Yearbook of Private International Law: Volume IX, 2007

YEARBOOK OF PRIVATE INTERNATIONAL LAW

YEARBOOK OF PRIVATE INTERNATIONAL LAW VOLUME IX – 2007

FOUNDING EDITOR PETAR ŠARČEVIĆ † EDITORS ANDREA BONOMI

PAUL VOLKEN

Professor at the University of Lausanne

Professor at the University of Fribourg

PUBLISHED IN ASSOCIATION WITH SWISS INSTITUTE OF COMPARATIVE LAW LAUSANNE, SWITZERLAND

Stæmpfli Publishers Ltd. Berne

sellier. european law publishers ISBN 978-3-86653-071-3

Stæmpfli Publishers Ltd. Berne ISBN 978-3-7272-2748-6

The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.

© 2008 by sellier. european law publishers GmbH, Munich, Stæmpfli Publishers Ltd., Berne, and Swiss Institute of Comparative Law. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of the publisher.

Production: Karina Hack, Munich. Printing and binding: Friedrich Pustet KG, Regensburg. Printed on acid-free, non-ageing paper. Printed in Germany.

ADVISORY BOARD TITO BALLARINO Milan

HANS VAN LOON The Hague

JÜRGEN BASEDOW Hamburg

FERENC MÁDL Budapest

GENEVIÈVE BASTID-BURDEAU Paris

RUI MANUEL GENS DE MOURA RAMOS Lisbon/Coimbra

MICHAEL BOGDAN Lund

YASUHIRO OKUDA Tokyo

ELEANOR CASHIN RITAINE Lausanne

GONZALO E. PARRA-ARANGUREN The Hague/Caracas

SIR LAWRENCE COLLINS London DIEGO P. FERNÁNDEZ ARROYO Madrid/Buenos Aires

SYMEON C. SYMEONIDES Salem (Oregon) PIERRE WIDMER Lausanne

HUANG JIN Wuhan

ASSISTANT EDITORS GIAN PAOLO ROMANO Legal adviser, Swiss Institute of Comparative Law EVA LEIN Legal adviser, Swiss Institute of Comparative Law

BART VOLDERS Attorney at Law Brussels

ADDRESS FOR MANUSCRIPTS AND CORRESPONDENCE Swiss Institute of Comparative Law Dorigny, CH – 1015 Lausanne

ENGLISH REVISION KAREN JEANNERET-DRUCKMAN Legal adviser, Swiss Institute of Comparative Law

SHAHEEZA LALANI Legal adviser, Swiss Institute of Comparative Law

CHARLES TABOR lur. doct. Candidate, Louisiana State University

MARC R. MERRILL Attorney at Law, Baton Rouge

TABLE OF CONTENTS ________________ Foreword ........................................................................................................ xi Abbreviations ................................................................................................ xv The Rome II Regulation – An Overview Gerhard HOHLOCH Place of Injury, Habitual Residence, Closer Connections and Substantive Scope – the Basic Principles..................................................... 1 Th.M. DE BOER Party Autonomy and its Limitations in the Rome II Regulation. ............... 19 Peter HUBER / Martin ILLMER International Product Liability A Commentary on Article 5 of the Rome II Regulation. ........................... 31 Michael HELLNER Unfair Competition and Acts Restricting Free Competition A Commentary on Article 6 of the Rome II Regulation ............................ 49 Thomas KADNER GRAZIANO The Law Applicable to Cross-Border Damage to the Environment A Commentary on Article 7 of the Rome II Regulation ............................ 71 Nerina BOSCHIERO Infringement of Intellectual Property Rights A Commentary on Article 8 of the Rome II Regulation ............................ 87 Guillermo PALAO MORENO The Law Applicable to a Non-Contractual Obligation with Respect to an Industrial Action A Commentary on Article 9 of the Rome II Regulation .......................... 115 Bart VOLDERS Culpa in Contrahendo in the Conflict of Laws A Commentary on Article 12 of the Rome II Regulation ........................ 127 Georgina GARRIGA Relationships between Rome II and Other International Instruments A Commentary on Article 28 of the Rome II Regulation ....................... 137 Symeon C. SYMEONIDES Rome II: A Centrist Critique .................................................................... 149 Yuko NISHITANI The Rome II Regulation from a Japanese Point of View ......................... 175 Cecilia FRESNEDO DE AGUIRRE / Diego P. FERNANDEZ ARROYO A Quick Latin American Look at the Rome II Regulation ...................... 193 Reid MORTENSEN A Common Law Cocoon: Australia and the Rome II Regulation ............ 203

National Reports Richard Frimpong OPPONG A Decade of Private International Law in African Courts 1997-2007 (Part I) ...................................................................................................... 223 Dário MOURA VICENTE Sources and General Principles of Portuguese Private International Law: An Outline ................................................................. 257 Dan Andrei POPESCU Some Remarks on the Applicable Law to International Successions in Romania ............................................................................................... 277 Gülören TEKINALP The 2007 Turkish Code concerning Private International Law and International Civil Procedure ............................................................ 313 Claude EMANUELLI Recognition and Enforcement of Foreign Judgments in Quebec ............. 343 Christa ROODT A Wider Vision in Choice of Prescription Law ....................................... 357 Christa JESSEL-HOLST The Bulgarian Private International Law Code of 2005 .......................... 375 Mónica HERRANZ BALLESTEROS New Perspectives in Spanish Legal Practice on the Exercise of Rights of Access Across International Borders ................................... 387 News from Brussels Kieran St Clair BRADLEY Activities of the European Community in the Field of Private International Law in 2007 ............................................................ 399 Court Decisions Christian A. HEINZE / Anatol DUTTA Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe – From Turner to West Tankers ............................ 415 Anna GARDELLA European Union – The ECJ in Search of Legal Certainty for Jurisdiction in Contract: The Color Drack Decision................................ 439 Gilles CUNIBERTI England – Enforcement of Arbitration Agreements: The End of the English Exception ........................................................... 449

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Tiong Min YEO Singapore – The Effect of Contract on the Law Governing Claims in Torts and Equity ...................................................................... 459 Elena JÚDOVÁ Slovak Republic – The Habitual Residence in Slovakian Private International Law: Decision of the District Court in Martin of 21 December 2007 ................................................................................... 471 Carolina SAF Sweden – The Validity of a Collective Labour Agreement Resulting from a Swedish Blacking – The Rickmers Tianjin 2007 AD Nr. 2 .......... 481 Monika PAUKNEROVÁ Czech Republic – Jurisdiction over Consumer Contracts under Article 15(1) (B) of the Brussels I Regulation, and the Definition of the Concept of ‘Consumer’s’ Domicile ............................................... 495

Forum Andrea CARLEVARIS The Recognition of Enforcement of Interim Measures Ordered by International Arbitrators........................................................................... 503 Laurence USUNIER Regulating the Jurisdiction of Courts in International Litigation towards a Global Answer in Civil and Commercial Matters.................... 541 Texts, Materials and Recent Developments The 2007 Turkish Code on Private International Law and International Civil Procedure (translated by N. Ayşe ODMAN BOZTOSUN) ............................................ 583 Books Reviews............................................................................................. 605 Index ............................................................................................................ 613

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FOREWORD ________________

The year 2007 was arguably the most extraordinary year in recent memory for the development of Private International Law on both a regional and universal level. Within the European Union, the process of unification of Private International Law culminated in 2007 with some very fundamental achievements. Following many years of extensive negotiation, the Community institutions finally reached the political consensus necessary to adopt two very important – and much debated – conflicts of law regulations. In July, the ‘Rome II’ Regulation on the law applicable to non-contractual obligations was enacted. Shortly thereafter, the European Parliament and the Council agreed on the final text of the ‘Rome I’ Regulation on the law applicable to contractual obligations; as currently slated, this instrument is expected to be adopted (and to replace the Rome Convention) in the spring of 2008. Thus, over thirty years after a 1972 draft on the law applicable to contractual and non-contractual obligations, which was soon condemned to oblivion, two parallel sets of conflicts rules concerning the entire area of the law applicable to obligations will soon come into operation in the Member States of the European Union, the only exceptions being Denmark and, possibly, the United Kingdom (whose attitude towards ‘Rome I’ is still uncertain). As remarkable as these developments have been, they were not the only events that took place on the European front in 2007. Two additional actions stand to have a lasting effect on Private International Law in the EU. First, two regulations have been adopted that – even though less celebrated than Rome I and Rome II – will soon play a key role in conflicts’ practice: the instrument revising the 2000 Regulation on service of documents, and a Regulation creating uniform European civil procedure rules for small claims. Secondly, the European Community exercised its broad external competences under ECJ opinion 1/03 and signed in October, with Denmark, Iceland, Norway and Switzerland, the revised version of the Lugano Convention. As far as uniformity on a global level is concerned, the Hague Conference on Private International Law proved also very successful. A couple of years after the Convention on choice of court agreements, two ambitious instruments were adopted in the area of maintenance obligations. First, the Hague Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance creates an extremely broad and detailed cooperation scheme. This scheme is rounded out with innovative rules guaranteeing free legal assistance to certain categories of foreign maintenance creditors, notably children. This treaty also creates uniform grounds and procedures for recognising and enforcing foreign support orders. Second, the Hague Protocol on the Law Applicable to Maintenance Obligations of 23 November 2007 modernizes the existing Hague Conventions of 1956 and 1973 by enhancing the role of party autonomy and of the lex fori.

It is important to note that this achievement has been attained through the active participation of the European Community, which was awarded membership status to the Hague Conference in April. This major institutional development and the positive outcome of the maintenance project indicate that the creation of a unified Private International Law system inside the European Union is not necessarily bound to adversely affect the elaboration of global instruments. Developments on a European and global level are not the only events that took place in 2007. On the national scale, the process of reforming existing Private International Law codifications continued at a steady pace. After Japan in 2006, Turkey reviewed its own rules on conflicts-of-law and jurisdiction. Volume IX of the Yearbook of Private International Law is again a very rich and multi-faceted book reflecting the vitality and fluidity of a subject that is in constant motion. The Yearbook was once again able to provide an overview of the current issues in Private International Law, even if all of the developments described above could not be dealt with in detail. Instead of blindly following the agenda reviewed above, we have decided to focus on the ‘Rome II’ Regulation, by devoting to it an entire thematic section of this volume. It is our belief that this text opens up a new era in the process of creating a European PIL system. Indeed, it represents the Community institutions’ first attempt to directly regulate pure applicable law issues based on Articles 61 and 65 of the EC Treaty, whose potential is likely to prove far-reaching in the future. At the same time, the Regulation extends the reach of the European rules to the area of non-contractual obligations that, until now, were the sole prerogative of Member States. Moreover, being the first regulation that openly and frankly opts for an erga omnes approach, ‘Rome II’ will have a clear impact on relationships with third States. For all of these reasons, we believed that the new regulation deserved a detailed commentary and analysis of its main provisions, including those on torts and other non-contractual obligations, such as pre-contractual liability. Because of the interest that this European text presents for third States, we also asked some distinguished scholars from non-European areas (the U.S., Japan, Latin America and Australia) to express their views on this important piece of Community legislation and the possible influence it may have on conflict developments in their respective countries and regions. Further progress in the EC system is more generally illustrated by the section ‘News from Brussels,’ which we brought back this year with the intent of continuing it in future volumes. Two notes on the first ECJ cases concerning the ‘Brussels I’ Regulation – Color Drack and West Tankers – also touch upon further progressions in the broader EC system. Other important achievements, in particular the ‘Rome I’ Regulation, will be discussed in the 2008 volume. The additional reason for which all of the 2007 developments are not analytically covered in this volume is that we did not want to sacrifice our traditional sections, which we regard as a valuable source of hard-to-access information.

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In the section ‘National Reports,’ a very detailed and, indeed, unique study on the PIL decisions of African courts over the last decade deserves special attention. This section includes a comprehensive report on the above mentioned reform of the Turkish PIL and various contributions on Bulgarian, Canadian, Portuguese, Romanian, Spanish, and South African law. The section on ‘Court Decisions’ includes the comments on Czech, Slovakian, Singaporean, English and Swedish decisions. Lastly, the ‘Forum’ section boasts the synthesis of two brilliant comparative PhD theses on issues of arbitration and adjudicatory jurisdiction. We would like to express our gratitude to all authors who contributed to this impressively rich and varied volume – indeed the richest ever. Once again, our Assistant Editor, Gian Paolo Romano, has played a key role in choosing and revising the contributions, with helpful assistance by his two new ‘Co-Assistants’, Bart Volders and Eva Lein. This dynamic trio of young scholars who have been moulded by the Swiss Institute of Comparative Law will prove to be an important added value for the Yearbook’s development in the years to come. In this same perspective, a very important role will also be played by the members of our Advisory Board. Many thanks are owed to all of them for their precious support, particularly Profs. Michael Bogdan and Diego Fernández Arroyo, who have joined in 2007. Finally, we would like to acknowledge the invaluable assistance of our dedicated English revisers – Mr. Charles Tabor, Mr. Marc Merrill, Mrs. Karen Jeanneret-Druckman and Mrs. Shaheeza Lalani – as well as of Mrs. Monique Bassin, for her immense secretarial support.

Andrea Bonomi

Paul Volken

Yearbook of Private International Law, Volume 9 (2007)

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ABBREVIATIONS ________________

Am. J. Comp. L. Am. J. Int. L. Clunet ECR I.C.L.Q. I.L.M. id. IPRax OJ PIL RabelsZ Recueil des Cours

Rev. crit. dr. int. pr. REDI Riv. dir. int. priv. proc. Riv. dir. int. RIW RSDIE

American Journal of Comparative Law American Journal of International Law Journal de droit international European Court Reports International and Comparative Law Quarterly International Legal Materials idem Praxis des internationalen Privat- und Verfahrensrechts Official Journal Private International Law Rabels Zeitschrift für ausländisches und internationales Privatrecht Recueil des Cours de l'Académie de la Haye de droit international = Collected Courses of The Hague Academy of International Law Revue critique de droit international privé Revista española de derecho internacional Rivista di diritto internazionale privato e processuale Rivista di diritto internazionale Recht internationaler Wirtschaft Revue suisse de droit international et européen = Schweizerische Zeitschrift für internationales und europäisches Recht

THE ROME II REGULATION: AN OVERVIEW ________________

PLACE OF INJURY, HABITUAL RESIDENCE, CLOSER CONNECTION AND SUBSTANTIVE SCOPE: THE BASIC PRINCIPLES Gerhard HOHLOCH∗

I. II.

III.

Introduction Art. 4 of Rome II: The Regulation’s General Conflicts Rules for International Tort Law A. Structure of the Regulation B. The Rome II Place of Injury Connecting Factor (Art. 4 (1)) C. The Connecting Factor of Common Habitual Residence (Art. 4(2)) D. The ‘Escape’ Clause (Art. 4(3)) Scope and Qualification A. Material Scope and Qualification B. Non-Application of Art. 4 in Regards to Certain Exceptions and Specific Delicts C. Art. 4’s Range of Application D. Territorial Scope

I.

Introduction

When the Rome II Regulation comes into force on 11 January 2009,1 it will be the first time in history that Europe will have a unified conflict of laws system for a ∗

Professor at the University of Freiburg i.B. This contribution has been translated from German into English by Marc Merrill, attorney-at-law. 1 Regulation (EC) No 864/2007 of the European Parliament and the Council of 11 July 2007 on the law applicable to non-contractual relations (Rome II), Official Journal of the European Union Nr. L199/40 from 31 July 2007. A copy of the German text with the first comments from the German legal literature can be found in HOHLOCH G., in: ERMAN (Hrsg.), Handkommentar zum BGB Bd. II, 12. Aufl. 2008, Vor Art. 38 EGBGB no. 8 et seq., for first German commentaries to Art. 1 et seq. ‘Rome II’ see ibidem, Art. 40 – 42 EGBGB Yearbook of Private International Law, Volume 9 (2007), pp. 1-18 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Gerhard Hohloch portion of Private International Law (‘PIL’). These will be conflicts rules that have both direct effect and which have a uniform statutory source.2 These uniform rules relating to non-contractual obligations will without doubt have a high practical significance within the field of PIL. This is especially true for PIL related to tort law, less so for the conflicts rules related to unjust enrichment and negotiorum gestio. International tort law must predominantly resolve unplanned, damage causing events where the actors are randomly confronted with each other, and thus, requires a legally certain and good and practical system of connecting factors. This is possibly more important than those rules relating to contractual relationships where the possibility of choice of law by the contracting parties is always of first priority. It is because of this that the Rome II Regulation, in its some 40 years of legislative history, has been the subject of a diverse and multifaceted discussion in not only German legal literature, but also the legal literature of other Member States.3 (Introductory Law to the German Civil Code [= German Act of Private International Law] no. 1 ss. 2 For a perspective on the coming ‘Europeanization’ of Private International Law (PIL), see HOHLOCH G. (note 1), Art. 3 EGBGB, no. 60, and – generally – HOHLOCH G., in: Festschrift H. Stoll, Tübingen 2001, 533 et seq. 3 See, from the new German legal literature on the subject, the following articles and/or essays: VON BAR CH./SCHULTE-NÖLKE H., ‘Gemeinsamer Referenzrahmen für europäisches Schuld- und Sachenrecht’, in: ZRP 2005, 165-168; DEINERT O., ‘Das Herkunftslandprinzip und seine Bedeutung für das Internationale Deliktsrecht’, in: EWS 2006, 445454; HEIDERHOFF B., ‘Eine europäische Kollisionsnorm für die Produkthaftung: Gedanken zur Rom II-Verordnung’, in: GPR 2005, 92-97; VON HEIN J., ‘Die Kodifikation des europäischen Internationalen Deliktsrechts’, in: ZvglRWiss. 2003, 528-562; ID., ‘Die Kodifikation des europäischen IPR der außervertraglichen Schuldverhältnisse vor dem Abschluß?’, in: VersR 2007, 440-452; HEISS H., ‘Das Kollisionsrecht der Versicherungsverträge nach Rom I und II’, in: VersR 2006, 185-188; HUBER P./BACH I., ‘Die Rom II-VO – Kommissionsentwurf und aktuelle Entwicklungen’, in: IPRax 2005, 73-84; JAYME E./KOHLER CH., ‘Europäisches Kollisionsrecht 2007: Windstille im Erntefeld der Integration’, in: IPRax 2007, 493506; ID., ‘Europäisches Kollisionsrecht 2005: Hegemonialgesten auf dem Weg zu einer Gesamtvereinheitlichung’, in: IPRax 2005, 481-493; KOZIOL H./THIEDE TH., ‘Kritische Bemerkungen zum derzeitigen Stand des Entwurfs einer Rom II-Verordnung’, in: ZVglRWiss 2007, 235-247; LEIBLE S./LEHMANN M., ‘Die neue EG-Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht (‘Rom II’)’, in: RIW 2007, 721-735; MANKOWSKI P., ‘Entwicklungen im Internationalen Privat- und Prozessrecht 2004/2005 (Teil 1)’, in: RIW 2005, 481-499; MÖRSDORF-SCHULTE J., ‘Spezielle Vorbehaltsklausel im Europäischen Internationalen Deliktsrecht?’, in: ZVglRWiss 2005, 192-256; SONNENTAG M., ‘Zur Europäisierung des Internationalen außervertraglichen Schuldrechts durch die geplante Rom II-Verordnung’, in: ZvglRWiss 2006, 256-312; PHILIPP O., ‘Rechtswahl auch bei außervertraglichen Schuldverhältnissen’, in: EuZW 2005, 516; STAUDINGER A., ‘Internationale Verkehrsunfälle und die geplante Rom II-Verordnung’, in: SVR 2005, 441-450; STEMPFLE CH., ‘EU-Einigung bei Rechtswahl außervertraglicher Haftung (Rom II)’, in: PHI 2006, 90-91; THIEDE TH./LUDWICHOWSKA K., ‘Die Haftung bei grenzüberschreitenden unerlaubten Handlungen’, in: ZVglRWiss 2007, 92-103; WAGNER G., ‘Internationales Deliktsrecht, die Arbeiten an der Rom II-Verordnung und der Europäische Deliktsgerichtsstand’, in: IPRax 2006, 372-390. Wohl zuletzt WAGNER G., ‘Die neue Rom II-Verordnung’, in: IPRax 2008, 1 et seq. From the Austrian literature, see HEISS H./LOACKER L., ‘Die Verge-

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Basic Principles of Rome II Rome II seeks to satisfy these needs and requirements of international tort law with a system of rules, the foundation of which are set forth in Art. 4, that have in the past proven their worthiness. The first basic rule is the applicability of the law of the place of injury. Of course this is nothing new, as it is ‘the’ basis of international tort law that has a particular tradition in all EU Member States; a tradition which can be traced back to the establishment of the Statutentheorie (‘theory of statutes’).4 The initial approaches relating to the ‘Europeanization’ of the law of non-contractual obligations, approaches which can be found in the ‘preliminary draft’ of 1973, also sought the implementation of the place of injury rule.5 The establishment of this unified law for 26 countries certainly produced a uniform place of injury rule. This means both the adoption of a unitary place of injury rule on the one hand, and the renunciation of national idiosyncrasies on the other. 11 January 2009 will mark the end of the particular German view of place of injury, just as it will mark the end of, for example, the Austrian or English one.6 In their place will be, as far as the material, temporal and spatial personal scope of meinschaftung des Kollisionsrechts der außervertraglichen Schuldverhältnisse durch Rom II’, in: JBl 2007, 613 et seq. For a Swiss perspective on the historical development, see VON OVERBECK A.E./VOLKEN P., ‘Das internationale Deliktsrecht im Vorentwurf der EWG’, in: RabelsZ 1974, 211 et seq. From the French literature, GUERCHOUN F. / PIEDELIÈVRE S., ‘Le règlement sur la loi applicable aux obligations non contractuelles (‘Rome II’)’, in: Gaz. Pal. 2007, Doctrine 3186 et seq.; NOURISSAT C. / TREPPOZ E., ‘Quelques observations sur l’avant-projet de proposition de règlement du Conseil sur la loi applicable aux obligations non contractuelles ‘Rome II’, in: Clunet 2003, 7 et seq. For the Italian literature, see BARIATTI S., ‘La futura disciplina delle obbligazioni non contrattuali nel quadro della comunitarizzazione del diritto internationale private’, in: Riv. dir. int. priv. e proc. 2005, 5 et seq.; WEINTRAUB R., ‘Rome II and the Tension Between Predictability and Flexibility’, in: Riv. dir. int. priv. proc. 2005, 561 et seq.; MUNARI F. / SCHIANO DI PEPE G., ‘Liability for Environmental Torts in Europe: Choice of Forum, Choice of Law and the Case for Pursuing Effective Legal Uniformity’, in: Riv. dir. int. priv. proc. 2005, 607 et seq.; SIEHR K., ‘European Private International Law of Torts. Violations of Privacy and Rights Relating to the Personality’, in: Riv. dir. int. priv. proc. 2004, 1201 et seq. 4 See HOHLOCH G., Das Deliktsstatut, Frankfurt a.M. 1984, p. 15 et seq. (containing an account of the development of the place of injury rule in Europe and USA since the Kommentatoren). A modern perspective on the basic function of German international tort law, see BGHZ 86, 57 et seq. and established jurisprudence; in addition HOHLOCH G., ‘Auflockerung als Lippenbekenntnis?’, in: JuS 1980, 81 et seq., covering the contemporary sources to the creation of the preliminary draft of 1973. 5 Compare, VON OVERBECK A.E. / VOLKEN P. (note 3), 56 et seq.; LANDO O., ‘The EC-Draft Convention on the Law Applicable to Contractual and Non-Contractual Obligations’, in: RabelsZ 1974, 6 et seq. 6 Compare instead Art. 40 Abs. 1 EGBGB (as amended since 1999); for this, as well as the developments in German PIL, HOHLOCH G. (note 1), Art. 40 EGBGB no. 1 et seq.; for a fuller account see 11. Aufl. 2004, Art. 40 EGBGB no. 1 et seq.; for Austrian law, see § 48 Austrian Act Relating to Private International Law (Connection on the place of conduct with the ‘escape clause’ - ‘Ausweichklausel’) in § 48 Abs. 1 p. 2 IPRG, for a range see HEISS H. / LOACKER L. (note 3), 625; for the particular embodiment of the place of injury rule from the English perspective, see HOHLOCH G. (note 4), p. 85 ss.

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Gerhard Hohloch Rome II reaches, only the new place of injury rule of Art. 4 (1) of Rome II. The break from the up until now ‘national’ PIL will be enormous. Less dramatic, but just as significant, will be the coming into force of Art. 4 (2) of Rome II. Common habitual residence as a meaningful ‘result-oriented’ connection for damage rules,7 in the event that both tortfeasor and victim habitually reside in the same jurisdiction, and after the damaging event return to this jurisdiction, is today not new. It has, however, in the Member States of the EU at different times, for different motives and in many cases after some effort, replaced the ‘common nationality’ connection which was first recommended or practiced.8 This common residence connection represents nowadays a stable foundation after some 40-50 years of practice in a turbulent system whose purpose was to make the conflict analysis for tort more flexible. It was (and sometimes still is) a system which sought to determine the controlling law, in extreme cases, through the use of connecting factors such as the ‘better law,’ the law of the predominant interest, or the law of the ‘most significant relationship’ (‘engste Verbindung’).9 For those particularly unique cases in which the specific connecting factors of paragraphs 1 and 2 can’t find the ‘correct’ law, the ‘manifestly closer connection’ has been reduced to the ‘escape’ clause of Art. 4 (3).10 The practical significance of this clause, however, will continue to be rather small. Those basic rules set forth in Art. 4 evidence their significance for the future of European PIL when they are examined together with three other components of the Rome II Regulation. On the one hand, the reach of Rome II is provided in Art. 1 and 2, where provisions are laid down for the field of application and the definition of torts under the Regulation. These provisions set forth rules, which do not appear in the PIL laws of the continental EU Member States, but have the style For more on the term, HOHLOCH G. (note 4), in: JuS 1977, 81 et seq. For the German development that goes back some time and which, as of 1920, was influenced by the Swiss PIL, see HOHLOCH G., Deliktsstatut (note 4) p. 57 et seq. The ‘RechtsanwendungsVO’ (Applicable Law Regulation) of 1941, a unilateral conflicts norm that tied to German citizenship, was soon overcome in the German practice and was no longer an obstacle for the gradual change leading to common habitual residence, see from the case-law of the Bundesgerichtshof (BGH), in: BGHZ 34, 22 et seq.; BGH: in: NJW 1976, 477 et seq., BGHZ 86, 57 et seq. And then the following different opinions (for this HOHLOCH G. (note 1), 11. Aufl. 2004, Art. 40 no. 1 et seq. The respective legal connecting factor is found in basically all of the PIL norms of European countries, norms which were completed during the ‘Codification Epoch’ of the second half of the 20th Century; see a copy of the text in its original language with a German translation in RIERING W. (Hrsg.), IPR-Gesetze in Europa, München (etc.) 1998. 9 The excessive discussion of the questions and ‘approaches’ in the European countries, especially the discussion with suggestions (and angry extortions!) through the thoughts and teachings of the US American Law of Conflicts, is today predominantly interesting only from a historical perspective; for a compilation of those materials, HOHLOCH G., Das Deliktsstatut (note 4), 85 et seq.; more concisely, HOHLOCH G. (note 4), in: JuS 1980, 81 et seq. 10 For the function of the ‘escape clause’ in the contemporary PIL legislation, see for example SIEHR K., Das internationale Privatrecht der Schweiz, Zürich 2002, p. 495, 497 et seq. 7 8

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Basic Principles of Rome II that all uniform EU regulations have; a style it must have for the purpose of a more effective harmonization of the 26 Member States (without Denmark).11 Then again, Art. 4 loses some of its significance through Art. 5 et seq., where individual types of delicts have been listed, each with its independent conflicts rules. This represents, at least from a formal perspective, a difference of Rome II with respect to many present national conflicts systems, in which special rules based on the special type of delict are rarely found.12 On 11 January 2009 Rome II will in most cases, through overlap and primacy, practically abolish national conflicts rules. National PIL will remain applicable only in exempted areas. It is then the job of the national legislative authorities to either highlight or harmonize the differences. This exigency exists less so in regards questions surrounding international application. Art. 3 of Rome II sets forth universal application, i.e. application as to third countries, and thus also, for example, Switzerland as a third country. Thus, on 11 January 2009 the Swiss legal practice will be confronted with 26 countries that will have this fundamentally uniform conflicts system. This would be directly relevant for the Swiss to the extent that they practice the so-called ‘remission’ (‘Rückverweisung’, ‘renvoi au premier degré’) or the ‘transmission’ (‘Weiterverweisung’, ‘renvoi au nième degré’) with respect to Art. 132 et seq. IPRG, which however, pursuant to Art. 14 IPRG, is not the case. Therefore, the new PIL for torts in the EU is for the Swiss practice significant, if jurisdiction for a tort case lies in a Member State – be it pursuant to general jurisdiction per Art. 2(1) of the Lugano Convention or pursuant to the special rule of Art. 5 Nr. 3 of this Convention.13 The court sitting in a particular Member State will apply the conflicts law of his lex fori, i.e. Rome II, also in relationship to Switzerland. This particular feature can play a very practical role in litigaSee the comparable construction of the Rome Convention on the law in relation to contractual relationships of 9.6.1980 – ‘Rome 1980’ (Art. 1 and 2) and the Brussels I Regulation, as also both of the matrimonial regulations. 12 For a textbook example of a ‘unified solution’, see Art. 40 – 42 EGBGB; With the enactment of the German PIL norms related to non-contractual obligations on 1 June 1999, German PIL, being fully cognizant of and as a renunciation of many different proposals during the legislative history, chose to turn away from a construction which would have incorporated individual rules for specific types of delicts (for example protection of personality, products liability, competition law...). Divergent from this is, for example, the Swiss PIL. In Art. 132 of the Swiss PIL Act is found a limited catalog of conflicts laws for particular types of delicts (for example products liability, liability stemming from traffic accidents). 13 ‘Location of the damaging event’ in terms of Art. 5 Nr. 3 still applies –different than Art. 4 (1) of Rome II (see in addition section II.2.) ‘Ubiquitätsprinzip’ (‘Ubiquity Principle’), i.e. location of conduct and location(s) of direct damage are the same; see in addition the ECJ-Jurisprudence since ‘Mines Potasse’ ECJ 30.11.1976, in: ECR 1976, 1735 = NJW 1977, 495 and ECJ 19.9.1995 (‘Martinari’), in: ECR 1995, 2719 = IPRax 1997, 331 with a note by HOHLOCH G., at 312 et seq. To the limits of the location of direct damage compared with the location of a subsequent property loss, ECJ 10.6.2004 (‘Kronhofer’), in: NJW 2004, 2441 = IPRax 2005, 32 with note by HEIN J., at 17, OLG Stuttgart 6.7.1998, NJW-RR 1999, 138 = IPRspr. 1998 Nr. 147. 11

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Gerhard Hohloch tion, whether it be at the point of developing a general litigation strategy, or when seeking the recognition and execution of foreign judgments in Switzerland pursuant to Art. 31 et seq. of the Lugano Convention (at least by the ordre public examination of Art. 27 Nr. 1).

II.

Art. 4 of Rome II: the Regulation’s General Conflicts Rules for International Tort Law

A.

Structure of the Regulation

The Rome II Regulation presents the model of how European PIL rules would look if they had to regulate a single area of private law, as the case may be international private law. The rules regarding the scope of application (here Art. 1-3) are followed by individual areas. More specifically, rules for non-contractual obligations, the first being the rules of international tort law (PIL of torts, Art. 4-9), are followed by the general provisions, in particular those dealing with the scope of the applicable law, prohibition of renvoi, ordre public, as well as the transitional and final provisions. Due to this ‘statutory structure,’ Rome II is certainly not an example of elegant and properly constructed codification; rather it has a piecemeal structure that seeks to place ‘legal island’ (‘Rechtsinsel’) next to another ‘legal island’ until – maybe – a European code of Private International Law will exist.14 Art. 4 is the article within this system of Rome II that covers the general conflict laws for tort, i.e. the basic rules of place of injury (paragraph 1), the rule for common habitual residence, and the rule covering those rare factual constellations where the escape clause of paragraph 3 may be applicable (‘Auffangklausel’). The European construction style is evidenced by the repetition of this same structure in Art. 5 et seq. Reference to ‘common legal environment’ (gemeinsames Umweltrecht) or to the close connections repeatedly surface as preferred connections, a feature which could possibly lead to regulatory ‘hypertrophy’, but also at the same time to simpler application. The style of construction has just the opposite appearance and tradition of the classic national PIL statutory structure. This classic structure is one which, because of its conciseness, lends itself to circumvention. 14 For more on the emerging PIL created through successive single pieces of European legislation, i.e. ‘legal islands’(‘Rechtsinseln’)(‘Rome I,’ ‘Rome II,’ ‘Rome III’ ...) see HELDRICH A. in: Palandt Kommentar zum BGB, 67. Aufl. 2008 Art. 3 EGBGB no. 13, 14 and the citations found therein; just as appropriate HOHLOCH G. (note 1), Einl. Art. 3 EGBGB no. 60, 63, 64; for a critical view on this method of legislating, see for example HOHLOCH G. (note 2), 533 et seq. The planned European Frame of Reference will probably have rather minor effect for the future creation of general European PIL codification. The requirements for a more compact PIL do not overlap in this respect with the requirements of the material law.

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Basic Principles of Rome II The new style is likely to simplify application. When one is faced with the application of Art. 4 of Rome II, one can confine oneself to Art. 4. This is almost just as true if one has to apply Art. 5 or 6 or 7. More often than not, the individual articles include the hierarchy system of connecting factors and indicate whether the basic rule of the first paragraph is applicable or whether a particular rule from the following paragraphs is the controlling. Resort, then, to an ‘escape clause’ for all delict and conflict cases in separate articles of the statute is not needed. This is different, for example, than German PIL, where the escape clause applicable to unjust enrichment, negotiorum gestio and torts is included in Art. 41 EGBGB rather than in the single provisions of Art. 38 (unjust enrichment), 39 (negotiorum gestio) and 40 (tort).

B.

The Rome II Place of Injury Connecting Factor (Art. 4 (1))

1.

Narrowing of ‘Place of Injury’ to ‘Place of Direct Damage’

In relation to a non-contractual obligation arising out of a tort, Art. 4 (1) states that, ‘[u]nless otherwise provided for in this Regulation’, the applicable law shall be the law of the country in which the damage occurs, irrespective of both the country in which the event giving rise to the damage occurred and the country(s) where indirect damage occurs. The new uniform European conflicts law related to torts therefore designates the place of direct damage (lex loci damni or ‘Erfolgsort’). This is the result of a long process whereby a number of other variations of the place of injury rule found in national PIL systems were rejected. The country in which the damage occurs is the country where the legally protected interest is injured (‘Rechtsgutverletzung’).15 The particular language used (‘country in which the damage occurs’) evidences the affinity of the new rule to the Brussels Convention, as also to the ‘Brussels I’ Regulation of 200116 (Art. 5 Nr. 3) and the necessity of an autonomous definition in terms of Art. 4 (1) of Rome II (i.e. a place of injury term that is independent from the law of the Member States). Place of injury in terms of Rome II means the ‘location of direct damage’ (‘Erfolgsort’) as it has been hereto used in language of international tort law.17 15 Compare the explanatory statement of the draft proposal of the Commission from 22 July 2003 for the Regulation of the European Parliament and the Council on the law applicable to non-contractual relations (‘Rome II’), COM (2003) 427 final version, page 13. For the general concept see HOHLOCH G. (note 1), Art. 40 EGBGB no. 10 a. See also the compilation of the assessments in the – already considerable – German legal literature in HEISS H. / LOACKER L. (note 3), 624, a number of useful sources in N. 133 et seq. 16 Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. 17 The Regulation’s word choice is satisfactory. The formulation ‘… in which the damage occurs...,’ is an acceptable European compromise (see practiced similar terminology in Art. 5 Nr. 3 Brussels I Regulation), that is especially desired because it leads to a ‘European conflicts of law nomenclature’ that will assist in a future general conflict of laws codification.

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Gerhard Hohloch The establishment of the place of injury rule as the place of direct damage, described as the ‘country in which the damage occurs’, is consistent and leads to certain outcomes which are worthy of note. As regards its consistency, a European standardized and simplified general connecting factor for place of injury requires, as a European legal concept and as a universally applicable connecting factor, objectivity and neutrality. Place of injury as a connecting factor generally lends itself to objectivity. An aspect adding to the objectivity of the location of damage in the European arena may be that the law of the place where the damage occurs is best suited for the central tort sanction, i.e. the compensation of the damage. The actions of the tortfeasor have insomuch limited weight in the evaluation.18

2.

The Displacement of the Place of Injury Characteristics of National PIL

The Rome II connecting factor related to place of injury is the current connecting factor found in the majority of Member States. For these countries (for example France), the coming into force of Art. 4 (1) will change nothing.19 To the limited extent that the difference between place of conduct and place of direct damage can have significance,20 this new rule will represent an innovation for those countries that until now have preferred the ‘place of conduct’ rule.21 Falling victim to the trend towards simplicity and unambiguity of connecting factors is Art. 40 (1) EGBGB, along with the rest of the ‘Ubiquitätstheorie’ (‘Ubiquity Theory’) that it represents. This rule has been in effect since 1 June 1999 in Germany.22 This means that, once Rome II comes into force, German international tort law will have undergone two successive amendments within a span of ten years, although practical consequences may not be that far-reaching. In force for some 100 years, up until 1999, was the so-called ‘ubiquity principle’ (‘Ubiquitätsprinzip’). Here, the place of conduct and place of direct damage were alternatively applicable and choice between them would be effected by the court on an ex officio basis, based on a comparative better-law approach (‘Günstigkeitsvergleich’). This In this context see recital 16 of the Rome II preamble for a clear and accurate explanation of the reasons behind the selection of the ‘place of direct damage’ connection; see also the European Commission proposal from the 22nd of July 2003 on the regulation of the European Parliament and the Council on the law applicable to non-contractual obligations (‘Rome II’) COM (2003) 427 final version, p. 13. 19 See an evaluation by KADNER GRAZIANO TH., Gemeineuropäisches Internationales Privatrecht, Tübingen 2002, p. 196 et. seq.; see also the reasons for the European Commission proposal from the 22nd of July 2003 on the regulation of the European Parliament and the Council on the law applicable to non contractual obligations (‘Rome II’) COM (2003) 427 final version, p. 12. 20 In this respect see section c). 21 For example Austria, see § 48 Abs. 1 öst. IPRGesetz (Austrian PIL Act). 22 Generally applicable is the law of the country where the act occurred, but such law can be displaced at the aggrieved party’s unilateral choice by the law of the country where the harmful event took place, subject to time and procedural limitations. 18

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Basic Principles of Rome II analysis should ultimately result in the application of the law which would benefit the aggrieved party.23 Art. 40 (1) EGBGB, which is still partly based on the Ubiquitätsprinzip, has been law in Germany since 1 June 1999.24 As of 11 January 2009 only the place of direct damage will matter.25

3.

