Non-Contractual Obligations (PIL)

by Jan von Hein

1. European private international law of non-contractual obligations

After more than 30 years of preliminary works, the private international law of non-contractual obligations has been unified to a large extent in the European Union by Regulation 864/2007 of 11 July 2007 (Rome II Regulation). The Rome II Regulation came into force on 11 January 2009. The Regulation applies in all ‘situations involving a conflict of laws’, without limiting its scope to conflicts between Member States’ laws (Art 1(1) Rome II Regulation). In addition, Art 3 lays down the principle of universal application, ie that any law specified by the Regulation shall be applied whether or not it is the law of a Member State. Because of the exceptions from the material scope of Rome II, autonomous conflict of laws rules of the Member States maintain some of their importance, eg for violations of personality rights (Art 1(2)(g) Rome II Regulation). Furthermore, the Hague Conventions on the law applicable to Products Liability (HCP) and on the law applicable to Traffic Accidents (HCTA) remain unaffected by the Rome II Regulation (Art 28(2) Rome II Regulation). Moreover, the precedence of other provisions of Union law in relation to particular matters has to be considered (Art 27). Finally, the Rome II Regulation is not effective in Denmark (Art 1(4)), but is applicable in the United Kingdom and Ireland, both of which have declared an opt-in. In sum, despite all efforts at harmonization, the European private international law of non-contractual obligations still shows a rather fragmented picture in its core areas.

2. Methodological foundations of the Rome II Regulation

Although the Europeanization of private international law has sometimes been labelled as a ‘revolution’, the Rome II Regulation proves to be rather conservative from a methodological point of view. The basic economic rationale underlying the Rome II Regulation is succinctly captured in recital 6, which epitomizes the basic tenet of the methodology developed by Savigny in the 19th century, ie the goal of an international harmony of decisions. A general paradigm shift to the country of origin principle, with which the basic connection to the place of acting would have corresponded in international tort law, did not materialize. A universal application of the country of origin principle would have imposed the burden of information about foreign law on the victim in a one-sided manner and would inevitably have required a distinction between rules of private international law in intra-Union and third-state cases. The goal of international decisional harmony shapes the methodology of the Rome II Regulation, which is based on the principle of the closest connection (Arts 4(3), 5(2), 10(4), 11(4), 12(2)(c) Rome II Regulation), but fixes this principle for reasons of legal certainty in black letter rules of connection for individual types of torts. In principle, not the court but the legislature shall determine the seat of a legal relationship.

Proposals for an extension of the escape clause, which were inspired by the conflicts revolution that raged in the United States in the 1960s and 1970s, were rejected by the Council and the Commission. On the other hand, the legislature has not succumbed to the temptation to exaggerate the central idea of legal certainty, but admits explicitly the necessary flexibility of the judicial decision (recital 14, Art 4(3) Rome II Regulation). It is only concerning product liability that an indirect reception of the conflicts revolution by the method of a cascade of connections (Art 5 Rome II Regulation), which was influenced by the HCP, can be noticed. Finally, the Rome II Regulation is consistent with classic private international law insofar as basically the ‘spatially’ best law and not the substantively ‘best’ law is to be applied. In only three special cases—Multi-State-delicts in antitrust law (Art 6(3)(b)), environmental damage (Art 7) and direct action against the insurer of the person liable (Art 18)—a right to opt for the more favourable law is provided to the injured party. In sum, the Rome II Regulation does not provoke a fundamental methodological paradigm shift for European private international law, but is an expression of a continuous process of evolution, drawn upon the legacy of Savigny.

3. Material scope of the Rome II Regulation

The Rome II Regulation applies, in situations involving a conflict of laws, to non-contractual obligations in civil and commercial matters (Art 1(1)1 Rome II Regulation). The term ‘civil or commercial matter’ has to be defined in an autonomous way; in this context the case law of the ECJ, eg as concerns the Brussels I Regulation (Reg 44/2001), can be consulted. The regulation shall explicitly not apply to public law matters (revenue, customs, administrative matters), Art 1(1)2 Rome II Regulation. The liability of the state for acts or omissions in the exercise of state authority is not a civil matter in terms of the regulation (Art 1(1) s 2). Article 1(2) Rome II Regulation lists specific civil matters which shall be excluded from the scope of the regulation, namely family relationships and relationships with comparable effects (eg civil unions, registered homosexual partnerships), matrimonial property regimes, negotiable instruments, certain questions of company law, trusts, nuclear damage and violations of rights relating to personality (Art 1(2)(a)–(g)). The exclusion of the law of negotiable instruments and of company law causes problems of classification (subsections (c) and (d)) capital markets law (international), company law (international). The exclusion of obligations arising out of violations of rights relating to personality is due to a lack of political consensus. In February 2009 the Commission submitted a comparative study on the situation in the Member States as regards the law applicable to non-contractual obligations arising out of violations to privacy and rights relating to personality (JLS/2007/C4/028).

