cannot be derogated from by agreement by virtue of the law which, in the absence of choice, would have been applicable on the basis of paragraph 1".

While Article 22 of the Rome I Regulation does not oblige EU member states to apply Rome I to conflicts between the different laws of countries within a member state, it leaves this option open. And the UK and Scottish Parliament applies Rome I to internal UK governing law conflicts.  Regulation 4 of  The Law Applicable to Contractual Obligations (Scotland) Regulations 2009 (SSI 2009/410) extends the application of the Rome I Regulation (with the exception of Article 7 (insurance contracts) with are dealt with separately) to conflicts solely between the laws of Scotland, England and Wales and Northern Ireland and Gibraltar. Regulation 4 provides: 

4.  Conflicts falling within Article 22(2) of Regulation (EC) No. 593/2008

Notwithstanding Article 22(2) of Regulation (EC) No.593/2008 of the European Parliament and of the Council on the law applicable to contractual obligations (Rome I), that Regulation shall, with the exception of Article 7 (insurance contracts)1 , apply in the case of conflicts between— (a) the laws of different parts of the United Kingdom, or (b) the laws of one or more parts of the United Kingdom and Gibraltar, as it applies in the case of conflicts between the laws of other countries”.

We have more paper chasing because the effect of Regulation4 is to apply the Rome I Regulation to conflicts between different parts of the UK in contractual obligation cases. Thus a credit card agreement can choose - with the consent of the consumer by signing it - English law. The Rome I Regulation is then engaged. And on the face of it, section 23A of the Prescription and Limitation (Scotland) Act 1973, requires the Scottish courts to respect that choice for prescription issues.

However, section 23A(4) disapplies section 23A where Rome I is engaged, as would occur in our example case where English law is chosen to govern a Scottish consumer contract. However, the journey does not end there, because as we have seen Article 6.2 of Rome I prevents a consumer from losing statutory protections in their country of habitual residence which they would have enjoyed had the business not chosen a different law. So if a defender is a consumer who had their habitual residence in Scotland when the contract was concluded, English law can be chosen.

However, the Scottish consumer would still be entitled to enjoy the five year time period under the Prescription and Limitation (Scotland) Act 1973. A consumer protection that exists in Scotland is preserved by virtue of Article 6.2 of Rome I. All of which would mean the DPC can't rely on an English law six year time bar period for pursuing a debt in a Scottish consumer contract.  As this point looks set to be debated at Glasgow Sheriff Court, hopefully an answer to this interesting paper chase will be available shortly.

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Tuesday, 28 November 2017

Tackling rough sleeping this winter: new actions in Scotland welcomed by Govan Law Centre

Govan Law Centre (GLC) has welcomed new actions announced today by the First Minister to further tackle rough sleeping this winter.  The actions were recommended by the Scottish Government’s Homelessness and Rough Sleeping Action Group (HARSAG).

Today's announcement is backed by an initial £328,000 worth of investment from government and group members, including an additional caseworker/solicitor in Glasgow provided by Govan Law Centre.

Measures include increasing emergency accommodation and support in areas with the greatest numbers of rough sleepers, making personal budgets available to front line workers to meet immediate housing needs, and supporting greater use of the emergency Nightstop service.

HARSAG member, and GLC's Principal Solicitor, Mike Dailly said: "No-one should have to sleep rough this winter and these additional resources will make a real difference. All public and third sector agencies have a part to play this winter if we are to realise the ambition of making rough sleeping rare and unnecessary in Scotland. This is a key step towards delivering the First Minister’s commitment to eradicating rough sleeping in Scotland".

Further details of the new actions for this winter are available here, and include:
  • Increased emergency accommodation in Edinburgh, and increased outreach capacity in Edinburgh, Glasgow, and Aberdeen
  • Multi-agency partnership working boosted, adopting ‘by name lists’ and empowering front line workers through direct access to services and dedicated accommodation
  • Making personal budgets and/or flexible emergency fund available for front line staff to employ where maximum flexibility is required to meet immediate housing needs
  • At times of extreme weather, ensure flexible provision is available in Edinburgh and Glasgow for anyone who will not use winter night shelters, despite all efforts
  • Maximise use of Nightstop – which provide young people with emergency accommodation for up to 2 weeks in the homes of approved volunteers – in Edinburgh and support implementation in Glasgow by January 2018

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Tuesday, 21 November 2017

Inner House declares ‘Sword of Damocles’ contractual term unlawful: GLC Public Interest Litigation Unit

A homeowner involved in a legal dispute with a Scottish local authority has won his appeal after arguing the council acted beyond its powers in imposing a condition to an award of grant assistance, which required homeowners to pay their share of the cost of repairs by the time the final account for works was issued or lose all grant assistance.

Judges in the Inner House of the Court of Session allowed an appeal by a homeowner, who argued that Glasgow City Council, in imposing a “pre-payment condition” as a term of grant assistance, acted ultra vires of its powers in terms of Part 2 of the Housing (Scotland) Act 2006. Lord Malcolm and Lord Glennie heard that the homeowner co-owned a flat in Govanhill, Glasgow, with his wife.

Following a survey of properties in the area, in April 2011 the council served a work notice on the owners of the flats stating that their tenement building in Langside Road was in “disrepair” and that certain repair works required to be carried out to put right a number of defects.

