The law applicable to non-contractual obligations – The Rome II Regulation

Outline of the Community (European Union) legislation about The law applicable to non-contractual obligations – The Rome II Regulation

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The law applicable to non-contractual obligations – The Rome II Regulation

Document or Iniciative

Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II).

Summary

This Regulation defines the conflict-of-law rules applicable to non-contractual obligations in civil and commercial matters, including product liability, negotiorum gestio (acts relating to the affairs of another person) and culpa in contrahendo (non-contractual obligations arising out of dealings before the conclusion of a contract). Applicable from 11 January 2009 in all Member States except Denmark, it does not attempt to harmonise the substantive law of the signatories in the field of non-contractual obligations, but only their conflict-of-law rules, so that, no matter where in the EU an action is brought, the rules determining the applicable law will always be the same. As a general rule, and in order of priority, the law applicable is:

• the law of the country where the damage occurs;
• the law of the country where both parties were habitually resident when the damage occurred;
• the law of the country with which the case is manifestly more closely connected than the other countries.It authorises the parties to choose, by mutual agreement, the law that will be applicable to their obligation.

Specific rules are provided for certain domains, e.g. product liability and intellectual property, and certain domains are excluded, notably revenue, customs and administrative matters, the liability of the State, and matrimonial and family relationships.

Defining the applicable law: harmonising conflict-of-law rules in the EU

When the Rome II Regulation comes into application (11 January 2009), it will apply to events giving rise to damage that occur after it came into force (20 August 2007).

The law applicable to non-contractual obligations under this Regulation governs:

• the basis and extent of liability, including the persons who may be held liable;
• the grounds for exemption from liability; the limitation or division of liability;
• the existence, nature and assessment of damage and the remedy claimed;
• the measures that the court may take to prevent or end injury or damage and provide for compensation (within the limits of national procedural law);
• the transferability of the right to seek compensation, including by succession;
• the persons entitled to compensation for damage sustained personally;
• liability for the acts of another person;
• extinction of obligations, and the rules relating to prescription or limitation based on a period of time.

As a general rule (Article 4), the law applicable to a non-contractual obligation arising out of a tort/delict is the law of the country in which the damage occurs, regardless of the country or countries in which indirect consequences of the event may occur. There are, however, two major exceptions: (1) When the defendant and the claimant are both habitually resident in the same country at the time when the damage occurs, it is the law of that country that applies. (2) When the event is manifestly more closely connected with a different country (e.g. deriving from a pre-existing relation between the parties, such as a contract), it is the law of that country that applies. The Regulation is of universal application: that is, the law specified is applied whether or not it is the law of a Member State.

The Regulation does provide for some freedom of choice: the parties are free to choose the law applicable to a non-contractual obligation either by common agreement after the event giving rise to the damage or, between business people, by an agreement freely negotiated before the event giving rise to the damage. The choice must be explicit or evident from the circumstances, and must not prejudice the rights of any third party. This freedom of choice does not apply to infringements of intellectual property (see below), and cannot be invoked when all the elements relevant to the situation relate to a country other than the one chosen. Similarly, Community law overrides the law of a non-EU country, chosen by the parties, when all the elements of the situation are located in one or more EU Member States.

For unjust enrichment, including undue payments, the applicable law is that governing a pre-existing relation between the parties, e.g. a contract or a harmful event closely connected with the unjust enrichment. If there is no such relation, but both parties were habitually resident in the same country where the event giving rise to the unjust enrichment occurred, it is the law of that country that applies. Failing that, the applicable law is that of the country in which the unjust enrichment occurred or, if the event is manifestly more closely linked with another country, the law of that other country. This also applies to negotiorum gestio (the law governing an existing relation between the parties, or failing that the law of the country of habitual residence, or failing that the law of the country in which the acts were performed or, finally, the law of the country with which the matter is most closely connected). As regards culpa in contrahendo (non-contractual obligations arising out of dealings before the conclusion of a contract), the applicable law is that governing the contract (regardless of whether the contract was actually concluded or not). The concept of culpa in contrahendo is autonomous for the purposes of the Regulation, and should not necessarily be interpreted in the sense of national law. If the law cannot be determined, the applicable law is that of the country in which the damage occurred, or failing that the law of the country where both parties are habitually resident or of the country most closely associated with the event.

The Regulation makes specific provision for certain domains:

• Product liability. The law of the habitual residence of the person sustaining the damage at the time the damage occurred, if the product is marketed in that country; otherwise, the law of the country in which the product was purchased; otherwise, the law of the country in which the damage occurred, if the product is marketed there.
• However, if the defendant could not foresee the marketing of the product in one of the other countries as above, the law applicable is that of his habitual residence. If the harmful event is closely connected with a different country, then it is the law of that country that is applicable.
• Unfair competition and acts restricting free competition. For non-contractual obligations resulting from an act of unfair competition, the applicable law is that of the country in which competition or the collective interests of consumers are or are likely to be affected, unless the act affects only the interests of a specific competitor, in which case the general rule laid down in Article 4 applies. For non-contractual obligations resulting from an act restricting free competition, the applicable law is that of the country in which the market is or is likely to be affected. When this applies to more than one country, a claimant suing in the domicile of the defendant can choose the law of that country, provided that the market in that country is affected. A claimant suing more than one defendant in the court of the defendant’s domicile can choose the law of that court only if the act restricting competition affects the market in that Member State.
• The law applicable in these cases cannot be derogated from by an agreement under Article 14 of this Regulation, which allows the parties to choose the law applicable to a non-contractual obligation by common consent.
• Environmental damage. The general rule applies, unless the claimant chooses to base his action on the law of the Member State in which the harmful event occurred.
• Infringement of intellectual property rights. The law applicable to a non-contractual obligation resulting from the infringement of an intellectual property right is that of the country for which the protection was sought. There can be no derogation to this provision.
• Industrial action. The law applicable to a non-contractual obligation relating to the liability of a worker, employer or professional association resulting from damage caused by a strike or lock-out, whether in progress or after the event, is that of the country in which the industrial action is taken.

Matters excluded

This Regulation does not apply to revenue, customs or administrative matters, to the liability of the State, or to non-contractual obligations arising out of:

• family or similar relations, including obligations of maintenance;
• matrimonial property regimes and similar, wills and successions;
• bills of exchange, cheques, promissory notes and other negotiable instruments;
• the law of companies, in relation to e.g. their creation and legal capacity, liability of members, etc.;
• relations between the settlers, trustees and beneficiaries of a trust created voluntarily;
• nuclear damage;
• violations of privacy and rights relating to personality, including defamation.

Relationship with existing international conventions

The Regulation does not affect the application of international conventions governing non-contractual obligations to which one or more Member States are parties. Article 29 of the Regulation provides that the Member States are supposed to notify the Commission of such conventions by 11 July 2008 at the latest. After that, the Member States are required to notify the Commission of all denunciations of such conventions. That is why this article is applicable from 11 July 2008, while the Regulation as a whole is applicable from 2009.

Between Member States, the Regulation overrides conventions concluded exclusively between them to the extent that these concern the matters it covers.

Review

Not later than 31 December 2008 the Commission will present a study on the situation in the field of the law applicable to non-contractual obligations arising out of violations of privacy and rights relating to personality, as regards the freedom of the press and freedom of expression in the media.

Not later than 20 August 2011 it will report on the application of this Regulation and may then put forward any necessary amendments.

References

Act	Entry into force – Date of expiry	Deadline for transposition in the Member States	Official Journal
Regulation (EC) No 864/2007	20.8.2007 Date of application: 11.1.2009	–	OJ L 199 of 31.7.2007