France’s highest court, the Cour de cassation, has recently shed light on how article 11§2 (article 13 in the revised version) of the European Union Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (known as Brussels I) should be applied when a breach of contract is the basis for a direct action brought by the victim against the liability insurer of the party in breach. The judgment applies to both the original wording and the revised version of 2012.

Article 11§2 of Brussels I provides that:

“Articles 8, 9 and 10 shall apply to actions brought by the injured party directly against the insurer, where such direct actions are permitted”.

This gives the injured party a wide choice of courts in which to sue the insurer of the responsible party but determining whether direct actions are permitted is crucial to decide whether the chosen court has jurisdiction to rule on the direct action. Which law should apply to decide whether a direct action is possible when the action arises from a breach of contract?

This question was much-debated under French law until this case clarified matters. Here, the French claimants, whose truck and content were damaged by fire in France, decided to bring a direct-action lawsuit in France against the German liability insurer of a repairer. The repairer had agreed by contract to repair the truck and was thus in breach.

The Cour de cassation has now clearly established that the availability of the direct action should be ascertained according to either (a) the law applicable to the underlying contract; or (b) the law applicable to the insurance policy. This solution offers an alternative, as both laws can equally apply to decide whether the direct action is permitted.

By contrast, however, only the law applicable to the insurance policy will govern the scope of the victim’s rights.