The line between contractual and non-contractual obligations is drawn by way of an autonomous characterization. Torts/delicts in terms of Art 2(1) Rome II Regulation encompass obligations arising out of strict liability. Furthermore, Art 2(1) makes clear that obligations arising out of dealings prior to the conclusion of a contract (culpa in contrahendo) are to be regarded as non-contractual; consequently, they are governed by Rome II and not by Rome I (Art 1(2)(i) Rome I Regulation (Reg 593/2008)); see 5. d) below). This characterization of culpa in contrahendo ensures consistency with the Brussels I Regulation (see recital 7 Rome II Regulation). Article 2(2), (3) Rome II Regulation include obligations that are likely to arise within the scope of the Regulation and thus allows the determination of the applicable law with regard to preventive actions for injunctions.

According to Art 1(3) Rome II Regulation, the Regulation shall not apply to evidence and procedure, without prejudice to Arts 21 and 22. Apart from that, the distinction between lex causae and procedure follows from several subsections of Art 15 Rome II Regulation, which are particularly relevant to the legal systems of common law. Exemptions from liability, limitations of liability as well as the existence, the nature and the assessment of damage or the remedy claimed are governed by the law applicable to the non-contractual obligation (Art 15 (b), (c) Rome II Regulation). Thus, a procedural characterization of the quantification of damages is excluded. Although recital 33 obliges the courts to take into account all effective costs and losses of the specific victim under the applicable substantive law, it does create a special connection regarding such an assessment. Article 15(d) Rome II Regulation states that the lex causae is to supply the measures a court may take to prevent, terminate or to compensate a damage; however, merely within the limits of powers conferred on the court by its procedural law. Finally, Art 15(h) characterizes the question of prescription bindingly as a question of substantive and not of procedural law.

4. The law applicable to torts under the Rome II Regulation

a) Basic rule and general questions of connection

Pursuant to Art 4(1) Rome II Regulation, obligations arising out of a tort or delict shall be governed by the law of the country in which the damage occurs, irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur. This rather convoluted phrase means that the place of injury of the legally protected interest is the real connecting factor (see recital 17). From an economic point of view, the place of injury will usually lead to an efficient solution because the tortfeasor can generally be expected to inform himself about the law of the country in which the damage occurs, whereas the victim is given the opportunity to take out insurance in accordance with the law that he or she is presumably accustomed to.

In cases in which several injuries are spread across more than one country, a mosaic principle applies, ie each injury is governed by the law at the respective place of injury. The connection to the place of damage is displaced in cases where the person claimed to be liable and the person sustaining the damage both have their habitual residence in the same country at the time when the damage occurs (Art 4(2) Rome II Regulation). This derogation from the law applicable under Art 4(1) allows for a more efficient handling of lawsuits, particularly with regard to traffic accidents, because the victim typically brings an action against the tortfeasor at their common habitual residence and has to deal with the consequences of the damage suffered by him in the country where he is domiciled. Nevertheless, the rules of safety and conduct in force at the place of acting have to be taken into account as so-called local data (Art 17 Rome II Regulation). The notion of habitual residence is only partially defined in Art 23.

Article 4(3) of the Rome II Regulation contains a general escape clause that is, however, only to be applied under exceptional circumstances, ie ‘where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2’. The deviation from the preceding paragraphs has to be carried out for the whole tort/delict; a splitting (dépeçage) of the connection into separate questions (eg establishment of liability on the one hand, quantification of damages on the other hand) is prohibited. The escape clause also permits deviating from the connection to the common place of habitual residence (para 2) in favour of the place of damage (para 1), if further circumstances refer to that place (eg the registration and the insurance of the vehicle in case of car accidents). Article 4(3) s 2 Rome II Regulation provides the principle of an accessory connection to a pre-existing relationship between the parties, such as a contract.

