Select Committee on European Union Minutes of Evidence

Examination of Witness (Questions 100-119)

29 JANUARY 2004

Sir Peter North CBE QC DCL FBA

  Q100  Lord Neill of Bladen: I was really rather intrigued, when you were talking about the borderline between tort and delict. It came to the back of my memory the discussions one used to have about bad faith in the contractual process and that the lack of it would give you culpa in contrahendo and whether that is settled by Rome I, or whether you could have debates about whether bad faith in the course of negotiation was tortuous in character or whether it was contractual.

  Sir Peter North: I think that is a very good example of the sort of definitional issue which arises. I took the example from Rome I because it is specifically addressed in the text, but these classification issues are going to arise in any court . I think, if we have both Rome I and Rome II Regulations, with an assumption that it is very clear as to what the dividing line is between the two, which it is not, then it will be the European Court of Justice which is the body which will have to determine that. If you like, it is a litigation-creating gap, which lawyers might say is great but the world outside would not.

  Chairman: Somebody will have to pay for it.

  Q101  Lord Neill of Bladen: My point is, legislation is not covered by Rome I, there is nothing definitional there about what is a contract? It is an unfair question.

  Sir Peter North: There are provisions, and I am racking my brain now, I have to confess, as to what is not covered but there is not a clear definition of what is contractual.

  Q102  Chairman: If the Regulation were to be brought in, as part of European law, presumably it would be necessary for the 1995 Act provisions to be repealed?

  Sir Peter North: In whole or in part. In part if the Regulation's scope was limited to intra-Community Member State matters. There would be an issue then as to whether the whole of Part III of the 1995 Act should be replaced for the rest of the world. It is the point I was making earlier. Certainly Part III would have to be replaced for those matters covered by the agreed scope of the Regulation.

  Q103  Chairman: If the Regulation set it as it is at the moment, would not Article 2 require the whole of the 1995 Act provisions to go?

  Sir Peter North: It would point in that direction, yes.

  Q104  Chairman: Then we would have a very interesting state of affairs, and very pleasant for lawyers, if it were held then to be on challenge that it was outside the scope of Article 85, the Regulation?

  Sir Peter North: Yes, and that is why I think there is an important argument to be had as to whether by free choice, if the rules are reasonably satisfactory, we can apply them by our own sovereign decision to the circumstances which would not be covered.

  Q105  Chairman: The leading of substantive Articles really is Article 3. How would you regard that, is that a lex loci delicti, a lex damni rule, or what is it?

  Sir Peter North: I had not come across the phrase, the lex damni rule, until a list of questions was suggested to me that you might wish to raise, but it seems to me to be about right. Clearly it is not the same as the similar provision in Section 11 of the 1995 Act. I suppose one has to ask whether the description really matters very much. The rule in Article 3 is formulated in a way different from Section 11, because Section 11 says that the applicable law is the law of the country in which the events constituting the tort or delict in question occur; so it is not focused on the damage, but then goes on to say, in section 11(2), that well, actually, it is the law of the country where death is suffered, or it is the law of the country where property damage is suffered. That is actually clothing Section 11 of our Act with a lot of the characteristics of Article 3, but, the fall-back provision in the 1995 Act says that in any other case, which is not death or personal injury or damage, the applicable law is that of the country in which the most significant element, or elements, of the events occur. So there is a general view which you can use to look at how you apply the overriding rule of what is the law of the country in which the events constituting the act occurred. At that point, you are into a rule which is really rather different from Article 3, as I read it, because Article 3 drives you continually down the route of having to look for the law of the country where the damage occurred, or was going to occur. It is not as dramatically different as one might think, because the two most obvious cases of potential difference, death and personal injury, on the one hand, and damage to property, on the other, are elided together by Section 11(2) of our Act.

  Q106  Chairman: Would it not be necessary, in order to make sense out of Article 3, to have some description of what actually is meant by `damage' for the purpose of application of the Article?

  Sir Peter North: Absolutely, yes.

  Q107  Chairman: Which, at the moment, is absent?

  Sir Peter North: Yes. I agree entirely.

  Q108  Chairman: As we are on Article 8(3), the third paragraph says, notwithstanding paragraphs one and two, it is clear that the non-contractual obligation is manifestly more closely connected. You have referred, I think, substantially, as did some of the other commentators who sent in their views, and that is the adverb which is used, is it not, in the 1995 Act?

  Sir Peter North: Yes. The Act is substantially more appropriate. I think there is a broader issue here, perhaps broader than obviously is revealed, though, to be fair to the Commission, it is touched on in their covering material. There is clearly a concern in relation to Rome I that what I might call the let-out clause, contained in Article 4, of Rome I, says that if there has not been a choice of the applicable law for a contract then, you can go to, if you like, a general connection rule. I think there is a perception that courts in this country have jumped rather quickly to the general connection rule without going through looking at the rigour of whether one presumption or another presumption applies. That is perceived by some in the Commission as being rather too liberal an approach, let me put it like that. That concern, I think, blows into the drafting of Article 3(3) in Rome II. I think that is why the phrase `manifestly more closely connected' has been included, or at least, one of the reasons that it is there, so that you cannot slide out of applying Article 3(3) too easily, as it might be thought courts have slid out of applying the equivalent provision in Rome I.

  Q109  Chairman: I think, manifestly would be a stricter word than substantially?

  Sir Peter North: Yes.