Reach of the Connecting Factor

Art. 4 (1) of Rome II is the basic conflicts rule of international tort law that, again, with its implementation on 11 January 2009, will be the applicable PIL norm for Europe. The ‘place of injury’ connecting factor, or more accurately the ‘place of direct damage’, means a legal change for a number of Member States (that is from other ‘place of injury’ variations to that of ‘place of direct damage’). Admittedly, the practical implications that Art. 4 (1) of Rome II could possibly have in this respect are, as set forth in the comments below, limited. To determine the significance of Art. 4(1), one should consider the material scope of application of this provision. Art. 4, along with its paragraph 1, does not have direct significance for the delicts listed in Art. 5-9 of Rome II, as they have their own special conflicts rules. Due to the precedence of Art. 5-9 of Rome II, Art. 4 is fundamentally reduced to those delicts that are not covered by those provisions. By cutting out those delicts related to products liability (Art. 5), competition law (Art. 6), environmental damage (Art. 7), infringements related to intellectual property (Art. 8), and industrial actions (Art. 9), there only remain the miscellaneous traffic accidents, as well as other general delicts that do not fall under Art. 5-9. These delicts will predominantly be committed as ‘Punkt- oder Platzdelikte’ (‘point or location delicts’). This means that these torts will be completely realised within a single jurisdiction and, therefore, will normally not involve a border crossing during their perpetration. The typical ‘distance torts’ (‘Distanzdelikte’), i.e. those torts which involve a crossing of a legal border at some point between the conduct and the result, are, in the system of Art. 4-9 of Rome II, no longer covered by the general conflicts norm (Art. 4). The protection of the private sphere, marriage and personality (‘right of privacy’), including defamation related to one’s commercial reputation, are not covered by Rome II, due to the exceptions found in Art. 1 (2) letters (a)-(g).26 As to cross-border emissions damage cases (environmental damage cases), the second large delict type and one for which the determination of place of perpetration is often difficult, they are handled in Art. 7 and, once For details see for example HOHLOCH G. (note 1), 9. Aufl. 1993, Art. 38 EGBG No. 15 et seq. 24 For a treatment of the ‘Bestimmungsrechts’ in Art. 40 (1) EGBGB, see HOHLOCH G. (note 1), 10. Aufl. 2000, 11. Aufl. 2004, Art. 40 EGBGB no. 22 et seq. 25 On the future implementation into the German PIL, HOHLOCH G. (note 1), 12.. Aufl. 2008, Art. 40 EGBGB no. 21 et seq., 31 a. 26 There may be, however, special cases which fall under the competition conflict norm of Art. 6, which has its own place of injury term. 23

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Gerhard Hohloch again, not Art. 4. This is true both for environmental damages which do not arise out of the violation of individual legal interests and for those which consist in the damage caused to individual interests by means of natural elements (water, air and soil).27 As to point or location delicts, the typical example being an accident with tortious consequences, it is not difficult to determine the location where the damage occurred. Regularly coming into question is the place of the accident (‘Unfallort’), i.e. a single location, where the entire delict was consummated. The example evidences that in the clearly limited material scope of application of Art. 4, the adoption of the place of damage is appropriate, and lastly without alternative. Everything regarding causality which occurred elsewhere, that is not in the location of the damaging occurrence, i.e. where the damage to the legal interest of the aggrieved party occurs, remains in the conflicts law related to tort out of consideration.This applies to preparatory acts as well as omissions. An example would be the failure to examine a technical aspect of an automobile in the home garage of the car’s owner or driver, this failure leading to the occurrence of damage at the location of the accident. In the case of strict liability, the ‘home’ of the risk is irrelevant for the occurring of the damage. Accordingly, the law regarding liability of the place of damage will be applied.28 Rome II, again, in this respect sets forth nothing new. Nothing different applies to what occurs after the ‘act’. Again, not only in German PIL, but also in the conflicts laws of other Member States, ‘secondary’ or ‘consequential damage’ (‘Folgeschäden’) and other damage arising out of the injury to the protected legal interest (i.e. consequential costs, immaterial damage, indirect damage to third parties) are not regarded as deserving separate connecting factors. It is certainly not a new approach not to adopt a different connecting factor with respect to ‘indirect damage’ in cases where the injury to the legal interest and the resulting primary damage occur in the same place. However, Art. 4 (1) of Rome II directly puts up with one of the ever connected problems with place of direct damage as a connecting factor: If the delict is a ‘Streudelikt’ (‘scattered tort’), i.e. a tort where the victim suffers legal injury and damage in multiple, different jurisdictions, then the solution lies with the ‘mosaic’ accumulation of the individual injuries found in the different places of direct damage.29 The problem, nevertheless, has little consequence for Art. 4 (1) of Rome II. ‘Streudelikte,’ which can be found (and be very problematic) in torts causing prejudice to personality

Finally, see WAGNER G. (note 3), 1, 9. Earlier attempts to differentiate between connecting factors applicable to strict liability and fault liability (see e.g. RABEL E., The Conflict of Laws, volume II, (2nd ed. 1960) 334, are for a long time out of date: see e.g. STOLL H., in: Festschrift M. Ferid, München 1978, 397-416. 29 See HOHLOCH G. (note 1), Art. 40 EGBGB no. 31 and cites found therein. 27 28

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Basic Principles of Rome II rights,30 do not regularly fall within the scope of Art. 4 (1) of Rome II, and thus the problem normally does not arise in this area.

C.

The Connecting Factor of Common Habitual Residence (Art. 4(2))

1.

Development

Taking precedence over the general connecting factor related to place of injury is Art. 4 (2) of Rome II, which adopts, where available, the common habitual residence of the parties (‘gemeinsamer gewöhnlicher Aufenthalt’, ‘résidence habituelle’). As the preferred connecting factor, Art. 4 (2) was already present in all relevant Member State legal systems, albeit based on different legal foundations. The 1971 Hague Convention on the Law Applicable to Traffic Accidents makes use of this connecting factor, at least indirectly. The legal reforms, which since 1960 have been introduced in the ‘newer’ Member States, also adhere to this principle. Elsewhere, for example Germany, it was the courts, encouraged by the literature, which had been increasingly using a result-oriented connecting factor, notably the law of nationality (‘Heimatrecht’) or the law of ‘common legal environment’ (‘gemeinsame Rechtsumwelt’). It was clear for many legal systems long before the passage of Rome II that habitual residence was an uncomplicated and practicable connection that belonged to the legal instrumentarium of international tort law. Art. 133 (1) of the Swiss IPRG is an excellent and clear example.31 Germany needed a little more time to simplify its tentative and extremely varied case law into the 1999 enacted rules of Art. 40 (2) EGBGB.32

2.

Content

‘Common habitual residence’ means that the parties involved in the tortious situation have the factual center of gravity of their lives (‘faktische Lebensmittelpunkte’) in the same country. Rome II itself does not contain – and rightly so – a definition of ‘habitual residence’, even when one searches in Art. 23 where certain individual terms are defined: place of central administration for juridical persons, associations, corporations (Art. 23(1) of Rome II),33 habitual residence for natural

See as a typical example the case ‘Shevill’ of the ECJ (ECJ 7.3.1995, in: ECR 1995 I 415, = IPRax 1997, 111 with note by KREUZER K. / KLÖTZEN, 90 = Rev. crit. 1996, 487, note by LAGARDE P. = Riv. dir. int. priv. proc. 1995, 763). 31 See HEINI A., in: Zürcher IPRG-Kommentar, 2. Aufl., Zürich 2004, Art. 133 no. 3 and cites found therein. 32 Compare HOHLOCH G. (note 1), Art. 40 (11th ed. 2004) no. 32 et seq. and Art. 40 (12th ed. 2008) nos. 32 et seq., 40. 33 Correctly is ‘domicile’ applicable, and not the ‘law of incorporation’; this provision is purpose-oriented and thus is not contradictory to the development of the European 30

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Gerhard Hohloch persons when injuries occur during their business activity, Art. 23(2) of Rome II). The question of whether the term ‘residence’ should be autonomously construed or whether its meaning should be inferred from the conflicts law of the forum state is ultimately pointless. ‘Autonomous’ interpretation of Rome II, historical background reasons, as well as the pursued European goals of Art. 61, 65 of the Treaty of Rome, make clear that Art. 4 (2) of Rome II refers under ‘habitual residence’ to the factual center of life activities, supported by the relevant will of the concerned person. It is therefore sufficient that Art. 23 of Rome II contains rules for the residence of juridical persons and for special cases. They are helpful tools that are also available in the ‘Brussels I’ Regulation.34 More is not needed. Legal definitions only have, in PIL norms as in other areas of law, an assisting function. In the case of such self-explanatory terms as ‘habitual residence’, statutory definitions are not necessary.

D.

The Escape Clause (Art. 4 (3))

Connecting factors such as place of injury and common habitual residence are not adequate for the multitude of possible tort constellations. This was evidenced by the national conflicts laws when certain specific delicts, which are now separately dealt with in Art. 5 et seq., were not so handled. Occasionally the facts in a given case are such that the general PIL rules related to connecting factors are ‘manifestly’ not appropriate. Practical cases which arose in the prior German practice are situations which bear a strong relationship to a contract or cases presenting other more significant connections.35 The German experience, however, has also shown that those exceptions where there really existed a ‘closer connection’, thus prompting a deviation from general connecting factors, are small in number.36 So should it continue in the future with the application of Art. 4 (3) of Rome II. Art. 4 (3) demands a ‘manifestly closer connection.’ As a result, it must be evident that the rules of paragraphs 1 and 2 would not fit. Foreseeable is a situation where the tort in question is closely linked to a complex contractual relationship and where the governing law should be that of the contract. Mechanical solutions are however to be avoided. The proper approach requires first an analysis of paragraphs 1 and 2. If the result is so to say ‘lopsided’, then the obvious and imperative correction remedy can be made with the help of the escape clause. By no means, however, does Art. 4(3) necessitate a constant correction analysis.. Instead, international corporation law based on the ECJ jurisprudence.; for the latter see HOHLOCH G. (note 1), Annex II on Art. 37 EGBGB (12th ed. 2008), nos. 22 et. seq. 34 Art. 59 – 61 ‘Brussels I’ Regulation. 35 See for the particulars HOHLOCH G. (note 1), Art. 41 EGBGB (12th ed. 2008) no. 10. 36 The German jurisprudence has so far been most conservative, compare with what is at most obiter dicta in the case law of the BGH (BGH in: VersR 1961, 518; in: BGHZ 87, 95, 103 = IPRax 1984, 30 with remarks by HOHLOCH G., p. 14; further citations by HOHLOCH G. (note 1), Art. 41 EGBGB (12th ed. 2008) no. 11.

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Basic Principles of Rome II Art. 4(3) of Rome II is just as small a piece of the Regulation as Art. 41 EGBGB is in relation to Art. 40 et seq. EGBGB.37

III. Scope and Qualification A.

Material Scope and Qualification

Commensurate with the construction principles of European legal drafting (‘Normsetzung’) in international private conflict of laws and international procedural law (besides Rome II also Brussels I, the matrimonial regulations, as well as the upcoming Rome I), Rome II sets forth its material and territorial scope of application in Articles 1 through 3. Those articles apply to the entire material scope of the Regulation, i.e. torts, unjust enrichment, negotiorum gestio and culpa in contrahendo. Art. 2 seeks to establish for the entire field a common foundation for the term damage, and thus also impending damage. The attempt is not necessarily successful since under the conventional understanding of the German and other Member States’ PIL, enrichment claims, just as much as negotiorum gestio claims, are not construed as cases seeking reparation of damage. Notwithstanding these terminology issues, claims for damages, claims based on restitutionary obligations, and reimbursment of expenses stemming from negotiorum gestio, all fall within the scope of the Regulation. This is just as true relating to pre-emptive claims, which seek to guard against and hinder potential damage, or claims which seek to abate prospective causes of damage but which do not yet have the ‘dimensions’ of a damage claim. If unjust enrichment and negotiorum gestio, which in Art. 10 and 11 have their own conflicts norms, fall outside the scope of a contribution on Art. 4, which is limited to ‘torts’, Art. 4 covers claims for damage prevention (‘Schadensvorbeugung’), loss avoidance (‘Schadensverhütung’), damage compensation (‘Schadensvergütung’) and restitution (‘Schadensrestitution’). As far as the legal basis for such claims is concerned, Rome II only governs ‘non-contractual’ claims. Because Rome II Regulation does not seek to bring about a revolution in international tort law, falling into the arena of ‘non-contractual liabilities’ should be classic torts as they are uniquely embodied in all European legal systems, whether codified or whether developed through the case law of a particular Member State.. As for classification, Rome II seeks through the concept of ‘non-contractual delicts’ to generally cover all that which is encompassed within non-contractual liability and the prevention of liability. As a rule of Community law, the Regulation embodies a European standard whose definition shall draw on the procedural The application of Art. 4 (3) of Rome II should hardly differ from the implementation of Art. 133 (3) Swiss PIL Act; see for the latter HEINI A. in: Zürcher Kommentar (note 31) Art. 133 nos. 13 et seq. 37

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Gerhard Hohloch law classification of claims that can be brought within the forum delicti under Art. 5(3) of the ‘Brussels I’ Regulation.38 Captured will be all damage claims stemming from non-contractual fault liability, regardless of its characterization as liability for proven or presumed fault. Covered also are forms of strict liability, i.e. liability independent from fault, regardless of how it is designated in different national systems (‘strict liability,’ ‘responsabilité pour risque,’ ‘Gefährdungshaftung’) and irrespective of its legal foundation in codification, special laws, or jurisprudence. The ‘European’ classification also provides guidance as to the classification of the claims for damage prevention and avoidance (‘Schadensvorbeugungund –verhütung’). Such claims do not necessarily require a traditional tort law foundation. Examples belonging in this category are the French tort claims based on neighborhood nuisances (‘troubles de voisinage’) and ‘negative’ claims pursuant to German law actio negatoria (‘Eigentumsfreiheitsklage’, § 1004 BGB).39 It is important here to look past the dogmatic ‘rim’ of national developments so as to reach, for the purposes of a ‘functional qualification’, the harmony sought from Art. 2 in regards indemnification and damage prevention. An excellent example for this is Art. 44 EGBGB, where the claim for the protection against property damage is not subject to the lex rei sitae, but rather subordinate to Art. 40 I EGBGB (‘concurrent conflicts rules approach’).40 This is also the approach with Art. 4 and Art. 2 of Rome II. To summarize: Art. 1, 2, and 4 of Rome II seek to shape the material scope through an autonomous qualification that considers non-contractual obligations certain injunction claims, abatement claims and general damage claims. Proper guidance for this European qualification is the framework created through Art. 5(3) of the ‘Brussels I’ Regulation. On this basis today, simple fault, strict liability and preventative claims can all be classified under Art. 4. In cases of doubt, notably in case where claims are based on third country law, some sort of ‘comparative qualification’ must be used. Art. 1, 2, and 4 of Rome II are European norms whose primary foundation is existing European law. Thus, for interpretation purposes, other regulations which were established pursuant to Art. 61, 65 Treaty of Rome should be considered. Private law directives, for example the products liability directive, which has been the subject of commentary and case law, could also be helpful.41 If this pool of rules and terms is not 38 Keeping in mind that the classification of claims and suits can be predetermined under the ‘tort jurisdiction’ of Art. 5, Nr. 3 Brussels I Regulation. 39 Compare in the Art. 5 Nr. 3 Brussels I Regulation (‘or may occur’) the inserted additional formulation. For the inclusion of the negative actions (actio negatoria) KROPHOLLER J., Europäisches Zivilprozeßrecht, 8. Aufl., Heidelberg 2005, Art. 5 nos. 74, 76. 40 For more detail HOHLOCH G. (note 1), Art. 44 EGBGB (12th ed. 2008) nos. 1 et seq. 41 Compare the rules of the Art. 5 of Rome II to the European Union directive related to products liability (examples within HOHLOCH G. (note 1), [12nd ed. 2008] Art. 40 EGBGB no. 52; JUNKER A., in: Münchener Kommentar, BGB [4th ed. 2006] Art. 42 annex no. 40 et seq., 42).

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Basic Principles of Rome II sufficient to classify a ‘new’ claim under Art. 2 and 4 of Rome II, then one should not stick to the lex fori of the particular Member State in whose court or agency the case has been brought. The controlling law, or lex fori, for the purpose of characterization under Art. 2 and 4 of Rome II, is the law of all the Member States which make up the EU’s territorial area. Their laws must then be consulted – obviously within a comparative approach – if in a doubtful case the solution to the problem revolves around the applicability of Art. 4.

B.

Non-Application of Art. 4 in Regards to Certain Exceptions and Specific Delicts

1.

Specific Groups of Delicts Found in Art. 5-9 of Rome II

Art. 4 of the Rome II Regulation is, however, negatively limited by the special rules for specific torts found in Art. 5-9 of Rome II. Art. 5-9 do not include ‘special connecting factors’ (‘Sonderanknüpfungen’) which would regulate particular aspects of the tort additional to, or in derogation of, Art. 4. for specific tort groups falling within the scope of Art. 5-9.42 Rather the Regulation sets forth independent conflict of laws rules, which allow, basically without referral to Art. 4, for the implementation of the conflicts of law treatment of specific ‘delicts’ (or the ‘prevention of delicts’), to which, respectively, Art. 5, 6, 7 or 9 Rome II apply. As was previously set forth, the conflict of laws practice should proceed in such a manner so as to first examine the particular facts of the case in order to determine whether the delict falls under Art. 5 et seq. If that question is answered in the affirmative, then a return to Art. 4 is only required in as far as language within Art. 5 et seq. mandates such a return or when a segment of a particular provision uses the same language as Art. 4. Otherwise, the specific conflict of laws rules of Art. 5-9 of Rome II are ‘exclusively’ applicable, meaning that a conflict of laws solution for the respective tort is to be found according to Art. 5-9 of the Rome II, as well as the general and final provisions of Art. 13 et seq. As for the specific and detailed application of Art. 5-9, reference should be made to the additional articles in this volume which are dedicated to those provisions.

2.

Non-Application of Rome II in Regards the Exceptions Listed in Art. 1

The Rome II Regulation is meant to regulate the conflict of laws in regards to noncontractual liability. Non-contractual liability belongs in the European system to ‘civil and commercial matters,’ which, based on European understanding, does not include governmental liability for damages stemming from acta iure imperi, liability questions arising from revenue, customs or administrative law matters. Art. 1(1) of Rome II shows in this respect congruence with Art. 1 of Brussels I. Such congruence is desirable and should be continued in order to reach a true European 42

See for a misunderstanding WAGNER G. (note 3), 6.

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Gerhard Hohloch system of conflict of laws and international civil procedure. Breaches of an official duty (for example, § 839 BGB), which are of a private law nature, admittedly fall within the scope of application of Art. 1(1), as well as Art. 4 of the Rome II Regulation.43 Art. 4 is, just like the whole regulation, not applicable when the exceptions of Art. 1(2) apply. The catalogue, starting with letter (a) and continuing until letter (g), is based on Art. 1(2) of the Rome Convention on the Law Applicable to Contractual Obligations and applies predominantly to non-contractual obligations which belong to a specific area of law (outside of tort law) which has its own – up to this point not European – conflict of laws rules. Defining the scope of application of Art. 4 is actually once again a problem of qualification, which can be accomplished with a methodology based more or less on the same system mentioned above.44 Art. 1 (2) creates an exception for claims arising in the areas of matrimonial, family and inheritance law (letters (a) and (b)). This includes maintenance claims (even if according to substantial national law they are, under some circumstances, regarded as tort claims but still have a maintenance function45), community property claims, and legacy or forced portion claims. Paragraph 2, letters (a) and (b) are not, however, meant to exclude from the scope of Art 4 et seq. tort claims which are real tort claims, although they emerged ‘within the family’ or within the community of heirs. Such claims are still to be qualified as tort claims and consequently, in regard to conflict of laws, dealt with by means of Art. 4 or 5 et seq. Their ‘embedding’ in a ‘inner family context’ may for example lead to the application of Art. 4(3) of Rome II and, for example, result in an application of a connecting factor relating to the effects of marriage. Qualification as a tort is nevertheless appropriate.46 The same applies to claims arising from negotiable instruments (paragraph 2, letter (c)), and (mostly) internal disputes regarding trusts and corporations. Delicts in the areas of securities administration, trust administration or liability of organs or bodies of legal persons or other associations can be still qualified as torts to which Art. 4 or 5 et seq. can apply. This result may be reached only after carefully examining that the facts of the case do not require application of a controlling securities, trust or corporate law.47 43 This is similar to how such cases apply under Brussels I; see decisions of the ECJ reached under art. 5 Nr. 3 of Brussels I concerning breach of official duty, ECJ 21.4.1993 (‘Sunday’), in: CJR 1993 I, 1963; in: IPRax 1994, 37; additionally the decision in BGHZ 123, 268, in: IPRax 1994, 118. 44 See above, III. A. 45 On the differentiation, see an overview by HOCHLOH G. (note 1), 12th ed. 2008, Art. 18 EGBGB no. 26 (for example on French and Turkish law provisions). 46 Not different as for example Art. 41 EGBGB in current German PIL, however not before carefully examining if sufficient ‘accessoriness’ exists, above II. D, as also N. 33. 47 A problem of significant importance is the question of liability arising with regard to a foreign incorporated but domestically domiciled juridical person; this fully practical question, arising due the liberal case law of the ECJ with regard to international company

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Basic Principles of Rome II Art. 4 is further not applicable in cases where the personality rights exception is applicable. Here it is about genuine tort law and the prevention of torts. Rome II’s lack of applicability in this area is simply due to the drafters and legislators could not find a common solution. Until a subsequent solution for the Regulation, or new national regulation, is introduced, the current law of the Member States remains.48 Courts can, however, use Rome II’s Art. 4 et seq. as a fruitful source with regards to their jurisprudence

3.

Priority of special conflicts rules

Finally, the scope of application of Art. 4 is limited by the priority of EU Law and paramount international conventions (Rome II Regulation, Art. 27-28). Examples can be found in the ‘Herkunftslandsprinzip’ (‘country of origin principle’) of the Ecommerce directive and in particular, with regard to Switzerland’s relations to the single EU Member States, the Hague Convention on the Law Applicable to Traffic Accidents. The Hague Convention takes precedence to the extent that it is applicable.

C.

Art. 4’s Range of Applicability

Some short remaining comments concern the substantial scope of application of Art. 4 of Rome II. Rome II does not bring about a revolution in the area of international tort law of the EU Member States. Noteworthy changes are evidenced through the general exclusion of renvoi (Art. 24) and the possible taking into account of special ‘connecting factors’ for ‘local data’ (Art. 17), which are already well-known in most legal systems of the Member States.49 Art. 15 provides, in a continental style, for the general applicability of the controlling law to all issues in tort (i.e. refusal of the issue-by-issue approach), yet due to lack of regulatory provisions allows for further general application of independent connecting factors for law, should be decided as follows: tort liability which qualifies as tort liability should be governed by the tort law, which inasmuch is concurrently applicable along with liability rules applicable according to the (foreign) controlling law of the corporation. Details in HOHLOCH G. (note 1), Art 37 EGBGB (12th ed. 2008) Appendix II nos. 44, 45 (at the end). 48 The legal status, as well as its development, is unsettled. In EU Member State Germany a group of experts for the German Government (Deutscher Rat für IPR = German Council of PIL), to which the author belongs, is discussing the creation of an ‘accompanying act’ according to which the provisions of Art. 38 – 42 EGBGB would be aligned to the provisions of the Rome II Regulation, so as to achieve a harmonization of connecting factors. Results are not yet available; see HOHLOCH G (note 1), Einl. art. 38 EGBG (12th ed. 2008) no 8. On the wider German legal position on personal rights, see an overview by i.c. Art. 40 EGBGB no. 53. 49 For the established German legal practice compare remarks by HOHLOCH G. (note 1), Art. 40 EGBGB (12th ed. 2008) no. 43.

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Gerhard Hohloch preliminary questions. The regulation’s own public policy clause will displace such ‘plafond’ provisions as Art. 40(3) EGBGB, but will have to deal carefully with such unloved institutions as American ‘punitive damages’ (Art. 26).50

D.

Territorial Applicability

Art. 4 is not, like the whole regulation, applicable in Denmark. It is, however, applicable in all other EU Member States, even when the place of injury lies in Denmark. In such cases a German court is to apply Art. 4 and not Art. 40 I EGBGB. Only Danish courts are not bound by Art. 4 et seq. Art. 4 has after all, according to Art. 3, ‘universal applicability’. This leads to the substantial practical importance of Rome II for Switzerland as a third country.51

For details see HOHLOCH G. (note 1), Art. 40 EGBGB (12th ed. 2008), nos. 76-77a. 51 See also above at I. C. 50

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PARTY AUTONOMY AND ITS LIMITATIONS IN THE ROME II REGULATION Th.M. de BOER∗

I. II. III.

V. VI.

Choice-of-Law Principles Party Autonomy as Defined in the Rome II Regulation Article 6: No Freedom of Choice in Cases Relating to Unfair Competition or Restriction of Trade Article 8: No Freedom of Choice in Cases Relating to Infringement of Intellectual Property Rights Freedom of Choice before or after the Event Conclusion

I.

Choice-of-Law Principles

IV.

Party autonomy is one of the leading principles of contemporary choice of law. Long gone are the days when conflicts scholars still argued that the applicable law could not be displaced by party agreement, as private individuals, by their own volition, cannot rise above the applicable law.1 Not until the 1960’s did it dawn on them that this levitation trick might be supported by the adoption of a conflicts rule allowing the parties to choose the applicable law.2 Since then, party autonomy has gradually gained ground in national and international conflicts legislation, and its scope has been extended from contracts to torts, succession,3 matrimonial prop∗

Professor of private international law and comparative law at the University of Amsterdam. The text of this article was concluded in December 2007. 1 In this vein, e.g.: NIBOYET J.P., ‘La théorie de l’autonomie de la volonté’, Recueil des Cours de l'Académie de Droit International de la Haye, 16 (1927-I), The Hague, p. 53 et seq.; CALEB M., Essai sur le principe de l’autonomie de la volonté en droit international privé, Paris 1927, p. 167 et seq; HIJMANS I. H., Algemeene Problemen van Internationaal Privaatrecht, Zwolle 1937, p. 169 et seq; SCHOLTEN P., C. Asser’s Handleiding tot de beoefening van het Nederlandsch Burgerlijk Recht, Algemeen Deel, Zwolle 1954, p. 211. 2 VISCHER F., Internationales Vertragsrecht, Die kollisonsrechtlichen Regeln der Anknüpfung bei internationalen Verträgen, Verlag Stämpfli & Cie, Bern, 1962, p. 23, citing NIEDERER W., Einführung in die allgemeinen Lehren des internationalen Privatrechts, Zürich 1954, p. 193, and a decision of the Swiss Bundesgericht, BGE 79 II 299. 3 Cf. Article 5 Hague Convention of 1 August 1989 on the Law Applicable to Succession to the Estates of Deceased Persons; Articles 90(2) and 91(2) Swiss Bundesgesetz über das Internationale Privatrecht (IPRG); Article 79 Belgian Wetboek van Internationaal Privaatrecht. Yearbook of Private International Law, Volume 9 (2007), pp. 19-29 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Th.M. de Boer erty,4 and, in some jurisdictions, even divorce and maintenance.5 Given the acceptance of party autonomy in such a wide range of choice-of-law categories, one is bound to assume that it is supported by a common denominator. It has been argued that the parties’ freedom of choice is justified by the need for legal certainty and predictability,6 by a ‘subjective theory of the proper law,’7 or ‘for want of a better solution’.8 That does not explain, however, why there are areas of conflicts law in which the parties’ freedom of choice is either limited or non-existent, while there are other areas in which the need for predictable solutions is met by clear-cut uniform conflicts rules. To me, therefore, freedom of choice in conflicts law can only be explained by linking it to freedom of disposition in substantive law. Where party autonomy is given free reign in the forum’s domestic law, its national conflicts law is likely to allow a choice of law by the parties. Conversely, freedom of choice is likely to be denied in areas in which the corresponding substantive law is meant to protect third parties or public interests and therefore is couched in mandatory language. That is why the law governing marriage, parentage, adoption, parental responsibility, or rights in rem can generally not be chosen by the parties. On the other hand, where a dispute does not concern anyone but the litigants – which usually implies that they are free to resort to alternative means of dispute resolution – there is no reason to curb their freedom to choose the applicable law. That is why party autonomy is now generally accepted as a leading principle in contracts choice of law. As a tenet of the choice-of-law method adopted in most legal systems in the world today, party autonomy is an anomaly. At any rate, a method that is supposed 4 Cf. Articles 3 and 6 Hague Convention of 14 March 1978 on the Law Applicable to Matrimonial Property Regimes; Article 52 Swiss IPRG; Article 15 German Einführungsgesetz zum Bürgerlichen Gesetzbuche (EGBGB); Article 49 Belgian Wetboek van Internationaal Privaatrecht. 5 A limited freedom of choice already exists in several EC Member States and is also endorsed in the various drafts of the so-called ‘Rome III Regulation’ (more properly: the ‘Brussels II-ter Regulation’) and in the drafts of a Regulation on international maintenance obligations. 6 This used to be a popular proposition in the 1960’s and 1970’s. Surprisingly, it is still the main argument supporting party autonomy in the Rome II Regulation; see infra under II. 7 MANN F.A., ‘The Proper Law of a Contract’, in: ICLQ 3 (1950), p. 60 et seq.: ‘subjective theory of the proper law: that legal system which, by their express or implied intention, the parties intended to apply’. Contra: MORRIS J.H.C., ‘The Proper Law of a Contract: A Reply’, in: ICLQ 3 (1950), p. 197 et seq., at p. 207: ‘the subjective theory of the proper law is no more than a fiction ...’. 8 In a rather pedantic article – my first attempt at academic writing – I took the view that, in a choice-of-law method which is geared to the designation of the law most closely connected, party autonomy is an anomaly to be tolerated only – for want of a better solution – if objective choice-of-law rules prove to be inconclusive: DE BOER TH.M., ‘Subjectieve verwijzing: anomalie of grondbeginsel?’, in: JESSURUN D’OLIVEIRA H.U. (et.al.), Partijinvloed in het internationaal privaatrecht, Deventer 1974, p. 47-72, at p. 68. My contribution to this collection of essays is best forgotten.

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Party Autonomy and its Limitations in the Rome II Regulation to designate the law of the country with which the legal relationship at issue is most closely connected should not leave room for the parties to choose a law that does not qualify as such. Yet, we have come to accept that the closest connection is not the only criterion by which the applicable law may be selected. Apart from conflicts rules based on the principle of the closest connection and the principle of party autonomy, there are at least two different kinds of rules that are not meant to determine the ‘center of gravity’ or the geographical ‘seat’ of the legal relationship. Instead, they give expression to a social policy underlying the forum’s substantive law, which is either translated into a connecting factor that focuses on the party in need of protection, or into a number of alternative references, with a preference for the one by which a specific goal can be achieved.9 Choice-of-law rules focusing on consumers, employees, children, maintenance creditors, etc. could be said to reflect the function of the corresponding substantive law, which is protection of the weaker party. They are based, therefore, on a choice-of-law principle that is known as the ‘principle of functional allocation,’ or the ‘protection principle’.10 Alternative reference rules are based on the so-called ‘favor principle,’ as they allow a choice of the one law among several alternatives that achieves a favored result, such as the formal validity of a legal transaction,11 the legitimation of a child born out of wedlock,12 or the obligation to pay maintenance.13

9 A more extensive treatment of the principles underlying choice of law can be found in my dissertation, Beyond Lex Loci Delicti, Conflicts Methodology and Multistate Torts in American Case Law, Deventer/New York 1987, p. 42 et seq., and in my Hague lectures, ‘Facultative Choice of Law, The Procedural Status of Choice-of-Law Rules and Foreign Law’, Rec. cours 257 (1996), The Hague, p. 277 et seq. 10 It should be noted that protection is only afforded at the choice-of-law level. A rule referring to the law of the consumer’s habitual residence (cf. Article 5(3) Rome Convention 1980) may leave the consumer empty-handed at the level of substantive law. Conflicts rules that are based on the principle of functional allocation do achieve equal treatment of the weaker party, regardless of whether they have entered into a domestic or international legal relationship. 11 Article 1 Hague Convention of 5 October 1961 on the Conflicts of Law Relating to the Form of Testamentary Disposition; Article 9(1) Rome Convention of 1980 on the Law Applicable to Contractual Obligations. 12 Article 4 Dutch International Parentage Act (Wet conflictenrecht afstamming); Articles 72-74 Swiss IPRG; Articles 20-21 German EGBGB. 13 Articles 5 and 6 Hague Convention of 2 October 1973 on the Law Applicable to Maintenance Obligations.

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II.

Party Autonomy as Defined in the Rome II Regulation

According to the preamble of the Rome II Regulation, a rule allowing the parties to choose the law applicable to a non-contractual obligation is based on two objectives: ‘to respect the principle of party autonomy and to enhance legal certainty’. This rationale is not very convincing, as it does not answer the questions of why party autonomy should be respected, or why a choice by the parties would lead to greater certainty than the one to be achieved by the Regulation’s uniform conflicts rules. At any rate, the preamble does not explain why the parties should be allowed to choose the law of a country that is not in any way connected with the non-contractual obligation at issue. Such freedom of choice can only be understood if it is viewed as a transposition of the parties’ power to dispose of their rights under substantive law to the level of conflicts law. It would seem that the main provision on party autonomy in Rome II, Article 14 in its final version, has not given rise to much debate, as all the elements of the Commission’s original proposal have remained basically intact. The parties’ freedom to choose the applicable law is still subject to a number of restrictions: (1) the choice-of-law agreement must be entered into after the event giving rise to the damage occurred; (2) the choice must be express, or demonstrated with reasonable certainty by the circumstances of the case; (3) it may not affect the rights of third parties; (4) in domestic cases, a choice of foreign law cannot displace the mandatory provisions of the law that would apply without the choice; (5) in intra-community cases, the choice of the law of a non-member state cannot displace mandatory provisions of Community law; (6) the choice of a foreign law cannot displace overriding mandatory rules of the forum, and (8) a choice-of-law agreement does not affect the law applicable to non-contractual obligations arising from an infringement of intellectual property rights, as designated by Article 8. In the final text of the Regulation, a similar restriction has been included with respect to unfair competition and restrictive trade practices, both covered by Article 6. Another novelty is the exception to the first restriction if all parties concerned are engaged in commerce. For the rest, Article 14 is essentially the same as Article 10 in the Commission’s first proposal.14

14 There are some minor differences in wording (‘shall’ instead of ‘must’, ‘where’ instead of ‘if’, etc.), as well as some legal differences. In the Commission’s proposal, the agreement would only be valid if the parties entered into it ‘after their dispute arose.’ Article 14 now provides: ‘after the event giving rise to the damage occurred.’ The time factor in Article 10(2) and 10(3) – all elements located in one state or in one or more Member States – has been changed from ‘at the time when the loss was sustained’ into ‘when the event giving rise to the damage occurs.’

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Party Autonomy and its Limitations in the Rome II Regulation The restrictions on the parties’ freedom of choice in domestic15 and intracommunity cases16 can also be found in the Rome I Regulation.17 The same can be said about the priority of the forum’s overriding mandatory provisions,18 the criteria for a valid choice,19 and the rights of third parties.20 That leaves us with three limitations that are specific to Rome II and, therefore, deserve separate treatment. I will first deal with the bar on party autonomy in the fields of unfair competition (III) and intellectual property (IV), and then with the requirement that a choice-oflaw agreement between private parties can only be made post factum (V). As I am fully aware of the fact that in the area of non-contractual obligations parties seldom exercise their freedom of choice, the following remarks are primarily meant to stir up academic debate, not to illuminate the limits of Article 14 in actual practice.

15 Article 14(2) referring to situations in which a choice of foreign law is the only foreign element. The occurrence, the resulting loss, the habitual residence of the parties, etc. are all located in one and the same country, but not the country whose law was chosen. 16 Article 14(3), now referring to ‘elements ... located in one or more Member States.’ In the Commission’s first proposal, Article 10(3) referred to ‘elements ... located in one of the Member States.’ Strictly speaking, this phrasing would make Article 10(3) redundant next to Article 10(2), while it would not have the effect of turning the EU Member States into one ‘territoire juridique.’ 17 In the Rome Convention of 1980, there was a restriction on party autonomy only in domestic cases: Article 3(3). At the time of this writing (December 2007), a political agreement was reached on the text of the Rome I Regulation. Article 3(3) and Article 3(4) now address the same issues as those covered by Article 14(2) and 14(3) Rome II. 18 Article 16 Rome II, only referring to overriding mandatory provisions of the law of the forum; cf. Article 9(2) Rome I. There is no reference to overriding mandatory provisions of the law of other countries – cf. Article 9(3) Rome I, however limited in scope – probably because it is difficult to imagine what interests other countries could have, in the field of non-contractual obligations, in the application of their law. Even if the parties have chosen a different law, under Article 17 rules of safety and conduct in force in the country where the harmful event occurred must be taken into account anyhow. 19 Under Rome II, ‘the choice shall be expressed or demonstrated with reasonable certainty by the circumstances of the case.’ Article 3(1) Rome I is phrased differently: ‘The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case.’ Hopefully, both provisions have the same meaning. Curiously, the issue of whether the parties actually reached a choice-of-law agreement is not subjected – as in Rome I – to the law that would apply if the agreement were valid, but should be resolved by ‘respect[ing] the intentions of the parties’ (preamble, recital 31). 20 In Rome I, Article 3(2) only refers to a change in the law chosen by the parties: such a change ‘shall not .... adversely affect the rights of third parties.’ In Rome II, there is no provision on the possibility of changing the chosen law: ‘The choice shall not prejudice the rights of third parties.’ I assume that Rome I does not allow the rights of third parties to be prejudiced by any choice-of-law agreement, and that under Rome II the parties are free to change their choice-of-law agreement, without prejudice to the rights of third parties, of course.

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III. Article 6: No Freedom of Choice in Cases Relating to Unfair Competition or Restriction of Trade Under Article 6, non-contractual obligations arising out of an act of unfair competition are subject to the law of the country where competitive relations or the collective interests of consumers are (or are likely to be) affected. If the damage results from a restriction of competition, the law to be applied is the law of the country where the market is (or is likely to be) affected. In either situation, the applicable law cannot be displaced by a choice-of-law agreement: Article 6(4). This restriction is explained, more or less, in recital 21, where it says that ‘the conflict-of-law rule should protect competitors, consumers and the general public and ensure that the market economy functions properly.’ Read in conjunction with the reference to ‘competitive relations and collective interests of consumers’ in Article 6(1), this statement suggests that unfair competition and restrictive trade practices affect public rather than private interests. Or, to put it differently, in the area of unfair competition and restrictive trade practices, interests of a higher order than those of individual competitors are at stake. On the level of substantive law, those interests are generally protected by mandatory provisions,21 which may range from standards of conduct to rules on the determination of the burden of proof, or on the nature and measure of damages, etc. As explained under I, the less room there is for party agreement on this level the less freedom the parties should be allowed on the choice-of-law level. In this respect, the ban on choice-of-law agreements in Article 6(4) is quite justified. Unfortunately, there are several provisions in Rome II that are difficult to square with this line of reasoning. If the parties’ freedom of choice corresponds with their freedom of disposition under substantive law, it is hard to see why the drafters of Rome II have chosen to prohibit choice-of-law agreements in all unfair competition cases, even those in which the defendant’s conduct does not affect collective interests – the situation covered by Article 6(2) – while the parties’ freedom of choice is not curbed in any way by Article 7, the provision on environmental damage, or Article 9 covering industrial actions. ‘Where an act of unfair competition affects exclusively the interests of a specific competitor,’ Article 6(2) calls for the application of the general conflict-of-law rules laid down in Article 4. Yet, a choice-of-law agreement is still blocked by Article 6(4). If the law of the market may be displaced in this situation by the law of the parties’ common habitual residence or the law of another more closely connected country, it is hard to Laws that are meant to protect trade and commerce from restraints, monopolies, price-fixing, price discrimination, etc. (antitrust laws) qualify as ‘overriding mandatory rules’ within the meaning of Article 9(1) of the latest draft of the Rome I Regulation, as they are crucial to the ‘political, social, or economic organisation’ of the country in which they are in force. However, Rome II only gives precedence to overriding mandatory provisions of the forum state (Article 16). If choice-of-law agreements were allowed under Article 6, the parties could evade the rules of foreign competition law, whether or not they would qualify as overriding mandatory provisions. 21

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Party Autonomy and its Limitations in the Rome II Regulation see why it cannot be displaced by the law designated by the parties in accordance with Article 14.22 In my view, this is a mistake that should be corrected in the next version of Rome II. On that occasion, the relation between party autonomy and environmental law should be reconsidered as well. Article 7, the provision on the law applicable to environmental damage, calls for the application of the law of the place of injury, or – at the victim’s option – the (probably more favorable) law of the place of conduct. Since protection of the environment would seem to be no less a public interest of the state concerned than protection against unfair competition or restrictive trade practices, I fail to see why Article 7 does not also contain a restriction on a choice by both parties similar to the one laid down in Article 6(4). The same could be said with regard to the provision covering industrial actions: Article 9 refers to the lex loci delicti, subject to the common habitual residence exception of Article 4(2), but it does not rule out choice-of-law agreements. Still, it would seem that industrial actions affect social and economic interests of a higher order than those of the parties concerned, justifying a restriction on party autonomy similar to the one included in Article 6(4).

