Posts Tagged Regulation 864/2007
Of tractors and trailers. Insurance contracts, subrogration, contracts and torts. Sharpston AG on the scope of Rome I and II.
First, a quick heads-up on precedent: the difference between ‘contract’ and tort’ in European private international law is crucial, as regular readers of this blog will have observed. Crucial, yet the concept is left undefined in the Brussels I (and Recast) Regulation (which has a different special jurisdictional rule for both), the Rome I Regulation on applicable law for contracts, and the Rome II Regulation on applicable law for torts. Undefined, for these foundational elements of private law are outside the reach of legal and political compromise in the legislative process. Yet courts of course do have to apply the rules and in doing so, have to distinguish between both.
The CJEU pushes an ‘autonomous’ EU definition of both concepts which in the past has led to the seminal findings in Jakob Handte (C-26/91) and Kalfelis. In Handte the Court held: the phrase ‘matters relating to a contract [ ] is not to be understood as covering a situation in which there is no obligation freely assumed by one party towards another.’ (the double negative exercised scholarship for some time). In Kalfelis the Court had earlier defined ‘tort’ as ‘all actions which seek to establish liability of a defendant and which are not related to a ‘contract’ within the meaning of Article 5(1).’ (5(1) has become 7(1) in the Recast).
Is the relationship between two insurers, having covered liability for a towing vehicle cq a trailer, each subrogated in their insured’s rights and obligations, one of them currently exercising a claim against the other in partial recovery of the compensation due to the victim, non-contractual?
Per Kalfelis, tort as a category is residual. Sharpston AG’s starting point in Joined Cases Ergo Insurance and AAS Gjensidige Baltic, Opinion issued yesterday, therefore is to examine whether the recourse action is essentially contractual in nature. In the negative, the action is non-contractual. The case is evidently made more complex by the underlying relationships between insurer and insured, and the presence of subrogration. In question is not therefore the relationship between the insurer and the victim: this is clearly non-contractual. The question is rather whether the action of one insurer against the other is contractual in nature, given the contractual relationship between insurer and insured, cq the non-contractual relationship between the insured and the victim.
Sharpston AG first gets two issues out of the way. Lithuania (both referred cases are pending in Lithuanian courts) is a signatory State to the Hague Convention on the law applicable to traffic accidents, which is left unaffected by Rome II by virtue of Article 28. However the Convention itself holds that it does not apply to recourse action and subrogation involving insurance companies. Further, a suggestion that Directive 2009/103 (relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to insure against such liability) includes a conflict of laws (applicable law) rule which is lex specialis vis-a-vis the Rome Regulation, was quickly dismissed. Indeed the Directive’s provisions do not indicate whatsoever that they can be stretched.
Then comes the core of the issue, the nature of the relationship underlying the claim. This, the AG suggests, is contractual. Relevant precedent referred to includes Brogsitter and OFAB. Essentially the AG puts forward an ancestry test: what is the ancestry of the action, without which the parties concerned would not be finding themselves pleading in a court of law?: she uses ‘centre of gravity’ (‘the centre of gravity of the obligation to indemnify is in the contractual obligation’); ‘rooted in’ (‘the recourse action by one insurer against the other…is rooted in the contracts of insurance’); and ‘intimately bound up’ (‘[the action] is intimately bound up with the two insurers’ contractual obligation‘). (at 62).
Incidentally, in para 20 of her Opinion the AG refers, in giving context, to the difference between Lithuanian and German law (the accidents both occurred in Germany) as regards the limitation periods for bringing a recourse action. In Rome II, limitation periods are included in Article 15 as being covered by the lex causae; ditto in Article 12 of Rome I. This pre-empts discussion on the matter for whether limitation periods are covered by lex fori (as a procedural issue) or the lex causae is otherwise not necessarily the same in all Member States.
If the CJEU confirms, preferably using the terminology of its AG, the tort /contract discussion in my view will have been helpfully clarified.
Winrow v Hemphill: The High Court emphasises exceptional nature of ‘manifestly closer connected’ in Rome II. Clarifies ‘habitual residence’.
Winrow v Hemphill ( EWHC 3164), involved a road traffic accident that occurred in Germany on 16 November 2009. The claimant was a rear seat passenger in a vehicle driven by Mrs Hemphill (‘the first defendant’), which collided head on with a German vehicle. The defendant admitted fault for the collision. As a result of the collision, the claimant sustained personal injury, for which she received some treatment in Germany and further ongoing treatment in England. She and her husband returned to live in England in June 2011, earlier than planned. ‘Second defendant’ was the German insurer of the first defendant.
