4 Law applicable to non-contractual obligations
| (26326)
16231/04
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| Draft Regulation on the law applicable to non-contractual obligations ("Rome II")
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| Legal base | Article 61(c) EC; co-decision; QMV
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| Department | Constitutional Affairs; Scottish Executive Justice Department
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| Basis of consideration | Minister's letter of 20 February 2006
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| Previous Committee Report | HC 38-xii (2004-05), para 4 (23 March 2005) and see HC 63-xxxiii (2002-03), para 4 (15 October 2003), HC 42-vii (2003-04), para 2 (21 January 2004) and HC 42-xxvii (2003-04), para 4 (14 July 2004)
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| To be discussed in Council | No date set
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| Committee's assessment | Legally and politically important
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| Committee's decision | Not cleared; information on progress requested
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Background
4.1 The purpose of this draft Regulation is to provide uniform
choice of law rules operating in the Member States to determine
the law which is to apply to non-contractual liability, such as
liability for negligence and other breaches of duty. In making
the proposal the Commission states that it should be in the form
of a Regulation, laying down "detailed, precise and unconditional"
uniform rules which would not require any measures by the Member
States for their transposition into national law.
4.2 The previous Committee considered earlier versions
of this draft Regulation on 15 October 2003, 21 January 2004 and
14 July 2004 and the current version on 23 March 2005. The previous
Committee noted that a substantial volume of commercial litigation
is conducted in London between parties who have no particular
connection with the United Kingdom but who choose to litigate
or arbitrate their disputes here. The previous Committee shared
the Government's concern over the lawfulness of the "universal"
nature of the Regulation (i.e. that it should apply regardless
of whether any party in the case is connected in any significant
way with the European Union and whether or not the law applied
by the choice of law rules was the law of a Member State). It
agreed with the Minister that the proposal should have regard
to the limits expressed in Article 65 EC and should therefore
be limited to rules which were necessary for the proper functioning
of the internal market.
4.3 The previous Committee also welcomed the deletion
of the rule which would have prevented the application of any
rule of law which had the effect of causing non-compensatory damages,
such as exemplary or punitive damages, by making such a rule "contrary
to Community public policy". The previous Committee did not
think it appropriate for the proposal to provide for a "Community
public policy" when in private international law "public
policy" was traditionally a matter for States, and did not
think that the Regulation should create any inflexible rule against
the award of non-compensatory damages. When the previous Committee
last reported on the proposal on 23 March 2005, it noted that
it had been substantially amended so as to contain a number of
options in relation to scope and the rules determining the applicable
law in relation to product liability, privacy and defamation and
environmental damage. It asked the Minister to keep the Committee
informed of any progress in resolving the issues which were currently
the subject of the various options.
The Minister's letter
4.4 In her letter of 20 February 2006 the Parliamentary
Under-Secretary of State at the Department for Constitutional
Affairs (Baroness Ashton of Upholland) informs us of the progress
made on this matter during the UK Presidency, and of attempts
by the Austrian Presidency to gain political agreement on certain
provisions of the proposal.
4.5 The Minister reports that the Council Working
Group has considered all of the amendments proposed by the European
Parliament in July 2005, and attaches to her letter a version
of the proposal which incorporates the amendments accepted by
that Group. The Minister draws our attention to those aspects
of the text where the amendments proposed by the European Parliament
were accepted, with the rest being rejected. The Minister adds
that Austria has stated that it would make this proposal a priority,
and that it is the objective of the Presidency to reach a political
agreement and, if possible, a common approach on the entire text
by the end of June 2006.
4.6 In her letter the Minister states that the Government
agrees with the Presidency that the general structure of the proposal
should be retained, so that the Regulation would continue to set
out a general rule on the law applicable to a tort or delict,
complemented by a number of specific rules to cover particulars
cases. The Government also agrees with the Presidency that the
Regulation should apply to situations where damage is likely to
occur, as well as to those where it has occurred, and with the
proposals for Article 3 setting out the general rule for determining
the applicable law (i.e. the law of the country where the damage
has occurred or is likely to occur, unless there is manifestly
a closer connection with the law of some other country).[14]
4.7 The Minister notes that a special rule has been
proposed for product liability cases in Article 4. (This provides
for a number of possible applicable laws, such as the law of the
place where the person sustaining the damage was habitually resident,
or the law of the country in which the product was acquired, or
the law of the country in which the damage was sustained. A number
of variants are also proposed as options.) The Minister states
that the Government does not favour a special rule for such cases,
and believes that the general rule in Article 3 should apply.