IV. Article 8: No Freedom of Choice in Cases Relating to Infringement of Intellectual Property Rights It is generally assumed that the territorial nature of intellectual property rights does not support application of any other law but the law of the country for which protection is claimed (lex loci protectionis).23 Hence, the Rome II Regulation neither leaves room for the law of the parties’ common habitual residence, nor provides for a proper law exception. Choice-of-law agreements are expressly prohibited in Article 8(3). The exclusive reign of lex loci protectionis is justified in recital 23 by 22 Cf. KREUZER K., ‘Tort Liability in General’, in: MALATESTA A. (ed.), The Unification of Choice of Law Rules on Torts and Other Non Contractual Obligations in Europe, The ‘Rome II’ Proposal, Padova 2006, p. 45-58, at p. 55: ‘Where an act of unfair competition exclusively affects the interests of an individual competitor, there is no reason why the parties should not be allowed to select, by agreement, the law applicable to their relations.’ 23 Cf. VAN EECHOUD M.M., Choice of Law in Copyright and Related Rights, Alternatives to the Lex Protectionis, The Hague/London/New York, 2003, p. 95 (with numerous citations in footnote 263): ‘There is however quite widespread agreement that the general conflict rule for copyright (and other intellectual property) is the one referring to the law of the country for which protection is claimed (Schutzland principle; lex protectionis). Some infer this conflict rule from the territorial nature of copyright. Others derive it from the national treatment principle as enshrined in the Berne Convention and other treaties, or see the lex protectionis expressed directly in Article 5(2) BC and similar clauses.’ See also: FAWCETT J. J. & TORREMANS P., Intellectual Property and Private International Law, Oxford 1998, p. 462 et seq.

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Th.M. de Boer the invocation of a ‘universally acknowledged principle’ that ‘should be preserved’. A more compelling explanation is given by Kreuzer: ‘The exclusion of an agreement on the law applicable to infringements of intellectual property rights is due to the fact that in these cases the rights are existing only on a territorial basis so that the parties possibly could select a legal system under which no intellectual property right may exist.’24 However, if infringements of intellectual property rights are compared to other ways of causing damage to another’s property, it can hardly be maintained that the law governing the tort should also be applicable to incidental questions such as the existence or extent of property rights. Those issues belong to a different choice-of-law category and should be treated accordingly. A similar approach could be taken with regard to intellectual property rights. I agree with Kreuzer that the existence and extent of such rights should be measured against the lex loci protectionis. The question of whether a particular act constitutes an infringement – in other words, the unlawfulness issue – cannot be separated from questions pertaining to the existence, scope, and duration of the intellectual property right at issue.25 I see no reason, however, why other issues – such as: who can be held liable, the limitation or division of liability, or the nature and measure of damages – could not be subjected to a different law. In the Swiss statute on private international law, Article 110(2) does allow the parties to choose Swiss law with regard to ‘claims resulting from an infringement of intellectual property rights,’ a phrase which is meant to exclude the unlawfulness issue from the scope of choice-of-law agreements.26 While I would not limit the parties’ options to a choice of lex fori, there is much to be said for an approach in which the legal consequences of infringement could be subjected either to the law of the country with which they are most closely connected (lex domicilii communis, proper law, or accessory choice of law), rather than the lex loci protectionis, or to the law chosen by the parties.

KREUZER K. (note 22), p. 55/56. Cf. VAN EECHOUD M.M. (note 23), p. 206 et seq., p. 229; id., Overleefde teritorialiteit: grensoverschrijdende auteursrechtinbreuken onder de ‘Rome II’-ontwerpverordening, AMI/Informatierecht 2005, p. 45-56. 26 VISCHER F., in: HEINI A. ET AL. (eds.), IPRG Kommentar, Kommentar zum Bundesgesetz über das Internationale Privatrrecht (IPRG) vom 1. Januar 1989, Zürich, 1993, p. 865: ‘Nach dem Wortlaut von Art. 110 Abs. 2 ist die Rechtswahl nur für Ansprüche aus der Verletzung, nicht für die Frage der Verletzung selbst, zugelassen.’ The German text of Article 110(2) refers to ‘Ansprüche aus Verletzung von Immaterialgüterrechten’, the French text to ‘les prétentions consécutives à un acte illicite’, the Italian text to ‘pretese derivanti dalla violazione di diritti immateriali’, all of them suggesting that unlawfulness as such is a separate issue. 24 25

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Party Autonomy and its Limitations in the Rome II Regulation

V.

Freedom of Choice before or after the Event

The last restriction on party autonomy I should like to discuss is the one laid down in Article 14(1), requiring that choice-of-law agreements between non-professional parties are entered into after the event giving rise to the damage occurred. Similar restrictions can be found in, e.g., the German, Belgian, and Swiss statutes on private international law.27 It would seem that they all rest on the same rationale, which is: preventing abuse of choice-of-law agreements where the parties do not have equal bargaining power.28 Whether or not such fear of abuse is justified, it should be borne in mind that most choice-of-law agreements covering an anticipated tort are made in connection with a contractual relationship between the parties. They – or at least one of them – want to make sure that the law of their choice will be applied to any dispute that may arise as a result of their relationship, regardless of whether the action sounds in contract or in tort. Even if their agreement would be invalid under Article 14(1), an action sounding in tort would still be governed by the law of their choice, as there is likely to be a close connection between their contractual relationship and the tort at issue,29 the situation expressly mentioned in Article 4(3). In other words, even if a choice-of-law agreement would be invalid because it was entered into before the event giving rise to the damage occurred, it would be replaced by an accessory choice of the (chosen) lex contractus.30 The remaining cases – those in which the parties have entered into an agreement on the law applicable to a future tort while they are not bound by a pre-existing relationship – will be so rare that they hardly warrant the elaborate distinction between anterior and posterior agreements formulated in Article 14(1)(a) and (b). Still, this concern for the plight of the weaker party reveals another flaw in the methodological underpinnings of the regulation. If an imbalance in the parties’ 27 Germany: Article 42 EGBGB; Belgium: Article 101 Wetboek van Internationaal Privaatrecht; Switzerland: Article 132 IPRG. In the Netherlands, on the other hand, the parties are free to choose the applicable law both before and after the tortious event: Article 6 Wet conflictenrecht onrechtmatige daad. 28 Cf. the reason given in the Swiss Message concernant une loi fédérale sur le droit international privé (loi de DIP) du 10 novembre 1982/Botschaft des Bundesrats zum Bundesgesetz über das Internationale Privatrecht (IPR-Gesetz) vom 10. November 1982, BBl. 1983 I p. 263-519, at no. 284.222: ‘Dans le droit délictuel international, on a affaire de plus en plus à des parties qui ne bénéficient pas d’une capacité de négocier égale. Adopter une réglementation trop libérale reviendrait à exposer la partie la plus faible au danger d’être exploitée.’ 29 Cf. KROPHOLLER J., Internationales Privatrecht einschließlich der Grundbegriffe des Internationalen Zivilverfahrensrechts, 6. Aufl., Tübingen 2006, 53 IV 5 at p. 531/532; SIEHR K., Internationales Privatrecht, Deutsches und europäisches Kollisionsrecht für Studium und Praxis, Heidelberg 2001, p. 241. 30 With regard to their contractual relationship, the parties’ freedom of choice could be restricted as well. The protection of the weaker party then no longer depends on Article 14(1) Rome II, but on, e.g., Article 6(2) or Article 8(1) Rome I in its version of 29 November 2007 (Article 5(2) and Article 6(1) of the Rome Convention of 1980).

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Th.M. de Boer bargaining power should be remedied by a provision like Article 14(1) – which would seem to be based on the same rationale as the one underlying the validity of forum selection clauses in insurance contracts, consumer contracts, and contracts of employment under the Brussels I Regulation31 – it is hard to see why ‘non-commercial parties’ should not be given the opportunity to rely on an anterior choiceof-law agreement if that would benefit their case, just like the Brussels I Regulation allows the weaker party to rely on an anterior choice-of-forum agreement. On a more fundamental level, it could be asked whether the desire to protect the weaker party, as expressed in Article 14(1), should not be mirrored in the rules that apply in the absence of a choice-of-law agreement, notably the main rule of Article 4. In an Explanatory Memorandum accompanying the Commission’s original proposal, the lex loci damni rule is said to reflect ‘the modern concept of the law of civil liability, which is no longer ... oriented towards punishing for faultbased conduct: nowadays, it is the compensation function that dominates.’32 This view is upheld in recital 16 of the preamble: ‘A connection with the country where the direct damage occurred strikes a fair balance between the interests of the person claimed to be liable and the person sustaining the damage, and also reflects the modern approach to civil liability and the development of systems of strict liability.’ These statements suggest that Article 4(1) is based on the principle of functional allocation, translating the compensatory function of modern tort law into a connecting factor that is focused on the tort victim as the party to be protected. This suggestion is reinforced by the assumption that the place of injury coincides with the victim’s habitual residence ‘in most cases.’33 Yet, it can hardly be maintained that the lex loci damni rule reflects the compensatory function of modern tort law. Statistically, I would say, the place of injury might as well coincide with the tortfeasor’s place of residence, if there is any coincidence at all. A functional approach would assure that victims are afforded compensation in accordance with their own law, possibly subject to a foreseeability exception.34 In my view, the lex loci damni rule is based on the principle of the closest connection, reflecting no other choice-of-law objective than the achievement of predictable and uniform results. There is a methodological discrepancy, therefore, between provisions in Rome II that are meant to further substantive policies – such as the protection of public interests in Article 6, or the protection of the weaker party in Article 14(1) – and those that remain totally blind to the result Articles 13(1), 17(1), and 21(1), respectively, all of them referring to choice-of-forum agreements entered into after the dispute arose. 32 Explanatory Memorandum, COM(2003) 427 final, at p. 12. 33 Ibid., at p. 11: ‘In most cases [the lex loci damni] corresponds to the law of the injured party’s country of residence.’ 34 Cf. the provision on product liability, allowing for an exception if the person claimed to be liable could not foresee that his product would be marketed in one of the countries listed in Article 5(1). In its original version, Article 5 only referred to the law of the victim’s habitual residence, a clear example of functional allocation. The current version is based on a ‘cascade system of connecting factors, together with a foreseeability clause’ (recital 20). 31

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Party Autonomy and its Limitations in the Rome II Regulation they achieve, despite the token remarks on the function of modern tort law in the Explanatory Memorandum and the preamble.

VI. Conclusion The practical import of a provision on choice-of-law agreements in the area of noncontractual obligations is undoubtedly limited. Where disputes arise between parties that are not bound by a pre-existing relationship, they have little cause to agree on a law that could put one of them at a disadvantage. Still, the Rome II Regulation would be incomplete without a provision on party autonomy and its limitations. Article 14 allows the parties to choose any law they want – not necessarily the lex fori or the law of one of the countries with which the case is in some way connected. Unless both parties are engaged in commercial activities, a valid agreement can only be made after the event giving rise to the damage occurred, a restriction meant to protect the interests of the weaker party. Collective interests are deemed to be affected by infringements of national or Community competition law, hence the ban on choice-of-law agreements in Article 6(4). A similar prohibition can be found in Article 8(3). The latter restriction does not seem to be warranted by a concern for public interests but – more likely – by an outdated choice-of-law approach to disputes over the infringement of intellectual property rights. Studying the various drafts and the final version of the Rome II Regulation, one can hardly escape the impression that it has come to be based on rather disparate choice-of-law considerations, ranging from the need for uniformity, predictability, and legal certainty to ‘the function of modern tort law, the protection of ‘public interests,’ and a concern for ‘weaker parties’. But even if methodological eclecticism is a characteristic of contemporary choice of law, consistency is required in assessing the choice-of-law objective to be achieved in a particular area, and in choosing the choice-of-law technique best suited to achieve it. Thus, if collective interests call for a ban on choice-of-law agreements, party autonomy should be ruled out in all areas in which such interests are at stake. If the exclusion of ex ante agreements is deemed to be justified by the interests of the weaker party, an exception should be made for cases in which the weaker party wants to rely on such an agreement. And, generally, if the main rule in Rome II is said to be supported by ‘the compensatory function of modern tort law’, it should not ‘strike a fair balance between the interests of the person claimed to be liable and the person sustaining damage,’ as it says in recital 16; rather, it should focus on the person to be compensated. To me, these inconsistencies are illustrative of a general lack of awareness of the bedrock of modern European conflicts law among those involved in drafting EU conflict-of-law instruments. Ever optimistic, I trust that their understanding of choice-of-law methodology will have improved before the Rome II Regulation is up for revision.

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INTERNATIONAL PRODUCT LIABILITY A COMMENTARY ON ARTICLE 5 OF THE ROME II REGULATION Peter HUBER* / Martin ILLMER** I.

II.

III.

IV. V. VI.

Legislative History A. (Re-)Entering the Stage of the European Community B. The First Draft of the Commission C. The Initial Proposal by the Commission D. The Position of the European Parliament E. The Amended Proposal by the Commission F. The Common Position of the European Council G. The Final Round General Outline A. Scope 1. Strict and Fault-Based Liability 2. Definition of Product 3. The Injured Person 4. Person Claimed to Be Liable B. The General System of Determining the Applicable Law The Cascade System of Art. 5(1) A. The Cascade Connections 1. Habitual Residence 2. Place of Acquisition 3. Place Where Damaged 4. The Marketing Requirement a) Purpose b) Person Marketing the Product c) Product or Product of the Same Type? d) Lack of Marketing B. The Foreseeability Qualification Common Habitual Residence, Art. 4(2) Escape Clause, Art. 5(2) Interrelation with the 1973 Hague Convention

On 11 July 2007, the European Parliament and the Council of the European Union adopted Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (Rome II).1 It will become effective on 11 January 2009 and marks a ∗

Professor, Johannes-Gutenberg-University Mainz, Germany. Senior Research Fellow, Max-Planck-Institute, Hamburg, Germany.

**

Yearbook of Private International Law, Volume 9 (2007), pp. 31-47 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Peter Huber / Martin Illmer cornerstone in the process of harmonising private international law in the Member States of the European Union.2 During the legislative process leading to Rome II, the conflicts rule on product liability has been the subject of intense controversy and debate. The rule finally adopted in Art. 5 is a compromise based on a common position adopted by the Council on 25 September 2006.3 It reads: Article 5 Product Liability 1. Without prejudice to Article 4(2), the law applicable to a noncontractual obligation arising out of damage caused by a product shall be: (a) the law of the country in which the person sustaining the damage had his or her habitual residence when the damage occurred, if the product was marketed in that country; or, failing that, (b) the law of the country in which the product was acquired, if the product was marketed in that country; or, failing that, (c) the law of the country in which the damage occurred, if the product was marketed in that country. However, the law applicable shall be the law of the country in which the person claimed to be liable is habitually resident if he or she could not reasonably foresee the marketing of the product, or a product of the same type, in the country the law of which is applicable under (a), (b) or (c). 2. Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraph 1, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question. OJ L 199, 31.7.2007, at p. 40. Apart from Denmark, to which Title IV of the EC Treaty which is the legal basis for the Rome II Regulation does not apply according to the Protocol on the Position of Denmark to the Treaty of Amsterdam. 3 Common Position (EC) No 22/2006 adopted by the Council on 25 September 2006 with a view to adopting Regulation (EC) No .../... of the European Parliament and of the Council of ... on the law applicable to non-contractual obligations (Rome II), OJ C 289E, 28.11.2006, at p. 68. 1 2

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International Product Liability under Rome II The present article will discuss the legislative history of the provision (I) and give a short general outline (II), before turning to the most important rules (III-V). It will conclude with some short remarks on the provision’s relationship to the 1973 Hague Product Liability Convention (VI).

I.

Legislative History

A.

(Re-)Entering the Stage of the European Community

After a failed attempt in the 1970s to include rules on the private international law of tort and delict into the 1980 Rome Convention, the issue re-entered the stage of the European Community in the late 1990s. The crucial impetus was the Treaty of Amsterdam entering into force on 1 May 1999.4 It empowered the European Community under Art. 65 lit. b to legislate, inter alia, in the field of conflict of laws by way of Regulation, in order to promote uniformity of the rules throughout the Member States. In the light of the forthcoming amendments to the EC Treaty, the unification of the law applicable to non-contractual obligations was already put on the agenda in late 1996, followed by a first draft Convention under the auspices of the Austrian Council Presidency in late 1998. At the same time, the Groupe Européen de droit international privé (GEDIP) adopted a proposal for a European convention on the law applicable to non-contractual obligations that it submitted to the European Commission.5 The proposal does not, however, contain a separate rule or presumption regarding the law applicable to a product liability issue, although it operates with special presumptions for specific areas of tort and delict, such as privacy and personality rights, defamation, unfair competition, restrictive trade practices, and environmental damage.

B.

The First Draft of the Commission

Following the amendments by the Amsterdam Treaty, it was time for the Commission to take over the initiative. This resulted in a first draft of a Regulation on the law applicable to non-contractual obligations in May 2002.6 The draft already contained a special rule on the law applicable to product liability in Art. 5. It provided for a combination of cumulative and alternative factors leading to the applicable OJ C 340, 10. 11. 1997, at p. 173. The proposal is accessible at . 6 The first draft is accessible at . 4 5

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Peter Huber / Martin Illmer law. In doing so, it bore a considerable degree of similarity to Arts. 5 and 6 of the 1973 Hague Convention.7 The law of the injured person’s habitual residence or main establishment applied if either that state was also the main establishment of the person claimed to be liable or the product was acquired in that same state. If there was no single state where both elements were present, the law of the state where the damage occurred applied. During the consultation period, the Commission received about eighty contributions from a wide variety of stakeholders.8 Most of them welcomed a separate rule for product liability, taking account of the special circumstances compared to usual tort and delict cases. Three issues were stressed repeatedly throughout the contributions: (1) the high number of settlements between the involved insurers; (2) the necessity or desirability of an escape clause9 (often this was combined with a plea for a parallel determination of the applicable law to tort/delict and contract10); and finally (3) the more general question whether the European Union should adopt the same rules as those of the 1973 Hague Convention.11

C.

The Initial Proposal by the Commission

The Commission presented a first proposal of the Regulation on 22 July 2003, accompanied by an Explanatory Memorandum.12 The rule on product liability adopted in Art. 4 differed considerably from the one in the first draft. First, by way of reference it incorporated Art. 3(2) (common habitual residence) and Art. 3(3) (escape clause) of the general rule on delict and tort into the rule on product liability. Thus, when there is a common habitual residence, the law of the state of common residence applies. In the absence of a common habitual residence, the law of the habitual residence of the injured person applies, unless the person claimed to be liable can show that marketing in that country took place without his consent; in the latter case the law of the country of habitual residence of the person claimed to be liable applies. Nevertheless, none of those three laws As to the 1973 Hague Convention see below VI. Most of them are accessible at . 9 See e.g. Hamburg Group for Private International Law, in: RabelsZ 67 (2003), p. 1 et seq., at p. 18 et seq.; Response of the Government of the United Kingdom, Annex, para. 11 and 12; Réponse de Professor C. Nourissat, at p. 16. 10 See in particular the Comments by the Hamburg Group for Private International Law, in: RabelsZ 67 (2003), p. 1 et seq., at p. 18 et seq.; Position Paper by the Bar Council of England and Wales, para. 17 et seq. 11 In favour of that e.g. the Deutscher Rat für Internationales Privatrecht in its comments (Stellungnahme der 2. Kommission), at p. 21 et seq.; also considering it the German Bundesministerium der Justiz, Anhörung, at p. 3. 12 COM(2003) 427 final, accessible at http://europa.eu.int/eur-lex/lex/LexUriServ/ site/en/com/2003/com2003_0427en01.pdf. 7 8

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International Product Liability under Rome II applies if there is a manifestly closer connection to another country, in which case the law of that country applies. Secondly, it contained amendments of the relevant connecting factors for identifying the applicable law. The combination of cumulative and alternative factors was abandoned and replaced by a system of just two cumulative factors: the habitual residence of the injured person and the place of marketing of the product. The cumulative nature was still somewhat disguised by the fact that the place of marketing was introduced as a defence for the person claimed to be liable. If the person claimed to be liable could show that the product was marketed without his consent in the state of the habitual residence of the injured person, the law applicable was that of the country of the habitual residence of the person claimed to be liable. However, in substance the rule already came close to the connection in Art. 5(1) lit. a of the finally adopted Regulation. By introducing the requirement that the product be marketed in the country indicated by the other connecting factor – at this stage only the habitual residence of the person sustaining damage – the Commission chose a solution that had long been discussed and favoured by many scholars.13 The Commission’s proposal was endorsed by the European Economic and Social Committee as a balanced approach to the conflicting interests.14

D.

The Position of the European Parliament

Rome II had to be adopted under the codecision procedure according to Arts. 61 lit. c., 65, 67, and 251. The position taken by the European Parliament on 6 June 200515 was largely based on the Report by the Committee on Legal Affairs.16 It provided for the deletion of the special rule on product liability and argued in favour of resolving cases of international product liability under the general rule of tort and delict. In turn, the escape clause in the general rule was extended by several criteria. Those included the aspects of certainty, predictability, uniformity of result, protection of legitimate interests, and the policies underlying the law applicable absent the escape clause. The position of the European Parliament, in particular regarding the amendments of the escape clause, was strongly criticised. It 13 See in particular Hamburg Group for Private International Law, in: RabelsZ 67 (2003), p. 1 et seq., at p. 15 et seq.; KADNER GRAZIANO T., ‘The Law Applicable to Product Liability – The present state of the law in Europe and current proposals for reform’, in: I.C.L.Q. 54 (2005), p. 475 et seq., at p. 481 et seq.; SONNENTAG M., ‘Zur Europäisierung des Internationalen außervertraglichen Schuldrechts durch die geplante Rom II-Verordnung’, in: ZVglRWiss 105 (2006), p. 256 et seq., at p. 282 et seq.; WANDT M., Internationale Produkthaftung, Heidelberg 1995, para. 1059 et seq. 14 OJ C 241, 28.9.2004, p. 1 et seq., at p. 4. 15 P6_TA(2005)0284. 16 COM(2003)0427 – C5-0038/2003 – 2003/0168(COD); Diana Wallis from the United Kingdom was rapporteur.

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Peter Huber / Martin Illmer was regarded as substantially changing the systematic approach to conflict rules in tort law and trying to import the U.S. conflicts resolution into the European system of private international law, despite the legal uncertainty it had produced.17

E.

The Amended Proposal by the Commission

The amended proposal by the Commission in response to the European Parliament’s position restated the special rule set out in the Commission’s initial proposal, with minor clarifications.18 The Commission insisted on the necessity of a separate rule providing for a different solution from the general rule for reasons of predictability of the applicable law.19 It pointed specifically at the need for certainty and predictability with regard to insurers often involved in product liability cases, aiming for amicable settlements of those disputes.

F.

The Common Position of the European Council

The Common Position of the Council followed to a large extent the initial proposal by the Commission, as slightly modified by the amended proposal.20 With regard to the rule on product liability, the Council rejected the approach of the European Parliament dealing with product liability cases by applying the general rule.21 Returning to a system of lex specialis and lex generalis, the Council followed the Commission’s systematic approach. Regarding the content of this special rule, however, the Council amended the Commission’s proposal substantially. While it accepted the incorporation of Art. 4(2) (common habitual residence) into Art. 5 and added a second section to Art. 5 restating the escape clause of Art. 4(3), the Council introduced a new cascade system of connections with a foreseeability qualificaVON HEIN J., ‘Die Kodifikation des europäischen IPR der außervertraglichen Schuldverhältnisse vor dem Abschluss?’, in: VersR 2007, p. 440 et seq., at p. 441; WAGNER G., ‘Internationales Deliktsrecht, die Arbeiten an der Rom II-Verordnung und der Europäische Deliktsgerichtsstand’, in: IPRax 2006, p. 372 et seq., at p. 386; POSCH W., ‘The ‘Draft Regulation Rome II’ in 2004: Its past and future perspectives’, in: YbPIL 6 (2004), p. 129 et seq., at p.146 et seq.; in contrast arguing for a more flexible approach, SYMEONIDES S., ‘Tort Conflicts and Rome II: A View from Across’, in: MANSEL/PFEIFFER/ KRONKE/KOHLER/HAUSMANN, Festschrift für Erik Jayme, Band 1, München 2004, at p. 935 et seq.; WEINTRAUB R., ‘Rome II and the Tension between Predictability and Flexibility’, in: RASMUSSEN-BONNE/FREER/LÜKE/WEITNAUER, Balancing of Interests, Liber Amicorum Peter Hay zum 70. Geburtstag, Frankfurt 2005, at p. 451 et seq. 18 COM(2006) 83 final, accessible at . 19 Explanatory Memorandum, p. 5, accessible at . 20 Statement of the Council’s Reasons, OJ C 289E, 28.11.2006, at p. 76. 21 Statement of the Council’s Reasons, OJ C 289E, 28.11.2006, at p. 79. 17

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International Product Liability under Rome II tion in Art. 5(1). Thus, the special connecting factors of the rule on product liability were amended. The rule as shaped by the Council was finally adopted by Parliament and the Council on 11 July 2007.

G.

The Final Round

While proposing several amendments to the Common Position in its second reading that were highly controversial, Parliament accepted the rule on product liability. In the parliamentary debate the issue was not even raised,22 and the Position of Parliament contains no amendments to the rule.23 Consequently, it was not further addressed in the subsequent conciliation process.

II.

General Outline

A.

Scope

1.

Strict and Fault-Based Liability

The rule in Art. 5 covers all forms of liability arising from damage caused by a product, whether the liability is strict or fault-based.24

2.

Definition of Product

The term ‘product’ is not defined in the Regulation: however, in its Explanatory Memorandum,25 the Commission refers to the definition of product in Art. 2 of the Directive on the harmonization of product liability laws in the member states.26 In the subsequent legislative process, the issue was not discussed any further and the

The parliamentary debate is accessible at . P6_TC2-COD(2003)0168, accessible at . 24 COM(2003) 427 final, at p. 15. 25 COM(2003) 427 final, at p. 13. 26 Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Members States concerning liability for defective products, OJ L 210, 7.8.1985, at p. 29 as amended by Directive 1999/34/EC of the European Parliament and of the Council of 10 May 1999 amending Council Directive 85/374/EEC on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products, OJ L 141, 4.6.1999, at p. 20 (which explicitly amends Art. 2 of the 1985 Directive). 22 23

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Peter Huber / Martin Illmer use of the term ‘product’ was not challenged. Most commentators on the proposals and the common position do not even address the issue.27 It seems to be generally accepted that the reference to the definition in the Product Liability Directive provides a satisfactory solution. Encompassing all movables even if incorporated into another movable or immovable, including electricity, it is a very wide term covering the vast majority of product liability cases. In the remaining cases – if there are indeed any – one may apply the general rule on tort and delict in Art. 4 and, depending on the circumstances, find an appropriate solution by applying the escape clause of Art. 4(3). Application of the marketing requirement in Art. 5(1) raises a specific issue concerning its scope with regard to products of the same type that will be discussed below.28

3.

The Injured Person

The rule in Art. 5 is not restricted to consumers. Rather, it applies to any person sustaining any damage caused by a product. It is submitted that this is the case regardless of the fact that Recital (20) refers to the protection of consumers’ health.29

4.

Person Claimed to Be Liable

The concept of the ‘person claimed to be liable’ is not limited to only the manufacturer of the final product. In its Explanatory Memorandum, the Commission refers to the various persons who are potentially liable under Art. 3(2) of the Product Liability Directive.30 However, this does not imply that the rule is limited to those persons. Rather, a distinction should be made: For the purpose of determining the applicable law pursuant to Art. 5, the person claimed to be liable can be any person.31 Whether this person is then actually liable is a matter of the applicable substantive law.

For an explicit approval of the Commission’s approach see STONE P., ‘Der Vorschlag für die Rom II-Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht’, in: EuLF (German issue) 2004, p. 213 et seq., at p. 225. 28 See at III. A. 4. c). 29 See the Commission in the Explanatory Memorandum, COM(2003) 427 final, at p. 15, and recital 20 of the Regulation itself. 30 COM(2003) 427 final, at p. 15. 31 But see also STONE P. (note 27), at p. 225. 27

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International Product Liability under Rome II B.

The General System of Determining the Applicable Law

The law applicable to international product liability is not exclusively determined by the rule in Art. 5 of the Regulation. Other provisions have to be taken into account. Thus, a choice of law under Art. 14 takes precedence over any of the objective connections under Art. 5, just as it does over the objective connections under Art. 4. In addition, the provisions of Art. 4(2) and Art. 4(3) apply to cases of product liability: Art. 4(2) is incorporated by reference, Art. 4(3) is plainly repeated in Art. 5(2) – in terms of drafting, a reference as set forth in the Commission’s proposal probably would have been more elegant.32 The only special feature of the lex specialis in Art. 5 is the cascade system of connecting factors, which is supplemented by a foreseeability defence in favour of the person claimed to be liable in Art. 5(1). Accordingly, these two elements are explicitly stated in Recital (20) of the Regulation as forming the essential core of the rule on product liability. The resulting structure of the system of the law applicable to cases of product liability may be illustrated by projecting the cascade created by the interplay of Arts. 4, 5, and 14 as they stand: 1.

Choice of law (Art. 14), or, failing that,

2.

Common habitual residence (Art. 5(1)1 in connection with Art. 4(2)), or, failing that,

3.

Habitual residence of the person sustaining damage if the product was marketed in that country (Art. 5(1)1 lit. a) and if this marketing was reasonably foreseeable for the producer (Art. 5(1)2) or, failing that,

4.

Place of acquisition of the product if the product was marketed in that country (Art. 5(1)1 lit. b) and if this marketing was reasonably foreseeable for the producer (Art. 5(1)2) or, failing that,

5.

Place of occurrence of damage if the product was marketed in that country (Art. 5(1)1 lit. c) and if this marketing was reasonably foreseeable for the producer (Art. 5(1)2), with connections 2. to 5. being subject to a

6.

Manifestly closer connection to another country (Art. 5(2) – which is identical with Art. 4(3)).

Regardless, Art. 17 of the Regulation states that as far as it appears appropriate, account shall be taken of the rules of safety and conduct at the time and place of the event giving rise to liability.

Concurring WAGNER G., ‘Die neue Rom II-Verordnung’, in: IPRax 2008, p. 1 et seq., at p. 7; VON HEIN J. (note 17), at p. 447. 32

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Peter Huber / Martin Illmer

III. The Cascade System of Art. 5(1) A.

The Cascade Connections

The cascade provided for in Art. 5(1) has three levels, each level consisting of two cumulative elements. One of these elements, the marketing of the product in the relevant country, is common to all three levels. The other element, the connecting factor, varies as between the levels: habitual residence of the injured person, place of acquisition of the product, place where damage occurred.

1.

Habitual Residence

Art. 23 provides a non-comprehensive definition of the habitual residence connecting factor. It governs the problematic cases of companies and other bodies as well as natural persons acting in the course of their business activity. However, it does not define habitual residence for a natural person who is not pursuing a business activity. In that respect, unless and until the European Court of Justice ultimately provides guidelines on the relevant criteria, it seems reasonable to apply a comparative approach, taking account of the need to apply the Regulation uniformly in the Member States.33 Since the concept of habitual residence emerges in most systems of private international law,34 including several Hague Conventions,35 A similar problem occurs with regard to the Rome Convention, which in a similar way provides in Art. 18 for a uniform interpretation and application of the Convention in all member states; this comes close to an understanding based on a comparison of the concepts under the various national laws; see in so far also the Resolution (72) 1 of the Committee of Ministers of the Council of Europe of 18 January 1972 on the standardisation of the legal concepts of ‘domicile’ and ‘residence’, accessible at https://wcd.coe.int/com.instranet. InstraServlet?Command=com.instranet.CmdBlobGet&DocId=642794&SecMode=1&Admi n=0&Usage=4&InstranetImage=48966. 34 Civil law jurisdictions traditionally rely on the concept of nationality, common law jurisdictions traditionally rely on the concept of domicile. For a use of the concept of habitual residence, see e.g. Art. 4(2) of the Rome Convention; Art. 14(2) No.2, 15, 40(2), 41(2) of the German EGBGB; see for further details on German law KEGEL G./SCHURIG K., Internationales Privatrecht, 9th ed., Munich 2004, § 13 III. 3.; KEGEL G., ‘Was ist gewöhnlicher Aufenthalt?’, in: BECKER (ed.), Festschrift für Rehbinder, Munich 2002, at p. 699.; section 46 of the English Family Law Act 1986; section 1 of the English Wills Act 1963; see for further details on English law, DICEY, MORRIS AND COLLINS, The Conflict of Laws, 14th ed., London 2006, para. 6-125 et seq. and ROGERSON P., ‘Habitual Residence: The New Domicile?’, in: I.C.L.Q. 49 (2000), at p. 86; for an American standpoint see CAVERS D., ‘Habitual Residence: A useful concept?’, in: Am.Univ.L.R. 21 (1972), at p. 475; for a detailed comparative analysis see BAETGE D., Der gewöhnliche Aufenthalt im IPR, Tübingen 1994. 35 E.g. the Hague Convention on the law applicable to traffic accidents (1971); Hague Convention on the law applicable to product liability (1973); Hague Convention on the law applicable to maintenance obligations (1973); Hague Convention on the law 33

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International Product Liability under Rome II the courts of the Member States are in a position to apply it, even though it forms part of a European Regulation requiring a uniform interpretation throughout the Member States. 2.

Place of Acquisition

The place of acquisition is a straightforward connecting factor that is easy to determine. For the connection to apply, it does not matter, in principle, whether the injured person bought the product directly from the person claimed to be liable (first purchaser) or from another person who acquired the product as first purchaser elsewhere (second purchaser). In the latter case, however, the circumstances may turn out to be such that it is appropriate to invoke the escape clause of Art. 5(2). 3.

Place Where Damage Occurred

The place where the damage occurred is the fall-back position of the cascade. Although this basically corresponds with the general rule for tort and delict in Art. 4(1), it differs from that provision in that it is qualified by the marketing requirement. 4.

The Marketing Requirement

The common denominator throughout all levels of the cascade is the requirement that the product must have been marketed in the country to which the relevant connecting factor points. a)

Purpose

The marketing requirement was introduced to strike a fair balance between the interests of the injured person and the person who is potentially liable. Whereas the varying factors are intended to operate in favour of the injured person, the marketing requirement was introduced to increase predictability of the applicable law for the person potentially liable. It is complemented by the foreseeability qualification in Art. 5(1)2. b)

Person Marketing the Product

For the purposes of the marketing requirement, it is irrelevant who marketed the product as long as that marketing was foreseeable for the person claimed to be applicable to agency (1978); (note that the term is not defined in any of the Hague Conventions.

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Peter Huber / Martin Illmer liable.36 Thus, a producer may not avoid liability by pointing only to the fact that the product was not marketed by himself but by a distributor or retailer. c)

Product or Product of the Same Type?

The question has been raised whether marketing of the one single product that caused the damage is required or whether the marketing element in Art. 5(1)1 lit. a to c is also satisfied if a product of the same type was marketed in the relevant country?37 For example: Is it necessary that the car roof rack with the production no. 43E698, which caused the damage, was marketed in the country of the relevant varying factor of lit. a to c, or is it sufficient that the type of car roof rack was marketed in the respective country, while the specific rack (no. 43E698) that caused the damage was marketed in another country? The problem is particularly relevant in case of lit. a and lit. c, since the habitual residence or the place of occurrence of the damage may easily differ from the place of marketing of the specific product. Despite the limited wording that relates only to marketing of the product on all three levels of the cascade in Art. 5(1)1 lit. a to c, one should consider extending the marketing requirement so that it is equally satisfied if products of the same kind were marketed in the respective country for the following reasons. First, one may infer from Art. 5(1)2 that the marketing requirement encompasses products of the same type since marketing and foreseeability have to refer to the same thing.38 The argument has considerable systematic appeal since the foreseeability qualification builds upon the cascade of Art. 5(1)1. Foreseeability of products of the same type would not be required as a defence if such products of the same type did not even satisfy the marketing requirement in the first place. The argument is convincing while not yet compelling. It is not inconceivable that the foreseeability defence raises the bar higher than the marketing requirement. Secondly, if marketing in Art. 5(1)1 lit. a to c required marketing of the one single product in the respective country of the connecting factor, this would conflict with the systematic structure of the cascade connections of Art. 5(1)1. The country of marketing would eventually determine the applicable law since the individual product is marketed only in one single country which may or may not coincide with one of the connecting factors of lit. a to c. The cascade structure would be replaced by a single connecting factor: the country of marketing which would regularly coincide with the country of acquisition under lit. b. This would conflict with the inner structure of the cascade: The varying connecting factors are the decisive criteria for determining the applicable law under Art. 5(1)1 whereas the marketing requirement is subordinated as a purely additional element. LEIBLE S./LEHMANN M., ‘Die neue EG-Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht («Rom II»)’, in: RIW 2007, p. 721 et seq., at p. 728. 37 WAGNER G. (note 32), at p. 7; LEIBLE S./LEHMANN M. (note 36), at p. 728; VON HEIN J. (note 17), at p. 447; STONE P. (note 27), at p. 225. 38 LEIBLE S./LEHMANN M. (note 36), at p. 728; similar WAGNER G. (note 32), at p. 7. 36

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International Product Liability under Rome II The criterion to distinguish products of the same type from products of a different type is the safety features of the product.39 Different safety features result in a different type of product. The wording, product of the same type, supports such an understanding, but the decisive argument relates to the purpose of the marketing element. The aim of the marketing element in Art. 5(1) is predictability of the applicable law for the person potentially liable. By referring to the safety features of the product the person claimed to be liable is put into a position where he can adapt those features of the product that are relevant for incurring liability to the standard required by the laws which may potentially apply and thus avoid incurring liability. This restrictive approach may conflict with the interrelation of price and product liability risk since diversified pricing may correlate with the regime of product liability the producer is facing in different countries and since the purchaser pays part of the purchase price for his remedies against the manufacturer or any other person that is liable. There seems, however, de lege lata no room to limit the marketing requirement to the one single product. It would jeopardise the new cascade structure substantially and disturb the operation of the new differentiated rule in Art. 5. d)

Lack of Marketing

The cascade system in Art. 5(1) does not provide for the law applicable if the product is not marketed in any of the countries indicated by the varying factors of lit. a to c. From a purely systematic standpoint, one could argue at first sight that the lex generalis on delict and tort in Art. 4 should apply in all situations where the lex specialis in Art. 5 does not provide for a law to apply. This is, however, unpersuasive for several reasons. First, one has to distinguish between Art. 5’s scope of application, on the one hand, and the connecting factors in Art. 5 determining the applicable law, on the other. The relationship of lex generalis and lex specialis exists in relation to the scope of application, but not with regard to the connecting factors determining the applicable law. Consequently, once a non-contractual obligation is within the scope of application of the special rule, the application of the general rule is barred. A non-contractual obligation arising out of damage caused by a product is within the scope of application of Art. 5. Secondly, applying the rule in Art. 4(1) would undermine the special rule in Art. 5(1) lit. c: In case of liability for damage caused by a product, the marketing requirement protects the person claimed to be liable from the application of the law of the place where the damage occurred if it differs from the place of marketing. Thus, a solution has to be found within the system of Art. 5 through the analogous application of one of its subsections. Art. 5(1)2 seems particularly suitable in this regard. If the law of the habitual residence of the person claimed to be liable applies whenever that person could not reasonably have foreseen marketing 39

To the same extent WAGNER G. (note 32), at p. 7.

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Peter Huber / Martin Illmer in the relevant country identified by lit. a to c, this must hold true, a fortiori, in a case where the product was not even marketed in the relevant country at all.40

B.

The Foreseeability Qualification

Once the applicable law has been determined pursuant to Art. 5(1)1 lit. a to c, the person claimed to be liable may raise the foreseeability defence. If he could not reasonably foresee the marketing of the product,41 or a product of the same type, then the law of his habitual residence applies instead of the law determined pursuant to Art. 5(1)1 lit. a to c.42 A similar defence is contained in Art. 7 of the Hague Convention.43 Extending foreseeability to a product of the same type noticeably raises the bar for successfully invoking the defence. The person claimed to be liable not only has to establish that the marketing of the specific product causing the damage was not reasonably foreseeable, he also has to establish that marketing products of the same type was not reasonably foreseeable. With regard to the consent element in the Commission’s proposal, which emerged as the foreseeability qualification in the Common Position, it has been argued that in the days of globalised trade and commerce, a producer is deemed to have consented to marketing in many countries, if not globally.44 However, it is submitted that such a wide concept of foreseeability is unconvincing for three reasons. First, it would undermine the defence substantially. Secondly, it would turn the defence into an irrebuttable presumption. Thirdly, the factual basis for such a presumption is doubtful even in a globalised world.45 40 Proposing the same solution WAGNER G. (note 32), at p. 7; LEIBLE S./LEHMANN M. (note 36), at p. 728; VON HEIN J. (note 17), at p. 447 (regarding the Common Position which does not differ in that respect); BENECKE M., ‘Auf dem Weg zu «Rom II» – Der Vorschlag für eine Verordnung zur Angleichung des IPR der außervertraglichen Schuldverhältnisse’, in: RIW 2003, p. 829 et seq., at p. 834 (as regards the Commission Proposal which equally does not differ in that respect). 41 The issue of whether the term ‘product’ in Art. 5(1)1 lit. a to c relates only to the one single product causing the damage or has to be interpreted extensively as covering products of the same type, is discussed below at III. C. 42 The application of the law of the habitual residence of the person claimed to be liable was criticised during the legislative process by many commentators, see e.g. Comment of HUBER P./BACH I., ‘Die Rom II-VO’, in: IPRax 2005, p. 73 et seq., at p. 77; VON HEIN J., ‘Die Kodifikation des europäischen Internationalen Deliktsrechts’, in: ZVglRWiss 102 (2003), p. 528 et seq., at p. 554; KADNER GRAZIANO T. (note 13), at p. 485; concurring, however, WAGNER G. (note 17), at p. 377 and (note 32), at p. 7. 43 As to the 1973 Hague Convention see below VI. 44 KADNER GRAZIANO T. (note 13), at p. 485; similar LORENZ W., ‘Der Haager Konventionsentwurf über das auf die Produktenhaftpflicht anwendbare Recht’, in: RabelsZ 37 (1973), p. 317 et seq., at p. 348. 45 HUBER P./BACH I. (note 39), at p. 77.