For the petitioner solicitor advocate Mike Dailly argued that there was nothing in Part 2 of the 2006 Act relating to the provision of grants which allowed the council to impose a “pre-payment condition” as a condition of a grant, failing compliance with which the grant would be revoked. Such a condition was “contrary to the policy objective” of part 2 and was not mentioned in the council's policy statement on assistance.  It was argued that as the council had made a decision to award the petitioner a 75% grant for the cost of repairs, it could not be withdrawn on the basis of the imposition of a condition which was ultra vires.

On behalf of the council, Gavin MacColl Q.C submitted that the pre-payment condition of the grant was intra vires, being permitted in terms of sections 74(4) and 81(1)(d) of the Act, and that it was imposed for a relating to Part of the Act - to encourage people to pay their share of the cost of repairs. However, the appeal judges ruled that the pre-condition did not fairly or reasonably relate to the grant and that it “goes well beyond what is legitimate”.

The judges also observed that it seemed to be “counter-intuitive” that an individual who had been found to be eligible for a mean-tested grant of 75% of the costs of the work should have the availability of that grant made subject to a condition with which he would “almost certainly find it difficult, if not impossible, to comply”.

Rt Hon Lord Glennie
Delivering the opinion of the court, Lord Glennie said: “It may be intended as a kind of sword of Damocles, hanging over the owner of the property to encourage him to pay the sum due from him for his share of the cost of the repairs. But, if activated, the effect goes much wider than enforcing payment of the sums already due; it takes away the whole of his grant.  

“The grant itself, and the threat to withhold it if the non-grant part of the cost is not paid in full and on time, is being used as a lever, a stick, to encourage payment by the owner of the part of the repair cost which he already is under an obligation to pay. This is not a condition which is attached to the grant for the purposes of the grant – to make sure that it is properly applied, that the work is carried out satisfactorily, or whatever".  


"It is attached to the grant for the purpose of ensuring payment of other sums which are and have always been the responsibility of the owner of the property. In those circumstances we consider that the pre-condition goes much further than is justified in terms of the Act. It is ultra vires the council.”
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Wednesday, 15 November 2017

Celebrating financial capability in Scotland

Last night stakeholders and guests at the Scottish Parliament celebrated financial capability work taking place across Scotland, as part of UK "Financial Capability Week".

The event was hosted by Ayrshire MSP, Ruth Maguire, and heard from Yvonne MacDermid, Chair of the Scottish Financial Capability Partnership, Govan Law Centre's Mike Dailly, Alison Hardie of Young Scot, Alison Watson of Shelter Scotland, Simon Watson of the Royal Bank of Scotland, Jonathan Baxter, Head Teacher and pupils from Flora Stevenson Primary School

As part of #TalkMoneyScotland week, Govan Law Centre will be providing a free financial capability and money advice session at Homes for Good, 97 Main Street in Glasgow’s Bridgeton this Thursday 16 November 2017 from 10am to 3pm. No appointment is necessary.

GLC's Principal Solicitor Mike Dailly said: "Good money skills are always key to resolving financial challenges and difficulties. But most importantly they are essential as a preventative tool: to avoid being scammed, fleeced, being hit with excessive fees and charges, borrowing at uncompetitive rates, buying financial products you don’t need or aren’t suitable for you, or ultimately just getting a bad deal as a consumer".

"Key life events – for good or for bad – will affect all of us throughout our life and having some financial resilience and support can make an unbelievable difference in a crisis. Knowledge truly is power, and we are a point in time where we can make financial capability skills and knowledge freely and instantly accessible to consumers when they need it if we utlise new opportunities next year from Opening Banking and the new Payment Services Directive".

Mike's talk is available here (opens as a PDF).
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Friday, 10 November 2017

Law as a tool for social change & justice: UK Law Centres Network 2017 annual conference

The annual conference of the UK Law Centres Network (LCN) took place for this first time in Glasgow this week, with representatives from law centres from Scotland, England and Northern Ireland in attendance.

Conference was opened by Scottish Minister for Legal Affairs and Communities, Annabelle Ewing MSP, who also read a personal welcome note to delegates from Scotland's First Minister, Nicola Sturgeon MSP.

Delegates were welcomed to a Civic Reception in Glasgow City Council by the Leader of the Council, Cllr Susan Aitken, and Depute Lord Provost, Cllr Philip Braat; and heard from the Dean of the Faculty of Advocates, Gordon Jackson Q.C. and former President of the Law Society of Scotland, Austin Lafferty.

The two-day event took place over 9 and 10 November 2017, and included a wide ranging plenary discussion on the law as a tool for social change. Conference heard from Matthew Smerdon, Chief Executive of the Legal Education Foundation, and Annabel Davidson Knight of Collaborate and the University of Newcastle.

GLC's Principal Solicitor, Mike Dailly addressing conference argued that unemployment, poverty, discrimination, poor housing and destitution were never accidental. They were the product of political choices, and the politics of omission.  In his view it was the job of law centres to campaign for change, and until change happened, use the law as best as possible to mitigate detriment to the communities law centres served.  Mike's speech to the LCN conference is available here (opens as a PDF)
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