The following was agreed between the parties:
- iii) Since the claimant’s husband was due to leave the army in February 2014 after twenty-two years’ service he would have returned to England one and a half to two years before that date to undertake re-settlement training. It was always their intention to return to live in England.
- ii) At the time of the accident the claimant was living in Germany, having moved there in January 2001 with her husband who was a member of Her Majesty’s Armed Services. Germany was not the preferred posting of the claimant’s husband, it was his second choice. He had four separate three year postings in Germany.
- i) The claimant was a UK national.
- iv) Whilst in Germany, the claimant and her family lived on a British Army base where schools provided an English education.
- v) While in Germany, the claimant was employed on a full-time basis as an Early Years Practitioner by Service Children’s Education, (UK Government Agency).
- vi) The claimant claimed continuing loss and damage including care and assistance and loss of earnings. She asserted that the majority of her loss has been and will be incurred in England. The claimant alleged continuing pain, suffering and loss of amenity.
- vii) The first defendant was a UK national and an army wife, with her husband serving with the Army in Germany. She had been in Germany for between eighteen months and two years before the accident. She returned to England soon afterwards.
The High Court was asked (1) what law applies per Article 4 Rome II, and (2) whether under the circumstances, Article 4(3) Rome II might have any relevance.
On the habitual residence issue, Rome II corrects the overall lex loci damni rule in cases of joint habitual residence between tortfeasor and victim (which was argued to be the case here). Habitual residence was also argued to play a role in the ‘closer connection’ test (see below).
Rome II, the Regulation of the law applicable to non-contractual obligations, does not define ‘habitual residence’ for individuals acting in their personal capacity. The matter therefore is one of national conflicts law. The habitual residence for a natural person is only defined by ht Regulation when it comes to his acting in the course of his business activity. ‘Habitual residence’ is a concept which is not used in Brussels I, however it is used in the Brussels II bis Regulation on jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matter of parental responsibility, where it is left undefined, and in the Rome III Regulation (an instrument of enhanced co-operation and hence not applicable in all Member States) implementing enhanced cooperation in the area of applicable law to divorce and legal separation, where, too, somewhat oddly given its date of adoption (after Rome I and II) it is left undefined.
The Court of Justice has defined ‘habitual residence’ in Swaddling, Case C-90/97, within the context of social security law (entitlement of benefits subject to a residence requirement) as the place ‘where the habitual centre of their interests is to be found. In that context, account should be taken in particular of the employed person’s family situation; the reasons which have led him to move; the length and continuity of his residence; the fact (where this is the case) that he is in stable employment; and his intention as it appears from all the circumstances.’
Undoubtedly the context of the adjudication needs to be taken into account, such as in Swaddling, a social security case, in which the seeking of holding of employment is likely to have a much greater relevance for determining habitual residence than in the context of, say, maintenance or parental responsibility (where, for instance, the interest and ‘anchorage’ of the child is likely to be much more relevant). [See also House of Lords M v M,  EWHC 2047 (Fam), a case referred to in Winrow]. Moreover, the Court of Justice itself has warned that its case-law on habitual residence in one area, cannot be directly transposed in the context of any other (Case C-523/07, A).
It is obvious however that the ‘centre of interest’ test which in one way or another finds its way into habitual residence in all relevant EU law, includes a subjective element: the intention of a person to be anchored in a particular place. This was argued to be relevant in the case at issue, because both victim and tortfeasor were resident in Germany on account of their husbands’ military posting there.
Slade J in my view justifiably held that having regard to the length of stay in the country, its purpose and the establishing of a life there, habitual residence of the Claimant at the time of her accident was Germany. It is not because she followed her husband who was posted in Germany on Army business, that she was in Germany involuntarily.
On the issue of manifestly closer connected per Article 4(3) Rome II, the High Court first of all confirmed the exceptional character of the escape clause, however emphasises, and I have great sympathy for this view, that in reviewing that exceptional possibility, there should be no limitation in principle of factors that can be taken into account: Article 4(3) clearly is an exception to the EU’s mantra of predictability in EU private international law, however one which even the European Commission foresaw and which is inherent to the very nature of the exception. Hence the High Court considered inter alia the joint nationality of the victims (with an interesting discussion on whether United Kingdom nationality may be relevant for the consideration of English law being applicable – there is no such thing as ‘English’ nationality); habitual residence at the time of the accident and subsequently; location of subsequent consequences (the victim now suffering those in England; loss of earning occurring in England), etc.: even what a particular court in a particular Member State may consider to be relevant for the application of 4(3) may be very unpredictable indeed may also be disparate across the EU.