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International Product Liability under Rome II It is submitted that the foreseeability qualification is a defence solely designed to protect the producer against the application of a law he either failed to or did not have to envision. If he does not invoke the defence, there is no injustice done to the injured person since the connecting factors in Art. 5(1)1 lit. a to c are designed in his favour. Consequently, the producer must have the right to abstain from invoking the foreseeability qualification.46

IV. Common Habitual Residence, Art. 4(2) Art. 5(1) explicitly refers to Art. 4(2) of the Regulation, which provides that where the person claimed to be liable and the injured person both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply. The rule in Art. 4(2) prevails over the connecting factors of the cascade system in Art. 5(1). It is not subject to either the marketing requirement or the foreseeability qualification. This indicates the great importance that the Regulation attaches to the common habitual residence as a connecting factor.

V.

Escape Clause, Art. 5(2)

The escape clause in Art. 5(2) provides: ‘Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in Art. 5(1), the law of that other country shall apply.’ A manifestly closer connection with another country might be based on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question. It does not, however, supersede a choice of law pursuant to Art. 14. From a drafting perspective, one may pose the question of whether it is an elegant approach to point to the common habitual residence connection of Art. 4(2) by way of reference, while incorporating the escape rule of Art. 4(3) by repetition. This is, however, a rather aesthetic issue.47 The escape clause may be invoked particularly in situations where there is a direct contractual relationship between the person claimed to be liable and the in46 The language of the Commission’s initial proposal in its Art. 4 (Art. 6 of the amended proposal) was in that respect clearer than the current language of Art. 5 of the Regulation. It stated ‘…, unless the person claimed to be liable can show …,’ as opposed to the current version of ‘… if he or she could not reasonably foresee…’ 47 WAGNER G. (note 32), at p. 7, leaves it at that.

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Peter Huber / Martin Illmer jured person. This scenario is explicitly mentioned in the escape clause as an example of a manifestly closer connection. In such a case, it is a reasonable solution to provide for the same law to govern liability in both tort and contract.48 Another area of application could be the liability towards ‘bystanders,’ i.e. persons hurt without having any contractual link to either the seller or producer and while not using the product. Regarding these bystanders, the law of the country where the damage occurred is commonly regarded as the most appropriate one.49 This result can be achieved by relying on the escape clause in Art. 5(2).

VI. Interrelation with the 1973 Hague Convention The Hague Convention on the law applicable to products liability of 1973 in its Arts. 4 to 7 provides for a rather complex system of cumulative connecting factors, two of which have to be present in one state for that state’s internal law to apply. The connecting factors are (1) the place of injury; (2) the place of the habitual residence of the person directly suffering damage; (3) the principal place of business of the person claimed to be liable; and (4) the place where the product was acquired by the person directly suffering damage. The applicable law is determined along a ladder of those connecting factors: First, the law of the place of injury applies if any of the other three criteria is also present in that state (Art. 4). Secondly, the law of the habitual residence of the person directly suffering damage applies if any of the remaining two criteria is also present in that state (Art. 5). Finally, the law of the principal place of business applies if none of the laws designated by Arts. 4 or 5 apply. This three-step-rule is accompanied by a defence of the person claimed to be liable pursuant to Art. 7: If he or she could not have foreseen the marketing of the product causing the damage in the relevant state, the law of that state does not apply. During the legislative process, it was suggested repeatedly50 that achieving a parallelism with the rules of the Hague Convention on the law applicable to products liability, which is in force in several EC Member States, was desirable. This could have been achieved either by adopting a rule identical to the one in Arts. 4 to 7 of the Hague Convention or by the European Union or all its Member States signing the Convention – neither happened. Despite the first draft of the CommisTo the same extent the Hamburg Group for Private International Law in its Comments in RabelsZ 67 (2003), p. 1 et seq., at p. 18. 49 See HUBER P./BACH I. (note 39), at p. 77; LEIBLE S./LEHMANN M. (note 36), at p. 728; SONNENTAG M. (note 13), at p. 283; WANDT M. (note 13), para. 1099 et seq.; HEIDERHOFF B. ‘Eine europäische Kollisionsnorm für die Produkthaftung: Gedanken zur Rom II-Verordnung’, in: GPR 2005, p. 92 et seq., at p. 94. 50 E.g. Stellungnahme der 2. Kommission des Deutschen Rates für internationales Privatrecht, at p. 20 et seq., accessible at . 48

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International Product Liability under Rome II sion of May 2002 being very close to the rule of the Hague Convention, the Commission’s initial proposal deviated substantially from it, aiming for a less complex rule.51 This approach was taken over by the Council in its common position and in the rule finally adopted as Art. 5. As a consequence of the non-synchronisation of the two rules, there are two different regimes within the European Union.52 Pursuant to Art. 28 of the Rome II Regulation, it does not prejudice the application of or prevail over the Hague Convention. As a result, there will be two regimes of conflict rules on product liability within the European Union: The Hague Convention will be applied by courts in Finland, France, Luxembourg, the Netherlands, Slovenia, and Spain, whereas the conflicts rule in Art. 5 of the Rome II Regulation will be applied in the remaining 21 Member States.

51 An aspect the Commission stressed again in its Communication to the European Parliament, COM(2006) 566 final, at p. 3. 52 This is strongly criticised by Stoll in his submission to the Commission upon the initial draft (‘untragbar’), accessible at ; with similar critique the Stellungnahme des Instituts für ausländisches und internationales Privat- und Wirtschaftsrecht der Universität Heidelberg, at p. 8 et seq., accessible at .

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UNFAIR COMPETITION AND ACTS RESTRICTING FREE COMPETITION A COMMENTARY ON ARTICLE 6 OF THE ROME II REGULATION Michael HELLNER∗

I. II. III.

IV.

V.

I.

Genesis and Contents of Article 6 The Relationship to the General Rule in Article 4 Unfair Competition A. Where Competition Relations or the Collective Interests of Consumers are Affected B. Only the Interests of one Specific Competitor are Affected Restrictions of Competition (Antitrust) A. The Country where the Market is Affected 1. The Definition of the Market 2. Directly, Substantially and Foreseeably Affected B. Effect on the Market in Several Countries Unfair Competition, Restriction of Competition – Issues of Characterisation A. Unfair Competition B. Restrictions of Competition C. Unfair Competition or Restriction of Competition or Both?

Genesis and Contents of Article 6

Article 6 of the Rome II Regulation1 concerns the law applicable to unfair competition and acts restricting free competition. It is an Article which has undergone quite substantial change over the course of negotiations. In the Commission’s original proposal from July 2003 the Article dealt only with unfair competition and there

∗ Associate Professor of Private International Law, Uppsala University. The author was a member of the Swedish delegation to the Committee on Civil Law Matters, the Council working party in which the common position of the JHA Council of the EU on the Rome II Regulation was prepared. The views expressed in this article are those of the author and do not necessarily reflect those of the Swedish government. 1 Regulation (EC) 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations ‘(‘Rome II’), OJ L 199, 31.7.2007, p. 40.

Yearbook of Private International Law, Volume 9 (2007), pp. 49-69 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Michael Hellner was no special rule for acts restricting free competition (or antitrust or restrictive trade practices; the three terms are used synonymously).2 In the first reading opinion of the European Parliament from July 2005, the Article had been deleted – together with special rules for products liability and environmental damage.3 The reason given by the rapporteur Diana Wallis was that the flexibility of a general rule would be preferable to rigid rules for each class of non-contractual obligation. Moreover, the difficulty to characterise torts such as violations of rules on unfair competition and environmental protection spoke in favour of the deletion of these special rules.4 In the Commission’s revised proposal from February 20065 the proposal to delete the special rule was rejected and a special rule remained. In reply, however, to the expressed difficulties of characterisation the term ‘unfair competition’ had been changed to ‘unfair commercial practices’, thus aligning the terminology to the Unfair Commercial Practices Directive.6 What is more, the Commission declared that it might support a special rule on restrictive trade practices depending on the replies (that were then still to come) to the Green Paper on damages actions for breach of the EC antitrust rules.7 In the Common Position of the Council from September 2006 Article 6 had been changed to include a special rule for acts restricting free competition, designating the law of the country on whose market the restriction has, or is likely to have, effect as applicable.8 The Article thus contained rules on both unfair competition and antitrust. The provision survived the co-decision procedure and was, after some important modifications in order to mitigate the consequences of multi-state 2 See COM(2003) 427 final, Brussels 22.7.2003. It should, however, be noted that a preliminary draft proposal by the Commission presented in May 2002 contained an Article 6 on unfair competition and other unfair practices. This author has always presumed that ‘other unfair practices’ meant antitrust. The preliminary draft is available at . 3 P6_TA(2005)0284, 6 July 2005, OJ C 157 E, 6.7.2006, p. 371. 4 See the rapporteur’s explanatory statement to the report for the EP Committee on Legal Affairs (JURI), PE 349.977, p. 38 et seq. 5 COM(2006) 83 final, Brussels 21.2.2006. 6 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’), OJ L 149, 11.6.2005, p. 22. 7 Supra (note 5), at p. 6. Green Paper on damages actions for breach of the EC antitrust rules, COM(2005) 672 final, Brussels 19.12.2005. 8 Common Position adopted by the Council on 25 September 2006 with a view to the adoption of a Regulation of the European Parliament and of the Council on the law applicable to non-contractual obligations (‘Rome II’), Council doc. 9751/7/06, OJ C 289E, 28.11.2006, p. 68.

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Unfair Competition and Acts Restricting Free Competition torts, included in the final text that was adopted by the European Parliament and the Council in July 2007:9 Article 6 – Unfair competition and acts restricting free competition 1. The law applicable to a non-contractual obligation arising out of an act of unfair competition shall be the law of the country where competitive relations or the collective interests of consumers are, or are likely to be, affected. 2. Where an act of unfair competition affects exclusively the interests of a specific competitor, Article 4 shall apply. 3. (a) The law applicable to a non-contractual obligation arising out of a restriction of competition shall be the law of the country where the market is, or is likely to be, affected. (b) When the market is, or is likely to be, affected in more than one country, the person seeking compensation for damage who sues in the court of the domicile of the defendant, may instead choose to base his claim on the law of the court seised, provided that the market in that Member State is amongst those directly and substantially affected by the restriction of competition out of which the non-contractual obligation arises on which the claim is based; where the claimant sues, in accordance with the applicable rules on jurisdiction, more than one defendant in that court, he can only choose to base his claim on the law of that court if the restriction of competition, on which the claim against each of these defendants relies, directly and substantially affects also the market in the Member State of that court. 4. The law applicable under this Article may not be derogated from by an agreement pursuant to Article 14. According to recital 21 ‘[t]he special rule in Article 6 is not an exception to the general rule in Article 4(1) but rather a clarification of it’. What the recital says is that the two connecting factors used for unfair competition – the country where competitive relations or the collective interests of consumers are affected – and for antitrust – the law of the country where the market is affected – lead to the same result as the connecting factor used in the general rule, viz. the country in which the damage occurs. The sole purpose for including a special rule is that of clarity. It is difficult to say whether there is a trend in favour of general rules or rules specific to each particular tort in this area of private international law. In recent codifications on private international law it is possible to find the position 9

See supra (note 1).

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Michael Hellner that no special rule for unfair competition and antitrust is needed. Then again, it is also possible to find examples which provide a special rule. By way of example, in the 1995 UK Private International Law (Miscellaneous Provisions) Act 1995 (c. 42), the Italian PIL statute from the same year and the 2002 rules on noncontractual obligations in the German PIL Code there are no special rules for unfair competition and antitrust (these statutes do not contain any special rules for particular types of torts).10 On the other hand, in Article 48 of the 1978 Austrian PIL Code, Article 52 of the (almost identical) 1996 PIL Code of Liechtenstein, Article 117 of the 1992 Romanian PIL Code, Article 4 of the 2001 Dutch Act on the law applicable to delicts and in Article 1222 of the Russian Civil Code (part III from 2002) there are specific rules regarding unfair competition. Swiss and Bulgarian law appear to be unique in that they contain both provisions on unfair competition and restrictions of competition – Articles 136 and 137 of the 1987 Swiss PIL Code and Article 107 of the 2005 Bulgarian PIL Code. The connecting factor common to all of these statutes containing special rules is that of the country whose market is affected (with modalities in the way of expressing this). Even though Article 6 is intended as a clarification, the clarification might be in need of some clarifications. Such is the purpose of this article. Moreover, the question of whether there is actually any difference between the connecting factor used in the general rule and those connecting factors used in Article 6 begs an answer. Recitals are not normative as such, and if Articles 4 and 6 use different language with different meaning then that is not going to be changed by a recital saying otherwise.

II.

The Relationship to the General Rule in Article 4

The general rule in Article 4 of the Rome II Regulation uses the place of damage as the main connecting factor. 1. Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur [emphasis added]. In most tort cases the application of this rule does not cause any problems whatsoever. It is those cases where the act giving rise to the damage and the effects thereof occur in different states that have caused quite some concern in private international law. Article 4(1) differentiates between three elements of such so10 The rules on the law applicable to non-contractual obligations in Arts. 38-42 EGBGB were added in 2002.

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Unfair Competition and Acts Restricting Free Competition called distance delicts: 1) the act or event giving rise to liability; 2) the injury suffered by the victim; and 3) the consequential loss following from that injury. It is the second element, the place of injury, or as expressed in the Regulation – the place in which the damage occurs11 – that is determinative in the Rome II Regulation. In choosing the place of injury the Regulation is well in line with the law of many Member States, although a majority seem to prefer the country of the act/ event and a significant minority give the person sustaining damage a choice between the two laws. Of the three places, the place of the act is the easiest to locate but not always self-evident. Particularly in cases where the harmful act consists of an omission can the place of action be difficult to determine; a relevant example would be in the case of a refusal to supply. From where should a particular good be delivered if the tortfeasor has several possible places from which to deliver? The country in which the damage occurred (the place of injury) is relatively easy to determine in those cases where the damage is sustained by a person or property. The relevant location is the country in which the person or property is situated when the damage occurs.12 It becomes more difficult in those cases where the injury is abstract. Examples would be defamation or infringement of intellectual property – or for that matter unfair competition and restrictive trade practices. The greatest difficulty lies in separating the place of injury from the third element, viz. the place of consequential loss (the country in which the indirect consequences of the injury occur). The Commission’s Explanatory Memorandum to the Rome II proposal refers to the Marinari case,13 in which the European Court of Justice held that ‘the place where the damage occurred’ under Article 5(3) of the Brussels Convention does not include the place where the victim suffered financial damage arising from the initial damage and suffered by him in another Contracting State.14 The interpretation is less clear when the victim suffers only financial damage as the result of a certain act. For such cases there is a tendency in the law of some states to determine the place of injury to be the location where the diminished assets are located.15

Injury is a better term than damage since the latter tends to lead the reader in the direction of indirect damage that is a consequence of the initial injury. Admittedly, this is mainly of relevance to the English language version. 12 See e.g. Section 11(2)(a) and (b) of the UK Private International Law (Miscellaneous Provisions) Act 1995 (c. 42). 13 ECJ, C-364/93, Marinari v Lloyds Bank, [1995] ECR I-2719. 14 Supra (note 2), at p. 11. 15 See for German law JUNKER A., ‘Art. 40, Unerlaubte Handlung’, in: SONNENBERGER H. J. (ed.), Münchener Kommentar zum Bürgerlichen Gesetzbuch, Band 10 Einführungsgesetz zum Bürgerlichen Gesetzbuche (Art. 1-46) Internationales Privatrecht, 4. Aufl., München 2006, p. 2355-2458, at p. 2370 (para. 32). See in this direction ECJ, C-18/02, DFDS Torline v LO, [2004] ECR I-1417. 11

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Michael Hellner A determination of the place of injury under the general rule in Article 4 could very well be identical with the country where competitive relations or the collective interests of consumers are affected in the case of unfair competition and the country where the market is affected in the case of acts restricting competition as specified in Article 6. In Germany and Switzerland legal writing and court practice have determined that the place where the damage occurs is the place where the object or interest that is protected by the rule giving rise to liability (geschütztes Rechtsgut) is located at the time of the injury.16 Italian legal writing has come to the conclusion that the relevant injury for unfair competition is the damage suffered by the competition itself; hence the relevant place is the place where the market is located.17 The statement in recital 21 that ‘[t]he special rule in Article 6 is not an exception to the general rule in Article 4(1) but rather a clarification of it’ would be correct if the objects of protection of those rules are those mentioned above. According to the Explanatory Memorandum to the Rome II Proposal, the purpose of rules against unfair competition is to protect not only competitors (horizontal dimension) but also consumers and the public in general (vertical relations). The Commission provides the illustration of two firms from State A both operating in market B as an example of where there might be a difference in the localisation of the place of injury between the general rule and the special rule for unfair competition.18 This author fails to see why the injury would not be located in market B unless the act of unfair competition is targeted specifically at the competitor from State A. What the Commission could possibly mean by this example is the widespread perception that the place of injury in cases of pure economic loss is located where the assets that are diminished are located.19 However, as has been pointed out, this is contradicted by the ruling of the European Court of Justice in Marinari20 concerning the location of damage under Article 5(3) of the Brussels Convention. It is submitted that, even if Article 6 is only a clarification, it is a welcome one. The theory of the object of protection is not universally accepted, and even so, the object of protection of unfair competition and antitrust is probably not selfevident and known to courts and practitioners all over the European Union.21 The 16 See HEINI A., ‘Art. 133’, in: GIRSBERGER D. ET AL. (eds.), Zürcher Kommentar zum IPRG, 2. Aufl., Zürich 2004, p. 1476-1483, at p. 1479 (para. 10); JUNKER A. (note 15), ibid. 17 HONORATI C., ‘The Law Applicable to Unfair Competition’, in: MALATESTA, A. (ed.), The Unification of Choice of Law Rules on Torts and Other Non-Contractual Obligations in Europe, Padova 2006, p. 127-158, at p. 151. 18 Supra (note 2), at p. 15. 19 JUNKER A. (note 15), at p. 2370 (para. 32). 20 Supra (note 13). 21 In agreement as to the need for a special rule for unfair competition see HONORATI C. (note 17), p. 153 et seq. and for antitrust ADOLPHSEN J., ‘Conflict of Laws in Cartel Matters in a Globalised World: Alternatives to the Effects Doctrine’, in: J. Priv. Int. L. 1 (2005), p. 151-183, at p. 177; BASEDOW J., ‘Jurisdiction and Choice of Law in the Private Enforcement of EC Competition Law’, in: BASEDOW J. (ed.), Private Enforcement of EC Competition Law, Alphen aan den Rijn 2007, p. 229-253, at p. 249 et seq.

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Unfair Competition and Acts Restricting Free Competition risk that courts will locate the injury at the place where the plaintiff has suffered individual injury as a result of unfair competition or restrictive trade practices is imminent. It is also highly likely that many courts will locate this individual injury at the seat of the victim. Moreover, when legislating on the European level there is a need for extra clarity since legal theories, concepts and ideas differ from country to country. We should also add that because Article 6(3)(b) contains a special rule for multi-state torts in antitrust litigation, it would fit very poorly in Article 4 (although a special rule for all multi-state torts could be envisaged).

III. Unfair Competition A.

Where Competitive Relations or the Collective Interests of Consumers are Affected

Instead of using the affected market as the relevant connecting factor for unfair competition, Article 6(1) focuses on ‘the country where competitive relations or the collective interests of consumers are […] affected’. According to the Explanatory Memorandum22 this connecting factor has its origins in a number of consumerprotection directives, in particular Directive 98/27 on injunctions for the protection of consumers' interests.23 In that Directive the expression ‘collective interests of consumers’ is used, but not as a connecting factor in a choice-of-law rule. The expression is used to describe the purpose of a number of Directives on consumer protection for which Directive 98/27 grants an enforcement mechanism in the form of injunctions. Recital 2 informs us that ‘collective interests mean interests which do not include the cumulation of interests of individuals who have been harmed by an infringement’. The expression is also used in the Regulation on consumer protection cooperation24 but the definition given in Article 3(k) is quite uninteresting: ‘the interests of a number of consumers that have been harmed or are likely to be harmed by an infringement’. From Article 3(b) we learn that collective interests of consumers are not located in the same place as where the act or omission originated or took place, where the responsible seller or supplier is established, or where evidence or assets pertaining to the act or omission are to be found. Supra (note 2), at p. 15. Directive 98/27/EC of the European Parliament and of the Council of 19 May 1998 on injunctions for the protection of consumers' interests, OJ L 166, 11.6.1998, p. 51. The Commission has proposed amendments to this Directive, see COM(2003) 241 final of 12.5.2003 and COM(2006) 692 final of 16.11.2006. 24 Regulation (EC) 2006/2004 of the European Parliament and of the Council of 27 October 2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws (the Regulation on consumer protection cooperation), OJ L 364, 9.12.2004, p. 1. 22 23

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Michael Hellner The problem with using this particular expression for unfair competition is that it differs from the expression used in Article 6(3) for antitrust, viz. the country where the market is affected. It would indicate that there is a purpose behind using two different connecting factors. However, the Explanatory Memorandum equates the effect on competitors’ and consumers’ interests with effect on the market.25 Moreover, being familiar with the legislative history, we know that antitrust was added in the Council negotiations. The first Presidency drafts spoke of ‘unfair competition, including an act restricting free competition’ and then used the connecting factor ‘country where competitive relations or the collective interests of consumers are […] affected’ for both.26 The different connecting factor for antitrust was added later when the present structure of separate paragraphs was introduced.27 No difference was intended, but rather it was just pointed out that the affected market was the traditional connecting factor for antitrust. Against this background it is submitted that, although unfair competition and antitrust use different connecting factors, no real difference is intended and the connecting factor used for unfair competition is also to be understood as designating the law of the affected market (more on the meaning of this concept infra).28

B.

Only the Interests of one Specific Competitor are Affected

Paragraph 2 makes an exception for cases when an act of unfair competition affects exclusively the interests of only one competitor. Relevant examples would include: improper interference with a competitor's business, as, for example, by enticing his employees to leave his employ; inducing breach of a competitor's contract; interference with a competitor's supplier and customer relations; industrial espionage; or unauthorised dissemination of business secrets. Admittedly, such actions indirectly also affect the market as such but consumers are neither induced nor are they mislead.29 There is a similar exception in Article 136(2) of the Swiss PIL code. That provision, however, designates the law of the habitual residence of the affected competitor. Instead, Article 6(2) of the Rome II Regulation refers back to the general rule in Article 4. This entails three differences in relation to acts of unfair competition that have a more general effect: 1) the law of the place of injury is applied rather than the law of the country where competitive relations or the colSupra (note 2), at p. 15. See Council document 10173/04 of 14.6.2004, JUSTCIV 81. 27 See Council document 7432/06 of 16.3.2006, JUSTCIV 62. 28 See, however, DREXL J., ‘Internationales Recht gegen den unlauteren Wettbewerb’, in: SONNENBERGER H. J. (ed.), Münchener Kommentar zum Bürgerlichen Gesetzbuch, Band 11 Internationales Wirtschaftsrecht (Art. 50-245 EGBGB), 4. Aufl., München 2006, p. 746-811, at p. 799 (para. 111). 29 VISCHER F., ‘Art. 136’, in: GIRSBERGER D. ET AL. (eds.), Zürcher Kommentar zum IPRG, 2. Aufl., Zürich 2004, p. 1536-1547, at p. 1543 (para. 18). 25 26

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Unfair Competition and Acts Restricting Free Competition lective interests of consumers are affected; 2) if the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply; 3) if there is a manifestly closer connection to the law of another country the law of that country shall apply. As indicated above, the first question is whether the country in which the damage occurs and the country where competitive relations or the collective interests of consumers are affected coincide. On the one hand the statement in recital 21 that ‘[t]he special rule in Article 6 is not an exception to the general rule in Article 4(1) but rather a clarification of it’ would indicate that no difference is intended. On the other hand it is quite possible to imagine differences if one takes into consideration that the object of protection of rules against unfair competition can also be the individual competitor.30 Let us return to the example given in the Explanatory Memorandum where two firms from State A both mainly operate in market B. Assume that firm X illicitly entices the employees of firm Y to leave their employment in State A. The immediate effect of the act of unfair competition is in State A, but it has effect on competitive relations in State B due to that being the State in which both firms mainly operate. If we acknowledge that rules on unfair competition have a triple objective, viz. to protect individual competitors, competition in general and the interests of consumers in general, then we can also acknowledge that there is a difference in connecting factors. What is more, if no difference had been intended, Article 6(2) ought only to have referred back to Article 4(2) and (3), and not the entire Article. Such a partial reference was made in the Commission’s original proposal but disappeared in the Council negotiations.31 It is therefore submitted that, in spite of the recital to the contrary, there is a difference between Articles 6 and 4 when an act of unfair competition affects only the interests of a specific competitor. The place of injury for such cases should be interpreted as meaning the place where the individual competitor suffered the injury. In the example of illicitly enticing the employees of a firm to leave their employment in a particular state, the place of injury would coincide with the place of employment. The difference between applying Article 6 and Article 4 is obvious in those cases where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs. For such cases, according to Article 4, the law of their common habitual residence is applicable regardless of where the damage occurs or in which market the act of unfair competition takes effect. The third difference between applying Article 6 or Article 4 is that Article 4(3) provides for a rule of displacement: Section 1 of the German Law Against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb) gives as the objects of protection competitors, consumers and the general interest in undistorted competition. 31 And this author, although having taken part in the negotiations, cannot recall that the matter was ever discussed. 30

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Michael Hellner 3. Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question. The example given in the text itself of when a manifestly closer connection might be at hand is when there is a pre-existing relationship between the parties, such as a contract, and that pre-existing relationship is closely connected with the tort/delict in question. An example of when there might be a pre-existing relationship between the parties is in the case of improper appropriation or disclosure of trade secrets obtained through, for instance, a joint research and development agreement. The text of Article 4(3) itself does not say if the fact that there is a pre-existing relationship between the parties, and there is a manifestly closer connection to another country based on this relationship, also means that the tort/delict in question should be governed by the law applicable to this pre-existing relationship. However, it is clear from the Commission’s Explanatory Memorandum that that was intended.32 Such an interpretation would also help bridge the gap between those States that would characterise such relationships as contractual and those that would characterise them as non-contractual. Nevertheless, it is submitted that, in particular when the parties have chosen the law applicable to a contract with which the act of unfair competition is closely connected, and that law is not closely connected to the act of unfair competition, it should not be applied. In such cases the requirement that there must also be a manifestly closer connection with another country is not fulfilled. The following example could serve as illustration of how the exception in paragraph 3 could work. A, with habitual residence in country X, is a mobile phone operator that delivers mobile phone services to B (who is a company, not a consumer), habitually residing in country Y. A contacts B and offers it a continuation of the mobile phone services for an additional 12 months but misleads the representative of B as to the conditions for receiving free cell phones for all employees of B included in the price. B asks for the cancellation of the contract and also for damages equaling the cost of buying the cell phones that he never received for free. If B sues in tort, under Articles 6(2) and 4(1) the law of B’s habitual residence would most likely apply. However, under Article 4(3) the law applicable to the sales contract could also be applied to the tort. Under Article 4(1) of the new Rome I Regulation this would most likely be the law of the seller.33 This makes sense since B’s request in many jurisdictions would be characterised as contractual.

Supra (note 2), at p. 12. At the time of writing (December 2007), the new Rome I Regulation on the law applicable to contractual obligations has been politically adopted by the European Parliament and the Council but is still subject to scrutiny by the jurist linguists. Thus, we make no 32 33

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IV. Restrictions of Competition (Antitrust) A.

The Country where the Market is Affected

Contrary to unfair competition, the connecting factor for non-contractual obligations arising out of acts restricting competition is the country where the market is affected. It has already been submitted that the country where competitive relations or the collective interests of consumers are affected, and the country where the market is affected, are essentially identical. Particularly in the area of antitrust law, however, the concept of a market is a complex one and merits further analysis.

1.

The Definition of a Market

The difficulty in using a concept such as the affected market as a connecting factor is that a market is something abstract; it is not a car, a house or a person that can be said to have been physically present at a particular place at a particular time when an injury is suffered. However, this is not unique to antitrust damages, as an intellectual property right or a person’s reputation are also abstract concepts.34 In most commentary on similar provisions in private international law statutes the concept of a market is defined as a jurisdiction in which the person sustaining the damage is (negatively)35 affected in his provision of products. This is normally the country in which the potential customers are located.36 However, as we well know from the study of EC substantive antitrust law, the question of market definition is also relevant in that context and can at times be quite difficult. The definition of the relevant market is decisive in the determination of whether there is a dominant position under Article 82 EC and is also relevant for determining dominance in the application of the Merger Regulation.37 Markets may additionally need to be defined when applying Article 81 EC, in particular when determining whether an appreciable restriction of competition exists or when establishing if the condition under Article 81(3)(b) for an exemption is met.38 formal reference to the Regulation. The text is available as EP document P6_TA-PROV (2007)0560 of 29 November 2007. 34 Note, however, the exception from scope for ‘non-contractual obligations arising out of violations of privacy and rights relating to personality, including defamation’ in Article 1(2)(g). 35 Under EC competition law the effect need not be negative. Cf. ECJ, C-56/64 & C59/64, Consten and Grundig, [1966] ECR 299. 36 See e.g. VISCHER F., ‘Art. 137’, in: GIRSBERGER D. ET AL. (eds.), Zürcher Kommentar zum IPRG, 2. Aufl., Zürich 2004, p. 1548-1559, at p. 1551 et seq. (para. 10). 37 Council Regulation (EC) 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation), OJ L 24, 29.1.2004, p. 1. 38 See Commission Notice on the definition of the relevant market for the purposes of Community competition law, OJ C 72, 9.12.1997, p. 13.

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Michael Hellner The definition of the relevant market in EC antitrust law consists of a relevant product market and a relevant geographic market. In the case law of the European Court of Justice the latter has been defined as an ‘area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas’.39 The question is whether the concept of the relevant geographic market from substantive Community antitrust law can also be used in determining the affected market for Community choice-of-law purposes. The definition could be useful in determining whether a particular country is included in the affected market or not (markets can be local, regional, national or covering territories of two or more countries). This is particularly so in the case of follow-on damages actions; that is cases where private litigation follows in the wake of an action by a national or Community competition authority. Moreover, procedural rules in some countries provide that decisions taken by competition authorities or courts trying cases brought by such authorities are either binding40 or have prima facie value as evidence41. The question of whether the definition of geographic market used in substantive EC antitrust law could also function as a connecting factor in a choice-oflaw rule would indeed merit further analysis for which this article is not the right venue.42 An obvious argument in favour is one of simplicity. Although market analysis at times can be quite difficult, most private antitrust cases are expected to be follow-on actions and the work of defining a geographic market will already have been completed – and perhaps even be binding to the court in the context of substantive law. It would also be quite complicated to work with two different market definitions – one for substantive law and one for choice-of-law – and, it might be added, a third one for determining jurisdiction under Article 5(3) of the Brussels I Regulation; but that is a whole other story.

See ECJ, C-27/76, United Brands, [1978] ECR 207, para. 44; C-322/81, Michelin, [1983] ECR 3461, para. 26; C-247/86, Alsatel, [1988] ECR 5987, para. 15 and from the Court of First Instance T-504/93, Tiercé Ladbroke, [1997] ECR II-923, para. 102. 40 Cf. Section 33(4) German Act Against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen). It is not the decision as such that is binding but the ‘Feststellung des Verstoßes’, i.e. the establishment of a violation of the law. 41 Cf. Section 5(a) of the United States’ Clayton Act, 15 U.S.C. §16(a) (2000). 42 This author has received a most generous grant from the Swedish Competition Authority to spend the next three years studying private international law aspects of damages actions for breach of EC antitrust rules. The question of the definition of the affected market is one of those that will be dealt with more extensively. 39

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Unfair Competition and Acts Restricting Free Competition 2.

Directly, Substantially and Foreseeably Affected

Article 137(1) of the Swiss PIL code contains a provision that ‘claims founded on restraint of competition shall be governed by the law of the State in whose market the direct effects of the restraint on the injured party occur [emphasis added]’.43 It is also a requirement for the application of U.S. competition law that there be ‘direct, substantial, and reasonably foreseeable effect’ on the U.S. market.44 Similarly, in German competition law there is a requirement that the effect on the German market be direct and substantial for the applicability of German competition law.45 In the Council there was agreement that there should be a recital recalling that the effect on the market has to be direct and substantial. Recital 20 of the Council’s common position of 25 September 2006 also makes clear that the effect on the market of a state must be direct and substantial.46 The European Parliament in its second reading on 18 January 2007 maintained its position from its first reading47 and was opposed to the Article. Thus, the Parliament was logically opposed to any related recital.48 The result of the negotiations in conciliation was to keep a specific rule on antitrust with some important additions concerning multistate damage in paragraph 3(b) that were initiated by the Commission. For reasons not clear to this author, the requirement that an effect on a market be direct and substantial was lost at this point.49 The disappearance from the text could be interpreted a contrario and its deletion would mean that a direct and substantial effect is not needed. Another argument in favour of this interpretation is that paragraph 3(b) allows a plaintiff, in the case of multi-state damage, to base his claim on the law of the forum if the effect of the restriction of competition in that country was direct and substantial. Since this is the only mention of direct and substantial in the text, one could, again ‘Ansprüche aus Wettbewerbsbehinderung unterstehen dem Recht des Staates, auf dessen Markt der Geschädigte von der Behinderung unmittelbar betroffen ist.’; ‘Les prétentions fondées sur une entrave à la concurrence sont régies par le droit de l’Etat sur le marché duquel l’entrave produit directement ses effets sur le lesé.’; ‘Le pretese derivanti da ostacoli alla concorrenza sono regolate dal diritto dello Stato sul cui mercato il danneggiato è direttamente colpito.’ 44 Cf. Restatement (Third) of the Foreign Relations Law of the United States § 403 (a). 45 See REHBINDER E., ‘§ 98 Abs. 2’, in: IMMENGA U./MESTMÄCKER E.-J., GWB Kommentar zum Kartellgesetz, 2. Aufl., München 1992, p. 2217–2297, at p. 2237 et seq. (para. 73 et seq.). 46 Common Position (EC) 22/2006 adopted by the Council on 25 September 2006, OJ C 289 E, 28.11.2006, p. 68. 47 Supra (note 3). 48 P6_TA(2007)0006, 18.1.2007. 49 But we strongly suspect that it was simply overlooked when the recital was redrafted to reflect the changes made in relation to restrictions of competition with multi-state effects. 43

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Michael Hellner a contrario, draw the conclusion that in all remaining cases there is no such requirement. It is submitted that this would not be a very useful interpretation even though there is certain logical and textual merit to it. Firstly, the requirement that the effect be direct and substantial is one of public international law and deals with the rights of states to apply their competition laws to restrictive acts. It would be a violation of public international law to assume prescriptive jurisdiction over anticompetitive acts with only very remote effects on the market of the legislating state.50 The reader should also bear in mind that the so called extraterritorial application of competition law was quite controversial some decades ago and there was strong resistance to the so called effects doctrine.51 Generally speaking then, if the choice-of-law rule would lead to the application of the law of a country even when the effect on its market is indirect and/or insubstantial it would lead to the application of a rule that normally would (should!) not be territorially applicable. That would either just be a bad idea or this would have to be taken into consideration and the rule would not be applied anyway.52 The second more down to earth question is what ‘direct and substantial effect’ actually means in a concrete case. Sometimes a requirement that the effect be foreseeable or even intended is built into the concept of directness.53 This author would oppose that interpretation since there is no support for it in any text on Article 6 that was discussed in negotiations leading up to the adoption of the Regulation, and furthermore, the requirement of intent is more relevant to substantive law than to private international law. Foreseeability is used in Article 5(1) on product liability but not elsewhere. One could a contrario deduce that it is not a requirement under Article 6. Having said this, it is not entirely easy to determine what constitutes a ‘direct and substantial effect’ in a concrete case. If one follows the previously disSee Art. 5 of the Resolution adopted at the 55th Conference of the International Law Association in New York on Rules on State Jurisdication in connection with Restrictive Trade Practices; MEESEN K. M., ‘Antitrust Jurisdiction under Customary International Law’, in: Am.J.Int.Law 78 (1984), p. 783-810, at p. 800. For a very lucid background of the effects principle and early attempts at jurisdictional restraint see GERBER D. J., ‘Beyond Balancing: International Law Restraints on the Reach of National Laws’, in: YJIL 10 (1984-85), p. 185221. 51 See in general NEREP E., Extraterritorial Control of Competition under International Law, Norstedts, Stockholm 1983; MENG W., Extraterritoriale Jurisdiktion im öffentlichen Wirtschaftsrecht, Springer-Verlag, Berlin/Heidelberg/New York 1994 and SCHWARTZ I./BASEDOW J., ‘Chapter 35, Restrictions on Competition’, in: LIPSTEIN K. (ed.), International Encyclopedia of Comparative Law, Volume III, Private International Law, Tübingen 1995. 52 On the importance of the territorial applicability of ‘self-limiting’ rules in the lex causae see i.a., HELLNER M., ‘Private International Enforcement of Competition Law: The Application of Foreign Competition Law’, in: this Yearbook 4 (2002), p. 257-301, at p. 284 et seq. 53 See e.g. Art. 5 of the ILA New York Resolution (note 50). 50

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Unfair Competition and Acts Restricting Free Competition cussed theory of an object of protection the following example could serve as illustration. An export cartel entered into between companies located in state A and aimed at the market of state B would only have direct effect on the market of state B even though this cartel could influence the amount of trade that goes from state A to state B. It is the competition in the market that is protected, not trade flows as such.54 However, this does not correspond to, for instance, the applicability of U.S. antitrust law, which focuses on ‘effects on commerce’ and not on ‘competition’ for its applicability,55 and also not for EC competition law which is applicable if there is an effect on ‘trade between Member States’.56 Nevertheless, it is submitted that, because the text of Article 6 uses the expression ‘market’ and not ‘trade’, this interpretation is to be preferred. Another example, if one chooses to focus on the effect on competition as such and not on the flow of trade, would be a refusal to supply by company A in state X to company B in state Y. The direct effect would be on the market of state Y and the effects on the markets of states Z, Zbis and Zter, to which company B would have sold the product, would be indirect. The requirement that an effect on competition also be substantial is one that is found in the substantive antitrust laws of many jurisdictions. By way of example, the European Court of Justice has several times established that EC antitrust law is not applicable to agreements of minor importance.57 There is also a Commission notice more concretely defining this de minimis principle in terms of annual turnover and market share.58 For several reasons the definition of de minimis in EC competition law cannot simply be transplanted into Article 6 of the Rome II Regulation. First of all, the requirement in Article 6 that a particular restriction of competition be substantial follows from restrictions on prescriptive jurisdiction in public international law. Public international law does not define in detail what the applicability of the antitrust law of a particular state should be. It only sets certain outer limits against abuse of prescriptive jurisdiction. The concept of de minimis in EC law, although attractively concrete, can also not be used since it is a rule that serves to determine, inter alia, when a particular restriction of competition is left to the national law of the Member States. It is submitted that both meanings of substantive effect should be followed. The concept of substantive effect from public international law sets a first thre54 See BÄR R., ‘Internationales Kartellrecht und unlauterer Wettbewerb’, in: SCHWANDER I. (ed.), Beiträge zum neuen IPR des Sachen-, Schuld- und Gesellschaftsrechts. Festschrift für Prof. Rudolf Moser, Zürich 1987, p. 143-178, at p. 166 note 63. 55 See NEREP E. (note 51), at p. 172 et seq. 56 See Article 81(1) EC. 57 See for instance ECJ, C-5/69, Völk v. Verwaecke, [1969] ECR 295 and C-215/96 & C-216/96, Bagnasco (Carlos) v Banca Popolare di Novara and Casa di Risparmio di Genova e Imperia, [1999] ECR I-135. 58 Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community (de minimis), OJ C 368, 22.12.2001, p. 13.

