3 Law applicable to non-contractual obligations
| (a)
(26326)
16231/04
—
(b)
(27314)
6622/06
COM(06) 83
|
Draft Regulation on the law applicable to non-contractual obligations ("Rome II")
Amended Draft Council Regulation on the law applicable to non-contractual obligations ("Rome II")
|
| Legal base | Article 61(c) EC; co-decision; QMV
|
| Document originated | (b) 21 February 2006
|
| Deposited in Parliament | (b) 24 February 2006
|
| Department | Constitutional Affairs; Scottish Executive Justice Department
|
| Basis of consideration | (b) EM of 10 March 2006
|
| Previous Committee Report | (a) HC 34-xxi (2005-06), para 4 (8 March 2006), 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)
(b) None
|
| To be discussed in Council | No date set
|
| Committee's assessment | Legally and politically important
|
| Committee's decision | Not cleared; information on progress requested
|
Background
3.1 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.
3.2 The previous Committee considered earlier versions of this
draft Regulation on 15 October 2003, 21 January 2004 and 14 July
2004 and the then current version on 23 March 2005. 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.
3.3 When the previous Committee last reported on the proposal
(document (a)) 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.
3.4 The Minister, the Parliamentary Under-Secretary of State at
the Department of Constitutional Affairs (Baroness Ashton of Upholland),
informed us in her letter of 20 February 2006 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. The Minister informed us that the
Government agreed 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 particular cases. The Government also agreed with the Presidency
on 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),[13]
but that the Government did not favour any special rule for product
liability cases since it believed that the general rule in Article
3 should apply.
3.5 The Minister informed us that the Presidency was proposing
a special rule under Article 5 to deal with unfair competition
cases. Again, the Government did not favour a special rule but
was aware that the majority of Member States did not share this
view. The Minister also informed us that the Presidency had proposed
a special rule (in Article 6) for defamation and privacy cases,
which provided 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.
The Minister explained that the proposed rule was "not fully
consistent with the Government's position" which was described
as supporting solutions "based closely on the country of
origin principle", but that the Government was 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.
3.6 We asked the Minister if such a "country of origin principle"
was not excessively weighted in favour of the media and 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.
3.7 In view of the 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, we asked the Minister for an account of the outcome of
the Justice and Home Affairs Council in February 2006 and held
document (a) under scrutiny.
The amended proposal for a Regulation
3.8 The Commission has produced an amended proposal (document
(b)) to take account of the amendments adopted by the European
Parliament on its first reading of the previous proposal on 6
July 2005 and of subsequent discussions within the Council Working
Group. Publication of the amended proposal has coincided with
efforts by the Austrian Presidency to gain political agreement
on a number of the most contentious issues arising under the previous
proposal, and which were discussed at the Justice and Home Affairs
Council on 22 February.
3.9 The amended proposal makes a number of technical changes,
many of which are in accordance with the Presidency text (and
on which we reported on 8 March). The more significant changes
from the original proposal are summarised below.
3.10 A number of changes have been made to the recitals, and we
note that in relation to product liability and unfair commercial
practices, the recitals refer to these being "penalised"
by Directive 374/1985/ EEC[14]
and 29/2005/EC[15] respectively.
3.11 Article 1, which determines the material scope of the Regulation,
contains the same exclusion of non-contractual obligations arising
from family relationships, matrimonial property regimes, bills
of exchange and cheques, trusts, acts done in the exercise of
public authority and evidence and procedure. However, a new provision
has been added at Article 1(2)(h) excluding "violations of
privacy and of personal rights by the media".
3.12 Article 4(1) allows the parties to choose the applicable
law by an agreement entered into after their dispute has arisen.
Where all the parties "exercise a commercial activity",
they may also make such an agreement before the occurrence of
the event from which damage arises (Article 4(2)). However, a
choice of law which is made by such agreements shall not prejudice
the application of the mandatory rules[16]
of a country where "all the other elements of the situation
at the time when the loss is sustained" are located in a
country other than the one whose law has been chosen.