The objective connections are displaced by a choice of law of the parties. Article 14(1)(a) Rome II Regulation limits consumers’ freedom of choice to the ex-post situation. The choice of law agreement must be demonstrated with reasonable certainty (Art 14(1) s 2). Article 14(1) s 2 makes clear that rights of third parties remain unaffected. According to Art 14(2), parties may not derogate from internally mandatory laws in purely domestic cases. Article 14(3) extends the limitation found in Art 14(2) to cases where the parties have chosen the law of a third state in a substantially intra-Union case. Parties are limited to the choice of the law of an actual country. Thus, the provisions in the Draft Common Frame of Reference (DCFR) for non-contractual obligations cannot, as a non-state body of rules, be the object of a choice of law selection by the parties. The only possibility allowing for their application would be an incorporation by reference under the applicable substantive law.

Whereas a recourse to public policy is renounced in several recent regulations on matters of international civil procedure (public policy), the Rome II Regulation contains a general clause protecting the public policy of the forum (Art 26). Recital 32 clarifies that courts of the Member States remain free to consider non-compensatory exemplary or punitive damages of an excessive nature as being contrary to their public policy. Internationally mandatory provisions of the forum’s law may be applied pursuant to Art 16 Rome II Regulation irrespective of the law otherwise applicable. For reasons of consistent interpretation (recital 7) the concept of mandatory provisions should be interpreted in accordance with the autonomous definition given in Art 9(1) Rome I Regulation. The Rome II Regulation does not deal, however, with the application of foreign mandatory provisions. Therefore, some authors argue that Rome II prevents a court from applying foreign mandatory rules. It seems to be more appropriate, however, to interpret Rome II’s silence in the sense that this question should be left to the further development of European jurisprudence and conflicts doctrine. At the very least, one cannot possibly deny the Member States’ courts the right to continue the established practice of taking foreign mandatory rules into account in the course of the application of their substantive laws (eg §§ 138, 826 Bürgerliches Gesetzbuch (BGB)) given that Rome II does not harmonize substantive civil law. The Rome II Regulation totally excludes the possibility of renvoi (Art 24 Rome II Regulation).

b) Special rules of connection

For special types of delicts, the place of acting still plays an important role. A subsidiary connection to the place of acting can be possible if the law at the place of damage is not foreseeable to the tortfeasor, eg the habitual residence of the producer in cases of product liability (Art 5(1) s 2 Rome II Regulation). Article 9 Rome II Regulation even prescribes an exclusive connection to the place of acting for industrial actions. Furthermore, concerning environmental damage, the law of the place of acting may be chosen by the injured party in order to ensure a high level of environmental protection (Art 7). In addition to that, in case of damages spread across more than one country caused by acts restricting free competition, the injured party may, for reasons of procedural efficiency, choose to base his or her claim on the law at the tortfeasor’s domicile, ie the centre of conduct (Art 6(3)(b)). Additionally, there is a connection to the place of acting in case of the infringement of a unitary Union intellectual property right because the lex loci protectionis does not provide an unambiguous regional allocation (Art 8(2)). Other special rules pursue an approach focused on the injury of legally protected interests but modify that approach in contrast to the general rule’s notion of place of damage. Among these are the connecting factors determining the law applicable to product liability (Art 5(1) s 1), the connection to the affected market concerning torts in the field of competition (Art 6(1) and (3)(a)) as well as the lex loci protectionis in case of infringements of intellectual property rights (Art 8(1)).

A deviation from the specific rules for special types of torts is only partially possible. The conflicts rules on product liability and industrial action explicitly reserve the connection to the common habitual residence (Arts 5(1) and 9 Rome II Regulation). However, the other specific rules cannot be displaced by a common habitual residence; there is, though, a counter-exception for acts of unfair competition exclusively to the detriment of a specific competitor (Art 6(2)). Only some of the special rules are subject to a correction by the principle of the closest connection. Concerning product liability, Art 5(2) contains a special escape clause which mirrors the content of Art 4(3). The escape clause is applicable to acts of unfair competition affecting exclusively the interests of a specific competitor as well (Art 6(2)). However, for the remaining types of torts which are regulated in a special way, recourse to the escape clause is barred. Party autonomy is granted unless it is explicitly prohibited, ie parties may choose the applicable law in cases of product liability (Art 5), environmental damage (Art 7) and industrial action (Art 9). On the other hand, free choice of law is explicitly excluded in the case of antitrust and unfair competition law (Art 6(4)) as well as for intellectual property law (Art 8(3)).