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Michael Hellner shold and is embedded in Article 6 itself. The meaning of the concept in the applicable national law is entrenched in Article 15 on the scope of the applicable law, in particular lit. a. As stated earlier, it does not make sense to apply a law, which according to its own scope of application, is not applicable. Although we have dealt with the concept of direct effect in the context of defining the market for antitrust law infringements, it is also arguably relevant in the area of unfair competition.59 However, it is doubtful whether a particular act of unfair competition also has to be substantial.60 It was never discussed in negotiations and is particularly questionable in cases where the act of unfair competition affects the interests of a specific competitor and not the market as such. In the 1983 Cambridge Resolution of the Institut de droit International on the Conflict-of-Laws Rules on Unfair Competition there is in Article II a requirement of foreseeability. However, according to this author, such a requirement cannot be upheld in the application of any rule under the Rome II Regulation with the exception of Article 5.

B.

Effect on the Market in Several Countries

At the end of negotiations, in conciliation between the Council and the European Parliament, an additional rule was included at the initiative of the Commission. Article 6(3)(b) now stipulates that if the markets of several countries are affected by a restriction of competition a plaintiff may select to base his claim on the law of the forum if: a) he brings suit in the defendant’s domicile; and b) the market of the forum is among those states directly and substantially affected by the restriction of competition. If a plaintiff sues several defendants in that court, he may chose to base his claim on the law of the forum if the claim against each of the defendants includes a claim based on a direct and substantial restriction of competition on the market of the forum. The expression ‘that court’ would have to be understood as meaning the court of one of the defendants’ domicile and not all of them. Otherwise the rule would make no sense. This corresponds to the rule in Article 6(1) of the Brussels I Regulation,61 according to which several defendants may be sued in the domicile of a single defendant if there are sufficient grounds to hear and determine the claims together. Even if several of the defendants are domiciled outside the Member States, and jurisdiction is assumed not according to the Brussels I Regulation but according to national law, it is still necessary that at least one of the defendants be 59 For the same opinion concerning Swiss law, where there is an explicit requirement of direct effect in Article 137 IPRG on restrictions of competition but not in Article 136 IPRG on unfair competition see BÄR R. (note 54), at p. 152. 60 See DREXL J. (note 28), at p. 800 (para 111). 61 Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ L 12, 16.1.2001, p. 1.

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Unfair Competition and Acts Restricting Free Competition domiciled in the country of the forum (a Member State) for the rule to be applicable. Claims for damages for violations of antitrust rules will very often involve damage arising out of restrictions of competition on several markets. This is particularly true when the damage arises from a violation of EC antitrust law, which is only applicable if it may affect trade between Member States. In cases where the Brussels I Regulation is applicable, the claimant has several options. One option is to sue at defendant’s domicile according to Article 2. That court will have jurisdiction to determine the entire case regardless of whether the restriction of competition has had effect on the markets of several countries. In this case the rule in Article 6(1)(b) serves to facilitate proceedings by allowing for the application of one single law to all restrictions of competition. Not only is the parallel application of several laws in one single case very complicated, but it can also be quite difficult to ascertain what damage has been suffered on each individual market. If there are several defendants, the claimant will most likely want to join the claims into one single action. Article 6(1) of the Brussels I Regulation allows for this ‘provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings’. This will be the case if for instance the claim is based on a cartel to which the defendants where parties and the cartel involved the markets of several countries. Another option that the claimant has is to sue at the place where the harmful event occurred according to Article 5(3) of the Brussels I Regulation. Following the case law of the European Court of Justice he can choose to sue in either: 1) the jurisdiction where the act giving rise to the damage occurred; or 2) the place where the damage occurred.62 Suing at the place of the act will, particularly in economic torts such as antitrust, very often coincide with the place of habitual residence of the defendant. If there are several defendants that have all acted on one and the same place with effect in several countries it would allow for proceedings against them to be joined.63 For such cases Article 6(3)(b) of the Rome II Regulation does not allow for the application of one single law. In our opinion there would have been some merit in allowing for this also in these cases. Admittedly, however, the number of cases will probably be so low that it does not justify a particular rule since the place of acting mostly will coincide with the place of habitual residence of the defendant (unless there are several places of business of a particular company). ECJ, C-21/76, Bier, [1976] ECR 1735. An interesting question is where the act giving rise to damage occurred in the case of a cartel agreement entered into in a particular country between several companies from different countries – in the country in which they entered into the cartel agreement or in their respective home countries in which they applied the agreement, or in both? For a general critique of the place of the commission of the tort as a basis for jurisdiction in competition law claims see FITCHEN, J., ‘Allocating Jurisdiction in Private Competition Law Claims within the EU’, in: Maastricht Journal of European and Comparative Law 13 (2006), p. 381-401, at p. 393 et seq. 62 63

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Michael Hellner If the claimant chooses to sue where the damage occurred the jurisdiction of that court will be limited to the damage that occurred to the market in its jurisdiction.64 For this reason it is unlikely that a claimant will want to use this ground for jurisdiction in other cases than when all, or practically, all damage has arisen in one single country and that country coincides with the domicile of the claimant. Unless the rules on jurisdiction were changed, it would make little sense to introduce the possibility for the application of one single law for such cases. Finally, in quite a few cases there will be a contractual relationship between the claimant and the defendant.65 The Courage case,66 in which the European Court of Justice determined that there is a duty for Member States to provide the remedy of damages for violations of Community competition law, was a case of an exclusive beer purchase agreement. In such cases there will frequently be a choice of court clause that extends to all claims related to the performance of the contract. If the clause is not held unenforceable or void, it will fix jurisdiction even if the plaintiff sues in tort. Since such clauses frequently will award jurisdiction to the courts of the domicile of the tortfeasor, the situation in respect of Article 6(3)(b) of the Rome II Regulation is the same as if Article 2 is the basis for jurisdiction. Originally, the Commission’s DG Competition asked for the application of the law of the forum in all cases giving rise to a non-contractual obligation stemming from an act contrary to Articles 81(1) and 82 EC (but they acknowledged that this would be inappropriate for national antitrust law).67 The main difference between that proposal and the final adopted text lies in cases where the claimant brings suit in the forum where the act giving rise to damage occurred. He would, if the law of the forum were always applied, have had the possibility of applying this law to all claims and not be limited to cases where the country of the forum was also the domicile of one of the defendants. Another difference is that in the adopted text the possibility to ask for the application of the law of the forum is open also when the restriction of competition affects the market of a third country, or when the act or omission is contrary to national antitrust law but not to EC competition law.68

ECJ, C-68/93, Shevill, ECR [1995] I-415. BASEDOW J. (note 21), at p. 212 refers to such situations as ‘transactional’. 66 ECJ, C-453/99, Courage, ECR [2001] I-6297. 67 In a note from the DG Competition dated 16 December 2004. See BASEDOW, J., supra (note 21), at p. 239 et seq. for a plaidoyer against different choice-of-law rules for national and EC antitrust law. 68 This latter situation is foreseen in Article 3(2) of Council Regulation (EC) 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ L 1, 4.1.2003, p. 1, but has to the knowledge of this author found little or no practical use. 64 65

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Unfair Competition and Acts Restricting Free Competition

V.

Unfair Competition, Restriction of Competition Issues of Characterisation

A general problem with the Rome II Regulation is that there are several types of non-contractual obligations that either can mean different things in different legal systems or are virtually unknown to some. For example, whereas the concept of unjust enrichment is widely used in German law, it is virtually non-existent in Swedish law (with the most notable exception of condictio indebiti).69 This problem of characterisation is to some extent also present when determining the delimitation between the Rome I Regulation and the Rome II Regulation. Pre-contractual liability would probably be the clearest example. Does culpa in contrahendo lead to a contractual or a non-contractual obligation?70 It is most likely that the European Court of Justice will adopt an autonomous method of characterisation, just as has been the case with the Brussels I Regulation. Concepts such as product liability, environmental damage, unjust enrichment, unfair competition and restrictions of competition will have a particular meaning for the purposes of the Rome II Regulation that will draw inspiration from, but be formally independent of, their meaning in the laws of the Member States.71 That this is intended is evident from the attempts to outline the meanings of certain non-contractual obligations in the recitals of the Regulation. A.

Unfair Competition

The first problem in connexion with Article 6 in particular is that unfair competition is an area of law that is virtually non-existent as a general tort in several jurisdictions, such as for instance in English law.72 And even for those Member States that do know unfair competition as a field of their domestic law, the concepts differ quite substantially. Secondly, there is a certain overlap between the law of unfair competition, at least as known in several Member States, and the law against restrictions on competition. Both can be simultaneously applicable to one and the same activity.

See case NJA 1999, p. 575 in which the Swedish Supreme Court declared that the basis for condictio indebiti was unjust enrichment. 70 The solution has been to follow the case law of the ECJ in case C-334/00, Tacconi, [2002] ECR I-7357, concerning the delimitation between Article 5(1) and (3) of the Brussels I Regulation, viz. that pre-contractual liability is non-contractual. See Article 12 of the Rome II Regulation and Article 1(2)(j) of the Rome I Regulation. 71 It is this author’s belief that the work of the Study Group on a European Civil Code on Principles of European Law will be very influential in this aspect. 72 See the position of the House of Lords that was for reasons of characterisation opposed to the rule. HOUSE OF LORDS, European Union Committee, 8th Report of Session 2003-04, The Rome II Regulation, Report with Evidence, HL Paper 66, p. 34 et seq. 69

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Michael Hellner We know very little of what meaning the ECJ in the end will attach to a concept such as unfair competition. That a relatively wide meaning is intended can be assumed by reading recital 21, which speaks of a conflict-of-law rule that ‘should protect competitors, consumers and the general public and ensure that the market economy functions properly’. Article 10bis of the 1883 Paris Convention for the Protection of Intellectual Property, to which all EU Member States are parties, could serve as a point of departure. According to paragraph 2 of that provision ‘[a]ny act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition’, which is illustrated by examples in paragraph 3: (i) all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; (ii) false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor; (iii) indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods. These examples are by no means exhaustive and further inspiration can be sought in, for example, Article 1 of the 1983 Cambridge Resolution of the Institut de droit International on the Conflict-of-Laws Rules on Unfair Competition that seeks to illustrate Article 10bis. The main additions in relation to the Paris Convention are improper appropriation of a competitor’s efforts, unfair price competition and improper interference with a competitor’s business. In the Explanatory Memorandum to its proposal the Commission lists as examples ‘acts calculated to influence demand (misleading advertising, forced sales, etc.), acts that impede competing supplies (disruption of deliveries by competitors, enticing away a competitor's staff, boycotts), and acts that exploit a competitor's value (passing off and the like)’.73 These examples all lie within the scope of the 1983 Cambridge Resolution. Here, however, we are leaving the area of consensus and it will be very interesting to see how the Court of Justice will interpret the rule in the future. For instance, unfair price competition does not exist in Swedish law (so long as it does not constitute predatory pricing and is contrary to the law against restrictions of competition) and improper interference with a competitor’s business, to the extent that it gives rise to any non-contractual obligation at all, would largely be characterised as a general tort and not as unfair competition. The problems of characterisation of unfair competition arise mainly in determining the relationship to: a) the general rule in Article 4; b) defamation and its exclusion from scope in Article 1(2)(g); c) intellectual property and Article 8; and d) restrictions of competition in Article 6(3). We will come back in particular to 73

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Unfair Competition and Acts Restricting Free Competition the relationship between Article 6(1) and (2) on unfair competition and Article 6(3) on restrictions of competition. B.

Restrictions of Competition

There is a definition of what constitutes a restriction of competition in recital 23, which refers to ‘prohibitions on agreements between undertakings, decisions by associations of undertakings and concerted practices’ and ‘the abuse of a dominant position’ and explicitly to Articles 81 and 82 EC and the law of the Member States. The definition is wide and its main purpose is to include actions for damages for violations of EC antitrust law within its scope. A question that begs an answer is whether actions for damages by aggrieved competitors against the recipient of unlawful state aid would fall under Article 6(3) or under the general rule in Article 4. Both antitrust and state aid are under the same chapter, viz. ‘rules on competition’ in the EC Treaty and serve the same purpose. It would, therefore, make sense to apply the same choice-of-law rule. C.

Unfair Competition or Restriction of Competition or Both?

There are a number of situations in which a particular behaviour could violate rules against unfair competition as well as rules against restrictions of competition.74 Examples would include various kinds of unfair price competition or a concerted boycott. It is clear from recital 9 to Regulation 1/2003 that a parallel application of national rules against unfair competition and Community antitrust law is foreseen.75 Against this background it is not likely that the European Court of Justice would give the two concepts an interpretation that would exclude a certain amount of overlapping. If and when there is an overlap, and when this overlap would lead to a difference in the applicable law, this will have to be accepted as an unfortunate consequence of the drafting of the rule.76 The applicant will have the possibility to base his claim on either rules against unfair competition or restrictions of competition (or both) according to what is most favourable to him. This will largely depend on the standpoint of the applicable law on issues such as standing, calculation of damages etc. The case in which an applicant in one and the same action will base his claim on both unfair competition and antitrust, and this would lead to the application of different laws for the two torts, will most likely be rare, but is conceivable.77 74 See GERBER D. J., Law and Competition in Twentieth Century Europe: Protecting Prometheus, Oxford 1998, at p. 34 et seq. for the roots of European laws against restrictions of competition in concepts of unfair competition. 75 Supra (note 68). 76 Hoping that this would not become the case BASEDOW J. (note 21), at p. 240. 77 See for Swiss law VISCHER F. (note 29), at p. 1540 et seq. (para. 10) and for German law DREXL J. (note 30), at p. 800 (para. 111).

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THE LAW APPLICABLE TO CROSS-BORDER DAMAGE TO THE ENVIRONMENT A COMMENTARY ON ARTICLE 7 OF THE ROME II REGULATION Thomas KADNER GRAZIANO∗

I. II. III. IV. V. VI.

VII.

Freedom of Choice (Art. 14) Law of the Country in which the Damage Occurs (Art. 7, First Part) Option to Choose the Law of the Country in which the Event Giving Rise to the Damage Occurred (Art. 7, Second Part) Injunctions Effects of Administrative Authorisations Abroad The Qualification of Claims by Public Authorities A. The Problem: Clean-Up Costs Incurred by Public Authorities B. ‘Civil Matters’ in the Sense of the Brussels I and Rome II Regulations 1. Preliminary Observations 2. Proposal for a Solution Conclusion

Under the Rome II Regulation, several connecting factors come into play for determining the law applicable to cases of cross-border damage to the environment.1 The following contribution presents these connecting factors and undertakes to provide some guidelines for their interpretation and application (I-IV). The contribution further addresses some highly topical issues, such as the effects that administrative authorisations permitting polluting activities under foreign administrative law may have on claims for cross-border environmental damage (V), and the question of whether claims for the recovery of clean-up costs incurred by public authorities fall under the Brussels I and Rome II Regulations (VI). Under many domestic liability systems, cases of environmental liability are governed by strict liability. Recital 11 of the Rome II Regulation makes sure that ∗ Professor of Law, University of Geneva; Visiting Professor at the University of Exeter, School of Law (2007-2008). 1 For the solutions in force in Europe prior to the entry into force of the Rome IIRegulation, see KADNER GRAZIANO TH., Gemeineuropäisches Internationales Privatrecht, Tübingen 2002, p. 236 et seq. and 194 et seq.; KADNER GRAZIANO TH., Europäisches Internationales Deliktsrecht, Tübingen 2003, p. 62 et seq. and p. 50 et seq.; KADNER GRAZIANO TH., La responsabilité délictuelle en droit international privé européen, Bâle 2004, p. 60 et seq. and p. 50 et seq.

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Printed in Germany

Thomas Kadner Graziano ‘for the purposes of this Regulation non-contractual obligations’ are to be ‘understood as an autonomous concept’ and that the ‘conflict-of-law rules set out in this Regulation […] also cover non-contractual obligations arising out of strict liability’.

I.

Freedom of Choice (Art. 14)

According to Art. 14 of the Rome II Regulation, the parties may agree to submit their non-contractual obligations to the law of their choice. Parties in cross-border environmental disputes may therefore firstly consider reaching an agreement as to the law applicable to their relationship. The first task for the Courts will therefore be to examine if a choice of law has been made under Art. 14. In what is probably the most famous precedent in cross-border environmental case-law in Europe, the case Bier v. Mines de Potasse d´Alsace, the Dutch claimant and the French defendant chose Dutch law to govern their relationship before the courts in the Netherlands.2 They hereby made sure that the Dutch court of appeal and the Dutch supreme court (Hoge Raad) would have the capacity to review the application of the law, which under Dutch law is possible where Dutch law is applied but not where a case is governed by foreign law (i.e. French law).3

II.

Law of the Country in which the Damage Occurs (Art. 7, First Part)

If the parties do not reach an agreement on the applicable law, the objective connecting factors of the Rome II Regulation apply. Under the first part of Art. 7, which refers to the general rule for complex torts in Art. 4(1), a claim ‘arising out of environmental damage or damage sustained by persons or property as a result of such damage’ is governed by ‘the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur’. There are many arguments in favour of applying the law of the country in which the damage occurs. Victims will usually expect to be compensated according to the standards of the law of the place where their rights and interests are damaged and consider this solution to be just and equitable. Under this solution, all 2 3

ECJ Case 21/76 Bier v. Mines de Potasse d'Alsace [1976] ECR 1735. See Rechtbank Rotterdam 8. 1. 1979, Nederlandse Jurisprudentie 1979, n° 113

at 15.

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Law Applicable to Cross-Border Damage to the Environment victims that suffer damage in the same country are treated equally. Persons who cause damage in the same country are also treated equally, regardless of the place from which they are acting4. Under this rule, if, for example, an Italian company spills poisonous chemicals into the Mediterranean that later cause damage to the natural environment and, e.g., to the fishing and the tourism industries in Corsica5, damage claims will be governed by the law of the place where the damage occurred, i.e. by French law. If a British ferry, a Swedish vessel or a Romanian oil-tanker lose containers with toxic chemicals or other polluting substances and hereby cause damage to the beaches in the Netherlands, or if a ship sinks in a storm in the North Sea and blocks Dutch waterways, the claims for clean-up or removal costs will be governed by Dutch law.6 Under the Rome II Regulation, the application of the law of the country in which the damage occurred does not depend on whether the damaging effect in this country was foreseeable for the defendant, and rightly so. Even though obligations arising out of nuclear damage are not covered by the Rome II Regulation7, the accident in Chernobyl in 1986 has made it perfectly clear that emissions can have very far-reaching damaging effects on the environment; effects can cross numerous national boundaries. In a period in which we are becoming increasingly aware of the effects of global warming, foreseeability is no longer an issue in environmental damage claims.8

See, with further references, KADNER GRAZIANO TH., Europäisches Internationales Privatrecht (note 1), p. 255 and 213 et seq.; LEIBLE S./ENGEL A., 'Der Vorschlag der EGKommission für eine Rom II-Verordnung', in: Europäische Zeitschrift für Wirtschaftsrecht 2004 7-17, p. 10. 5 See the case scenario in Tribunal de grande instance de Bastia 8. 12. 1976 (Montedison), Recueil Dalloz Sirey 1977, Jur. 427; Cour d'appel de Bastia 28. 2. 1977, Riv. dir. int. priv. proc. 1978, 189; Cour de Cassation 3. 4. 1978, Rev. crit. dr. int. pr. 1979, 858. 6 See the case scenarios in Hof 's-Gravenhage 25. 6. 1996 (Atlantic Steam Navigation t. Staat, or: Gaelic Ferry), Nederlands Internationaal Privaatrecht (NIPR) 1997, n° 211; Rechtbank’s-Gravenhage 7. 3. 1990, NIPR 1991, 163 (Staat t. Gorthon Lines); Rechtbank Rotterdam 15. 3. 1991, Nederlandse Jurisprudentie 1992, n° 91. 7 Art. 1(2)(f) of the Rome II-Regulation. 8 For a critical view on the element of foreseeability, see also VON HOFFMANN B., in: STAUDINGER J., Kommentar zum BGB, Art. 38-42 EGBGB, Neubearbeitung 2001 by VON HOFFMANN B., Berlin 2001, Art. 40 n° 7. For more details and arguments, see KADNER GRAZIANO TH., Europäisches Internationales Privatrecht (note 1), p. 255 et seq. 4

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III. Option to Choose the Law of the Country in which the Event Giving Rise to the Damage Occurred (Art. 7, Second Part) According to the first part of Art. 7 of the Rome II Regulation together with Art. 4(1) to which it refers, the law of the country in which the damage occurred applies. The second part of Art. 7, however, offers the person seeking compensation a unilateral option ‘to base his or her claim on the law of the country in which the event giving rise to the damage occurred’. The European legislator has thus, in derogation from the general rule of Art. 4(1) of the Rome II Regulation, and contrary to the rules governing all other complex torts, provided to apply a rule of ubiquity for cross-border environmental damage. According to the second part of Art. 7, the harmful event is supposed to occur both at the place where it originated from (the place of acting of the tortfeasor) and the place where the protected interest was damaged. The person seeking compensation can opt for the application of the law of the place of acting. This law will then apply instead of the law of the place where the damaging result occurred. In Bier v. Mines de Potasse d´Alsace, the ECJ adopted the rule of ubiquity for the purpose of international jurisdiction under Art. 5.3 of the Brussels I Convention9 and in order to determine the ‘place where the harmful event occurred’. Since the court’s decision in Bier, the rule of ubiquity has been well known throughout Europe. Insofar as it is used to determine the applicable law, the rule is, however, a novelty for many European States.10 The rule of ubiquity has the effect of discriminating against actors who cause damage across borders. Actors who have their place of business in the country in which the damage occurs are submitted to the tort law of this country and this country alone. However, under the rule of ubiquity in the second part of Art. 7, actors causing exactly the same damage in exactly the same place but acting from abroad, can be submitted to the liability standards of either of the two countries, at the choice of the person seeking compensation. In the years preceding the adoption of the Rome II Regulation, numerous authors in different European countries argued in favour of the rule of ubiquity for environmental damage despite the fact that they (sometimes fervently) rejected

The Brussels I Convention is no longer in force except in Denmark. Article 5.3 is now included in the Brussels I Regulation (Regulation 44/2001). 10 The rule of ubiquity was first introduced by German courts in the late 19th century and was later adopted by the German legislator (Art. 40 sect. 1 of the EGBGB) as well as in Italy (Art. 62 sect. 1 of the Italian PIL Act), in the Czech and Slovakian Republics (§ 15 of the respective PIL Acts), in Hungary (§ 32 sect. 1 and 2 of the law-decree on PIL), in Estonia (§ 164 sect. 3 of the Law on the Principles of the Civil Code), in Slovenia (Art. 30 sect. 1 of the PIL Act), in Russia (Art. 1219 sect. 1 of part III of the Civil Code). For environmental torts it was also adopted in Switzerland (Art. 138 of the PIL Act). 9

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Law Applicable to Cross-Border Damage to the Environment rules of ubiquity for other complex torts.11 The European legislator followed these opinions. However, it is clear that the legislator was well aware that the second part of Art. 7 establishes an exception to the general principle governing complex torts under the Rome II Regulation. This explains why, in Recital 25 of the Rome II Regulation, the European legislator expressly provides several arguments for having chosen a rule of ubiquity in Art. 7 including making a reference to Art. 174 of the EC Treaty.12 In order to justify the rule of ubiquity in Art. 7 of the Rome II Regulation, three different arguments are presented. Firstly, the legislator refers to the importance of the environment as confirmed by the EC Treaty. Secondly, it highlights the precautionary principle and the preventive function of liability laws in cross-border situations which, according to the legislator, is at its most effective if the most severe of the possible liability regimes in a given case is applied. Finally, the legislator invokes the ‘polluter pays’ principle. According to the European legislator these arguments ‘fully justify the use of the principle of discriminating in favour of the person sustaining the damage’ in the second part of Art. 7. In doing this, the legislator has openly and transparently balanced these reasons against the principle of equal treatment of potential polluters and has given priority to the former. Before Rome II, in countries in which rules of ubiquity were in force, the courts more often than not applied the law of the country in which the damage occurred. In claims for environmental damage however, the courts repeatedly applied the law of a country in which the event giving rise to the damage occurred (i.e. the law of the place where the tortfeasor had acted) which was more beneficial for the person seeking compensation. For example, in Germany, the courts have repeatedly decided claims for environmental damage caused in Germany but originating from sources in France, not under German law but under French law which 11 See, e.g., BEAUMONT P., ‘Private International Law of the Environment’, in: Judicial Law Review 1995, p. 35 et seq.; BETLEM G./ BERNASCONI CH., ‘European Private International Law, The Environment And Obstacles for Public Authorities’, in: Law Quarterly Review 2006, 124 at p. 138 et seq.: ‘race to the top’ and ‘levelling up’; DROZ G., ‘Regards sur le droit international privé comparé’, Recueil des Cours, Vol. 229 (1991) 9 at 300; JESSERUN D'OLIVEIRA H.U., ‘Le Bassin du Rhin, sa pollution et le droit international privé’, in: La réparation des dommages catastrophiques - les risques technologiques majeurs en droit international et en droit communautaire, Travaux des XIIIes Journées d'études juridiques, Brussels 1990, p. 165 et seq., 167 et seq.; VON BAR CH., Internationales Privatrecht, Vol. II, München 1991, n° 668 f.; KROPHOLLER J., Internationales Privatrecht, 6th ed., Tübingen 2006, § 53 IV 2. a); WANDT M., ‘Deliktsstatut und internationales Umwelthaftungsrecht’, in: RSDIE 1997, 147 at 174; VON HEIN J., Das Günstigkeitsprinzip im Internationalen Deliktsrecht, Tübingen 1999, p. 121 et seq. – Contrast with, e.g., KADNER GRAZIANO TH., Gemeineuropäisches IPR (note 1), p. 252 et seq.; LEIBLE S/ENGEL A. (note 4) p. 10: in favour of the application of the law of the country in which the damage occurred. 12 Title XIX of the EC Treaty, Environment, Art. 174(2) provides: ‘Community policy on the environment shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Community. It shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay’.

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Thomas Kadner Graziano was more favourable to the victim.13 The second part of Art. 7 of the Rome II Regulation introduces this option, offering this possibility from January 2009 on at a European-wide level. The ‘question of when the person seeking compensation can make the choice of the law applicable’ should, according to Recital 25 of the Rome II Regulation, ‘be determined in accordance with the law of the Member State in which the court is seized’. So, for the time being, the Regulation does not give the ECJ the power to develop common, autonomous criteria relating to the deadline by which a choice must be made when using the option under the second part of Art. 7 but rather refers this issue to the lex fori. This choice is understandable given that, except for Art. 40 sect. 1(3) of the German EGBGB14, no national legislator had explicitly dealt with this issue in any PIL Act prior to the adoption of the Rome II Regulation. Common European standards were therefore difficult to detect. This referral to the lex fori may, however, lead to some uncertainty as to when the option must be used. Arguably, it could have been left to the courts and ultimately to the ECJ to develop common European standards as for when the choice of law under the second part of Art. 7 has to be made.15

IV. Injunctions Art. 7 of the Rome II Regulation does not make a distinction between claims for damages and claims for other remedies, such as prohibitory or mandatory injunctions. According to Art. 2(2) and Art. 2(3)(a) and (b), the rules of the Rome II Regulation, however, also apply to ‘non-contractual obligations that are likely to arise’, Art. 2(2), and to damage that is likely to occur, Art. 2(3)(a) and (b). In principle, the Regulation therefore governs both compensation and injunctions. In the past, in the field of environmental damage originating from immovable property, injunctive relief was, in some countries, qualified as an issue of property law rather than as an issue of the law of tort or delict.16 Should this also be 13 OLG Saarbrücken 22. 10. 1957, Neue Juristische Wochenschrift 1958, 752; LG Saarbrücken 4. 6. 1961, IPRspr. 1960/61 Nr. 38, confirmed in OLG Saarbrücken 5. 3. 1963, IPRspr. 1962/63 Nr. 38; OLG Karlsruhe 4. 8. 1977, IPRspr. 1977 Nr. 27. 14 The provision reads: ‘Das Bestimmungsrecht kann nur im ersten Rechtszug bis zum Ende des frühen ersten Termins oder dem Ende des schriftlichen Vorverfahrens ausgeübt werden’ (according to this rule, the choice has to be made at an early stage of the procedure before the court of first instance). 15 However, in the end, this was not done. Under the current rule, one can well imagine a situation in which the time period in which this choice must be made has expired under one of the legal systems and not under the other. This may, once again, give incentives for forum shopping. 16 References in KADNER GRAZIANO TH., Europäisches Internationales Deliktsrecht (note 1), p. 60 and fn. 308.

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Law Applicable to Cross-Border Damage to the Environment the case under the Rome II Regulation, these remedies would not qualify as ‘noncontractual obligations’ and would therefore not fall within the scope of the Rome II Regulation. Several reasons can however be put forward for qualifying injunctions in environmental issues as non-contractual obligations (as opposed to obligations under property law) and thus bringing them within the scope of the Rome II Regulation and in particular within the scope of Art. 7. Firstly, in the national legal orders of the Member States of the European Union, the right to compensation and the right to injunctive relief are often closely linked and dependent upon each other. This is why in cross-border situations the two issues should not be treated separately and under different laws but rather be governed by the same law.17 Secondly, taking a comparative look at the existing laws also seems to favour treating both issues under the same law. In those countries in which the issue has been dealt with explicitly, damage claims and injunctions have (finally) been subjected to the laws of the same country. This is true for Germany, where Art. 44 of the EGBGB explicitly submits emissions originating from immovable property to the conflict-of-law rules governing tortious liability18, and it is also the case in Switzerland, where the dominant opinion in legal writing qualifies such issues as belonging to the law of obligations.19 Given the close link between rights for compensation and injunctive relief, the option under the second part of Art. 7 of the Rome II Regulation should not be interpreted as allowing the two remedies to be treated separately, i.e. breaking that link. In principle, it should therefore not be possible to opt for different laws to apply for damages and injunctions.

17 See, e.g., HAGER G., ‘Zur Berücksichtigung öffentlich-rechtlicher Genehmigungen bei Streitigkeiten wegen grenzüberschreitender Immissionen’, in: RabelsZ 1989/53, 293 at 297 et seq.; KERSCHNER F., ‘Zur Haftung nach § 26 Wasserrechtsgesetz und zum Deliktsstatut im IPR’, Juristische Blätter 1983, 337 at 349; WANDT M., in: SZIER 1997, 147 at 174; WOLF U., Deliktsstatut und internationales Umwelthaftungsrecht, Berlin 1995, p. 175 et seq. 18 Art. 44 of the EGBGB refers for ‘Ansprüche aus Beeinträchtigungen, die von einem Grundstück ausgehen’ (emissions that emanate from real property) to Art. 40 sect. 1 of the EGBGB, i.e. the general rule governing torts. 19 BUCHER A./BONOMI A., Droit international privé, 2nd ed., Bâle/Frankfurt a. Main 2004, n° 1113; DASSER F., in: HONSELL H./VOGT N. P./SCHNYDER A., Internationales Privatrecht (Basler Kommentar), 2nd ed., Basel 2007, Art. 138, n° 1; HEINI A., in: GIRSBERGER D./HEINI A./KELLER M./KREN KOSTKIEWICZ J./SIEHR K./VISCHER F./VOLKEN P. (eds.), Zürcher Kommentar zum IPRG, Kommentar zum Bundesgesetz über das internationale Privatrecht (IPRG) vom 18. Dezember 1987, 2nd ed., Zürich 2004, Art. 138 n° 4; DUTOIT B., Commentaire de la loi fédérale du 18 décembre 1987, 4th ed., Bâle/Frankfurt a. Main 2005, Art. 138 n° 4.

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V.

Effects of Administrative Authorisations Abroad

In some countries, in cases in which an administrative authorisation was granted permitting the polluting activity, compliance with the authorisation and with regulatory standards excludes the application of civil law actions altogether. More frequently however, administrative authorisations exclude the possibility to obtain injunctions but do not lead to immunity from damage claims. Under a third type of regime, administrative licences do not affect claims under private law at all.20 The effects of an administrative licence depend on the specific administrative regime in question and the effects of licences do not only differ from one country to another but also within one given legal system.21 Where pollution affects parties across national borders, the polluting activity may be covered by a foreign administrative authorisation or licence. The question then is whether and to what extent the licence should be recognised in other countries and whether it excludes the possibility of obtaining civil law remedies for damages or injunctions in neighbouring countries. Examples in which this issue was raised include the claims brought by German landowners before the German courts against the operator of Zurich airport22 and claims brought before the Austrian courts by Austrian farmers against the construction of a nuclear reprocessing plant in Wackersdorf in Germany.23 The effect of foreign administrative authorisations has proved to be a very delicate issue24 and the Rome II Regulation does not provide an explicit answer to this question either. Under the Rome II Regulation, different situations need to be distinguished. If according to Art. 14 of the Rome II Regulation, the parties agree to their relationship being governed by the law of the country in which the event giving rise to the damage occurred (the country of the place of acting), or if the person seeking compensation opts for the law of this country under the second part of Art. 7 of the Rome II Regulation, this law will govern all issues, i.e. damage claims, injunctions and the effect of administrative licences, without any major problems of coordination. If, however, the parties do not reach such an agreement and if the person seeking compensation does not unilaterally opt for the law of the country in which the event giving rise to the damage occurred, the obligations arising out of damage This was the case, e.g., for the French licence in Bier v. Mines de Potasse d'Alsace, see supra (note 3). 21 See, e.g., STALLWORTHY M., ‘Environmental Liability and the Impact of Statutory Authority’, in: Journal of Environmental Law 2003/15, 3 at 16 et seq.; DASSER F., in: HONSELL H./VOGT N. P./SCHNYDER A. (note 19), Art. 138, n° 19 with further references. 22 LG Waldshut/Tiengen, 11. 2. 1982, Umwelt- und Planungsrecht 1983, 14 (Zürich Kloten airport). 23 OLG Linz 15. 6. 1987, Juristische Blätter 1987, 577, and OGH 20. 12. 1988, Juristische Blätter 1989, 239 (nuclear reprocessing plant Wackersdorf). 24 See with further references KADNER GRAZIANO TH., Gemeineuropäisches IPR (note 1), p. 250 et seq., 256 et seq. 20

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Law Applicable to Cross-Border Damage to the Environment to the environment will be governed by the law of the country in which the damage occurred and the effects of the foreign licence on these actions will need to be determined. In such situations, certain courts in Europe adopted the position that, according to the principle of territoriality, administrative licences deploy their effect only within the territory of the state in which they were issued. These courts have consequently completely ignored foreign licences.25 Completely ignoring foreign licences may, however, lead to the judgment not being recognised or enforced in the country in which the licence was issued as such disregard for the licence may be seen as a violation of this country’s public order.26 It is true that tort cases in which foreign judgements were held to violate the public order are very rare in Europe.27 However, even under the Brussels I Regulation such a refusal remains an option (see Art. 27.1 of the Brussels I Regulation).28 Courts in the Netherlands and Austria have adopted a different position as to the effect of foreign licences.29 According to these decisions, foreign administrative authorisations are to be taken into consideration if a) the emissions are in accordance with public international law, if b) the conditions of foreign law to issue such licences are similar to the conditions existing for such licences under the lex fori, and if c) the party seeking compensation or an injunction has had the chance to participate, to be heard and to raise objections in the administrative procedure that led to the issuing of the licence.30 These decisions of Dutch and Austrian courts should be regarded as sources of inspiration for the solution of the problem under the Rome II Regulation. On the level of the substantive law applicable under the Rome II Regulation, licences granted under foreign law should be taken into consideration as local data and a matter of fact if they fulfil the requirements established by the case-law mentioned

25 BGH 10. 3. 1978, IPRspr. 1978, n° 40; OLG Saarbrücken 22. 10. 1957, Neue Juristische Wochenschrift 1958, 752 at 754. 26 OGH 13. 1. 1988, Juristische Blätter 1988, 323 (Chernobyl): ‘Die aufwendige Schöpfung von Urteilen, die nicht mehr sind, als ein wertloses Stück Papier, gehört nicht in den Aufgabenbereich der inländischen Gerichtsbarkeit’ (Translation: It is not the task of the domestic courts to produce judgements that aren't worth more than the paper they are written on.) See for a critical analysis also HAGER G., RabelsZ 1989/53, 293 at 302 et seq.; WANDT M., RSDIE 1997, 147 at 168 et seq. 27 For references, see KADNER GRAZIANO TH, Gemeineuropäisches IPR (note 1), p. 406 et seq. 28 In the case-law of European courts, it seems that no case has ever been reported in which a claim for an injunction against a polluting activity in a foreign country has been successful. On the contrary, there are several cases in which damage claims have been successful. 29 Rechtbank Rotterdam 16. 12. 1983, Nederlandse Jurisprudentie 1984, n° 341 at 8.7; OLG Linz 15.6.1987, Juristische Blätter 1987, 577, and OGH 20. 12. 1988, Juristische Blätter 1989, 239. 30 OLG Linz, Juristische Blätter 1987, 577 at 579.

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Thomas Kadner Graziano above.31 If necessary, the applicable national liability laws would need to be adapted accordingly.

VI. The Qualification of Claims for Compensation by Public Authorities Another question concerns the qualification of claims for compensation for cleanup costs or the costs of preventive measures incurred by public authorities. This issue has become even more important since the 2004 ‘Directive on environmental liability with regard to the prevention and remedying of environmental damage’32 gave the right to recover clean-up costs exclusively to public authorities without providing for specific procedures to bring such claims against parties that have caused such damage from abroad.

A.

The Problem: Clean-Up Costs Incurred by Public Authorities

If a person sustains damage to his health or property as a result of environmental damage, he or she will, under the tort law systems of practically all Member States of the European Union, be entitled to claim compensation under certain circumstances. For situations in which there has been no damage to private property as such, most Member States of the EU grant public authorities the right to take preventive action and, under certain circumstances, grant the right to claim the cost of the clean-up operation from the person who caused the damage. The 2004 European Directive on environmental liability also grants public authorities the right to recover such costs from the person who caused them. The Commission first considered giving similar rights to private parties, in particular to environmental associations which would have been particularly competent and apt 31 See the groundbreaking ideas put forward by: STOLL H., ‘Internationales Sachenrecht’, in: STAUDINGER J., Kommentar zum BGB, Internationales Sachenrecht, Bearbeitung 1996 von Hans Stoll, Berlin 1996, at n° 231 et seq., 237, 240; STOLL H., ‘Diskussionsvotum’, Berichte der Deutschen Gesellschaft für Völkerrecht 32, 1992, p. 372; see also VON BAR CH., IPR (note 11), at n° 717; KREUZER K., Berichte der Deutschen Gesellschaft für Völkerrecht 32, 1992, p. 290 et seq. (an issue of the substantive law of tort, i.e. of the lex causae); the dominant opinion in Switzerland is also in favour of taking foreign licences into consideration at the lex causae level (Datums-Theorie), DASSER F., in: HONSELL H./VOGT N P./SCHNYDER A. (eds.), Kommentar zum schweizerischen Privatrecht, Internationales Privatrecht, 2nd ed., Basel/Frankfurt a. Main 2007, Art. 138 n° 15; BUCHER A./BONOMI A. (note 19), n° 1115; for the Netherlands, see BETLEM G., Civil Liability for Transfrontier Pollution, London/Dordrecht/Boston 1993, p. 178 et seq. 32 Directive 2004/35/CE of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage, OJ L 143/56 of 30. 4. 2004.

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Law Applicable to Cross-Border Damage to the Environment to enforce these rights. The Commission finally decided, however, to rely exclusively on public authorities. If a person has caused damage to the environment across a national border and if a public authority in the country in which the damage occurred intervenes to remedy the damage and claims compensation for such costs, the question then is whether the international jurisdiction and the applicable law are to be determined according to the Brussels I and Rome II Regulations, or whether the issue is a matter of public law and consequently does not fall within the scope of either Regulation. The fact that the Directive on environmental damage gives recovery rights exclusively to public authorities makes the issue of the applicable rules to cross-border actions for the recovery of such costs highly topical today.

B.

‘Civil Matters’ in the Sense of the Brussels I and Rome II Regulations

Whether the Brussels I and Rome II Regulations apply to actions brought by a public authority depends on whether the issue is a ‘civil’ or ‘commercial’ matter in the sense of Art. 1(1) of the Brussels I Regulation and of Art. 1(1) of the Rome II Regulation.

