7 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 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 9 May 2006
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| Previous Committee Report | (a) HC 34-xxvi (2005-06), para 6 (26 April 2006), HC 34-xxii (2005-06), para 3 (15 March 2006), 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) HC 34-xxvi (2005-06), para 6 (26 April 2006) and HC 34-xxii (2005-06), para 3 (15 March 2006)
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| To be discussed in Council | Justice and Home Affairs Council June 2006
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| Committee's assessment | Legally and politically important
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| Committee's decision | Cleared
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Background
7.1 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 duties not assumed
by contract.
7.2 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.
7.3 We considered on 8 March 2006 a letter of 20
February 2006 from the Minister (Baroness Ashton of Upholland)
informing 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. The
Minister informed us that the Government agreed with the Presidency
on the general structure of the proposal, with 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 that the generally applicable law (Article
3) should be the law of the country where the damage has occurred
or is likely to occur, unless there was manifestly a closer connection
with the law of some other country, but did not favour any special
rule for product liability cases or for unfair competition cases.
7.4 The Minister's letter 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, but that in all
other cases, the law of the country where the publisher or broadcaster
is established would apply. The Minister explained that the Government
instead supported solutions based on applying the law of the country
of origin principle, but that it would also support the option
of excluding defamation altogether from the scope of the Regulation.
7.5 We considered an amended proposal from the Commission
(document (b)) on 15 March 2006, noting that publication of the
amended proposal coincided with efforts by the Austrian Presidency
to gain political agreement on a number of the most contentious
issues arising under the previous proposal (document (a)), and
which had been discussed at the Justice and Home Affairs Council
on 22 February 2006. We noted that the Commission's amended proposal
made a number of technical changes, many of which were in accordance
with the Presidency text.
7.6 In our review of the Commission's amended proposal,
we drew attention to the recitals which, in relation to product
liability and unfair commercial practices, seemed to refer incorrectly
to these matters being "penalised" by Directive 374/1985/EEC
and 29/2005/EC respectively. We also noted that Article 24 now
provided that the Regulation was not to prejudice the application
of multilateral conventions to which the Member States were parties
when the Regulation was adopted and which, in relation to particular
matters, laid down conflict of law rules. We noted the Government's
view that Member States should, in principle, be able to continue
to give effect to international agreements after the commencement
of the Regulation.
7.7 We considered two ministerial letters of 23 March
and 25 April 2006, together with the latest Presidency text of
the proposal on 26 April 2006. In her letters, the Minister explained
that the Presidency had put the text on the agenda for the April
Justice and Home Affairs Council. In her April letter, the Minister
explained in detail the changes envisaged by the Presidency text
and concludes that most, but not all of them, were favourable
to the UK's position. On those grounds the Minister asked if the
Committee would clear the proposal from scrutiny. In our Report
on the ministerial correspondence regarding the Presidency text,
we noted the Minister's point but concluded that in view of the
uncertainties which still attended the proposal, and the likelihood
of substantial further negotiations, we could not properly clear
the proposal as a whole from scrutiny. We also asked the Minister
to make it entirely clear in the Council that the UK considered
that the scope of the proposal exceeded the scope of Article 65
EC. At the same time, given the imminence of discussion in the
Council and the chance of securing agreement on changes favourable
to the UK's position, we indicated to the Minister that the Government's
agreement to the changes in the Presidency text would not need
to be withheld and would not be deemed to be a breach of the scrutiny
reserve.
The Minister's letter of 9 May 2006
7.8 In her letter of 9 May 2006, the Parliamentary
Under-Secretary of State at the Department for Constitutional
Affairs (Baroness Ashton of Upholland) reports to us on the outcome
of the Justice and Home Affairs Council on 28 April 2006. She
writes as follows:
"I am writing to update you and the Scrutiny
Committee following the discussions on Rome II at the meeting
of the Justice and Home Affairs Council on 28 April.
"At that meeting, political agreement was reached
on all articles in Rome II and I attach a copy of the final Presidency
proposal as agreed by the Council. This will now be adopted as
a common position by the Council later this year. The discussion
centred on two main issues; Article 8A — the special rule
for cases involving industrial action, where a small minority
of Member States were opposed to such a rule, and Article 25 governing
the relationship between Rome II and International agreements.
Neither of these issues were contentious as far as the UK was
concerned. On the latter, following mediation efforts by the UK,
the Presidency produced a compromise solution that commanded broad
support.
"Regarding the articles that were of concern
to the UK, on Article 1, the scope of the Regulation, I was aware
that there was not likely to be sufficient support amongst Member
States for our concerns on this issue to result in any amendment
to the Presidency proposal. However, due to the importance of
this issue I reiterated our continuing concerns that there was
no limitation on scope which was inconsistent with Article 65
and that this should not be a precedent for future dossiers. As
expected, there was little support for introducing such a limitation
and, as you will see from the attached Presidency text Rome II
continues to have universal application in that it requires no
particular connection between the parties to a dispute or the
facts of the dispute itself and any one or more Member States.
I have to accept that this outcome is not satisfactory. It is
however an issue which we will continue to raise in other dossiers
where it arises.
"There was no discussion on the issue of defamation
and similar cases as there was already clear agreement in the
Council that claims relating to defamation and breach of privacy
would be excluded completely from the scope of Rome II. This outcome,
which I supported, reflected the reality that there was no agreement,
within the Council, on any positive choice of law rule for such
claims. There was also agreement on a reference to defamation
and similar cases in the review clause. This provides that, no
later than four years after the Regulation comes into force, the
Commission shall submit a report to the Council and European Parliament
on its application and in particular, the report shall consider
non-contractual obligations arising out of violations of privacy
and rights relating to the personality, including defamation.
This agreement meets UK concerns that there should be a realistic
timescale for the production of the Commission's report and that
this should only be accompanied by proposals to adapt the Regulation
if the Commission considers that to be necessary.
"I am sure that you will share my view that
this is a good outcome for the UK, and its media interests in
particular. The eventual exclusion of defamation was, as you know,
a hard fought issue and we made a concerted effort to achieve
this end. You may be aware that I had many meetings with other
EU Justice Ministers and with the Commission who I am pleased
to say eventually agreed that exclusion was the only way forward.
"The UK's remaining concerns centred on the
proposed special rules for cases involving product liability (Article
4), unfair competition (Article 5) and environmental damage (Article
7). Again, there was limited support amongst Member States for
our concerns on these articles and although I reiterated our concerns,
agreement was reached on the Presidency proposal without further
amendment. This is an unsatisfactory outcome for the UK although
I intend to pursue our concerns, particularly regarding the rules
on product liability and unfair competition, with the Parliament
during their second reading where I hope there may be scope for
further amendment.
"Following the meeting of the Council, the recitals
in Rome II have been discussed in the Working Group. Political
agreement will be sought on these when the Council next meets
in June and I will write to you further in advance of that meeting.
A full common position on Rome II will then be adopted by the
Council later this year."
Conclusion
7.9 We thank the Minister for her letter and detailed
account of the discussions leading to political agreement on the
proposal. On the basis of our previous indication to the Government
that agreement to a compromise solution would not be deemed to
be a breach of scrutiny and that the changes to the Precitals
indicated in the Presidency text do not affect the substance of
the proposal, we are now happy to clear the proposals from scrutiny.
7.10 We note that, the Government remains concerned
about the product liability and unfair competition provisions
in the Presidency proposal. We share these concerns and notwithstanding
political agreement, urge the Government to continue to seek appropriate
amendments to these unsatisfactory rules, both during readings
in the European Parliament and possible inter-institutional negotiations.
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