On 11 January 2009, Regulation 849/2007/EC, (Rome II, or the Regulation), which harmonises the way EU Member States determine which law applies to non-contractual obligations, came into force. Previously, in most Member States the law applicable to non-contractual obligations was the law of the place where the tort was committed. The Regulation alters this so that the law of the place where the damage occurs will generally apply, subject to certain exceptions. The Regulation applies to all EU Member States except Denmark.

The necessary changes to UK law were made by the Law Applicable to Non-Contractual Obligations (England and Wales and Northern Ireland) Regulations 2008/2986.

SCOPE AND BASIC RULES

The Regulation applies, in situations involving a conflict of laws, to non-contractual obligations in civil and commercial matters. It does not apply in revenue, customs or administrative matters, or to the liability of the State for acts or omissions in the exercise of State authority.

Various other matters are also excluded, including noncontractual obligations arising out of or under: family and similar relationships; matrimonial and similar property regimes, wills and succession; bills of exchange and other negotiable instruments; the law of companies and other bodies corporate or unincorporated regarding various matters; relations between settlors, trustees and beneficiaries of voluntarily created trusts; nuclear damage; and violations of privacy, personality rights and defamation.

Damage is deemed to cover any consequence arising out of any tort or delict, unjust enrichment, negotiorum gestio (where an act is performed without due authority in connection with the affairs of another) or culpa in contrahendo (obligations in negotiation).

Generally, the law applicable to a non-contractual obligation arising out of a tort or delict shall be the law of the place where the damage occurs, regardless of the country where the event leading to the damage occurred and the country where the indirect consequences of that event occur. If, however, the person allegedly liable and the injured party both reside habitually in the same Member State at the time the damage occurs, the laws of that State apply. Also, where the circumstances indicate clearly that the tort is “manifestly more closely connected with a country” other than the country determined by either of these methods, the laws of that other country prevail.

EXCEPTIONS

There are certain exceptions to the general rule regarding specific types of damage:

  • Product liability (Article 5): The law applicable to noncontractualobligations arising from damage caused by a product shall be: (a) the law of the country where the person sustaining damage is resident habitually if the product was marketed in that country, or failing that; (b) the law of the country where the product was acquired if the product was marketed in that country, or failing that; (c) the country where the damage occurred if the product was marketed in that country. However, if the person liable could not reasonably foresee the marketing of the product in the country the law of which applies under (a), (b) or (c), then the law of the country where the person liable resides habitually applies.

If the circumstances clearly indicate that the tort is manifestly connected more closely with a country other than that indicated above, the law of that other country applies.

  • Unfair competition or restriction of competition (Article 6): The law applicable to non-contractual obligations arising out of an act of unfair competition shall be the law of the country where the competitive relations or the collective interest of consumers are affected. If acts of unfair competition affect exclusively the interests of a specific competitor, the general rule applies.

The law applicable to non-contractual obligations arising from restrictions of competition shall be the law of the country where the market is affected. If the markets of more than one country are affected, the person seeking compensation who sues in the court of the defendant’s domicile may instead choose to base the claim on the law of the court seised, provided that the market in that Member State is amongst those affected directly and substantially by the restriction of competition out of which the noncontractual obligation on which the claim is based arises.

  • Infringement of intellectual property (Article 8): The law applicable to non-contractual obligations arising from intellectual property rights infringement is that of the country for which protection is claimed or, regarding infringement of unitary Community rights, the country in which the act of infringement occurred.
  • Freedom of choice (Article 14): Except in certain cases which cannot be derogated from by agreement, the parties may agree to submit non-contractual obligations to the law of their choice: (a) either by agreement after the event leading to damage occurred; or (b) when all parties are pursuing a commercial activity, by agreement freely negotiated before the event leading to damage occurred. The choice must be demonstrated with reasonable certainty by the circumstances and shall not prejudice third party rights.

COMMENT

The Regulation changes fundamentally how the law applicable to non-contractual obligations is determined. It will be interesting to see whether it leads, in practice to increased legal certainty in respect of cross border dealings.