1.

Preliminary Observations

In dealing with this question, several preliminary observations must be made. First of all, the fact that a claim is brought by a public authority does not in itself exclude it from falling into the scope of application of the Brussels I and Rome II Regulations.33 Secondly, the ECJ has, in a well-established line of precedents, ruled that the concept of ‘civil and commercial matters’ in Art. 1(1) of the Brussels I Regulation ‘must be regarded as an independent concept which must be construed with reference first to the objectives and scheme of the [Regulation] and secondly to the general principles which stem from the corpus of the national legal systems’.34 Cases in which ‘the public authority acts in the exercise of its powers’ are excluded from the scope of the Regulation(s).35 Thirdly, according to Recital 7 of the Rome II Regulation, 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.’ The Brussels I, Rome I, and Rome II Regulations should therefore be construed in accordance with one another. What is more, in environmental liability issues the See, e.g., ECJ Case 29/76 LTU v. Eurocontrol, ECR 1976 p. 01541, at n° 4. Since ECJ Case 29/76 LTU v. Eurocontrol, ECR 1976 p. 01541, at n° 3, 5; quote from: ECJ Case 814/79, Netherlands v. Rüffer, ECR 1980 p. 03807, Summary at n° 1. 35 ECJ Case 29/76 LTU v. Eurocontrol, ECR 1976 p. 01541, at n° 4, 5. 33 34

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Thomas Kadner Graziano interpretation of these regulations should also be in accordance with the 2004 Directive on environmental liability. A fourth aspect to be taken into consideration is that Art. 2 of the EC Treaty counts the protection of the environment among the fundamental principles of the EU36 and Art. 174(2) of the EC Treaty expressly adopts the ‘polluter pays’ principle.37

2.

Proposal for a Solution

According to a well-established line of precedents of the ECJ, cases ‘where the public authority acts in the exercise of its powers’ are excluded from the scope of the Regulation(s).38 In several decisions, the ECJ has given guidelines as to when a public authority is to be regarded as acting in the exercise of its powers. In the case Netherlands v. Rüffer39 a German boat had collided with a Dutch motor vessel and had sunk in a public waterway. An international treaty between Germany and the Netherlands provided that the Netherlands were to be responsible for the ‘removal of wrecks’ in the waterway. The Dutch authorities had the wreck removed by a Dutch company and claimed compensation for the removal costs from the German owner of the sunken vessel. The Dutch Hoge Raad (Supreme Court) referred the issue to the ECJ in order to clarify whether the claim for redress was a ‘civil and commercial matter’ under Art. 1 of the Brussels I Convention (now: the Brussels I Regulation). The ECJ held that if a State removes ‘a wreck in a public waterway, administered by the State responsible in performance of an international obligation and on the basis of provisions of the national law which, in the administration of that waterway, confer [the State] the status of public authority in regard to private persons’, the State claiming recovery of such costs acts ‘in the exercise of its public authority powers’.40 The fact that the State brought a claim for Part One, Principles, Art. 2 of the EC Treaty reads: ‘The Community shall have as its task […] to promote throughout the Community […] a high level of protection and improvement of the quality of the Environment […]’. 37 Title XIX, Environment, Article 174(2) reads: ‘Community policy on the environment shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Community. It shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay.’ In the arguments for the rule of ubiquity in of Art. 7 of the Rome II Regulation, the European legislator expressly refers to Art. 174 of the EC Treaty, see Recital 25 of the Rome II Regulation and the text supra. See also BETLEM G./ BERNASCONI CH., ‘European Private International Law, the Environment and Obstacles for Public Authorities’, in: Law Quarterly Review 2006, 124 at 136. 38 See supra (notes 34 and 35). 39 ECJ Case 814/79, ECR 1980 p. 03807. 40 Supra (note 39), n° 8, 9. For a critical analysis of this case-law, see BETLEM G./ BERNASCONI CH. (note 37), at 132 et seq. 36

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Law Applicable to Cross-Border Damage to the Environment damages once the removal had been effected did not, according to the ECJ, change the character of the measure taken and did not have the effect that it was to be qualified as a civil matter. In later cases, the ECJ took a broader view as to the notion of ‘civil or commercial’ matters in the sense of Art. 1(1) of the Brussels I Regulation. In 1993, the ECJ had to decide on a damage claim brought by the parents of a pupil against a German state-school teacher for having caused the death of their son on a school trip to Italy. The teacher was supposed to have been supervising the pupils, had breached this duty and as a result caused the death of the claimants’ son. In this case, the ECJ held that the claim was a ‘civil matter’ even though the teacher was acting in the capacity of civil servant and even though the case was covered by a scheme of social insurance under public law that, according to German law, excluded a direct damage claim against a teacher.41 The court argued that ‘a teacher in a State school assumes the same functions vis-à-vis his pupils […] as those assumed by a teacher in a private school’ and held that ‘the right to obtain compensation for injury suffered as a result of conduct regarded as culpable in criminal law is generally recognized as being a civil law right’.42 In recent judgements the ECJ held that actions against individuals for the recovery of expenses made by public authorities may well fall within the scope of the Brussels I Convention/Regulation.43 In the Baten case, a community in the Netherlands had paid monthly contributions to a woman under Dutch social assistance laws. These laws provided a right to recovery for the amounts paid ‘from persons who do not, or do not fully, meet their maintenance obligations following a divorce’ and, accordingly, the Dutch community claimed recovery from the woman's ex-husband, living in Belgium. The ECJ held that such an action for recovery of sums paid by public authorities, as long as exercised in accordance with the rules and principles governing actions for recovery between private parties, is well within the scope of application of the Brussels I Regulation.44 If this principle is applied to the field of environmental law, an action for recovery of expenses incurred for cleaning up the environment or for preventing harm should be regarded as a ‘civil matter’ as long as the recovery is in accordance with the principles governing the right of recovery between private parties. Moreover, in the field of environmental law, the European legislator has created important new landmarks that today have to be taken into consideration when constructing the concept of ‘civil and commercial matters’ in the European conflict of laws. A first landmark is the 2004 Directive on environmental liability. On the one hand, Art. 3(3) of the Directive provides that ‘[w]ithout prejudice to relevant ECJ Case C-172/91 Volker Sonntag, ECR 1993 I-01963 at n° 20-22. Supra (note 41), at n° 19. 43 ECJ Case C-271/00 Baten, ECR 2002 I-10489. 44 Supra (note 43), at n° 34-37. See also BETLEM G./BERNASCONI CH. (note 37), at 134: ‘The parallel with the Rüffer scenario where a right of recourse for cost recovery of removal of a wreck was at issue is striking’. 41 42

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Thomas Kadner Graziano national legislation, this Directive shall not give private parties a right of compensation as a consequence of environmental damage or of an imminent threat of such damage.’ On the other hand, Art. 15(3) of the Directive is based on the idea that a State can also recover costs incurred under the Directive against parties having caused the damage from abroad and being domiciled in a foreign country. Art. 15(3) provides that ‘[w]here a Member State identifies damage within its borders which has not been caused within them […] it may seek, in accordance with this Directive, to recover the costs it has incurred in relation to the adoption of preventive or remedial measures’.45 The Directive does not establish a specific procedure for the recovery of such costs but states in its Recital 10(2) that ‘[t]his Directive, which does not provide for additional rules of conflict of laws when it specifies the powers of the competent authorities, is without prejudice to the rules on international jurisdiction of courts as provided, inter alia, in Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters’, i.e. the Brussels I Regulation. Consequently, according to the European legislator, the right to claim for the recovery of clean-up costs or the cost of preventive measures granted to public authorities under the 2004 Directive on environmental liability need, as far as cross-border claims are concerned, to be constructed as matters falling within the scope of the Brussels I Regulation. Since there is no special regime to enforce cross-border compensation of public authorities, such rights under the Directive would otherwise simply not be enforceable and would risk being a dead letter.46 There are further arguments in support of this view: In certain cases, preventive measures and damage claims following harm to the environment can be brought by individuals or, in some countries, by environmental associations. Such claims are, without any doubt, civil claims in the sense of the Brussels I and Rome II Regulations. The European legislator could very well have extended such remedies when drafting the 2004 Directive on environmental liability. The European legislator considered this option but finally decided to rely exclusively on public authorities. In the 2004 Directive however, the legislator, combined elements of public law with those of private law which has led to the Directive having a somewhat hybrid character.47 The fact that the rights for compensation and to recovery 45 Art. 15(3) of the Directive reads: ‘Where a Member State identifies damage within its borders which has not been caused within them it may report the issue to the Commission and any other Member State concerned; it may make recommendations for the adoption of preventive or remedial measures and it may seek, in accordance with this Directive, to recover the costs it has incurred in relation to the adoption of preventive or remedial measures’. 46 See BETLEM G./BERNASCONI CH. (note 37), at 128. 47 See, e.g., DE SADELEER N., ‘La directive 2004/35/CE relative à la responsabilité environnementale: avance ou recul pour le droit de l’environnement des Etats Membres?, in: VINEY G./DUBUISSON B. (eds.), Les responsabilités environnementales dans l’espace européen, Bruxelles/Zürich/Paris 2006, n° 59: ‘Il ressort de notre analyse que la directive 2004/35/CE s’inscrit davantage dans la perspective d’une redéfinition des mesures de police

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Law Applicable to Cross-Border Damage to the Environment of clean-up costs could very well have also been granted to individuals and to environmental associations but were not shows that such measures and claims do not necessarily belong to the sphere where the public authority acts ‘in the exercise of its public powers’ vis-à-vis the polluter and that they are well beyond the sphere of ‘acta iure imperii’. The task of cleaning up the environment (and claiming compensation for the clean-up costs) can be handed over to private parties, just as teaching pupils can be left to private schools.48 Moreover, since the adoption of the Rome II Regulation, several arguments following from this Regulation support this view. Recital 9 as well as Art. 1(1) of the Rome II Regulation exclude ‘administrative matters or […] the liability of the State for acts and omissions in the exercise of State authority (acta iure imperii)’ from the scope of the Regulation. As we have just seen, compensation for environmental harm in cross-border cases is neither an administrative matter nor does it follow from acta iure imperii. Probably the strongest argument in favour of applying the Brussels I and Rome II Regulations to claims brought by public authorities in the field of environmental damage follows from Recital 24 and the first part of Art. 7 of the Rome II Regulation. Recital 24 defines ‘environmental damage’ as an ‘adverse change in a natural resource, such as water, land or air, impairment of a function performed by that resource for the benefit of another natural resource or the public, or impairment of the variability among living organisms’. The Rome II Regulation thus defines ‘environmental damage’ independently of any damage to rights of the individual such as life, health or, in particular, of property. The first part of Art. 7 of the Rome II Regulation confirms that the Regulation applies independent of any damage to property rights of the individual: Art. 7 clearly draws a distinction between ‘a non-contractual obligation arising out of environmental damage’ and a non-contractual obligation arising out of ‘damage sustained by persons or property as a result of such damage’ – and it expressly covers both scenarios. Consequently, the Rome II Regulation covers not only damage to private property rights sustained via the environment, but covers also damage to the environment itself. Currently, individuals can bring claims for pure environmental damage only in certain cases and, on a European-wide level, only to a limited extent.49 The recovery of compensation for damage to the environment through remedies available to private parties is currently only patchy at best. As we have seen, the 2004 Directive on environmental liability in its Art. 11 grants the right to recover damages for pure administrative et, plus particulièrement, de la prise en charge de leur coût par les exploitants. Pour arriver à cette fin, le législateur communautaire a manifestement emprunté largement aux concepts de la responsabilité civile, ce qui a parfois conduit à un étonnant mélange des genres’. 48 See the ECJ’s argument in the Case C-172/91 Volker Sonntag, supra (note 41). 49 For details and different proposal for solutions, see GODT CH., Haftung für ökologische Schäden, Berlin 1997; LEONHARD M., Der ökologische Schaden. Eine rechtsvergleichende Untersuchung, Baden-Baden 1996; KADNER TH., Der Ersatz ökologischer Schäden – Ansprüche von Umweltverbänden, Berlin 1995; SEIBT CH., Zivilrechtlicher Ausgleich ökologischer Schäden, Tübingen 1994.

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Thomas Kadner Graziano environmental harm exclusively to public authorities. As the Rome II Regulation will also cover pure environmental harm, the intention of the legislator of the Rome II Regulation must clearly have been that these claims shall be regarded as ‘civil matters’ that fall within the scope of application of both the Rome II and Brussels I Regulations. Therefore, damage claims brought by public authorities against private parties for cross-border damage to the environment are to be regarded as ‘civil matters’ under both the Rome II Regulation and the Brussels I Regulation. The ECJ will have to take these recent groundbreaking legislative decisions into account when interpreting the notion of ‘civil matters’ in the Brussels I and Rome II Regulations in future cases.50

VII. Conclusion Prior to the entry into force of the Rome II Regulation, several fundamentally different rules were applied to determine the law applicable to cross-border environmental torts. Art. 7 of the Rome II Regulation achieves legal certainty as to the applicable law in cases of damage to the environment for actions for damages and actions for injunctive relief on a European-wide level. Given the fact that the Brussels I and Rome II Regulations have to be constructed in accordance with one another and with the Directive on environmental liability, Rome II does not only contribute to legal certainty as to the applicable law but also leads to important clarifications in matters of international jurisdiction and the recognition and enforcement of judgements in Europe.

50 See also BETLEM G./BERNASCONI CH. (note 37), at 150: ‘we call upon courts to interpret the notion of ‘civil and commercial matters’ so as to include civil law claims by public authorities for the protection of the environment’.

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INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS A COMMENTARY ON ARTICLE 8 OF THE ROME II REGULATION Nerina BOSCHIERO∗

I. II. III. IV. V. VI. VII.

Introduction The Reasons Advocated for Adopting a Uniform Choice-of-Law Rule The Absence of a Real ‘Public’ Private International Law for IPRs The ‘Need’ for an Uniform Conflict-of-Law Rule at the Community Level The Rationale of the Norm in Absence of a Real Risk of Forum Shopping General Features of the Special Rule Conclusion

I.

Introduction

Article 8 of Regulation (EC) No 864/2007 on the Law Applicable to Non-Contractual Obligations – universally known as the Rome II Regulation1 – which lays down a special Community rule for non-contractual obligations arising out of an infringement of intellectual property rights,2 represents the most recent expression

∗

Professor of Private International Law, University of Milan. In O.J. 2007 L. 199, 31 July 2007, p. 40 et seq. The Regulation shall apply from 11 January 2009 (except for article 29, which shall apply from 11 July 2008) in all the Member States (except Denmark, which did not take part in its adoption and, therefore, is not subject to its application (Recital No. 40). 2 The norm follows a unitary ‘holistic’ approach to the issue, only distinguishing between intellectual property rights granted under national law and ‘unitary’ Community intellectual property rights. The applicable law for the former is the universally acknowledged principle of the lex loci protectionis, meaning the law of the country for which protection is claimed. As to the latter, Article 8 paragraph 2 introduces a special choice-of-law rule to fill the gaps left by Community legislation, referring to the law of the country in which the act of infringement of the unitary Community rights was committed (lex loci delicti commissi). Paragraph 3 does not allow the parties to agree on which law will govern their rights and obligations resulting from an intellectual property right infringement, either before or after the infringement. 1

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Nerina Boschiero of a truly regional level ‘public private international law’ for intellectual property.3 The new Regulation has in fact been enacted by the European Community, a unique example of Regional Organization that according to the ECJ constitutes a ‘new legal order’ in international law,4 pursuant to a long series of political and institutional decisions taken by the European Council5 and further endorsed by the Community Institutions (Commission, Council and Parliament).6 The Community’s competence to adopt measures in matters of private international law is 3 For this expression see DINWOODIE G.B., ‘Developing a Private International Intellectual Property Law,’ Draft prepared for Northwestern Colloquium, October 12, 2007, pp. 2, 5 available at . 4 See ECJ, Van Gend & Loos v. Administratie der Belastingen, of 5 February 1963, in: Rec. 1963, p. 3, and Costa v. Enel, Order of 3 June 1964, in: Rec. 1964, p. 1194. 5 See the Presidential conclusion of 16 October 1999 during the Tampere European Council, points 28 to 39, endorsing the principle of mutual recognition of judgments and other decisions of judicial authorities as the ‘cornerstone’ of judicial cooperation in the Union, as well as the ‘Hague Programme’ (adopted by the European Council on 5 November 2004), which expressly required the Community to actively pursue the ‘harmonization’ of the Member States’ conflict-of-law rules regarding non-contractual obligations, in O. J. C 53, 3 March 2005, p. 1 et seq. 6 See the ‘Action Plan’ of the Council and the Commission on how best implement the provisions of the Treaty of Amsterdam on an area of freedom, security, and justice, in: O. J. C 19, 23 November 1999, p. 1 et seq.; see also the ‘Joint Commission and Council programme of measures to implement the principle of mutual recognition of decisions in civil and commercial matters,’ in: O. J., C 12, 15 November 2001, p. 1 et seq. On the historical background of the Regulation and the reconstruction of the efforts at the European level to codify conflict-of-law provisions applicable to non-contractual obligations, see the Explanatory Memorandum to the Proposal for a Regulation of the European Parliament and Council on the Law Applicable to Non-Contractual Obligations (‘Rome II’), COM (2003) 427 final, 22 July 2003, pp. 2-4. See also the following comments on the Proposal: DE VAREILLES-SOMMIÈRES P., ‘Quelques observations sur l’avant-projet de proposition de règlement du Conseil sul la loi applicable aux obligations non contratuelles ‘Rome II’, in: FUCHS A., MUIR WATT H., PATAUT E. (sous la dir. de), Les conflits de lois et le système juridique communautaire, Paris 2004, p. 185 seqq.; KREUZER K., ‘La Comunitarizzazione del diritto internazionale privato in materia di obbligazioni extracontrattuali (‘Roma II’)’, in: PICONE P. (ed.), Diritto internationale privato e diritto comunitario, Padova 2004, p. 421 seqq.; DREXL J., ‘The Proposed Rome II Regulation: European Choice of Law in the Field of Intellectual Property’, in: DREXL J., KUR A. (eds.), Intellectual Property and Private International Law, Heading for the Future, Oxford and Portland, Oregon 2005, p. 151 seqq.; BARIATTI S., ‘La futura disciplina delle obbligazioni non contrattuali nel quadro della comunitarizzazione del diritto internazionale privato’, in: Riv. dir. int. priv. proc. 2005, p. 5 seqq.; CARELLA G., ‘La disciplina internazionalprivatistica delle obbligazioni da fatto lecito nella proposta di regolamento ‘Roma II’, ibidem, p. 25 seqq.; BASEDOW J., DREXL J., KUR A. & METZGER A. (eds.), Intellectual Property in the Conflicts of Laws, Tübingen 2005; MALATESTA A. (ed.), The Unification of Choice of law Rules on Torts and Others NonContractual Obligations in Europe, The Rome II Proposal, Padova 2006; SYMEONIDES S. C., ‘Rome II and Tort Conflicts: A Missed Opportunity’, in: 56 Am. J. Comp. L. 2008, pp. 146; EDITORIAL COMMENTS, ‘Sometimes it takes thirty years and even more…’, in: CML. Rev. 2007, pp. 1567-1569.

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Infringement of Intellectual Property Rights based on an international agreement: the Treaty establishing the European Community, as amended by the Treaty of Amsterdam and the Nice Treaty.7 Article 65 (which is referred to in Article 61 (c)) expressly allows for the adoption of measures ‘promoting the compatibility of the rules applicable in the Member States concerning the conflict of laws and of jurisdiction’ (lett. b) ‘insofar as necessary for the proper functioning of the internal market’ (first part of Article 65).8 The new European conflict-of-law rule on non-contractual obligations arising out of an infringement of intellectual property rights has been enacted for a ‘public purpose’: to meet the ‘need’ created by the proper functioning of the internal market. According to the Community Institutions, this need demands that ‘the conflict-of-law rules in the Member State (…) designate the same national law irrespective of the country of the court in which an action is brought’ (Recital No 6).9 The ratio behind this latest effort to unify the tort based conflict-of-law rules of the Member States is, therefore, the same that inspired all previous Community initiatives in the field of private international law: to enhance the mutual trust among the Member States on which the mutual recognition principle of the Union is based. Given the fact that the ‘Brussels I’ Regulation – which superseded the Brussels Convention – still contains a number of options enabling claimants to bring their proceedings in one Member State rather than another, the absence of any unification of the private international governing non-contractual obligations in civil and commercial matters in the Community has been perceived as favouring forum shopping.10 Therefore, in light of the relevant differences in the substantive scope of the Brussels I Regulation and the current Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I)11 that will supersede the Rome Convention, the In O.J. C 325, 24 December 2002, p. 1 et seq., particularly p. 57 et seq. In general see BOSCHIERO N., ‘La cooperazione giudiziaria comunitaria in materia civile e commerciale’, in: Enciclopedia del diritto, aggiornamento 1, Milano 2007, p. 349 seqq. 8 The second limitation, posed by Article 65, which requires that those measures have ‘cross-border implications’, seems superfluous, since conflict of laws is by definition devoted to cases containing foreign elements. 9 It must be recalled that in its Owusu judgment (case C-281/02, 1 March 2005, in: Rec. 2005, p. I-1383) the Court of Justice had already expressed itself in favor of a Community competence, related to the proper functioning of the internal market, to enact ‘common rules of jurisdiction’ with regard to third countries. For the doubt that erga omnes conflictof-law rules, as those enacted in the Rome II Regulation aren’t really ‘necessary’ for the ‘proper functioning of the internal market,’ and the suggestion that ‘problems and policies involved in jurisdiction and conflicts rules are not necessarily identical; so Owusu is not the end of the story’, see EDITORIAL COMMENTS (note 6) p. 1575. 10 See Explanatory Memorandum (note 6), p. 3. 11 Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I), 15 December 2005, COM (2005), 650 final. The final version of the Rome I Regulation on the law applicable to contractual obligations is now available (in all languages of the EU) in the Register of the Council (doc. PECONS 3691/07 JUSTCIV 334 CODEC 1401of 31 March 2008). According to current sche7

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Nerina Boschiero new common rule on intellectual property rights inserted into the Rome II Regulation should serve the purpose of completing the existing European rules on private international law and international civil procedure. Thus, disputes before the courts of the Member States should be adjudicated according to the same applicable substantive law, irrespective of the country in which the action is brought. This will boost both the foreseeability of solutions and certainty as to the law applicable for settling cross-border disputes within the ‘European area of justice.’12 This essay evaluates whether the Rome II Regulation’s special conflict-oflaw rule for intellectual property right infringement actually fulfils the goal of ‘improv[ing] the predictability of the outcome of litigation, certainty as to the law applicable and the free movement of judgments’ (Recital No. 6) in intellectual property cases. It also assesses the extent to which Article 8 fits ‘into the current mosaic of international and national conflict of laws’ rules’ and ascertains whether or not it solves – or ignores – the difficulties in intellectual property law recently and extensively discussed in doctrine, particularly with regard to (1) the uncertain implications of existing international conventions and (2) the necessity of updating the ‘territorial principle’ to meet the realities of a networked world. Overall, this essay assesses whether it is really possible to speak of an ‘added value’ in Article 8 of the Rome II Regulation.13 The importance of the new rule cannot be underestimated in a panorama characterized by ‘almost’ no ‘public’ private international law for intellectual property. In fact, it represents the most recent expression of a ‘fresh’ awareness of the importance of both closely examining the private international law problems raised by the exercise of intellectual property rights on an international level and developing a truly ‘private international law’ of intellectual property, better adapted than the traditional schemes to the increasingly supranational character of intellectual property rights exploitation.14 The difficulty of formulating appropriate dule the text should be definitely approved by the JHA Council in its meeting of 17/18 April 2008. 12 The complementarity and the need of consistency between this Regulation and the Brussels I Regulation, as well as with the future Community instruments dealing with the law applicable to contractual obligations, is being referred to expressly in Recital No 7. 13 For this expression see PERTEGÁS M., ‘Intellectual Property and Choice of Law Rules’, in: MALATESTA A. (note 6), p. 247 et seq. 14 Private international law and intellectual property law have a long history of neglected relationships. For an historical explanation it is frequently stated that as far back as the late nineteenth century, the vast majority of intellectual property disputes were wholly domestic in nature: ownership or infringement issues did not have the potential of reaching the whole world, concerning mostly parties established within a single national territory and rights conferred by the law of that territory and infringements that took place there. Crossborder or transnational IP disputes involving foreign elements were rare and were resolved by the courts through the standard principles embodied into the multinational treaties establishing an international protection system for intellectual property. Since 1990’s, things have dramatically changed. The international intellectual property law, firmly rooted on the notion of territoriality, started to face new challenges. The digital networked environment

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Infringement of Intellectual Property Rights substantive solutions to be adopted by the international community at large, combined with the persistent diversity of laws in different countries on many issues of intellectual property and the pressing necessity to master the growing problems on a global level,15 have produced as a fundamental consequence the awareness that where harmonization or unification of substantive law cannot be reached, the best approach (or technique) to be followed to avoid contradictory decisions is favouring uniform results in the area of conflict of laws.

II.

The Reasons Advocated for Adopting a Uniform Choice-of-Law Rule

Article 8, which was absent in the preliminary draft prepared in 2002, has been inserted in the Commission’s Proposal published in 2003, after an intense debate that set (in the course of preparatory work) academic contributors against many other commentators (some governments, industry groups, stakeholders). The latter almost unanimously demanded to exclude any IP-issues from the scope of the Regulation in order to preserve the ‘principle of territoriality’ embodied into the nineteenth century international intellectual property system, e.g. the historic multilateral treaties assuring protection for, inter alia, copyright and industrial property, like the Berne Convention for Protection of Literary and Artistic Works of 1886 and the Paris Convention for the Protection of Industrial Property of 1883.16 In the end, the opposite (academic) view prevailed, and a specific article on infringement of IPRs was included in the 2003 Proposal to confirm the ‘territorial principle’ as ‘an exception’ to the basic solutions for non-contractual obligations, which are generally acknowledged (according to the Commission’s opinion, but

(after the satellites) has had the merit to enlighten the ‘international’ aspects of IPRs that have been neglected for too long, by transcending and sweeping the territorialism inherited from the historical roots of intellectual property. It often recognized that the internet has changed the nature of intellectual property litigation by creating the ability for multi-territorial ‘simultaneous’ communication of protected works and trade symbols, resulting in the increased risk of ‘ubiquitous infringements’ of intellectual property rights and, thereby, transnational cases that require courts to adjudicate the effect of foreign activities or to interpret foreign laws. The exponential increase (in the last thirty years) in conflicts involving trans-border elements in the contemporary world characterized by global trade and a global medium, have therefore forced the two areas (private international law and intellectual property law) to confront one another. 15 DESSEMONTET F., ‘International Private Law of Intellectual Property’, in: this Yearbook 2004, p. 70. 16 See the various submissions on the consultations launched by the Commission on the preliminary draft Proposal at .

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Nerina Boschiero without any further ‘explanation’) as incompatible with the specific requirements required in the field of intellectual property rights.17 It is quite impressive that the purpose, the ‘politics,’18 and the effect of the new codified community conflict-of-law rule – resulting from earlier steps that date back almost 30 years (when the E.C. commissioned to Eugen Ulmer an authoritative study on the law applicable to intellectual property rights)19 – has been confined by the Community legislator to a few Recitals and other ‘poor’ materials produced during the Community legislative process, such as an Explanatory Memorandum to an earlier Draft Proposal of the Rome II Regulation.20 This conclusion is especially disconcerting in light of the complexities of the ‘traditional’ territoriality principle21 and the still highly controversial question (in legal doctrine) of how to interpret (from a conflict-of-law’s perspective) the country-of-protection principle, which is universally recognized as underlying the ‘public international law’ of intellectual property. 22 Some explanations of the reasons underlying the choice-of-law approach chosen by the European Institutions for the specific issue of IPR infringement can be found in the Hamburg Group for Private International Law’s Comment of 23 September 2002 on the European Commission’s Draft Proposal, which proved to

See Explanatory Memorandum (note 6), p. 20. On the many facets of the ‘politics’ of intellectual property that dominate any kind of initiatives, including the elaboration and shape of conflict of laws rules and principles in domestic and international contexts, see the exact observations of AUSTIN G. W., ‘Substantive Harmonization and Other Approaches: Intellectual Property Politics and the Private International Law of Copyright Ownership’, in: Brooklyn J. Int’L. 2005, p. 900 seqq. 19 ULMER E., Intellectual Property Rights and the Conflict of Laws, Deventer 1978; ID., La proprietà intellettuale nel diritto internazionale privato, Commissione delle Comunità europee, Bruxelles-Lussemburgo 1980. 20 These materials have been rightly defined as ‘extremely unlikely to prove as helpful’ by DICKINSON A., ‘Cross-Border Torts in EC Court – A Response to the Proposed ‘Rome II’ Regulation’, in: EBLR 2002, p. 370, who also criticized the ‘omission’ of an official Green Paper on the project and/or an Official Report by the experts involved in preparation of this Regulation, explaining in detail the rational of the new Regulation’s rules, like those provided for the Rome, Brussels, and Lugano Conventions, which expanded considerably ‘upon the bare bones of the text’. 21 In general see BOUCHE N., Le principe de territorialité de la propriété intellectuelle, Paris, Budapest, Torino 2002. On the different approaches of scholars, courts, and policymakers to the ‘dominant legal principle’ of territoriality in the choice of law context of copyright infringement see DINWOODIE G. B., ‘Commitments to Territoriality in International Copyright Scholarship,’ Report of the Neuchâtel Study Session of ALAI, 2002, p. 74 seqq. (characterizing these approaches as ‘regressive or nationalistic,’ ‘reformed,’ and ‘internationalist’). 22 For a recent discussion of this point see BOSCHIERO N., ‘Il principio di territorialità in materia di proprietà intellettuale: conflitti di legge e giurisdizione’, in: AIDA 2007, pp. 34-104, particularly p. 42 seqq. 17 18

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Infringement of Intellectual Property Rights be most influential in the negotiation process.23 In suggesting that new Art. 6(a) be inserted into the Draft Regulation on ‘Infringement of Industrial and Intellectual Property Rights,’ the Hamburg Group reminded the European Commission of the wide consensus (at least, among most Member States) for the lex loci protectionis rule (and not the lex loci delicti) as the ‘special’ conflicts rule governing the infringement of national industrial and intellectual property rights, as confirmed by their private international laws. The Group also suggested that no choice-of-rule should have been adopted in contradiction to this principle, which represents the foundation of the substantive public international law on intellectual property, even if not stated ‘in explicit words’ in the international conventions on industrial property rights and still much in dispute regarding other international instruments, in particular for the Berne Convention on copyright law. It is precisely this reason – the persisting uncertainty over the private international law implications of these conventions – that urged the Hamburg Group to support the inclusion of a specific Community choice-of-law rule in favour of the law of the country for which the protection is claimed. The provision governing the relationship of the Rome II Regulation with the existing international conventions (now Article 28), which states that the Regulation ‘shall not prejudice the application of international conventions to which one or more Member States are parties at the time of its adoption and which lay down conflict-of-law rules relating to non-contractual obligations,’ was considered ‘insufficient’ to either ensure the acceptance of a ‘world-wide system of national industrial property rights’ or ‘provide for the non-application of the general rules of the EC Draft proposal.’ 24 The fact that the European Commission simply accepted the Hamburg Group’s reasoning25 does not eliminate the ‘preliminary’ problem that the European

23 HAMBURG GROUP for Private and International Law, ‘Comment of 23 September 2002 on the European Commission’s Draft Proposal for a Council regulation on the Law Applicable to Non-Contractual Obligations,’ in: RabelsZ 2003, p. 1 seqq; also available at: p. 22 et seq., p. 24 et seq. 24 Ibidem, p. 23, p. 25. According to the Hamburg Group, the international conventions in the field of registered rights (the Paris Union Convention for Industrial Property of 1883 in particular) have affirmed without any doubt ‘the authority of the principle of territoriality’, with the private international law consequence that ‘ownership and infringement are a matter for legislation in the country where protection is claimed’. The same argument has been made by the same Group to the Berne Convention, considered analogously built on ‘the principle of territorial protection’, which is mentioned in ‘explicit words’ in its arts. 5. 2 and 14.2 (a). In its comments on art. 8. 1 of the 2003 Draft Proposal, the European Commission adopted this point of view and recalled that both the Paris and Berne conventions are built on the ‘universally recognized principle’ of the lex loci protectionis, and that the rational of the new Community rule is ‘to enshrine’ the same principle. 25 Contra PERTEGÁS M. (note 13), p. 228, in note 14, according to which, by ‘making an explicit choice for a conflict of laws rule for IPR, the European Commission seemed to adhere to the view that no conflict of laws rule may be inferred’ from the existing instruments of substantive public international intellectual property law; ID., ‘Choice of Law and

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Nerina Boschiero Institutions should have investigated more closely: whether or not the international conventions on intellectual property lay down any ‘public’ private international law prescribing rules that compel the choice of a law applicable to the infringement of rights in the field. The answer to this question is obviously necessary to assess the ‘wisdom’ of inserting a new conflict-of-law rule on IPR infringement into the new Community Regulation, as all Member States (bound by or subject to its application) are also parties to these intellectual property international instruments. If the reasoning developed by the Hamburg Group and accepted by the European Institutions is deemed correct, then Article 8.1 – providing for the application of the same rule – could be considered ‘superfluous.’26 Community Regulations do ‘not tak[e] place in a vacuum’:27 if the existing multilateral conventions already solve the private international law issue concerning intellectual property rights infringement by providing for a coherent conflict-of-laws principle, it is rather difficult to see the ‘need’ for a specific Community rule that is in any case destined to be superseded by international norms. Vice versa, if the Hamburg Group and European Commission’s reasoning is wrong, and the international conventions on intellectual property, or at least the Berne convention, provide for a different rule, Articles 8.1 and 8.2 should be considered in flagrant violation of international law. In conclusion, a specific Community choice-of-law rule prescribing the lex loci protectionis principle is justified only if no conflict-of-law rules could be found in the existing instruments of public international law on intellectual property. In any case, regardless of the language of the new Community rules, the new Community specific rule for IPR infringement must comply with the conventional requirements, even if they do not speak to the issue of choice of law.28

III. The Absence of a Real ‘Public’ Private International Law for IPRs Whether and to what extent the substantive principles embodied in these international instruments ordain or imply any particular choice-of-law rules has always been a matter of much debate among academics and national courts, particularly in the field of copyright and related rights, as correctly recognized even by the Ham-

the Forthcoming Rome II Regulation’, in: BASEDOW J., DREXL J., KUR A., METZGER A. (eds.), (note 6), p. 159 seqq. 26 DREXL J. (note 6), p. 157 et seq. 27 EUROPEAN MAX-PLANCK GROUP FOR CONFLICT OF LAWS IN INTELLECTUAL PROPERTY (CLIP), ‘Intellectual Property and the Reform of Private International Law. Sparks from a Difficult Relationship’, in: IPRax 2007, p. 284. 28 FENTIMAN R., ‘Choice of Law and Intellectual Property’, in: DREXL J., KUR A. (eds.), (note 6), p. 133.

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Infringement of Intellectual Property Rights burg Group itself.29 All the international conventions forming the ‘public international law’ of intellectual property are built around three pillars: (1) national treatment (or principle of assimilation), (2) minimum substantive standards of protection, operating in tandem;30 and (3) the principle of independence of national rights.31 Everybody agrees that the core international conventional obligations affirm a notion of territoriality, but views diverge on whether the ‘territoriality principle’ also has a choice-of-law meaning. According to one interpretation, the national treatment clause simply implies a duty of non-discrimination: it only requires the application of the same substantive law to foreigners and nationals, thus coming into play after the applicable law has been defined through use of the national conflict of laws rules.32 According to another interpretation, the national treatment principle operates ‘in advance,’ in the sense that it has to be applied by the competent courts ‘before’ investigating the applicable law; this interpretation requires the national treatment principle to imply a duty of non-discrimination in applying choice-of-rules.33 For the most part, commentators agree on a choice-of-law understanding of the national treatment principle, but they adopt diverging views over which law the principle requires to be applied. According to some distinguished scholars, it should be interpreted as demanding the application of the law of the country of origin.34 On the contrary, some other scholars and courts have read the national treatment prinHAMBURG GROUP (note 23), p. 25. The reason is simple: the former principle without the latter could imply that an inadequate level of protection afforded by a member country to its own rightholders could be extended (for example) to foreign authors, in a way fully consistent with the principle of national treatment; an undesirable result that the international conventions avoid, precisely by imposing a minimum level of protection for foreigners. 31 This principle (independence of national rights) requires that an intellectual property right granted in a Member State, for example a trademark, is not affected by the status of any registration for the same mark in relation to the same goods that may exist in other Member States. See DINWOODIE G. B., ‘Private International Aspects of Protection of Trademarks’ in: World Intellectual Property Organization, 2001,WIPO/PIL/01/4, Geneva, available at: , p. 32. 32 Itar-Tass Russian News Agency v. Russian Kurier Inc., 886 F. Supp. 1120, 1131 (S.D.N.Y. 1995); 153 F 3d. at 91, stating: ‘We agree with the view of Amicus that the Convention’s principle of national treatment simply assures that if the law of the country of infringement applies to the scope of substantive copyrights protection, that law will be applied uniformly to foreign and domestic authors’. On the implications at the private international law level of the ‘Itar-Tass approach’, see TYDNIOUK A., ‘From Itar-Tass To Films By Jove: The Conflict of Laws Revolution in International Copyright’, in: Brook. J. Int’l L. 2004, p. 899 seqq. 33 KOUMANTOS G., ‘Sur le droit international privé du droit d’auteur’, in: Il diritto di autore 1979, p. 636; ID., ‘Le droit international privé et la Convention de Berne’, in: Le droit d’auteur 1988, p. 426 et seq. 34 BARTIN E., ‘Localisation territoriale des monopoles intellectuelles’, in: Clunet 1934, p. 793 seqq. 29 30

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Nerina Boschiero ciple (embodied in Article 5.1 of the Berne Convention, Article 2 of the Paris Convention, and Article 3.1 of the TRIPs Agreement (‘TRIPs’)) as implicating an opposite choice-of-law principle, directing courts to apply the law of the country of protection (lex loci protections).35 The idea that Article 3.1 of TRIPs mandates a particular choice-of-law rule is also defended by a leading academic treatise, according to which the WTO Member States have lost their autonomy to choose the choice of law rules they prefer as a consequence of the national treatment principle: ‘all convention provisions must be interpreted as adhering to the general rule that the law of the protecting country is the applicable law… Any alternative interpretation favouring the application of the country of origin or the law of the forum as a general rule is no longer acceptable.’36 Such an approach is in conflict with that adopted by another part of the doctrine,37 according to which the national treatment principle fails to provide any guidelines on the issue of choice of law in international intellectual property rights In favour of the interpretation that the existing international regime on IPRs actually foresees a conflict of laws pointing to the lex loci protectionis see: ULMER E. (note 19) p. 12, 19; DESBOIS H., FRANÇON A., KEREVER A., Les conventions du droit d’auteur et des droits voisins, Paris 1976, n. 135 (‘…la solution de conflit de lois qui est conservée et consacrée par l’art. 5, al. 1’); GINSBURG J. C., ‘Private International Law Aspects of the Protection of Works and Objects of Related Rights Transmitted through Global Digital Networks’ (WIPO document GCPIC/2), November 30, 1998, Geneva, at: , p. 35, ‘l’article 5.2 exprime à la fois un principe de nondiscrimination et un règle de choix de la loi’; GOLDSTEIN P., International Copyright: Principles, Law and Practice, New York 2001, p. 103 et seq. ; BOUCHE N. (note 21) p. 358 seqq., p. 363 seqq., p. 521 ss.; UBERTAZZI L. C., Voce ‘Diritto d’autore, III, Diritto d’autore internazionale e comunitario’, in: Dig. Comm. vol. IV, p. 452 seqq. 36 FAWCETT J., TORREMANS P., Intellectual Property and Private International Law, Oxford 1998, p. 481. This conclusion has been inferred (1) from the wording Article 3.1, stating that the aim of national treatment is the ‘protection’ of intellectual property, and (2) from the significance of the term ‘protection’ as explained in footnote 3 to Arts. 3 and 4, according to which this expression shall include ‘matters affecting the availability, acquisition, scope, maintenance, and enforcement of intellectual property rights as well as those matters affecting the use of intellectual property rights specifically addressed in this Agreement’. For an updated opinion, according to which Article 3.1 of TRIPS precludes ‘the application of a lex originis based approach to choice of law across-the board’, see TORREMANS P., ‘Which Law Applies? A Reply from Professor Torremans to Phillip Johnson’s Reply to His Earlier Work’, in: J. Intell. Prop. L. & Prac. 2005, p. 76. In the same sense, on the ‘negative nature’ of the national treatment principle, to be interpreted as denying a role to the lex loci originis, see also FENTIMAN R. (note 28), p. 135 et seq. 37 LUCAS A., ‘Private International Law Aspects of the protection of Works and Objects of Related Rights Transmitted through Global Digital Networks’, (WIPO document GCPIC/1), November 15, 1998, Geneva, at: ., p. 3. LUCAS A., LUCAS H.-J., Traité de la propriété littéraire et artistique, Paris 1994, n. 956, speaking of ‘an ancient temptation to lump together the status of foreigners and the conflict of laws’ that has for a long time heavily weighed, and still does, on the interpretation to be given to the principle of national treatment contained in all these international instruments. 35

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Infringement of Intellectual Property Rights disputes.38 If one ‘constraint’ on the choice-of-law rules that a Member State may adopt should be inferred from Article 3.1 of TRIPs and similar provisions contained in other international conventions, it is a very limited one: the impossibility of relying on ‘nationality’ as a proper connecting factor, because this could lead to different degrees of protection being granted to national and foreign rights owners.39 The central question of ‘which law applies’ in infringement proceedings still deserves an answer. This conclusion has also recently been expressed by the European Court of Justice, which in the Tod’s case stated: ‘[A]s is apparent from article 5.1 of the Berne Convention, the purpose of that convention is not to determine the applicable law.’40 The same idea is also shared by the WIPO, the International Organization that administers the intellectual property conventions, according to which, ‘neither does the national treatment principle reflect a private international law approach, as it does not purport to designate the law of any particular country that is to govern an intellectual property issue involving a foreigner, but merely states that foreigners should not be treated differently than nationals with respect to intellectual property issues.’41 The same discussion had taken place regarding the interpretation of art. 5.2 of the Berne Convention as a true choice-of-law provision.42 Again, many authors have directly inferred from this norm a conflict of laws rule pointing to the lex loci protectionis (helped in their conviction by the fact that the norm is, undoubtedly, cast in language that could resemble a conflicts rule).43 Others have argued that it implies the application of the lex loci delicti. Others, again, have interpreted it as an invocation of the law of the forum.44 According to the WIPO Guide to the Convention, the rationale of Article 5.2 of Berne Convention is to regulate the enjoyment of the ‘rights that are claimed by virtue of the Convention,’ i.e. the convention minima. In this respect, art. 5.2 concerns itself with only two areas: (1) the 38 PATRY W., ‘Choice of Law and International Copyright’, in: Am. J. Comp. L., 2000, p. 405 et seq.; DINWOODIE G. B. ‘Conflicts and International Copyright Litigation: the Role of International Norms’, in: BASEDOW J., DREXL J., KUR A. & METZGER A. (eds.) (note 6), p. 201; ID., ‘Trademarks and Territory: Detaching Trademark From the Nation State’, in: Hous. L. Rev. 2004, p. 891 et seq., JOHNSON P., ‘Which Law Applies? A Reply to Professor Torremans’, in: J. Intell. Prop. L. & Prac., 2005, p. 71 et seq. 39 PERTEGÁS M. (note 13), p. 228. 40 See the European Court of Justice, 30 June 2005, Tod’s and Tod’s France v. Heyraud, Case C-28/04, in: Rec. 2005, p. I- 5781 seqq., point 32. 41 WIPO, ‘Intellectual Property on the Internet: A Survey of Issues’, Geneva WIPO 2002, p. 118. 42 Art. 5.2 of the Berne Convention reads as follow: ‘Consequently, apart from the provisions of this Convention, the extent of the protection, as well as the means of redress afforded to the author to protect his right, shall be governed exclusively by the law of the country where protection is claimed’. 43 See supra, note 35. 44 References in BOSCHIERO N. (note 22), p. 43 seqq.

