The European institutions are currently discussing the draft Regulation on the Law Applicable to Non-contractual Obligations (Rome II) which attempts to harmonise the relevant rules on the law applicable to non-contractual liability, including tort. Rome II allows the parties to choose the law applicable to non-contractual liability by agreement.

Rome II provides as a general rule that the applicable law should be the law of the place where the damage occurred and not the law of the place where the event giving raise to the damage occurred. However if both parties have their habitual residence in the same jurisdiction, the law of that jurisdiction should apply. Then if the situation has a closer connection with the law of another country that law should apply. This would, for example, apply if the non-contractual obligation is closely linked to a contractual obligation and there is an expectation that the contractual and non-contractual obligations would be governed by the governing law of the contract.

The general rule that the applicable law should be the law of the place where the damage occurred may be in conflict with country of origin regulation in the E-commerce Directive 2000/31/EC. This provides that, as a matter of principle, a provider of e-commerce services (or, more precisely information society services) only has to comply with the laws applicable at its place of origin. By contrast, damage arising out of an e-commerce activity is likely to occur in the jurisdiction of the recipient’s residence (country of destination). Therefore, the provision on applicable law in Rome II would in many instances result in an applicable law other than that of the country of establishment of the e-commerce provider.

In other words, the effect of Rome II is that e-commerce providers still have to comply with the standards of tort law applicable in the countries in which they are providing services. This prospect has sent shockwaves to the business community. On the other hand, Rome II provides expressly that Community law, such as the provision of a country of origin rule under the E-commerce Directive, shall not be prejudiced. This can be read as meaning that the harmonised rules on the law applicable to torts would not apply to e-commerce as governed by the E-Commerce Directive and implementing legislation. Instead, as e-commerce providers would hope, the country of origin would govern their tort liability exclusively.

However the wording of the Draft Regulation is opaque and the meaning of the provision is far from clear. An alternative reading of this provision in Rome II is that the country of origin rule only applies to public enforcement as opposed to private enforcement action. Read in this way, in the case of enforcement by public authorities, the country of origin rule will apply. This would bar a public authority from applying for an injunction against a foreign service provider established in another Member State in connection with incoming information society services. On the other hand, in an action by a private party for a civil remedy, the harmonised rules on applicable law in Rome II and in particular the general rule on the place of the damage would determine the applicable tort law. Rome II does not provide a clear answer to the conflict of whether the country of origin rule applies to private disputes.

Arguably, the Draft Regulations do not clarify at all whether the country of origin rule overrides private international law. It only states the reverse, i.e. that Rome II is not intended to override the country of origin rule established in the Ecommerce Directive (and other Directives). Thus it leaves open the question about the scope of the country of origin rule in the E-commerce Directive.

One specific bone of contention relevant to e-commerce which is still disputed between the European Parliament and the Council is the issue of personality rights (privacy and defamation). The relevance of this is that the law and remedies concerning defamation and the protection of personality rights differ significantly between EU Member States. This area of law is difficult to harmonise and may constitute a barrier to the Internal Market for e-commerce.

The European Parliament at its Second Reading insisted on including special provisions concerning privacy and defamation rights, which had been deleted by the Council. The proposal of the European Parliament is that the applicable law is that of the country to which a publication or broadcast is principally directed, taking into account the language and size of the audience. Hence it can be said that the Parliament favours a targeted approach. For e-commerce this targeted practice may be impossible to determine: the language may be ambiguous, certainly if the information (on a website, for example) is in English and the location of the people accessing the website may be difficult to determine and/or quantify.

However, if the targeted jurisdiction cannot be determined, Parliament proposes that the applicable law is the law of the country where editorial control is exercised. This latter criterion may prove unsuitable for user-generated-content (such as blogs or video hosting websites), but where editorial control is exercised by a provider, the Parliament’s proposal is more favourable to e-commerce providers than the general rule, as the place where editorial control is exercised will frequently be the place of establishment of the e-commerce provider under the country of origin principle.