  Q110  Chairman: Coming down to Article 4, the point has been made, in a number of responses to us, that there ought to be a distinction drawn between product liability in consumer contracts and product liability in cases where it is business-business on either side of the litigation equation. Do you have a view on that front?

  Sir Peter North: Yes. It is, again, commented on in my written response. Article 4 seems clearly to be drafted with consumer protection in mind, and the Commission's Explanatory Memorandum suggests that. It is, however, not limited to consumer cases, though it is very much a protective rule for consumers. I see no justification for it in a business-to-business environment. In fact, I would start the other way round. I would ask, what is the argument for having any of these special rules in Articles 4-8? Why are they taken out of the generality of the main rule? If there is a very good case for any one of them, well, put it in, in relation to that case. There is an argument, though I am ambivalent about the strength of it, in terms of consumer protection in product liability cases; well then, put it in as a consumer protection measure, but not as a general measure.

  Q111  Chairman: Article 5, unfair competition, this has caused a lot of head-scratching in the responses we have received. That is mainly, I think, because unfair competition is not an expression which we have in our domestic law, a list of types of liability, and again it is a categorisation problem. I am told, and I do not know whether this is within your own knowledge as well, that it comes from German law, and the suggestion has been made that this must have been drafted by a German lawyer who was familiar with the German law of unfair competition. If one looks over the page to Article 8, which speaks of infringement of intellectual property rights, practically every infringement of intellectual property rights could be represented as being an item of unfair competition?

  Sir Peter North: Yes. I hardly need to say it in this company, but as soon as you start to have exceptional rules you have got to define "exception" Before I came here, I cast my mind back to the 1995 Act, because I was a Law Commissioner at the time when the reports which led to that Act were being prepared, though I had no responsibility for the ultimate draft Bill and Report of May 1986. I had left the Law Commission by then. We were involved in an exercise of asking whether we ought to have rules which separated out such matters as unfair competition, product liability, and the like. The clear view then, which was the view that Parliament later accepted in the 1995 Act, was that, no, we should not. It added nothing to the justice or the clarity of the law to do that, and I think we are back in the same debate here as to whether this approach is justified. The line I would take is not an unthinking line because in the world in which we live now, 20 years on, commercial issues have changed. Nevertheless, one must still ask what is the real case, and what is the limit of that case, for an exceptional rule from the generality, rather than this terribly broad-brush assumption?

  Q112  Chairman: That would run right down 4, 5, 6, 7 and 8?

  Sir Peter North: Yes.

  Q113  Lord Neill of Bladen: On unfair competition, take the case of stealing of customer lists. Now, by touching the right button, a fraudulent person can obtain an international list of some rival and then proceed to lobby and try to get the trade of those customers. I think my first question is, would that fall within the rule of Article 5(1), unfair competition, and, if so, how does the rule work, if it is my example, an international list? We are told the law should be the law of the country where competitive relations, or the collective interest of consumers, are, or are likely to be, directly and substantially affected, will end up in chaos in a dozen different countries, or is that resolved by some other provision?

  Sir Peter North: No, I do not think it is. I think my retort to a distinguished silk would be there is a lot of work for lawyers in there.

  Q114  Lord Neill of Bladen: You would argue, we do not need an Article 5 there at all?

  Sir Peter North: I would not be quite so dogmatic. I would be perfectly prepared to see an argument which said, "Here is a real sort of problem which needs to be governed by a rule different from the general rule." Rather than the drafting at the moment, which seems to be, "Here's a category, let's have a separate rule for it." I do not think the case for that is argued.

  Q115  Lord Neill of Bladen: The only special rule we have got is defamation, and that is after a lot of agonising following the Queen's Speech. It is a real difficulty, is it? That finally took defamation out of the new Act?

  Sir Peter North: Yes. I can say it in this place that that was essentially a political judgment rather than a detailed law reform, analysed judgment.

  Q116  Chairman: I cannot remember. What did the Law Commission recommend about that?

  Sir Peter North: Defamation should be covered by the general rule, and it was powerfully argued in this place that that should not be the case. One might say that the time available for a Bill from the Law Commission to be considered is limited, and you might say the Lord Chancellor of the day took the view that a Bill with the exclusion of provision for defamation in it was better than no Bill at all. I think I would say that.

  Q117  Chairman: There is special treatment for defamation and other privacy violations in Article 6, which says it is to the law of the forum where the Article 3 law would be contrary to the fundamental principles of the forum as one's freedom of expression and information?

  Sir Peter North: Again, I think the difficulty with that is that it is a very unclear rule; it is a very litigation-creating provision. Again, there will be those in the legal profession who would regard that as rather a good thing. Whether all the judiciary would, My Lord, I am not so sure. It is not very helpful, I think, to have a provision like that, if it is, in fact, going to be cast into legislative form, which it will be, as a Regulation.

  Q118  Lord Neill of Bladen: That is contrary to Recital (4), and we have already touched on part of that, the proper function of the internal market creates a need in order to improve the predictability of the outcome of litigation, certainty unto the law. This, for example, is actually creating uncertainties?

  Sir Peter North: Yes. I think it is a very vague provision.

  Q119  Chairman: The reference in the Article to the fundamental principles of the forum as regards freedom of expression and information sounds as though the draftsman has in mind countries with written constitutions?

  Sir Peter North: I was just about to say, I wonder who in this place is going to define them. There will be very varied views. It does seem to me that it will be an extremely difficult provision on which to advise clients as to whether they have to contemplate complying with the law of state A and state B. It is very unclear.

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