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Nerina Boschiero extent of protection, and (2) the means of redress. The Guide indicates that in those two areas ‘the law of the country where protection is claimed’ shall govern exclusively, unless the parties have agreed that another law should apply by the way of a forum selection clause. As regards an action of infringement, the Guide notes that ‘an author suffering infringement usually picks a court in the country in which his rights where infringed.’45 The logical consequence is that the plaintiff need not choose such a court, since he is permitted to choose another court, particularly in another country where no infringing acts occurred but where (for example) the defendant has his assets. In such cases, the Guide indicates that ‘it would be a matter for the courts to apply the appropriate private international law to resolve any conflict that arises.’46 This authoritative explanation strongly supports the conclusion that the provisions resembling conflict principles found in all the international instruments of substantive public international law on intellectual property do not address – purposefully – the private international law question of which law to apply to IPR infringement, and thus have no impact (or a very limited one) on choice-of-law questions. The provisions of these conventions were adopted without any general and coherent international private law principle.47 The drafters simply had not thought of the possibility of bringing an action to protect intellectual property rights in a State distinct from that in which the act of violation occurred. The normal situation was that of a perfect coincidence between the lex loci commissi delicti, the lex loci protectionis (the law of the country for which protection was claimed), and the law of the forum. This coincidence could also explain the ‘imprecision’ of the wording of art. 5.2 of the Berne convention, which refers to the ‘country where protection is claimed’ and for long time was read as claiming the application of the lex fori.48 Such a reading amounts to a negation of any conflict of laws reasoning for intellectual property issues, due to the perfect inutility of prospecting (in this field) the existence or need for a ‘unilateral’ and ‘negative’ choiceof-law rule that does not direct the application of the law of any country other than that of the forum. The factual coincidence between the forum and the country of protection could also explain the ambiguous ‘characterization’ suggested by Eugen Ulmer of Article 5.2 of the Berne Convention, referring to the country where proGuide to the Berne Convention for the Protection of Literary and Artistic Works (Paris Act, 1971), Geneva WIPO, 1978, hereinafter WIPO Guide, p. 34. 46 Ibidem. 47 DINWOODIE G. B. (note 2), p. 3. In favour of the interpretation of Article 5.2 of the Berne Convention as another illustration of the efforts to abolish discrimination against foreign authors see PERTEGÁS M., Cross-Border Enforcement of Patent Rights. An Analysis of the Interface Between Intellectual Property and Private International Law, Oxford 2002, p. 223 seqq; VAN EECHOUD M., Choice of Law in Copyright and Related Rights, The Hague, 2003, p. 107 seqq.; BERGÉ J.-S., La protection internationale et communautaire du droit d’auteur. Essai d’une analyse conflictuelle, Paris 1996, p. 204 seqq.; ID., « Droit d’auteur, conflit de lois et réseaux numériques: rétrospective et prospective », in: Rev. crit. dr. int. pr. 2000, p. 366; LUCAS A. (note 37), p. 3 ss. 48 LUCAS A., LUCAS H.-J. (note 37), n. 1072. 45

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Infringement of Intellectual Property Rights tection is claimed, who defined it as ‘not a complete rule of conflict.’49 Its incompleteness derives precisely from the fact that ‘although it adequately describes which law is to be applied in the event that an infringement occurs in the country whose courts are seized of a matter, it says nothing regarding infringements elsewhere.’50 If, as it seems, the ECJ, the WIPO, and most commentators are right in stating that the current international conventions simply fail to address the problematic issues of the private international law of intellectual property, then the Hamburg Group and the Commission were wrong in assuming (1) that the intellectual property law conventions mandate a particular conflicts rule, and (2) that the rationale of including an IPR specific choice-of-law rule based on the country-of-protection principle was deemed to preserve the current international instruments. Paradoxically, the exact opposite conclusion, i.e. the fact that there is almost no ‘public private international law’ of intellectual property, only supports and justifies such an inclusion.

IV. The ‘Need’ for an Uniform Conflict-of-Law Rule at the Community Level However, the question remains as to whether the absence of a uniform set of conflict of laws rules at the international level also entails a Community level lack of uniformity and legal certainty regarding the law applicable to IPR infringement which would make it advisable for the Community to lay down a uniform rule for this subject matter. Again, if all the Member States’ private international law systems provide the same country-of-protection principle, it would not have been necessary (under art. 65 (b) EC) to insert into the Regulation the exact same choice-of-law rule. In any case, even if national conflict rules on IPR infringement present differences, there is the need to analyze them in the context of the rules governing international jurisdiction of the courts, so as to ascertain if there are enough forums available to the claimant to generate a risk of forum shopping to escape the law normally applicable.51 As correctly pointed out, ‘diverging choiceof-law rules alone do not create a danger of forum shopping.’52 As to the very first question, a recent comparative study of a number of European States’ private international law systems has identified two major tendencies pointing both to the lex loci protectionis and lex loci commissi delicti. 53 Examples of specific choice-of-law rules for IPRs applying the lex loci protectionis ULMER E. (note 19), p. 19. FENTIMAN R. (note 28), p. 136; BOSCHIERO N. (note 22), p. 46. 51 See Explanatory Memorandum (note 6), p. 6. 52 DREXL J. (note 6), p. 161. 53 PERTEGÁS M. (note 47), Chapter 5; ID. (note 13), p. 229 seqq. 49 50

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Nerina Boschiero are Article 110 (1) of the 1987 Swiss Private International Law Act,54 Article 93 of the 2004 Belgian Private International Law Act,55 and Article 54 of the 1995 Italian Private International Law Act.56 A different case seems to be that of the 1974 Spanish Private International Law; its Article 10 is redacted in a negative and unilateral way, simply stating that intellectual and industrial property rights shall be granted protection on the Spanish territory by application of the Spanish law. Such a rule could easily be ‘bilateralized’ by applying the lex loci protectionis to all questions not covered by the article.57 In other systems, the law applicable to IPR infringement is to be inferred from the more general choice of law rule for torts: according to Article 34 (1) of the 1978 Austrian Private International Law Act, Article 38 of the 1996 Liechtenstein Private International Law Act, and Article 3(1) of the 2001 Dutch Private International Statute on Torts, the governing law is the lex loci delicti. It has also been suggested that due to the particularities of the enforcement of IPRs, the doctrine and the national courts of these latter Member States have also interpreted their respective tort choice-of-law rules as referring to the law of the State for which the protection is claimed, at least with respect to trademark and copyright infringement.58 Notwithstanding this conclusion, the situation in the field of private international law for copyright is commonly recognized to be far more complex.59 Article 67 of the 1993 Greek Copyright Act sets out the principle that ‘copyright in published works shall be governed by the law of the State in which the work has DUTOIT B., Commentaire de la loi fédérale du 18 décembre 1987, 3e ed., Bâle, Genève, Munich 2001, p. 319 seqq. 55 CARLIER J.-Y., « Le code belge de droit international privé », in: Rev. crit. dr. int. pr. 2005, p. 11 seqq.; FALLON M., « Le droit international privé belge dans les traces de la loi italienne dix ans après », in: Riv. dir. int. priv. proc. 2005, p. 318 seqq. 56 UBERTAZZI L. C., ‘La territorialità dei diritti del produttore fonografico, dell’artista e dell’IMAIE’, in: AIDA 1992, p. 100 seqq.; ADAM R., ‘Diritti reali (artt. 51-55)’, in: CAPOTORTI F. (a cura di), ‘Il nuovo sistema italiano di diritto internazionale privato’, in: Corr. giur. 1995, p. 1251 seqq.; SALVATORE V., ‘Sub Art. 54 (diritti sui beni immateriali)’, in: Le nuove leggi civili e commentate, 1996, p. 1337 seqq.; BALLARINO T., Diritto internazionale privato, 3 ed., Padova 1999, p. 592 seqq.; MASTROIANNI R., Diritto internazionale e diritto d’autore, Milano 1997, p. 365 ss.; CORTESE B., Il trasferimento di tecnologia nel diritto internazionale privato. Licenza e cessione di privative industriali e know-how, Padova 2002, p. 55 ss.; BALLARINO T., MILAN D., Corso di diritto internazionale privato, Padova 2005, p. 186 seqq.; UBERTAZZI L. C., Commentario breve alle leggi su proprietà intellettuale e concorrenza, 4a ed., Padova 2007, pp. 1405, 1418, 1454, 1465; BOSCHIERO N. (note 22), p. 48 seqq. 57 According to CARRASCOSA GONZÁLEZ J., ‘Conflict of laws in a centenary convention: Berne convention 9th September 1886 for the protection of literary and artistic works’, in: Festchrift E. Jame, I, München 2004, p. 113, the Spanish private international law (art. 10.4 Cc) uses the ‘same connecting factors as article 5.2 of the Berne Convention (the lex loci protectionis)’. 58 PERTEGÁS M. (note 13), p. 233 et seq.; BOSCHIERO N. (note 22), p. 47. 59 DREXL J. (note 6), p. 166. 54

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Infringement of Intellectual Property Rights been lawfully made accessible to the public for the first time.’60 The Portuguese Private International Law Act refers to the law of the country of origin for the acquisition of rights, but applies the lex loci commissi delicti to infringements.61 The French Law is silent on the point, but a leading judgment of the French Supreme Court – the ‘Rideau de fer’62 case – has been considered by the majority of French doctrine to have fixed ‘the state of art,’ consisting (precisely) in applying the law of the country of origin for the issues of existence, originality, and initial ownership of works, and the lex loci protectionis to the content of the rights and the scope of protection.63 An exception to the country of origin principle (as well as to the lex protectionis principle for those countries resorting to this choice-of-law rule) has been envisaged for the author’s moral rights. From a choice of law point of view, moral rights could be seen as personality rights linked to the person of the author of the work, thus forming part of the personal law of the author.64 Alternatively, some authors have argued that moral rights should be seen as fundamental human rights that protect the author against the abuse of his work. It has been suggested that – from the point of view of the UK’s approach – moral rights should form part of the ‘public policy’ principles.65 France, for instance, considers the author’s moral rights of such particular importance that the national provisions on this issue are considered ‘internationally mandatory,’ with the consequence that French courts apply the forum’s rules even if the author has no moral rights or has assigned all rights on the work under the law of the work’s country of origin.66 60 61

LUCAS A. (note 37), p. 10. SIEHR K., ‘Das Urheberrecht in neureren IPR-Kodifikationen’, in: UFITA 1988, p.

17 et seq. Civ. 1re, 22 December 1959, in: D. 1960, p. 93 seqq., note HOLLEAUX G. 63 This solution has been approved by the Conseil supérieur de la propriété littéraire et artistique, ‘Avis n° 2003-2 relatif à la loi applicable et à la juridiction compétente en matière de propriété littéraire et artistique’, 11 décembre 2003 at: , p. 7, reaffirming the opportunity to submit to the country of origin ‘l’existence d’un œuvre protégeable et la détermination du titulaire initial du droit’, and to the lex loci protectionis ‘le contenu des droits et le régime de la protection’; the report, however, recognizes that this interpretation has been contested by certain commentators. On March 5, 2002, the same French Supreme Court, dealing with a classic copyright infringement case, expressly rejected the application of the law of the country of origin and that of the forum and applied the law of the country(ies) where the infringement occurred, on a distributive bases, stating also that ‘the French law, as the law of the prejudice, is not applicable to the entire dispute absent a closer connection to France.’ Civ. 1re, 5 March 2002, Sisro c. Sté de droit néerlandais en liquidation Apersand Software Bv, in: D. 2003, p. 8 seqq, note JOSSELIN-GALL M. 64 This solution seems to be the prevailing one among the Italian commentators (note 56). 65 TORREMANS P., ‘The Law Applicable of Copyright: Which Rights are Created and Who Owns Them?’, in: RIDA 2001, pp. 37 seqq., 53 seqq. 66 We are referring to the well known decision of the French Supreme Court in Turner Entertainment v. John Huston, May 28, 1991, in: Rev. crit. dr. int. pr. 2001, p. 752 62

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Nerina Boschiero Such a scenario reveals not only a current mosaic of private international law Member States’ systems, among which the two possible alternative choice-oflaw solutions (lex loci protectionis and lex loci delicti commissi) still coexist, but also a persistent disagreement on the ‘scope’ of the law of the country for which protection is sought. In some countries, courts apply the lex loci protectionis only to the issue of infringement itself, its proof, and its sanctions. These countries consider that as far as copyright law is concerned, before analyzing the infringement itself it is necessary to solve the ‘preliminary’ questions of whether the work is protected by a copyright and who owns the work. All these issues are envisaged in light of the country where the work has first been published, as defined under art. 5(4) of the Berne convention, i.e. the so-called law of the country of origin. This conclusion is also supported by some prominent American authors, such as professors Ginsburg and Ricketson, who believe that the Berne Convention neither covers issues of ownership nor supplies a choice of law rule for determining authorship, except for Article 14ter, which deals (very incompletely) with rights in cinematographic works. The consequence of their position is that there can be no automatic claim to the law of the country where protection is claimed. 67 Other European countries, on the contrary, believe that all of these issues should be governed by the law of the country where the protection is sought and reject application of the country of origin. The German Supreme Court, for example, affirmed the principle that if protection under German copyright law is sought, the lex loci protectionis (i.e. the German Law) applies to questions of ownership, origin, scope, and content of copyright, as well as to exhaustion of rights, transfer, rights of use, and consequences of copyright infringement.68 This is also the case under Italian and Swiss law. The problem with the Rome II Regulation is that neither Article 8 nor Article 15, which define in a general way the scope of the law applicable by giving only an indicative and non-exhaustive list of issues at stake, clearly and explicitly deal with the problem of which law is applicable to the diverging national conflictof-laws solutions concerning the law applicable to initial ownership and authorship of unregistered IPRs. It is not yet clear if the new Community conflict rule should be considered a ‘general’ choice-of-law solution for all issues arising in infringement cases (existence, scope, duration, ownership, transfer, and infringement) and, seqq., note GAUTIER P.-Y.; further references in JOHNSON P., ‘Which law applies? A Reply to Professor Torremans’, in: J. Intell. Prop. L. & Prac. 2005, p. 75; TORREMANS P. (note 36), p. 76 et seq.; VAN EECHOUD M., ‘Alternatives to the Lex Protectionis as the Choice-ofLaw Rule for Initial Ownership of Copyrights’ , in: DREXL J., KUR A. (eds.) (note 6), p. 291, note 3. 67 GINSBURG J.C., ‘Ownership of Electronic Rights and the Private International Law of Copyright’, in: Colum.-Vla. J. L & Arts, 1998, p. 167 et seq.; RICKETSON S., The Berne Convention for the Protection of Literary and Artistic Works 1886-1986, London 1987, p. 209. In the same sense see also the American jurisprudence cited above (note 32). 68 See BGH in: GRUR 1986, p. 454 seqq.; GRUR 1987, p. 814 seqq.; GRUR 1992, p. 687; GRUR 1999, p. 152 seqq.; GRUR 2003, p. 328 seqq.

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Infringement of Intellectual Property Rights thus, excluding any recourse to the law of the country of origin (apart from the cases explicitly provided for by the international conventions), or if the controversial issues must be considered to fall outside the scope of the Rome II Regulation. This last (probable) interpretation of Article 8’s scope would leave untouched the existing situation and the diverging national conflict rules that will continue to govern such issues. The lack of a general consensus on a single law applicable to all issues – specifically the diverging characterization of the issues of ownership of copyrights (also for works created by employees) or transfer of copyrights (under contract or copyright law) – could explain why the Regulation does not address these issues in a conclusive manner. The main consequence is, nevertheless, the persisting legal insecurity about the proper understanding of the scope of the law of the country of protection and the part it has to play.

V.

The Rationale of the Norm in Absence of a Real Risk of Forum Shopping

Even if the comparative analysis of the rules of conflict of laws and the jurisprudence of the Member States highlights the opportunity to promote more compatibility between conflict-of-laws rules on IPR infringement in the Union, the issue of the applicable law still deserves further analysis, specifically in light of the preliminary question regarding jurisdiction. There is, in fact, a diffuse and correct belief among European commentators (also shared by the European Legislator) that choice-of-law issues cannot be dealt in isolation, and that mere differences between national laws on the choice-of-law solution for IPR infringement are not sufficient to justify the need of a ‘uniform’ Community choice-of-law rule in the Rome II Regulation. Diverging choice-of-law rules must also cope with a danger of forum shopping.69 Within the European Union, conflicts of jurisdiction in civil cases, including IP disputes, are now dealt under the Brussels I Regulation. Since the adoption of the Brussels Convention in 1968, superseded in 2002 by the Brussels I Regulation, the European rules on international jurisdiction have ‘shaken and, in significant respects, destroyed’ what has been described as the ‘parochial approach to intellectual property litigation,’70 serving as a basis for the courts of many Member States to assert jurisdiction in matters concerning foreign intellectual property rights. The rules of the ‘Brussels system’ (in the sense that the Brussels’ rules have been extended to EFTA States via the Lugano Convention of September 16, 1988, currently under revision)71 have dramatically changed the way these rights are liti-

DREXL J. (note 6), p 161. See Justice H. LADDIE, in his decision of October 14, 1997, in case Forte Dodge Animal Health et al. v. AKZO Nobel, in: F.S.R. 1998, p. 222. 69 70

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Nerina Boschiero gated, in primis by reducing considerably the ‘traditional’ scope of exclusive jurisdiction in IPR matters. Courts in the contracting States are in fact required to exercise jurisdiction over foreign IPRs whenever a basis for jurisdiction is provided under the Convention/Regulation system under the general title of jurisdiction (the domicile of defendant) or under special titles of jurisdiction (arts. 6.1 and 5.3). There is only one rule of exclusive jurisdiction in IPR matters – set out in Article 22.4 of the Regulation, which refers to proceedings having their object, or being mainly concerned with, the registration or validity of registered intellectual property rights – according to which only the courts of the Member State in which the deposit or registration has been applied for or completed have jurisdiction in those proceedings. Although this provision was initially interpreted narrowly by the ECJ,72 it has been recently reinterpreted in a way that significantly alters the functioning of the intellectual property litigation machinery as it has worked for many years in Europe. By two judgments handed down on July 17, 2006, 73 the ECJ took the view that Article 16.4 (22.4 of the Regulation) should apply regardless of the form of proceedings in which the patent’s validity issue is raised, be it by way of an ‘action’ or by a ‘plea in objection’. In addition, irrespective of the presence of the so-called ‘spider-inthe-web’ criteria elaborated by the Dutch courts, it is not longer possible for European courts to assert jurisdiction over claims against affiliated companies for coordinated infringement of European bundle patents.74 Both practices have been judged by the ECJ as ‘irreconcilable’ with the old Brussels Convention and, obviously, with the Brussels I Regulation.75 As a consequence, in proceedings concerning the registration and validity of registered rights, the exclusive jurisdiction provided by the Brussels I Regulation excludes the possibility of forum shopping. The same solution is provided, since July 2006, for infringement proceedings involving the validity of registered rights as an incidental matter, i.e. even if invalidity is brought forth (as usually happens) as a defence. The ability to choose the competent court according to the most favourable applicable law is left in only ‘pure’ infringement proceedings regarding registered intellectual property rights, i.e. when the issue of invalidity is not raised at all, or in the case of infringement proceedings for copyright and related rights, which by definition do not raise any question of ‘validity.’ In those cases, the plaintiff still has the ability to sue the defendant in either a court of his domicile or Lugano Convention of 30 October 2007, at . 72 ECJ, November 15, 1983, case 288/82, Duijnsteee v. Goderbauer, in: Rec., 1983, p. 3663 seqq. 73 ECJ, July 13, 2006, case C-4/03, GAT v. LuK, in: Rec. 2006, p. I-6509 seqq.; ECJ, July 13, 2006, case C-539/03, Roche Nederland BV et al. v. Frederick Primus and Milton Goldenberg, ibidem, p. I- 06535 seqq. 74 EUROPEAN MAX-PLANCK GROUP FOR CONFLICT OF LAWS IN INTELLECTUAL PROPERTY (CLIP) (note 27), p. 285. 75 In general on this point see BOSCHIERO N. (note 22), p. 92 seqq. 71

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Infringement of Intellectual Property Rights before a court in the place where the harmful event occurred or may have occurred. But, again, when a registered right is in question, the exclusive jurisdiction rule stipulated in Article 22.4 of the Brussels I Regulation ‘absorbs’ the special forum provided in Article 5.3 for matters relating to torts; this is because the locus delicti can be located in no place or country other than that of registration or deposit of the patent/trademark/design or other similar rights required to be deposited or registered, due to the territorial limitation of industrial (registered) rights. The only remaining choice given to the rightholder is to sue in the defendant’s domicile, in accordance with the general title governing jurisdiction. Whether or not it is really possible to speak of forum shopping in such cases is open to question, being that this choice is ‘immanent’ in the structure of the Regulation. This eventuality is in any case very remote, as the reality is that national courts and parties very rarely separate the adjudication of industrial registered right infringement from the assessment of their validity. The result is that these infringement proceedings would be invariably confined to the courts of the States in which registration has taken place, thus barring any recourse to the general rule of article 2 or the possibility of consolidating claims against infringers of parallel industrial property rights existing in several Member States (art. 6.1).76 In addition, in intellectual property matters the interpretation given by the ECJ to the special head of jurisdiction provided in Article 5.3 of the Brussels Convention/Regulation, which confers onto the plaintiff the right to sue in either the place of the event giving rise to the injury or the place where the damages occurred, does not provide any ‘real’ alternative. The well known distinction in ‘complex’ torts between the place of conduct and place of injury does not work in IPR infringement cases. Preparatory acts of infringement do not matter in terms of jurisdiction for intellectual property rights, as the principle of territoriality imposes that a IPR cannot be infringed where it does not exist; therefore, in infringement proceedings Article 5.3 can allow only courts in the State for which a right is granted to exercise jurisdiction over the action, on the premise that this is where both a) the event giving rise to the damage and b) the damage itself, occurred. 77 76 The real impact of the GAT-Roche twin decisions on European litigation over copyright cases is still an unresolved question. It has been affirmed that the GAT decision’s impact should be rather limited, as the exclusive jurisdiction of article 16.4/22.4 of the Brussels Convention/Regulation is definitely irrelevant in the case of copyright. The impact of the Roche decision could be different – where the application of exclusive jurisdiction does not come into play – as litigation concerning IPRs should follow the same rules, whether these rights are registered or not. It is possible, therefore, that the Roche ruling will have a significant impact on cross-border infringement cases involving multiple defendants. See NUYTS A., SZYCHOWSKA K., HATZIMIHAIL N., ‘Cross-Border Litigation in Intellectual Property Matters in Europe’, available at: , p. 29 et seq. 77 BOSCHIERO N. (note 22), p. 81 seqq.; contra WILDERSPIN M., ‘La compétence juridictionnelle en matière de litiges concernant la violation des droits de proprieté intellectuelle. Les arrêts de la Cour de justice dans les affaires C-4/03, GAT c. LUK et C-539/03, Roche Nederland c. Primus et Goldberg’, in: Rev. crit. dr. int. pr. 2006, p. 794. For the idea that a definite answer to this question cannot be given, see KUR A., ’A Farewell to Cross-

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Nerina Boschiero In conclusion, according to this analysis the possibility of forum shopping within the Union is very limited, being confined to copyright infringements and hypothetical ‘pure’ industrial registered rights infringements. Regarding the former, all Member States’ conflict-of-law rules (with the only exception of Greek law) demand the application of the law the country for which protection is claimed. As to the latter, the plaintiff’s ability to choose the competent court according to the ‘most favourable’ applicable law is practically nonexistent in light of the recent ECJ rulings. Consequently, it is quite difficult to state, as the Commission did, that the diverging choice-of-law rules in the Member States ‘create a legal imbalance between plaintiffs and defendants to the disadvantage of the latter,’ such as creating a problem that can be addressed by only a uniform European choice-of-law rule on intellectual property in the light of art. 65(b) EC. 78

VI. General Features of the Special Rule The general structure of the norm on IPR infringement strikes for what can be easily characterized as an excessively rigid and oversimplifying generalization, not only in comparison with the most recent body of choice-of-law rules concerning specific international rules on jurisdiction, choice of law and judgments in transnational IPR-related disputes of soft (non-binding) character proposed by the American Law Institute79 and by the Max Planck European Group on Conflicts of Law/Intellectual Property (CL-IP),80 but also in relation to the general approach taken by the Rome II Regulation for all other non-contractual obligations, claims, and legal consequences that may arise out of tort/delict, unjust enrichment, negotiorum gestio, or culpa in contrahendo. Those norms are, in fact, construed in a Border Injunctions? The ECJ Decisions GAT v. Luk and Roche Nederland v. Primus and Goldenberg’, in: IIC 2006, p. 851. 78 Contra DREXL J. (note 6), p. 163. 79 See ‘Intellectual Property: Principles Governing Jurisdiction, Choice of Law, and Judgments in Transnational Disputes, Proposed Final Draft (March 30, 2007) at: . See: DREYFUSS R., ‘The ALI Principles on Transnational Intellectual Property Disputes: Why invite Conflicts?’, in: Brook. J. Int’l L., 2005, p. 820 seqq.; DESSEMONTET F., ‘A European Point of View on the ALI Principles Intellectual Property: Principles Governing Jurisdiction, Choice of Law and Judgments in Transnational Dispute’, ibidem, p. 850 seqq.; ID. (note 15), p. 71 seqq. 80 KUR A., ‘Applicable Law: An Alternative Proposal for International Regulation – The Max Plank Project on International Jurisdiction and Choice of Law’, in: Brook. J. Int’l L., 2005, p. 953 seqq.; ID., ‘Jurisdiction and Enforcement of Foreign Judgments – The General Structure of the MPI Proposal’, in: DREXL J., KUR A. (eds.) (note 6), p. 21 seqq.; NORRGARD M., ‘Provisional Measures and Multiple Defendants in the MPI Proposal’, ibidem, p. 35 seqq. In general on both the ALI e MPI projects see HELLSTADIUS Å., MEIEREWERT W., ‘Jurisdiction and Choice of Law in Intellectual Property Matters – Perspectives for the Future (EU and World-Wide)’, in: IIC, 2005, p. 313 seqq.

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Infringement of Intellectual Property Rights way that reaches an adequate balance between the exigencies of legal certainty, on the one hand, and the demands of justice in the individual case, on the other: first, because the Regulation provides considerable leeway for party autonomy, and second, in so far as these rules are supplemented by an open-ended escape clause that allows a departure from those rules when ‘it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with another country.’ As an example of a manifestly closer connection with a country other than the one governing tort under the general rules, the second sentence of paragraph 3 of Article 4 suggests ‘a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.’81 As far as infringement of IPRs is concerned, the Rome II Regulation seems to have failed to take full advantage of the ‘progressive’ principle of party autonomy, as neither pre-tort nor post-tort choice of law agreements are permitted (Article 8.3); similarly, the parties and the courts cannot seek recourse through the escape clause embodied in the general rule, as Article 482 only covers obligations for which the Regulation itself does not lay down any ‘special rules.’ The European institutions have once again accepted the point of view of the Hamburg Group: party autonomy should not be allowed ‘where public interests are or may be involved.’83 As a side note, this opinion was shared by nearly all of the comments on intellectual property right aspects of the draft Proposal, according to which party autonomy was not ‘suitable’ for the ‘hard core’ claims relating to IPR infringement. Even though there are good reasons to partially exclude party autonomy in this field, 84 and being that it is absolutely true that intellectual property law has a substantial public-regarding component and that states’ sovereign decisions regarding the content and scope of protection granted for IPRs existing on their territories must be respected,85 it seems that there are no real cogent reasons why the 81 Even if redacted in a very strict and tight way, in order to avoid a risk of unforeseeability as to the applicable law, this escape clause proves to be definitely useful to attain the ‘proper equilibrium between the two perpetually competing goals of certainty and flexibility’, as correctly recognized also in Recital 14, according to which ‘this set of rules thus creates a flexible framework of conflict-of-law rules’, equally enabling ‘the court seized to treat individual cases in an appropriate manner’. See SYMEONIDES S.C. (note 6), p. 31. 82 Rome II’s central provision for cases in which the parties have not agreed or cannot agree on the applicable law. 83 HAMBURG GROUP (note 23), p. 38. 84 It is, in fact, correct to assert that the determination of the ‘unlawful character’ of the alleged infringing acts cannot be left to the law chosen by the parties, being inherently related to the existence of the intellectual property right itself (see PERTEGÁS M., note 13, p. 237), and to assert that the parties cannot be allowed to choose the law of a country in which the litigious right is not protected by the law of that country (HAHN C., TELL O., ‘The European Commission’s Agenda: The Future ‘R̀̀́ome I and II’ Regulations’, in: BASEDOW J., DREXL J., KUR A. & METZGER A. (eds.) (note 6), p. 12). 85 DINWOODIE G. B. (note 2), p. 100 et seq.; KUR A. ( note 80), p. 975.

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Nerina Boschiero owners of IPRs should not at least be allowed to chose the law applicable for determining the legal consequences of an infringement. In particular parties should be allowed to waive their rights to specific remedies in favor of the application of foreign law, provided that the interests of third parties are not adversely affected and that such a choice of law respects superior policy reasons embodied in public policy exception or in overriding mandatory provisions. Considering that in a number of Member States (like Belgium and the Netherlands) a party choice is possible,86 a certain flexibility to the parties of a conflict should (better) have been granted to make an ex-post choice of law for determining the remedies and the computation of damages. This would be consistent with the Swiss PIL law (Article 110.3), which allows party autonomy in IPR disputes for only patrimonial claims arising out of the infringement ‘after’ it has been assessed on the basis of the lex protectionis.87 The Ali principles, for example, allow parties to choose the law applicable to an infringement action at any time, including after the dispute arises. The reason given is that ‘efficiency interests are better served by allowing the parties to agree among themselves on the law that will determine what will usually be the monetary consequences of their conduct.’88 As to the very crucial questions of whether or not the parties should be granted freedom of choice in cases of intellectual property right violations, committed either outside any contractual relationship between the parties or within a licensing agreement, and whether or not is it convenient to treat contract and tort aspects in IPR disputes ‘in isolation,’ one might consider that, at least with respect to the exploitation of rights, the fundamental question regarding ‘who’ may bring a claim for the alleged infringement cannot be solved without looking at the contract entered into by the owner of the right. An ‘actionable’ copyright infringement, as well as the identification of the ‘person’ entitled to bring the claim, strongly depends on the scope of the rights granted under the specific license, contract, or assignment. To establish a copyright infringement, the claimant must show that the defendant carried out acts restricted by copyright without the license or consent of the copyright owner. It is in fact the copyright license that permits the licensee to carry out acts that would otherwise constitute infringement: it is usually a ‘breach of contract’ that takes the licensee’s activity outside the license, bringing it into the sphere of infringement. The same situation can be applied to a patent owner, who could be the inventor or his successor in title, as regards the protection of his industrial property: this succession has to be agreed upon in a contract governed by national law. If the inventor is an employee, under art. 60 of the European Patent Convention (EPC) his rights to the invention ‘shall be determined in accordance VAN EECHOUD M. (note 66), p. 5. PERTEGÁS M. (note 13), p. 237; LÓPEZ-TARRUELLA MARTÍNEZ A., ‘The law applicable to intellectual property right infringements under the Proposal for a Regulation Rome II’, available at: , No.15-June/July 2004. 88 ALI PRINCIPLES (note 79), § 302, Reporters’ Note p. 216. according to paragraph 2 of § 302, party autonomy is nevertheless excluded in relation to validity, existence, attributes, transferability, and duration of rights – whether registered or not – and formal requirements. 86 87

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Infringement of Intellectual Property Rights with the law of the State in which the employee is mainly employed; if the State in which the employee is mainly employed cannot be determined, the law to be applied shall be that of the State in which the employer has his place of business to which the employee is attached.’89 This solution establishes a close link between the contract of employment and the issue of employee ownership of intellectual property rights. Professor Torremans is undoubtedly right in asserting that this link provides a strong argument for applying the same law to both issues.90 Obviously, there will always be issues that should be ‘appropriately’ dealt with by one body of rules rather than the other. The problem, therefore, is that of ‘drawing the line’ between contract and tort law. It is generally submitted that non-contractual issues are for the law of the protecting country, and what is left to the lex contractus is the determination of the rights and obligations of the parties.91 Contractual freedom in relation to IPRs is generally admitted because the parties can only transfer or assign only whatever is assignable or transferable according to the protecting law.92 Convention on the Grant of European Patents, October 5, 1973 in O. J of the European Patent Organization 1973, p. 3, (hereinafter ‘EPC’). On new developments in European Patent Litigation, see BLUMER F., ‘Patent Law and International Private Law on Both Sides of the Atlantic’, WIPO Forum on Private International Law and Intellectual Property, Geneva, January 30 and 31, 2001, WIPO/PIL/01/3 available at: . 90 TORREMANS P., ‘Authorship, Ownership of Right and Works Created by Employees: Which Law Applies?’ in: E.I.P.R. 2005, p. 223 s., referring to authorship of a copyright work and first (initial) ownership of copyright in such a work. Obliviously, it very much depends on the solution given to the scope of application of lex loci protectionis. In any case, it seems possible for a different way of thinking in the line of what is suggested by the Author: that of characterization. If courts characterize initial employee ownership as a contractual matter, it will be possible to suck it into the contractual relationship and subject it to the law of the contract. The Ali Principles also designate a single law to determine initial ownership for registered and unregistered rights, such as copyright in the presence of a contractual relationship. See Chapter two (Title to and Transfer of Rights) which addresses the law applicable to ownership of rights. 91 DREXL J. (note 6) p. 172 et seq. 92 FAWCETT J.J. / TORREMANS P. (note 36), p. 548. It has been argued that freedom of choice of the applicable law should also be permitted in the case of a multi-State infringement of a unitary Community intellectual property right occurring in different member States. It has been submitted that the main arguments against party autonomy for national rights loose all their importance in this regard, as, by definition, all Member States provide for this protection. For the same reason, the escape clause should be applicable for Community rights in order to allow a deviation from the general rule (Article 8.2). See SHAPER E., ‘Choice-of-Law Rules in the EU –Special Issues with Respect to Community Rights-Infringements of Community Trade Marks and Applicable Law’, in: DREXL J. / KUR A. (note 6), p. 212. Another academic has suggested that the general rules on non-contractual obligations (freedom of choice, application of the law of the common domicile, and accessory choice of law relating to a pre-existing relationship) shall be applied to unitary Community industrial property rights, provided that the law of a Member State is applicable. As a possible solution for avoiding the disadvantages of the ‘mosaic approach’, i.e. the application of the laws of all Member States in which the acts of infringement were 89

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Nerina Boschiero Secondly, the choice made by the European Institutions to completely forbid party autonomy in relation to intellectual property, including pre-tort agreements between parties sharing the same bargaining position, has another shortcoming: it precludes without any doubt the possibility of ‘synchroniz[ing]’ the law applicable to contractual and non-contractual obligations arising out of the same fact-pattern. This solution has been retained even if (abstractly) the European Institutions recognized that is desirable to have a single, coordinated system to provide both regard to the conditions and extent of liability as well as remedies granted, by the way of the escape clause, which allow to apply the law chosen by the parties for their contractual relationship also to non-contractual obligation. In concrete, this possibility would amount to an admission of a choice-of-law agreement made before the harmful event regarding non-contractual obligations, which is not permitted for IPRs even if all the parties are ‘pursuing a commercial activity.’93 This solution in the Rome-II Regulation, not to deal with the interface problem of an intellectual property rights violation committed within a contractual relationship, inevitably increases the risk of fragmentation of the law applicable,94 inconsistencies, complexity, uncertainty, and cost in resolving disputes on IPR issues (subject to the law of the protecting country), very closed related to those regarding the obligations of the parties under the license contract or the contract of assignment (to which the law of the contract should be applicable). It also precludes the courts from adapting the rigid general rule provided in article 8 ‘to an individual case, so to apply the law that reflects the centre of gravity of the situation.’ Denying any role to party autonomy and any possibility for the courts to adapt the rigid rule to an individual case so as to have as the applicable law the one that best reflects the centre of gravity of the situation simply ends up in the European legislator’s ‘presumption’ to have dictated the ‘perfect rule’. But, as perfection ‘is not for this world’, each legislature has to provide a certain degree of flexibility in order to be able to overcome its intrinsic fallibility. Furthermore, the unconditional application of lex protections conflicts with the several departures from strict territoriality proposed by the most recent soft law initiatives. For example, both the Ali Principles and the Principles established by CLIP envision the application of a single set of rules – or a small set of rules for a specific state – when the alleged infringement cannot be located in one of several specific territories (ubiquitous infringements). This set of rules comes from the committed, it has been suggested to follow the jurisdiction rule developed by the European Court of Justice for multi-state injuries of personality rights the Fiona Shevill decision): the law of the country of domicile of the defendant for the whole damage, provided it is the law of a Member State and the various laws of the countries where the injuring acts were committed for claims restricted to the damages occurring in the states of the courts seized. See METZGER A., ‘Community IP Rights & Conflict of Laws- Community Trademark, Community Design, Community Patent- Applicable law for Claim for Damages’, in: DREXL J., KUR A. (eds.) (note 6), p. 222 seqq. 93 DREXL J. (note 6), p. 173. 94 METZGER A., (note 91), p. 219 seqq.