However on balance Slade J held that the balance was in favour of not applying the escape clause, particularly in view of the period of time of habitual residence in Germany, and subsequent continuing residence in that country (ia for follow-up treatment). Final holding therefore was
- Factors weighing against displacement of German law as the applicable law of the tort by reason of Article 4(1) are that the road traffic accident caused by the negligence of the First Defendant took place in Germany. The Claimant sustained her injury in Germany. At the time of the accident both the Claimant and the First Defendant were habitually resident there. The Claimant had lived in Germany for about eight and a half years and remained living there for eighteen months after the accident.
- Under Article 4(3) the court must be satisfied that the tort is manifestly more closely connected with English law than German law. Article 4(3) places a high hurdle in the path of a party seeking to displace the law indicated by Article 4(1) or 4(2). Taking into account all the circumstances, the relevant factors do not indicate a manifestly closer connection of the tort with England than with Germany. The law indicated by Article 4(1) is not displaced by Article 4(3). The law applicable to the claim in tort is therefore German law.
This judgment to my knowledge is one of few discussing Article 4(3)’s escape clause in such detail. A judgment which does justice to both the exceptional nature of the provision, and the need to consider all relevant factors.
Update 5 April 2019 see also application in  EWHC 801 (QB) Joshua Folkes v Generali Assurances.
As readers will be aware, the Rome II Regulation on the law applicable to non-contractual obligations, harmonises Member States’ governing law rules on non-contractual obligations (not entirely accurately known in short as ‘tort’). Article 15 clarifies that the scope of the law applicable is very wide:
Scope of the law applicable
The law applicable to non-contractual obligations under this Regulation shall govern in particular:
(a) the basis and extent of liability, including the determination of persons who may be held liable for acts performed by them;
(b) the grounds for exemption from liability, any limitation of liability and any division of liability;
(c) the existence, the nature and the assessment of damage or the remedy claimed;
(d) within the limits of powers conferred on the court by its procedural law, the measures which a court may take to prevent or terminate injury or damage or to ensure the provision of compensation;
(e) the question whether a right to claim damages or a remedy may be transferred, including by inheritance;
(f) persons entitled to compensation for damage sustained personally;
(g) liability for the acts of another person;
(h) the manner in which an obligation may be extinguished and rules of prescription and limitation, including rules relating to the commencement, interruption and suspension of a period of prescription or limitation.
The provision is important, because jurisdictions may differ quite substantially as to which parts of the dispute they consider to relate to the substantive matter of ‘tort’, as opposed to procedural law. Procedural matters are governed by the lex fori and continue to be so under the Rome II Regulation: Article 1(3) provides specifically
‘This Regulation shall not apply to evidence and procedure, without prejudice to Articles 21 and 22.’
Article 15 clearly has a limiting effect on Article 1(3), given that it qualifies a number of issues as being substantive law, even though national law may have considered these to be procedural.
Despite the clarification in the Regulation, combined with the EC proposal and with the recitals, difficulties do of course remain. However in particular ‘assessment of damage’ under Article 15(c) has a very wide scope indeed. For instance the scope of the applicable law arguably includes the determination of whether damages need to be determined ‘net’, taking into account subsequent history which impacts upon the dependency of the party that is being compensated, or rather ‘gross’, at the moment of death: see Cox v Ergo Versicherung, ( EWHC 2806 (QB)] and  EWCA Civ 1001].
In Wall v Mutuelle De Poitiers Assurances, following a severe road accident, plaintiff sued the insurance company in the UK – jurisdictional issues were not under discussion. The Court of Appeal had to review the extent to which French law, the lex causae, had to be applied by the English Courts: utterly and totally, with all its practical implications? Or with due regard for the distinction which the Regulation continues to make between procedure and substance? Tugendhat J unsurprisingly opted for the latter – much more eloquently than this posting can do justice: an English court must not strive to reach the same result as a French court would, let alone insist that evidence given to the English court be in the form of a French-style expert report (no more indeed than a French court would in the reverse hypothesis). As Tugendhat J summarises at 16, in fine: “Rules” as to the assessment of damages are therefore to be “imported”; if there is a rule as to what kind of loss is recoverable, that rule is to be imported. But mere methods of proving recoverable loss are not to be imported.
With reference to Dworkin no less on soft law, the Court did hold that applicable law should be understood to include “judicial conventions and practices”, for example “particular tariffs, guidelines or formulae” used by judges in the calculation of damages under the applicable law: in France, these are the so-called Dintilhac Headings.
Dworkin at the Court of Appeal: that was bound to catch my interest.
