Select Committee on European Union Minutes of Evidence

Examination of Witness (Questions 140-153)

29 JANUARY 2004

Sir Peter North CBE QC DCL FBA

  Q140  Chairman: My own instinct, which is not necessarily better than any observer's, is that, if a person is to have a direct action against an insurer, the insurer should never be liable to more than he was liable to pay under his contract. It is the section of the law on contractual obligation that should apply?

  Sir Peter North: With great respect, that is a very English law view. That is exactly where I began and I would share that view. What I find very difficult here is that, if one is dealing with jurisdiction issues, if one goes to the Brussels Convention, and now the Brussels Regulation, there are protective provisions in there which say the consumer, a less privileged party, if I can put it in an economic way, can have choices of jurisdiction, you can sue at home or you can sue where the defendant is. That seems to me entirely understandable. What I am finding it very difficult to find a rational explanation for is why they are doing that at the choice of law stage.

  Q141  Chairman: Do you think that they should not?

  Sir Peter North: I think they should not.

  Q142  Lord Clinton-Davis: Have you had any discussions yourself with the insurance industry, and, if you have, what was the outcome?

  Sir Peter North: No, I have not. It is a concern that I have, which I have voiced outside here, that the views of the insurance industry on all of this are very important, and it would seem to me, hopefully, that their input could be achieved at an earlier rather than a later stage. But, no, I have not had any discussions myself.

Lord Grabiner: The unstated premise of the provision, as drafted, is that the insured should be treated as a consumer, who is an inferior bargaining party, so to speak, there is not actually a bargaining party, and should be protected in this rather odd way.

Chairman: I do not know that it is the insured, it is the person who is not the insured, is it not?

  Q143  Lord Grabiner: If he makes claims, he seems to have the option. He is the beneficiary of the cover there, so he might be the insured but he might be some third party protected by the cover. He is saying, in effect, "I'm the consumer and I'm entitled to be given this special advantage"?

  Sir Peter North: If that were the case, which it is not, because it is not so limited, that would be consistent with the jurisdictional provisions in the Brussels Regulation, which do give, if you like, jurisdictional advantages to consumers. One could understand the purpose of a rule which said that the consumer, in one of these third party claim cases, might be given the choice between the laws. I have to say that that approach would have a consistency with the jurisdiction rule arguments. I am not convinced, however, that that is a really valid argument in the choice of law field, in the way it is in the jurisdictional field; but at least you could run the argument in an understandable way, if it was a consumer protection issue, which it is not here.

  Q144  Chairman: Sir Peter, can I ask you to look at Article 24 for a moment, which seems, if I read it right, to put at risk the practice of common law courts to give exemplary damages?

  Sir Peter North: Yes. My written comments are exactly the same as the ones I am about to express to you. I cannot see any justification for excluding the award of exemplary damages in the international sphere when it is still allowed in the domestic sphere; and I cannot see a good case for it not being allowed in the domestic sphere.

  Q145  Chairman: It might go wider than exemplary or punitive damages, because the reference is to "non-compensatory damages" and then there is a comma "such as . . ." so exemplary or punitive damages are just examples. If you had damages measured by reference to the profits which the wrongdoer had made and you had extracted from him as profit, that would be non-compensatory damages?

  Sir Peter North: What this looks like to me is, in a sense, the harmonisation of the law on exemplary damages, as I said when I wrote, by the side wind of this draft Regulation, and I see no case being made for that. There might be a case, though I do not know what it is; but certainly it has not been made, and it is not made in the Commission's paper anyway.

  Q146  Chairman: I do not think it has been established. It has been law for years but in patent infringement, for example, you can get your damages based on the royalty that the individual should have paid if he had gone through and negotiated for one, that is at non-compensatory level?

  Sir Peter North: It is not argued.

Lord Grabiner: It is compensatory.

Chairman: It is not compensatory, no. It is not based on the loss that you have suffered. It is based on the benefit he has obtained.

Lord Neill of Bladen: The theory is, if the defendant had behaved lawfully, he would have come and asked for a licence which he could have got and this is what he would have had to pay.

Chairman: The evidence may be that he would not have got it and he would have been turned down.

Lord Neill of Bladen: That would be different. The case I am thinking of actually involved a House of Lords case where they did decide, there was an offer, but anyone could go along who was in this trade and get a licence at a certain price. Of course, he would never have got permission, but that is a different matter.

Chairman: Forgive me, the current English law is that if he would not have got permission it does not matter, you extract from him his profit. There has been a recent case in the House, a doctor in Regent's Park, and the current rule is that if there is not any actual loss but the individual has made a profit out of what he has done, you can extract from him his profit. I think it is a very sensible development in the area of damages, but it seems to be contrary to what is contemplated here.

  Q147  Lord Grabiner: You have managed to stimulate debate on this side of the table, which is quite an achievement. You said that this was an example of an attempt at harmonisation. Actually, is it not really an attempt to abolish the concept, of harmonising the concept of abolition of the concept of exemplary damages?

  Sir Peter North: Yes. I think that is a perfectly fair way of putting it. I have just turned to the Commission document, the descriptive section on Article 24, and the final paragraph says: "Compensatory damages serve to compensate for damage sustained by the victim or liable to be sustained by him at a future date. Non-compensatory damages serve a punitive or deterrent function." Jumping back a paragraph, we are told that the effect of Article 24 is to ensure, I am paraphrasing now, that the award of such damages will be contrary to Community public policy. What has that got to do with a choice of law Regulation?

  Q148  Chairman: When we put the question to the Commission officials, they said that, oh, it was just making the law tidier.

  Sir Peter North: You can do that in all sorts of ways.

  Q149  Chairman: The suggestion has been made that the provenance of this is a desire to continue to permit the courts in the European Union to refuse to enforce American triple damages awards?

  Sir Peter North: You can achieve that more readily than by doing this.

  Q150  Chairman: You can do that a lot more simply, is that what you mean?

  Sir Peter North: Yes. I am not sure it is an argument which would be very convincing in the corridors of Brussels, but it is almost a vires argument. This point is outside the ambit of the instrument.

  Q151  Lord Neill of Bladen: Really it is Article 2, about laws in general, is it not?

  Sir Peter North: Yes. I think this is my vires point. It has a sweeping effect, which is not articulated in any way in the Report's paragraphs relating to Article 2.

  Q152  Lord Grabiner: It is not a complex point at all?

  Sir Peter North: No.

  Q153  Baroness Thomas of Walliswood: When we discussed this last week with the people from the Commission, the gentleman explained quite clearly why they had done it. They had seen a sort of rather inconvenient little bit of law and they thought, while they were putting through this one, they would add just a little bit of straightening out in there. We all yelled, or rather the Chairman very forcibly asserted, the idea of competence creep and he was covered in blushes, but he defended his action to the last. He would not give way, but it was totally competence creep, it was perfectly demonstrated.

  Sir Peter North: Obviously, My Lady, he was a very brave soul.

Baroness Thomas of Walliswood: He was a brave soul.

Chairman: Sir Peter, thank you very, very much indeed for a very interesting hour that you have given us, and your evidence will be of very great assistance to us in preparing our report and in trying to get rid of the fog in our minds about some of these issues. Thank you.

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