5. Other non-contractual obligations under the Rome II Regulation

a) General

The possibility of a choice of law also exists for other non-contractual obligations; moreover, the explanations at 4(a) above referring to public policy (ordre public), overriding mandatory provisions and renvoi also apply in this regard.

b) Unjust enrichment

If a non-contractual obligation arising out of unjust enrichment concerns a relationship existing between the parties (eg a contract or a tort/delict) which is closely connected with this unjust enrichment, the obligation shall be governed by way of an accessory connection (Art 10(1) Rome II Regulation). Where the law applicable cannot be determined on the basis of such a connection, the law of the common habitual residence of the parties shall apply (Art 10(2)). If this does not help either, the law applicable is that of the country where the unjust enrichment occurs (Art 10(3)). Appropriate flexibility is accomplished by an escape clause (Art 10(4)).

c) Negotiorum gestio

In principle, an accessory connection to an existing legal relationship also applies to obligations arising out of negotiorum gestio (Art 11(1) Rome II Regulation) (management of another’s affairs without a mandate (negotiorum gestio)). Where this is not possible, the law of the common habitual residence comes into operation (Art 11(2)). Where this connection also leads nowhere, the law of the country in which the act was performed applies (Art 11(3)). In the case of negotiorum gestio as well, a deviation from the regular conflicts rules by way of an escape clause is possible (Art 11(4)). A special rule for the voluntary performance of another person’s obligations without due authority is lacking.

d) Culpa in contrahendo

The conflicts rule concerning obligations arising out of culpa in contrahendo leads to an accessory connection to the law applicable to the actual or the hypothetical contract, which has to be determined pursuant to the Rome I Regulation (Art 12 Rome II Regulation) (contractual obligations (PIL)). The term culpa in contrahendo has to be interpreted in an autonomous way. Principally, the legislature has envisaged the violation of the duty of disclosure and the breaking-off of contractual negotiations. In contrast, personal injury suffered by a person while a contract is being negotiated is governed by Art 4 or other relevant provisions of the Rome II Regulation. For cases in which the law cannot be determined under Art 12(1) Rome II Regulation, the law at the place of damage applies (Art 12(2)(a)), which, in turn, is displaced by the law at the common habitual residence of the parties (Art 12(2)(b)). Finally, in case of an obviously closer connection to another country, a general escape clause (Art 12(2)(c)) applies.

Literature

Helmut Heiss and Leander D  Loacker, ‘Die Vergemeinschaftung des Kollisionsrechts der außervertraglichen Schuldverhältnisse durch Rom II’ [2007] Juristische Blätter 613; Andrew Dickinson, The Rome II Regulation: The Law Applicable to Non-Contractual Obligations (2008); Jan von Hein, ‘Something Old and Something Borrowed, but Nothing New?—Rome II and the European Choice of Law Evolution’ (2008) 82 Tul L Rev 1663; Phaedon John Kozyris, ‘Rome II: Tort Conflicts on the Right Track!’ (2008) 56 Am J Com L 471; Xandra E Kramer, ‘The Rome II Regulation on the Law Applicable to Non-Contractual Obligations: The European Private International Law Tradition Continued’ (2008) Nederlands Internationaal Privatrecht 414; Luis de Lima Pinheiro, ‘Choice of Law on Non-Contractual Obligations between Communitarization and Globalization’ (2008) 44 Riv Dir Intern Priv & Pros 5; Symeon C Symeonides, ‘Rome II and Tort Conflicts: A Missed Opportunity’ (2008) 56 Am J Com L 173; Gerhard Wagner, ‘Die neue Rom II-Verordnung’ [2008] IPRax 1; William Binchy and John Ahern (eds), The Rome II Regulation on the Law Applicable to Non-Contractual Obligations—A New International Litigation Regime (2009); Thomas Kadner Graziano, ‘Das auf außervertragliche Schuldverhältnisse anzuwendende Recht nach Inkrafttreten der Rom II-Verordnung’ (2009) 73 RabelsZ 1; Gralf-Peter Calliess (ed), Rome Regulations: Commentary on the European Rules on the Conflict of Laws (2011).