Pike & Doyle (Mumbai terror) at the High Court: forum non conveniens and the need for distinguishing Rome II and Brussels I
In Pike & Doyle v the Indian Hotels Company Limited, the High Court upheld its jurisdiction in the case of two (surviving but injured) victims of the Mumbai terror attacks. The UK Human Rights Blog has a posting on the forum non conveniens side of the case. I would like to point to some interesting observations in the judgment on the impact of the interpretation of the special jurisdictional rule for tort under the Jurisdiction Regulation (Brussels I).
The First Claimant suffers continuing pain and loss of amenity and substantial economic losses caused by his injuries. The Second Claimant sustained loss of earnings in England and Wales and has a continuing loss in the form of counselling. On that basis both Claimants have therefore suffered indirect or secondary damage as a result of the Defendants’ alleged negligence in Mumbai. The Claimants’ submission is that this is sufficient to found jurisdiction. The Defendants challenge this.
In support of their claim, defendant relied essentially on the impact which EU law suo arguendo has on the interpretation of the relevant English rules of procedure: as summarised by Stewart J (at 12):
The Defendants’ submission is as follows:
(i) Before 1 January 1987 RSC order 11 rule 1(1)(h) required a plaintiff to establish that the action was “founded on a Tort committed within the jurisdiction”. The test was “where in substance did the cause of action arise?” (Distillers Co Ltd v Thompson [reference omitted]).
(ii) On 1 January 1987 the rule changed such that the new RSC order 11 rule 1(1)(f) became “the claim is founded on a Tort and the damage was sustained, or resulted from an act committed, within the jurisdiction.” The change was made to give effect to Article 5(3) of the Brussels Convention and the decision of the European Court in Handelskwekerij G.J. Bier B.V. v Mines Potasse d’Alsace S.A. [reference omitted]
[references to further precedent omitted]
(iii) The European Rules do not allow indirect secondary damage to found jurisdiction.
Dumez France v Hessische Landesbank [reference omitted]). Marinari v Lloyds Bank plc [reference omitted]). [references to further precedent omitted]
(iv) This is all accepted and is in line with the original Bier case where the European Court held that where an act occurred in one Member State and the damage occurred in another, the Claimant could sue the Defendant in the Courts of either state. (…)
(v) Given the above, the Court should apply normal principles of interpretation to the rule namely: delegated legislation is construed in the same way as an Act, the starting point is to ascertain the legislative intention and the person seeking to understand that intention must do so in the light of the enactment and its purpose. The interpretation must be an informed one [references omitted]
(vi) Therefore since the pre 1987 law would not have allowed indirect secondary damage to found jurisdiction and since the purpose of the change was to align the RSC (subsequently CPR) with the European rules which do not allow such a founding of jurisdiction, the rules should be interpreted consistently with the European cases.
Stewart J disagreed and precedent did before him. Absent the European context – for defendant is not domiciled in the EU and the Brussels I-Regulation does not otherwise apply, there is no reason to assume that the relevant English rules cannot be applied taking into account indirect damage as a jurisdictional basis for the English courts: Tugendhat J had already held so with reference to the preparatory works of the relevant change to the Rules of Procedure. He effectively found that Parliament did not fully assimilate the rules relating to non party states with those relating to states which are a party; it effectively wanted their to be a wedge between the application of the jurisdictional rule for tort in and outside the Brussels-I context.
Neither, Stewart J held, can Rome II come to the defendants’ rescue. This was an attempt by defendants to recycle the limitation to Article 5(3) of the Brussels I Regulation. No reference to this was made in the judgment however a prima facie forceful recital in the Rome II Regulation is recital 7: The substantive scope and the provisions of this Regulation should be consistent with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) and the instruments dealing with the law applicable to contractual obligations.
Since Rome II harmonises applicable law for tort even if the national court upholds jurisdiction on the basis of its residuary jurisdictional rules (such as here, given that Brussels I does not apply), this bridge between the various Regulations might resurrect the relevance of the Dumez France and Marinari limitations to the judgment in Bier.
Stewart J however was not swayed and referred to Sir Robert Nelson in Stilyanou:
- Brussels 1 relates to a different subject matter, namely jurisdiction, and has to be construed as a separate regulation, albeit consistently with the other regulations forming part of the compatible set of measures.
- Rome II does not abolish the discretion which has to be exercised under the CPR in relation to non Member States.
- Article 2 on its face is wide enough to include any damage direct or indirect which the regulation as a whole covers. Article 4(1) expressly excludes indirect damage which would otherwise be included by virtue of Article 2. There is no reason why “damage” under the CPR should be interpreted as in a specific Article such as Article 4 which defines the applicable law, rather than interpreted as a general article such as Article 2 which applies to the regulation as a whole (apart from Article 4).