3.13 Articles 10 and 11 make new provision in relation to unjust
enrichment and negotiorum gestio[17]
respectively. In relation to unjust enrichment (which includes
payment of amounts wrongly received)[18]
the applicable law is to be that applying to any pre-existing
relationship between the parties, or failing this, the law of
the place where the event giving rise to the unjust enrichment
occurs. These rules may be displaced where the non-contractual
obligation arising out of unjust enrichment is manifestly more
closely connected with another country. In relation to negotiorum
gestio a similar series of rules is proposed. Accordingly,
if the non-contractual obligation arising out of an action performed
without due authority in connection with the affairs of another
person concerns a pre-existing relationship between the parties,
the applicable law will be that applying to such relationship.
If there is no such pre-existing relationship, and the parties
are habitually resident in the same country when the event giving
rise to the loss or damage occurs, the applicable law shall be
the law of that country. If the applicable law cannot be determined
by the rules above, it is to be the law of the country "in
which the action took place".[19]
As in the case of unjust enrichment, the operation of the rules
described may be displaced by the law of a country with which
the non-contractual obligation is manifestly more closely connected.
3.14 The provisions relating to the public policy of the forum,
previously contained in Article 22, have been amended. As before,
the Article provides that the application of a rule of law specified
by the Regulation may be disapplied if such application is "manifestly
incompatible with the public policy ("ordre public")
of the forum. A new provision states that the application of a
rule of law "that would have the effect of causing non-compensatory
damages to be awarded that would be considered excessive"
may be considered incompatible with the public policy of the forum.
3.15 Article 24 now provides that the Regulation shall not prejudice
the application of multilateral conventions to which the Member
States are parties when the Regulation is adopted and which, in
relation to particular matters, lay down conflict of law rules.
The Article requires that such convention be notified to the Commission.
However, in the case of the Hague Convention of 4 May 1971 on
the law applicable to traffic accidents and the Hague Convention
of 2 October 1973 on the law applicable to products liability,
the Regulation will take precedence where all the material aspects
of the situation are located in one or more Member States.
3.16 Article 26 provides for an implementation report by the Commission
not later than five years after the Regulation enters into force.
It is also provided that, in making its report, the Commission
is to "pay particular attention to the effects of the way
in which foreign law is treated in the courts of the Member States"
and that "if necessary, the report shall include recommendations
as to the desirability of a common approach to the application
of foreign law". The report is also to consider whether Community
legislation dealing specifically with the law applicable to traffic
accidents ought to be proposed.
The Government's view
3.17 In her Explanatory Memorandum of 10 March 2006 the Parliamentary
Under-Secretary of State at the Department for Constitutional
Affairs (Baroness Ashton of Upholland) explains that the revised
proposal from the Commission (document (b)) takes account of amendments
proposed by the European Parliament and of discussions within
the Council working group, and that its publication coincides
with the efforts of the Austrian Presidency to gain political
agreement on a number of contentious issues under the Regulation,
which issues have been discussed at the February Justice and Home
Affairs Council.
3.18 The Minister also reviews the major changes which the Commission
has made to its original proposal. The Minister notes that the
amendment to Article 1 excludes "violations of privacy and
of personal rights by the media" from the scope of the Regulation.
The Minister explains that the Government welcomes the proposal
to exclude defamation from the scope of the Regulation "as
a pragmatic way of moving this dossier forward in the absence
of any agreement in the Council on any positive rule in this controversial
area", but that it is concerned that a partial exclusion,
which relies on an undefined reference to "media",[20]
may result in legal uncertainty and situations where different
choice of law rules could potentially apply to different defendants
in the same set of defamation proceedings. The Minister indicates
that the Government will continue to press for the "whole
issue of defamation" to be removed from the Regulation as
the simpler and better solution.
3.19 In relation to the provisions in Article 4 on freedom of
choice of the applicable law, the Minister notes that parties
of any description may validly agree on the choice of law after
their dispute has arisen, but that only commercial parties may
agree on such a choice before the dispute. The Minister welcomes
this new Article as acknowledging the importance of enabling commercial
parties to exercise freedom of choice as to the applicable law,
where this is both possible and appropriate, and notes that there
is widespread support for this provision in the Working Group.