4.8 In relation to unfair competition, the Minister
informs us that the Presidency is proposing a special rule under
Article 5. This would provide for an applicable law which is the
law of the country "where competitive relations or the collective
interests of consumers are or are likely to be affected".
The Minister comments that the Government does not favour any
special rule but is aware that the majority of Member States do
not share this view. The Government would support a clarifying
recital which would make clear that the rules is not intended
to produce results which are substantially different from those
produced by Article 3. The Government also believes that the text,
or a recital, should give a clear definition of what is meant
by "unfair competition and acts restricting free competition",
rather than giving examples in the recitals of cases which would
be covered by Article 5.
4.9 The Minister informs us that the Presidency has
proposed a special rule (in Article 6) for defamation and privacy
cases, which attempts to balance the interests of the victim and
the media. The rule provides for the applicable law to be that
of the country where the person sustaining the damage has his
habitual residence if the publication was distributed or the programme
was broadcast in that Member State. In all other cases, the law
of the country where the publisher or broadcaster is established
would apply.
4.10 The Minister states that the proposed rule "is
not fully consistent with the Government's position" which
is described as supporting solutions "based closely on the
country of origin principle". The Minister adds that the
Government believes that "only solutions of that kind will
create the necessary high degree of certainty essential for securing
freedom of expression for the media and the proper functioning
of the internal market". The Minister comments that the Government
is mindful of the lack of consensus among the Member States and
would therefore support the option of excluding defamation altogether
from the scope of the Regulation "as this seems the most
likely and pragmatic way of moving forward on this important issue
and therefore the dossier as a whole".
4.11 The Minister explains that the Government is
content with the Presidency's proposals under Article 22 for dealing
with the public policy of the forum. (Article 22 provides that
a court may refuse to apply the law determined under the Regulation
where this would be "manifestly incompatible with the public
policy ('ordre public') of the forum"). The Minister
notes that a second sentence of Article 22 provides that such
incompatibility with public policy may exist if the application
of the designated law "would have the effect of causing excessive
non-compensatory damages to be awarded", but that the Presidency
is proposing that these words should be transferred to a recital
and that the Government is content with this approach. The Minister
also informs us that a proposal has also been made to delete the
reference to "excessive" but that this deletion might
cast some doubt on the limited circumstances in which English
law provides for exemplary or punitive damages and that the Government
will therefore press for "excessive" to be re-inserted,
or the entire recital to be deleted.
4.12 Finally, the Minister explains that in relation
to Article 23 (which governs the relationship with other EC instruments)
the Government will continue to press for a recital to make clear
that the Regulation "does not undermine the working of the
E-Commerce Directive[15]
and related internal market measures".
Conclusion
4.13 We are grateful for the Minister's letter
informing us of the state of negotiations on this proposal immediately
prior to the Justice and Home Affairs Council on 20 February.
We are aware of continuing disagreement within the Council on
a number of aspects of this proposal, notably in relation to the
rules determining the applicable law in privacy and defamation
cases, and we look forward to an account by the Minister of the
outcome of the Council meeting.
4.14 On the question of defamation and privacy,
we note the Minister's statement that the proposed rule "is
not fully consistent with the Government's position, which is
to support solutions based closely on the country of origin principle"
but we ask the Minister if such a "country of origin principle"
is not excessively weighted in favour of the media. We also ask
if — taken together with the universal nature of the Regulation
— such a rule might not produce unintended consequences,
such as by causing the law of, for example, a Middle Eastern country
to apply to a case where a broadcast or other publication from
such a country causes damage to a person in a Member State.
4.15 We shall hold the document under scrutiny
pending the Minister's reply and further information from her
as to the prospects for further negotiation on the present proposal.
14 It should be recalled that, by reason of Article
2, the applicable law may be the law of any country, whether or
not it is the law of a Member State. Back
15
OJ No L178 of 17.7.2000, p.1. Back
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