- Inconsistencies in the meaning of damage may exist as the tests are different under Brussels 1, Rome II and CPR. The latter includes the exercise of the discretion and hence consideration of forum conveniens to ensure the proper place for the trial is selected, whereas Brussels 1 and Rome II do not.
- Rome II does not concern jurisdiction and does not override CPR 9(a). Where Brussels I does not apply, the issue of jurisdiction will be governed by a country’s own rules ie. in England and Wales the CPR
Neither Stewart J nor Sir Robert refer to recital 7 Rome II however their arguments in my view are supported post their findings by the ECJ judgment in Kainz.
A very interesting case for many aspects of conflicts law.
Liability for defective products and the relationship between Brussels I and Rome II. The ECJ in Kainz.
In Case C-45/13 Andreas Kainz v Pantherwerke AG, the ECJ held on the determination of locus delicti commissi, the place giving rise to the damage, in the case of defective products. It held this was the place where the product in question was manufactured. The special jurisdictional rules of Article 5 are in effect forum conveniens applications: they are intended to enable the court objectively best placed to determine whether the elements establishing the liability of the person sued are present, to assume jurisdiction. For product liability cases, this includes inter alia the possibility of gathering evidence in order to establish the defect in question.
Pantherwerke AG is an undertaking established in Germany which manufactures and sells bicycles. Mr Kainz, resident in Salzburg, purchased a bicycle manufactured by Pantherwerke from Funbike GmbH, a company established in Austria. On 3 July 2009, while riding that bicycle in Germany, Mr Kainz suffered a fall and was thereby injured. The place of the event giving rise to the damage is, Mr Kainz claims, located in Austria as the bicycle was brought into circulation there, in the sense that the product was there made available to the end-user by way of commercial distribution.
Mr Kainz argued specifically that the Courts should take into account not only the interests of the proper administration of justice but also those of the person sustaining the damage, thereby enabling him to bring his action before a court of the Member State in which he is domiciled. The ECJ disagreed, at 20:
‘although it is apparent from recital 7 in the preamble to Regulation No 864/2007 that the European Union legislature sought to ensure consistency between Regulation No 44/2001, on the one hand, and the substantive scope and the provisions of Regulation No 864/2007, on the other, that does not mean, however, that the provisions of Regulation No 44/2001 must for that reason be interpreted in the light of the provisions of Regulation No 864/2007. The objective of consistency cannot, in any event, lead to the provisions of Regulation No 44/2001 being interpreted in a manner which is unconnected to the scheme and objectives pursued by that regulation.’
This is a statement I like a lot and have advocated for some time. In general, I find the link between applicable law and jurisdiction (often leading to Gleichlauf-type considerations; such as in Article 22’s exclusive jurisdictional rules) not very attractive.
The Foreign Trade Antitrust Improvements Act (“FTAIA”): How does one decide jurisdiction in competition cases.
Whether the US’ Foreign Trade Antitrust Improvements Act (“FTAIA”) is jurisdictional or rather establishes a substantial condition on the merits under the US Sherman Act (its main anti-trust law) has been extensively debated and arguments for or against now also rely on the seminal Morrison litigation (emphasising the need to draw a careful line between true jurisdictional limitations and other types of rules).
The FTAIA provides in short that the Sherman Act (the main source of US anti-trust or ‘competition’ law) shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless – (1) such conduct has a direct, substantial, and reasonably foreseeable effect – (A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or (B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and (2) such effect gives rise to a claim under the Sherman Act.
In Lotes v Foxconn, Scheindlin USDJ for the US District Court of New York rejected jurisdiction and found FTAIA to be of a jurisdictional nature. Plaintiff and defendant are Chinese corporations, competing in the USB connector market. Neither of them sell or manufacture the connector in the United States, however Lotes, plaintiff, argues that the management by defendant of its patents effectively forecloses Lotes from gaining a foothold in inter alia the US market. Judge Scheindlin found there to be a disconnect between the relevant foreign market (in competition terms) in which the defendant is alleged to create a monopoly (the Chinese market in USB 3.0 connectors), and the US market supposedly affected by the attempted monpolisation.
At the level of competition authorities, the issue of jurisdiction is sometimes managed using comity considerations in inter-State agreements [such as the US -EU agreements: see here and here]. These agreements employ some form of an effects and comity doctrine. Of course where enforcement of competition law is sought through private action, these agreements do not apply, leaving courts to having to apply their standard jurisdictional (or are they – see above) rules. This is no different in the EU, albeit that jurisdiction there is much easier determined, typically on the basis of corporate domicile. What (competition) law applies, is regulated through an EU equivalent, in the Rome II Regulation, of the US’ minimum contacts doctrine.