3.20 In relation to the special rules in Articles 10 and 11 on
unjust enrichment and negotiorum gestio, the Minister notes
that the applicable law in unjust enrichment cases will, broadly,
be the law of the country where the event giving rise to the unjust
enrichment occurs and that in cases of negotiorum gestio
the applicable law will be the law that governs the relationship
between the parties that gave rise to the eventual action. The
Minister states that the Government agrees with the focused approach
taken by the Commission in both these areas and that it represents
an improvement on the Commission's earlier proposal which was
to cover the entirety of the field of non-contractual obligations
outside the area of tort and which would have created legal uncertainty.
The Minister adds that Member States support this more focused
approach.
3.21 On the question of public policy (Article 22), the Minister
informs us that the issue of referring to excessive non-compensatory
damages as an example of the application of a rule of foreign
law which was manifestly incompatible with the public policy of
the forum was discussed at the JHA Council on 22 February. The
Minister informs us that Member States agreed that the equivalent
reference in the Presidency text should be deleted, and that the
Government is content with such deletion.
3.22 The Minister notes that Article 24 makes it clear that the
Regulation will not prejudice the application of multilateral
conventions to which Member States are party when the Regulation
is adopted and which lay down conflict of law rules relating to
non-contractual obligations. The Minister explains that the Government
takes the view that Member States should, in principle, be able
to continue to give effect to international agreements after the
commencement of the Regulation.
3.23 The Minister comments that the Government supports the Commission's
proposal for an implementation report, but that it has concerns
about the reference in Article 26(2) to a review of national procedures
involved in enabling the application of foreign law. The Government
questions the need for a review of such matters which "should,
in principle, be properly left to be dealt with by courts at national
level".
Conclusion
3.24 We agree with the comments made by the Minister on the
Commission's revised proposal. We have commented in our previous
Report on the unsatisfactory nature of the proposed choice of
law rule for privacy and defamation in the Presidency text, and
we note that it is now proposed to exclude "violations of
privacy and of personal rights by the media". We agree with
the Minister that the exclusion is unclear for the reason the
Minister has explained, but would add that the reference to "personal
rights" is also unclear.
3.25 We note that the recitals refer to product liability and
unfair commercial practices as being "penalised" by
the relevant EC Directives, but it appears to us that these do
not require criminal sanctions to be applied, so the reference
appears to be incorrect, but we would be grateful for the Minister's
comments.
3.26 We agree with the Minister's comment that Member States
should not be inhibited from continuing to give effect, after
the adoption of the Regulation, to international agreements containing
choice of law rules in relation to particular matters. However,
we ask if the Minister also takes the view that Member States
should remain free to accede to future international conventions
after adoption of the Regulation.
3.27 In relation to Article 24 as it now stands in the Commission
text, it is not clear to us if the international agreements in
question are ones to which all Member States are party, or if
it is sufficient, for operation of the exception, that only some
Member States be party. We should be grateful for the Minister's
comments on which meaning is to be preferred.
3.28 We should also be grateful if the Minister could inform
us on how the matter is now to be taken forward, in particular
on whether it is the Presidency text or the Commission's revised
proposal which will form the basis of further negotiations.
3.29 We shall hold both documents under scrutiny pending the
Minister's reply.
13 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
14
OJ No L 210 of 7.8.1985, p.29. Back
15
OJ No L 149 of 11.6.2005, p.22. Back
16
I.e. Rules of law which cannot be derogated from by contract. Back
17
A doctrine derived from Roman law (and which is a feature of the
law of Scotland) governing the liability of a person who acts
in the affairs of another without authority. Back
18
Which would seem to include the common law action for money had
and received. Back
19
The reference to 'action' is presumably intended to be a reference
to the act performed without due authority, rather than to 'action'
in the sense of proceedings, so it is presumably not a rule applying
the lex fori in such cases. Back
20
The reference to 'personal rights' is equally undefined. Back
| 