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Infringement of Intellectual Property Rights state with the closest connection to the dispute (supplemented by a market impact assessment) and applies to the issues of existence, validity, duration, attributes, and infringement of IPRs, as well as to the remedies for such infringements. This approach, which takes into consideration common situations arising from internet based (copyright) infringement, is pursued in parallel to the consolidation of territorial claims before one court, even in absence of an agreement between the parties. The drafter’s objective is to simplify the task for both parties and courts in the interest of efficiency. Both sets of rules seek to obtain two benefits: (1) the simplification benefits garnered by applying one law – instead of the laws of each affected State – to the portion of infringement occurring within each State’s borders, and (2) assuring, to the extent possible, compliance with the sovereignty interests underlying the territoriality approach. Thus, both set of rules emphasize the ‘exceptional circumstances’ in which a court could override the general principle of the lex protectionis. And, to do so they provide that whenever a court applies a single or reduced number of applicable law(s), the alleged infringer retains the right to demonstrate that his or her conduct is admissible in another Member State, even if the same activity is unlawful in all other States concerned; if such a showing is made, it must be taken into account by the court when fashioning remedies.95 This approach seems to be de facto able to overcome the largest objection to applying a single law approach to ‘global’ disputes, which by definition involves the interest of more than one State. The rigidity of Article 8, by contrast, impedes any possibility of relaxing the rigour of the principle of territoriality in any respect.96

VII. Conclusion As a result of the views expressed in this essay, it seems appropriate to conclude that the special community rule for intellectual property right infringement does not really increase legal certainty for either owners or users of intellectual property. First, it does not resolve the only problem that still needs a uniform solution – particularly in cross-border copyright disputes: the lex protectionis’ scope of application. Second, this ‘hard and fast’ norm does not strive for a reasonable compromise between the exigencies of legal certainty, on the one hand, and flexibility, on the other. Third, it does not even attempt to avoid the tension between the territoriality of IPRs and the globality of the new digital environment. Overall, there has been no serious attempt to justify the need for such a rigid uniform rule in this area, particularly in the light of reasons advocated for its inclusion in the Rome II Regulation, which do not seem at all conclusive.

95

ALI PRINCIPLES (note 79), Reporters’ Note, p. 248, § 321. 2; KUR A. (note 80), p.

978. 96 OHLY A., ‘Choice of Law in the Digital Environment – Problems and Possible Solutions’, in: DREXL J., KUR A. (eds), (note 6), p. 251 seqq.

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Nerina Boschiero This conclusion does not mean (of course) that there is no interest in establishing a new real ‘public’ private international law rule in this field, or that a specific choice-of-law rule based on the territoriality principle could not have been presented as the most suitable European rule for IPR infringement. Simply, a more in-depth investigation of the conflict problems relating to IPRs in the European Union should have been made, and the Commission should have presented evidence of the difficulties currently arising in this context that create an obstacle to cross-border trade and the movement of persons.97 Absent any real risk of forum shopping in infringement proceedings or a merely-hypothetical risk that the co-existence of diverging conflict rules in the Member States distorts the internal market’s functioning, the rationale of Art. 65 (b) should have been better justified by the European Institutions.98 For example, the recourse to Art. 65 (b) could have been justified with a truly public-private international law reasoning: (1) the opportunity of superseding – at a European level – the classic approach to international protection of intellectual property embodied in the current conventional instruments, which were adopted without any real effort to articulate any coherent and general principle of private international law, and (2) the opportunity of trying to garner a consensus that the lex protectionis principle is the basic choice-of-law principle regarding intellectual property infringement and is a true and genuine rule of private international law to be applied in intellectual property conflicts, at least in Europe. This principle should not have been merely invoked, but explained and defended as the proper conflict of law rule for most issues (creation, scope, validity, duration, and termination). It is simply a consequence of the ‘logic and the function of the choice-of-law process’, i.e not to apply another law that cannot in ‘its own terms’ be applied, thus rendering the choice-of-law process ‘incoherent’.99 Regarding the ‘protection’ of intellectual property, assuming that the new European rule should be interpreted as limiting itself to regulating only the issues of infringement, proof, and sanctions, the fact that the country of protection and the country of infringement do not necessarily coincide could have been better clarified. By and large, the main arguments for inserting a specific choice-of-law rule in the Rome II Regulation was to (1) fill the gap left by the current international conventions by dictating a uniform choice-of-law solution for cases where the domestic law of the forum does not apply, and (2) to put an end to the dispute over the correct meaning of Article 5.2 of the Berne convention, which refers to the law of the country ‘where’ protection is claimed, by clarifying that it should be understood as ‘for which’. The aim should have been to prevent application of the fo97 Response of the Government of the United Kingdom to the Consultation on a Preliminary Draft Proposal for a Council Regulation on the Law Applicable to Non-contractual Obligations, (note 16) p. 1. 98 Unless one considers that the objective of Article 65 EC simply consists in creating uniform Community law as such, and that a need for a European choice-of-law rule in the field of intellectual property is only mandating by diverging national conflict rules. 99 FENTIMAN R. (note 28), p. 142 et seq.

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Infringement of Intellectual Property Rights rum’s law when the sole basis for its application derives from the forum court’s competence to hear the claim. It is worth noting that notwithstanding the clear wording finally adopted in Article 8, referring to the law of the country for which protection is sought, i.e. the country for the territory of which protection is claimed, the Commission interpreted this expression in its 2003 commentary in a slightly ambiguous way: ‘the law of the country in which protection is claimed.’ According to the Commission, the territorial principle, as used in the Berne and Paris Conventions, should be understood in copyright cases as ‘the law of the country where the violation was committed’; however, when there has been a counterfeit of an industrial property right, the applicable law is that ‘of the country in which the patent was issued or the trademark or model was registered.’ In the words of the Commission, this solution would enable ‘each country to apply its own law to an infringement of an intellectual property right which is in force in its territory,’ thus confirming ‘that the rights held in each country are independent.’100 This interpretation of Article 8’s special rule for intellectual property seems to suggest that the law applicable to a non-contractual obligation resulting from an infringement of intellectual property rights should always be interpreted as the law of the country before the courts of which the claim is brought, the protection is sought, and the act of infringement was committed. In other words, as a consequence of the view expressed by the European Commission, the universally recognized principle of the lex loci protectionis could still be interpreted by the national courts in Member States in a very ‘strict’ way, inevitably pointing to the law of the seized court (the lex fori). This suggestion is certainly misleading. Apart from patents and other registered rights that are often within the exclusive jurisdiction of the courts of the State granting the right, particularly when registration and invalidity are involved, the protecting State for all other infringements is not necessarily the State where the proceeding is pending under Community civil procedure law.101

Explanatory Memorandum (note 6), p. 20. See CLIP, EUROPEAN MAX-PLANCK GROUP FOR CONFLICT OF LAWS IN INTELLECTUAL PROPERTY, ‘Exclusive Jurisdiction and Cross Border IP (Patent) Infringement Suggestion for Amendment of the Brussels I Regulation’, in: E.I.P.R., 2007, p. 143 seqq.; ID., ‘Intellectual Property and the Reform of Private International Law- Sparks from a Difficult Relationship’, in: IPRax 2007 p. 284 et seq; VAN EECHOUD M., ‘The Position of Broadcasters and Other Media under ‘Rome II’ Proposed Regulation on the Law Applicable to NonContractual Obligations’, in: Iris plus, 2006, p. 5. 100 101

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THE LAW APPLICABLE TO A NON-CONTRACTUAL OBLIGATION WITH RESPECT TO AN INDUSTRIAL ACTION A COMMENTARY ON ARTICLE 9 OF THE ROME II REGULATION Guillermo PALAO MORENO∗

I. II. III.

IV.

Origin and Aim of Article 9 Scope of Article 9 Connecting Factors A. Freedom of Choice B. Common Habitual Residence C. Lex Loci Acti 1. Rationale of the Rule 2. Determining the Loci Acti Concluding Remarks

I.

Origin and Aim of the Article

In order to find the purpose of article 9 of Regulation (EC) Nº 864/2007 (hereinafter, Rome II Regulation), we must trace it back to the Report issued by the European Parliament on 27 June 2005,1 when this provision has for the fist time been proposed as article 6 (‘Industrial action’) of the future Rome II Regulation..2 It is interesting to highlight that such a special conflict of law rule was not included in the previous proposals adopted by the Commission of the European ∗ Professor Dr. Guillermo Palao Moreno, Professor of Private International Law, Universitat de València (Spain). 1 Report on the proposal for a Regulation of the European Parliament and of the Council on the law applicable to non-contractual obligations (‘Rome II’), prepared by the Committee on Legal Affairs of the European Parliament, whose Rapporteur was Diana Wallis (A6-0211/2005). A proposal also assumed by the U.K. Presidency (as article 8 a) in its Proposal of 22 December 2005 (JUSTCIV 245, CODEC 1218), and also supported by the Swedish delegation of 23 February 2006 (JUSTCIV 39, CODEC 182). 2 ‘The law applicable to a non-contractual obligation arising out of industrial action pending or carried out, shall be the law of the country in which the action is to be taken or has been taken’.

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Guillermo Palao Moreno Union.3 In fact, its incorporation in the Rome II Regulation comes from an exclusive initiative of the European Parliament, so that ‘[t]he rights of workers to take collective action, including strike action, guaranteed under national law’, would not be undermined.4 The definitive wording and numbering of article 9 can be found in the Common Position of 25 September 2006, drafted in view of adopting the Rome II Regulation.5 From that moment on there have been no changes in relation to the title, number, or content of that provision. Furthermore, underlying this provision we can also find the purpose of countering the effects (from a conflictual perspective) of the Judgement of the European Court of Justice (hereinafter, ECJ), of 5 February 2004, in Case C-18/02, Torline.6 Let me remind the reader that in the mentioned case the Court decided, inter alia, to apply article 5.3 of the Brussels Convention of 1968 as well as to interpret its connecting factor (‘place where the harmful event occurred’), in relation to the legality of a notice of industrial action given by a Swedish trade union (followed by a sympathy action from another trade union in the same country), affecting a Danish ship-owner, with the purpose of securing a collective agreement for a Polish crew. Among other conclusions (mainly related to the material scope of article 5.3), the ECJ concluded that the harmful event could take place either in Sweden (as the place where the action took place) or in the country where the damage occurred. And, under the circumstances of the case, Denmark could be considered the flag State. Of course, the ECJ affirmed that it would also be acceptable to consider other States as places of the direct harmful effect, and the flag State should not always necessarily be regarded as that place. However, the jurisdiction of the flag State was an accepted possibility. Therefore, this Judgement allowed some room for forum actoris. With this precedent in mind, the European Parliament declared that the extension of this jurisprudence to determine the law applicable to a non-contractual 3 An institution which, from the very beginning, was very critical about the adoption of that provision (even though it was sensitive to the underlying political arguments), as it considered that the proposed rule was too rigid. In this respect, see Amendment 31 of the amended proposal of 21 February 2006 (COM (2006) 83 final). 4 Report issued by the European Parliament on 27 June 2005. Nevertheless, PATAUT had previously suggested the possibility of a specific rule for those situations for a future Rome II Regulation, PATAUT E., Note Torline, in: Rev. crit. dr. int. pr. 2004/4, p. 800-808, at p. 808. 5 O.J. C 289E/68, 28 November 2006. However, in order to appreciate the several modifications of the provision from its original version, we must bear in mind article 8 a of the overall compromise package of the Presidency issued on 10 April 2006 (JUSTCIV 85, CODEC 293) and, more definite, in article 8 a of the overall compromise package of the Presidency issued on 21 April 2006 (JUSTCIV 104, CODEC 350). 6 Judgement of the Court (Sixth Chamber), of 5 February 2004, C-18/02, Danmarks Rederiforening (acting on behalf of DFDS Torline A/S) v. LO Lansorganisationen i Sverige, (acting on behalf of SEKO Sjöfolk Facket för Service och Kommunikation), O.J. C 71/3, 20 March 2004. See PALAO MORENO G., Note Torline in: REDI 2004/2, p. 848-853.

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Rome II and Industrial Actions obligation derived from an industrial action (taking into consideration the solution envisaged by article 4.1 of the Rome II Regulation, in cases of Distanzdelikte7) could have reached the conclusion of considering as applicable a law other than the country where the industrial action was carried out.8 This effect required to be avoided, as long as the European Parliament considered that this conclusion could harm the rights of workers9. Regardless, as we will see, this protection has also been extended to employers in the final version of article 9.10 With this protective philosophy in mind and directly influenced by the precedent of Case C-18/02, Torline, article 9 appears to be a provision enacting a specific conflict of law rule, completely novel not only from a comparative perspective (as it is impossible to find a similar provision, either in national law or in International Conventions) but also in the context of Community Law (where the regulation of collective labour relations and the conflicts which may arise in connection to them has been very limited).

II. Scope of Article 9 Article 9 refers ‘to a non contractual obligation in respect of the liability of a person in the capacity of a worker or an employer or the organisations representing their professional interest for damages caused by an industrial action.’ To determine the article’s scope, three important elements must be considered: First, it must be determined which subjects could have carried out the industrial action; second, it must be determined whether the event causing the damages should be characterised as an industrial action; and third, it must be determined whether there is the existence of a tortious consequence (liability) in relation to that industrial action. First, from a subjective perspective, an industrial action could be carried out not only by workers (‘or the organisations representing their professional interests’)11 but also by employers (‘or the organisations representing their professional

See the commentary on article 4. See GARCIMARTÍN ALFÉREZ F.J., ‘La unificación del derecho conflictual en Europa: el Reglamento sobre ley aplicable a las obligaciones extracontractuales («Roma II»)’, in: La Ley 2007/6798, p. 1 et seq., par. 59. 9 Also supported by the Swedish delegation, on 23 February 2006 (JUSTCIV 39, CODEC 182). 10 Recital 27. 11 See, however, article 6 as proposed by the European Parliament in 2005 and the proposal of the French delegation for the wording of recital 14a of 4 May 2006 (JUSTCIV 113, CODEC 428). 7 8

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Guillermo Palao Moreno interests’).12 Therefore, article 9 would cover measures adopted by the first group of people (such as a strike action) as well as the second group (such as a lock out).13 In this respect, the scope of the original proposal of the European Parliament of 2005 has been significantly widened by the final version of article 9, as long as that previous text only covered industrial actions carried out by a trade union (not even mentioning those situations where such actions were conducted by workers individually), parallel to the factual circumstances of Case C-18/02, Torline. This extension could have had an influence in the Commission’s change of attitude, as that institution always considered the proposal of the European Parliament to be very rigid.14 Moreover, and in relation to the organisations representing the professional interests of workers, we must bear in mind that ‘the legal status of trade unions or of representative organisations of workers’ will be determined in accordance with the law of the Member States.15 As a result, this approach excludes an autonomous characterization of that concept16 - disturbing but completely logical option, if we consider the existing differences in national legislations within the European Union and the lack of a common European legal framework. Besides, this is a question related to the legitimacy of adopting such actions and is closely linked to the existence of the right to exercise a collective action, elements which traditionally enjoy a territorial character.17 Second, and in respect to the objective element, article 9 refers to an ‘industrial action.’18 The terminology used in that provision could have allowed us to conclude, at a first glance, that we were dealing with an autonomous concept in the Rome II Regulation. However, Recital 27 states that ‘[t]he exact concept of industrial action, such as strike action or lock-out, varies from one Member State to another and is governed by each Member State’s internal rules.’ Moreover, it is important to note that Recital 27 mentions some of those actions, and article 9 also includes those ‘pending or carried out’ actions. Again, the European institutions prefer not to develop an autonomous concept but to refer to national laws in order to define the terms used in article 9.19 A choice which, even though understandable under the circumstances of the negotia-

An extension included in article 8 a of the overall compromise package of the Presidency issued on 21 April 2006 (JUSTCIV 104, CODEC 350). 13 Recital 27. 14 See Amendment 31 of the amended proposal of 21 February 2006 (COM (2006) 83 final). 15 Recital 28. 16 Cf. Recital 11. 17 Also, PATAUT E. (note 4), at p. 804. 18 The wording ‘industrial action’ was first used in article 8 a of the overall compromise package of the Presidency issued on 10 April 2006 (JUSTCIV 85, CODEC 293). 19 Cf. Recital 12. 12

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Rome II and Industrial Actions tion, is not only unusual in a Regulation aimed at providing uniform solutions20 but also could be subjected to criticism (as it deals with the important question of the material scope of the article and therefore the Regulation itself). Specially, when the definition and regulation of such actions are not only very different from one Member State to the other, but also if we take into consideration the lack of a uniform legal framework from a European and International perspective when those actions frequently cross borders.21 In that respect I consider that this approach would be contrary to the objective expressed in Recital 11 to establish an autonomous concept of a non-contractual obligation. Besides, it would undermine the final unifying value of this European instrument. Third, also from an objective perspective, article 9 only deals with the tortious consequences of the industrial action.22 Therefore, the provision refers exclusively to liability directly derived from the industrial action.23 Consequently, it excludes other damages which may not arise directly from the exercise of that fundamental right24 as well as other non-contractual obligations which may result from that action.25 Regardless, article 9 does not offer a clear answer in respect to its application to relationships vis-à-vis third parties.26 Moreover, article 9 does not cover the ‘conditions relating to the exercise of such action:’27 a decisive question directly linked to the exercise of fundamental LEIBLE S./LEHMANN M., ‘Die neue EG-Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht («Rom II»)’, in: RIW 2007/10, p. 721-735, at p. 731. 21 See LYON-CAEN G./ LYON-CAEN, A., Droit social international et européen, Paris 1991, p. 53-57; CHAUMETTE P., ‘Fragment d’un droit des conflits internationaux du travail?’, in: Droit Social 2005/3, p. 295-301; REITHMANN CH./MARTINY D. (eds.), Internationales Vertragsrecht, Köln 2004, at p. 1400-1413; PATAUT E. (note 4), at p. 804-805. 22 A specification not included in article 8 a of the overall compromise package of the Presidency issued on 21 April 2006 (JUSTCIV 104, CODEC 350). See VON BAR CH., The Common European Law of Torts, Oxford 1998, Vol. I, p. 286, 332-334. 23 Note the proposal of the French delegation for the wording of recital 14c of 4 May 2006 (JUSTCIV 113, CODEC 428): ‘(…) the law applicable to industrial action must govern only remedy and compensation for direct economic damage caused or likely to be caused by such action’. 24 See the joint declaration of the delegations of the Republic of Latvia and the Republic of Estonia of 30 May 2006 (JUSTCIV 118, CODEC 455). 25 A limit which is consistent with the criticisms raised by the Commission of the European Union. See the Communication pursuant the second subparagraph of article 251 (2) of the EC Treaty concerning the common position (COM (2006) 566 final). Cf. article 6 of the proposal issued by the European Parliament in 2005, referring more generally to a non-contractual obligation. 26 In this sense, the Communication pursuant the second subparagraph of article 251 (2) of the EC Treaty concerning the common position (COM (2006) 566 final). Also, LEIBLE S./LEHMANN M. (note 20), at p. 731. However, GARCIMARTÍN ALFÉREZ F.J. (note 8), par. 60. 27 Recital 28. 20

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Guillermo Palao Moreno rights, which will also be determined by national legislation. We must bear in mind that, according to the ECJ Judgement in Case C-18/02, Torline, the legality of the industrial action is covered by article 5.3 of the Brussels Convention.28 In this context and notwithstanding the above mentioned clarifications, I believe that it would also be a desirable objective of the present provision to pursue a consistent interpretation of both article 9 of the Rome II Regulation and article 5.3 of Regulation (EC) Nº 44/2001 (hereinafter, Brussels I Regulation).29

III. Connecting Factors Article 9 establishes a hierarchy of three connecting factors to determine the law applicable to a liability which may arise from the analysed situations. First, the non-express derogation of article 14 allows us to consider freedom of choice as the first connecting factor.30 Second, the reference to article 4.2 of the regulation turns the common habitual residence into the second factor.31 Third, when the previous solutions are not available, ‘the law of the country where the action is to be, or has been, taken’ will be the third and final connecting factor. Comparing those connecting factors with the solutions provided by the Brussels I Regulation (from a jurisdictional perspective) shows their differences. Therefore, in cases of damages derived from an industrial action, forum and ius will not always concur. Not only because of the role played by the general fora present in the Brussels I Regulation (articles 2, 23, and 24) but also because of the interpretation of the special rule in matters relating to tort (article 5.3 of the Brussels I Regulation) in Case C-18/02, Torline. However, we must take into account that European institutions did not intend to enable the complete coincidence of forum and ius.32

28 See the Judgement of the ECJ, C-18/02, Torline, par. 1 (a). The conflictual consequences of this characterization have been criticised by PATAUT E. (note 4), at p. 805. 29 Recital 7. 30 See the commentary on article 14. 31 See the commentary on article 4. This connecting factor was incorporated in article 8 a of the overall compromise package of the Presidency issued on 10 April 2006 (JUSTCIV 85, CODEC 293). However, it was previously suggested by the Swedish, Finnish, and Netherlands delegations on 10 March 2006 (JUSTCIV 56, CODEC 234) and afterwards adopted by the Presidency on 16 March 2006 (JUSTCIV 62, CODEC 247). 32 Recital 7 only refers to the necessity to be consistent with the substantive scope of the Brussels I Regulation.

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Rome II and Industrial Actions A.

Freedom of Choice

As the first alternative, article 14 of the Rome II Regulation provides the possibility for parties to agree on the applicable law in some cases and under some circumstances. This solution may have positive effects, from the perspective of predictability and legal certainty, in relation to the analysed situations. As regards the application of article 14, we must bear in mind that a distinction should be drawn between commercial and non-commercial activities. In this respect, a tort derived from an industrial action can not be considered as a ‘commercial activity.’ Therefore, such an agreement should only be entered into after the industrial action giving rise to the damage occurred. Hence, previous agreements included in an individual contract of employment or in a collective agreement will be inadmissible. Moreover, a choice of law conforming with article 14 paragraph 2 ‘shall not prejudice the application of provisions of that other country which cannot be derogated from by agreement.’ This could often happen in cases of industrial actions due to their close connection to the exercise of fundamental rights (as the right to strike is considered in some countries). Therefore, the application of mandatory rules of Labour Law (normally of a territorial character) is likely to be considered in those situations.33 According to this provision, as an example, if parties agree to the application of the law of the country where the damage occurred, the effect of this selection could be severely limited by the mandatory rules of Labour Law of the State where the harmful action took (or is to be taken) place. In that respect, we must also bear in mind the close connection between the legality of an industrial action and the tortious consequences which may derive from it, as stated in Case C-18/02, Torline. In any case, we must be aware of the scarce probabilities that in practice parties will make use of article 14 of the Rome II Regulation in those cases; even though freedom of choice is available with all of its beneficial effects, parties prefer legal certainty. B.

Common Habitual Residence

In the very likely event where the parties have not chosen an applicable law, the law of the country of the common habitual residence will apply. This connecting factor may allow some conflictual predictability for the parties,34 as well as some See LYON-CAEN G./ LYON-CAEN, A. (note 21), at p. 55-56; LIUKKUNEN U., The Role of Mandatory Rules in International Labour Law, Helsinki 2004. 34 However, in principle it does not affect third parties. This possibility was suggested by the German delegation on 30 March 2006 (JUSTCIV 84, CODEC 295) by adding a paragraph 2 to article 8 a: ‘However, where an enterprise sends workers to another country where the action takes place the law of the common habitual residence is applicable not only in relationship between the enterprise and its workers but also in relation to third parties.’ 33

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Guillermo Palao Moreno room for proximity. In this respect, we must take into account that the mentioned element (habitual residence) will be determined in accordance with article 23.35 As an example, if the industrial action took place on a ship or an airplane started by its crew or workers (‘or the organisations representing their professional interests’) and their habitual residence would coincide with the flag state, this common law should be applied regardless of the place where the action was carried out.36 Other connecting factors present in article 4 of the Rome II Regulation would be excluded, as only paragraph 3 is expressly mentioned. This limitation may have important practical consequences, as neither will there be any escape from the solutions present in article 9 nor will there be room for any flexibility in their application. Thus, it is doubtful not only whether the objectives of article 9 could have been accomplished by application of the general rule (adding some precise clarifications in the Recitals) but also (as we will see below) whether the result of applying this article will prove to be beneficial to the rights of the workers. C.

Lex Loci Acti

Finally, in those situations where there is neither a pactum de lege utenda nor a common habitual residence, the applicable law will be that of ‘the country where the action is to be, or has been, taken.’ In fact, this was the sole connecting factor that the European Parliament considered when it suggested this special and protective rule,37 as well as the major contribution of article 9. Thus, it deserves much closer attention because of those reasons. Two questions are the most important when we approach this factor. First, what were the objectives of the European institutions when this provision was proposed? Second, does the application of this connecting factor achieve adequate results? 1.

Rationale of the Rule

As mentioned above, this rule was primary intended to protect the interests of workers, although this intent was afterwards extended to employers as well.38 In one way, article 9 aims at avoiding the possible negative effects which could be derived from the application of article 4 to the personal liability derived from an industrial action. Thus, in my opinion, this rule does not primarily seek to specify See the commentary on article 23. See LEIBLE S./LEHMANN M. (note 20), p. 731-732. 37 As for the initiative of the European Parliament of 2005, it was considered as the sole available connecting factor. Therefore, the possibility of it being derogated was excluded - maybe another reason for the critical approach by the Commission of the European Union in respect to its rigid character. 38 In favour of this solution, even before the Proposal of the European Parliament was published, PATAUT E. (note 4), at p. 805-806. 35 36

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Rome II and Industrial Actions the territorial solution present in article 4 (the lex loci delicti rule), an objective which may be found more clearly in other articles (e.g., article 8), but to exclude its application in those cases covered by article 939 through the development of a special conflict of law rule. In this respect, when article 9 makes a clear option in favour of lex loci actus we can conclude that the main objective of the provision is to eliminate the consequences which may occur from the application of article 4.1 to industrial actions (especially in situations of a Distanzdelikt). Therefore, by this rule both the place of conduct and the place of the damage are considered to be concentrated in the place where the industrial action is carried out, as long as the consequences which may arise in other places are considered indirect and not taken into account.40 Thus, through this reasoning the law of the country where both elements are considered to coincide is estimated to be the most appropriate solution to asses the liability derived from those actions. In other words, by this option article 9 shows a clear preference for the law of the national ‘labour market’ where the industrial action was carried out.41 That is, with this connecting factor this provision favours the application of the law of the country where the labour conflict took place.42 Accordingly, this place will usually be the same as the place of work.43 For illustrative purposes, when the work, as well as the industrial action, were carried out on board a ship, the law of the flag of that ship should be applicable to determine any liability arising from that action. However, if damages did not occur on board or it was a flag of convenience, that law should not be considered closely connected to the situation.44 In spite of the mentioned advantages of the rule, the final wording of article 9 raises some doubts which have not been clarified by European institutions. On the one hand, the damage caused by an industrial action is mainly a financial loss,

However, GARCIMARTÍN ALFÉREZ F.J. (note 8), par. 60. In this respect, GARCIMARTÍN ALFÉREZ F.J. (note 8), par. 60. 41 In this sense, LEIBLE S./LEHMANN M. (note 21), at p. 731. Even more, if we consider the current impossibility of declaring the existence of a ‘European labour market’. See PALAO MORENO G., ‘Las normas de Derecho internacional privado de origen comunitario en materia de contrato individual de trabajo, ante los retos de la integración europea y de la globalización’, in: AEDIPr 2005, p. 309-334, at p. 314-315. 42 See FRANZEN M., ‘Internationale Zuständigkeit beim Aufruf zum Boykott eines Seeschiffes’, in: IPRax 2006/2, p. 127-129, at p. 128; REITHMANN CH./MARTINY D. (eds.) (note 21), at p. 1411. 43 See GAMILLSCHEG F., ‘Labour Contracts’, in: I.E.C.L., Vol. III, Ch. 28, p. 7-28, at p. 20. 44 In this sense, HERGENRÖDER C.W., Note to Torline, in: GPR 2005, p. 33-36, at p. 36; REITHMANN CH./MARTINY D. (eds.) (note 21), at p. 1412. See the concerns of the Greek delegation in respect to this question in its statement of 31 May 2006 (JUSTCIV 118, CODEC 455). 39 40

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Guillermo Palao Moreno and it is normally caused where the affected enterprise is established.45 Therefore, in the case of a Distanzdelikt where a strike took place in one country regarding a company established in a different country, it is very much doubtful to consider that the place of establishment has no interest from a conflictual perspective as only indirect damages could occur there. On the other hand, we can also wonder whether the creation of this special conflict of law rule, and consequential derogation from the solutions envisaged in paragraphs 1 and 3 of article 4, is adequate to fulfil the protective objective pursued by article 9. In this sense, when the ECJ interpreted article 5.3 of the Brussels I Regulation in Case C-18/02, Torline, the Court reasoned in terms of proximity (close connection) to determine both the place of conduct and the place of direct result - an approach which could have also been used to interpret the escape clause present in article 4.3 of the Rome II Regulation and maybe reaching the same solution as the one envisaged in article 9. Hence, I do not find strong reasons for a complete abandonment of the ubiquity rule, corrected by the closest connection test, in the case of an industrial action.46 In addition, the same criticism which may arise from the choice stated in article 4.1 in favour of the loci damni when facing a Distanzdelikt could also be raised in relation to the loci actus rule present in article 9. Again, I am of the opinion that the flexible approach provided by article 4.3 could have proven useful for industrial actions, under the circumstances of a given case. 2.

Determining the Loci Acti

In most of the cases, this connecting factor will not create major problems in practice. An industrial action will usually be carried out in one country. Thus the determination of that place will rarely be challenged and the application of article 9 will provide a predictable result for the parties in many situations. However, currently collective labour conflicts usually enjoy an international as well as a multilocalised character. In this respect, an industrial action could not only be carried out in different countries but it could also have cross-border effects. We can consider, as an example, an action carried out by temporary posted workers, or pilots of an airline company, as well as a sympathy action, which could be carried out in several countries by different national trade unions. Those complex situations would create difficulties when trying to ascertain the law applicable to determine any possible liability which may arise in such contexts; difficulties which do not find a straight forward solution in article 9 and create negative effects on the legal certainty intended by the Rome II Regulation.47 From a jurisdictional perspective, MANKOWSKI P., ‘Article 5’, in: MAGNUS U./ MANKOWSKI P. (eds.), Brussels I Regulation, München 2007, p. 77-236, at p. 208-209; KREIL L., Note to Torline, in: ZESAR 2005, p. 138-140, at p. 139. 46 Similarly, SYMEONIDES S.C., ‘Tort Conflicts and Rome II: Impromptu Notes on the Rapporteur’s Draft’, p. 1-7, at p. 5 (available at: ). 47 Also, LEIBLE S./LEHMANN M. (note 20), at p. 731. 45

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Rome II and Industrial Actions This lack of legal certainty, however, could not be solved through the application of paragraph 3 of article 4. Thus we can wonder which would be the most suitable solution for such cases. The express inclusion of the place where the action was carried out in article 9 makes it difficult to find an easy answer to that problem. In this respect, in those situations where the decision to adopt such action was centralized in one country, the law of the country where that initiative started could be considered the applicable law. However, in cases of a complete coordination of national trade unions adopting such a position, that answer would not be that obvious and, as a consequence, it could be ascertained that there were different places of acting and several applicable laws.48 That conclusion would have the negative result of multiplying the determination of the place where the action was carried out and, as a consequence, fragmenting the law applicable to a liability arising from an industrial action (the so called, ‘mosaic effect’).

IV. Concluding Remarks The major contribution of article 9 of the Rome II Regulation is the creation of a specific conflict of law rule completely novel from a comparative perspective. The obvious objective of that rule is to undermine the effects of the Judgement of the ECJ in Case C-18/02, Torline, from a conflictual perspective. However, some legitimate doubts arise not only in relation to the development of a special provision in the Rome II Regulation for those cases but also whether article 9 is adequate for the protective objectives underlying its proposal. In that respect, and particularly in relation to the second question, in this study I have stressed the problems generated by this provision in terms of interpretation and application. Not only when we face the problem of determining its scope (a solution left to national laws) but also when we examine the role played by the connecting factors chosen for article 9 (specifically, the determination of the lex loci when the action was carried out in several countries), as well as the application of this article in relation to third parties. But even more important is that neither the preparatory works nor the Recitals of the Rome II Regulation make a satisfactory showing of two aspects: First, through the application of article 4 it would be impossible to reach an adequate and protective result in any case, and second, article 9 offers a more appropriate answer in cases of liability derived of an industrial action. Therefore we can wonder whether we are faced with a useful provision.49 Only the future application of article 9 will clear these shadows. LYON-CAEN G./ LYON-CAEN, A. (note 21), at p. 56 Cf. NOURISSAT C./TREPPOZ E., ‘Quelques observations sur l’avant-projet de proposition de règlement du Conseil sur la loi applicable aux obligations non contractuelles (Rome II)’, in: Clunet 2003, p. 7-32, at p. 29-32. 48 49

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CULPA IN CONTRAHENDO IN THE CONFLICT OF LAWS A COMMENTARY ON ARTICLE 12 OF THE ROME II REGULATION Bart VOLDERS∗

I. II. III. IV.

Introduction Qualification Connecting Factors Conclusion

I.

Introduction

The Regulation (EC) No 864/2007 of 11 July 2007 of the European Parliament and of the Council on the law applicable to non-contractual obligations (commonly referred to as the ‘Rome II Regulation’)1 lays down uniform rules to determine which substantive law should apply to issues in international cases where the claim is brought to enforce a non-contractual obligation.2 There already existed within the European Union, prior to the entry into force of the Rome II Regulation, an established body of choice of law rules for contractual obligations.3 Common conflict rules for non-contractual obligations were however missing, although the idea of having a single choice of law regime for non-contractual obligations at the European Union level is no novelty.4 ∗

Dr. iur.; Attorney-at-Law at the Brussels Bar. O.J. L 199 of 31 July 2007, pp. 40-49. 2 Pursuant to Article 31 Rome II, the Rome II Regulation shall apply to events giving rise to damage which occur after its entry into force. Article 32 Rome II states that the Regulation shall apply from 11 January 2009, except for Article 29 Rome II, which shall apply from 11 July 2008. 3 Convention on the law applicable to contractual obligations (hereinafter: ‘1980 Rome Convention’), O.J. C 027 of 26 January 1998, pp. 34-46 (consolidated version). 4 The initial idea of the Member States was to come up with a convention covering both contractual and non-contractual obligations. Despite the Member States succeeded in producing a first draft convention covering both types of obligations in 1972, a number of disagreements eventually prevented them to finalise and to adopt this first draft proposal. For some commentaries on the 1972 draft convention, refer to JESSURUN D’OLIVEIRA H., ‘Observations concerning the preliminary draft EEC Convention on the law applicable to contractual and non-contractual obligations’, in: N.I.L.R. 1975, pp. 194-201; LAGARDE P., 1

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Bart Volders The objective of the Rome II Regulation is to ensure that courts in each of the Member States apply identical choice of law rules to disputes involving noncontractual obligations. According to the Community legislator, uniform conflict rules avert the risk of distortions of competition between Community litigants.5 The substantive scope of the Rome II Regulation, whilst some particular matters have been expressly excluded from its scope6, is otherwise intended to cover comprehensively all non-contractual obligations. Its substantive scope and (most of) its provisions, furthermore pursue consistency 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 (the ‘Brussels I Regulation’) and the (draft) instruments dealing with the law applicable to contractual obligations.7 While it is true that the Rome II Regulation and the 1980 Rome Convention, soon to be replaced by a Rome I Regulation,8 deal with choice of law and not with jurisdiction, the proposal to interpret common provisions congruently, subject of course to certain exceptions,9 is clearly to be applauded.10 Streamlining the interpretation of common notions contained in jurisdictional or choice of law ‘Examen de l’avant projet de Convention CEE sur la loi applicable aux obligations contractuelles et non-contractuelles’, in: T.C.F.D.I.P. 1971-1972, pp. 147-203 ; VANDER ELST R., ‘L’unification des règles de conflits de lois dans la CEE’, in: J.T. 1973, pp. 249-253 ; VANDER ELST R., ‘Projet de Convention CEE sur la loi applicable aux obligations noncontractuelles’, in: R.T.D.E. 1975, pp. 185-195. 5 Preamble of the Rome II Regulation, consid. 13. 6 Article 1, par. 2 Rome II. 7 Preamble of the Rome II Regulation, consid. 7. 8 On the conversion of the 1980 Rome Convention into a Community Regulation, refer to BONOMI A., ‘Conversion of the Rome Convention into an EC instrument’, in: this Yearbook 2003, pp. 53 et seq.; LEIN E., ‘Proposal for a Regulation on the Law Applicable to Contractual Obligations (Rome I) COM(2005) 650 Final, 15.12.2005: A Short Commentary’, in: this Yearbook 2005, pp. 391 et seq.; MANKOWSKI P., ‘Der Vorschlag für die Rom I-Verordnung’, in: IPRax 2006, pp. 99 et seq. 9 PERTEGÁS SENDER M., ‘The notion of contractual obligation in Brussels I and Rome I’, in: MEEUSEN J./PERTEGÁS SENDER M./STRAETMANS G. (eds.), Enforcement of International Contracts in the European Union. Convergence and divergence between Brussels I and Rome I, Antwerp/Oxford/New York 2004, pp. 176 et seq., nrs. 5.4 et seq. 10 BRIGGS A./REESE P., Civil Jurisdiction and Judgements, 4th edition, London 2005, pp. 147-148, nr. 2.124 (according to these authors, it seems fairly unlikely that ‘those who drafted these instruments intended the central definitional terms to have divergent meanings: they were all drafted in Brussels, and comprise the jigsaw part of what will one day soon be a private international legal code for the Member States’); GAUDEMET-TALLON H., Compétence et execution des jugements en Europe. Règlement n° 44/2001, Conventions de Bruxelles et de Lugano, 3th edition, Paris 2002, p. 139, nr. 183; SCHULTZ J., case note under ECJ 8 March 1988 (Arcado c./ Haviland), in: N.J., 1990, No. 424, p. 1627 (this author refers of a ‘verticale begrippenunificatie’). Contra: MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (BASEDOW J. [et al.]), ‘Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations’, in: RabelsZ. 2007, pp. 237-238.

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Culpa in Contrahendo in the Rome II Regulation Community law instruments is unarguably the easiest solution, which, for this mere reason, serves best legal certainty.11 The approach taken in the Rome II Regulation is to divide non-contractual obligations into two groups: a first group of non-contractual obligations arising out of a tort or delict12 and a second group that does not.13 Whereas civil wrongs are, in general, readily identifiable and, while it is acknowledged that substantial grey areas continue to exist between contractual and tortuous liability throughout the various jurisdictions, the notion of tortuous and delictual liability is commonly understood across the European Union. It proves far more complex, however, to classify and to define the second category of non-contractual obligations, which comprises claims arising out of unjust enrichment, negotiorum gestio and, what is of interest here, culpa in contrahendo covering non-contractual obligations arising out of dealings prior to the conclusion of the contract. The idea to provide in a common, European Union conflicts rule for claims arising out of a culpa in contrahendo – or, in general, claims arising out of precontractual dealings – was initially propounded by the European Group of Private International Law (‘EGPIL’) in the explanatory documents to its Proposal for a European Convention on the law applicable to non-contractual obligations adopted at the meeting of the Group in Luxembourg of 25 through 27 September 1998.14 But also the Max Planck Institute for Foreign Private and Private International Law (‘MPI’) argued in its comments on the European Commission’s Green Paper on the conversion of the 1980 Rome Convention, albeit in different terms, in favour of an express provision dealing with claims arising out of a culpa in contrahendo.15 The approach taken by the European Union legislator in the new Rome II Regulation does, however, differ on a number of important terms from both proposals. The structure of our analysis is twofold. A first subsection will analyse more thoroughly what actually constitutes a claim arising out of a culpa in contrahendo within the meaning of Article 12 Rome II. A second subsection will asses, once the claim has been qualified as a claim arising out of a culpa in contrahendo, the practical operation of this provision. At the outset, we should admit to be slightly disappointed with Article 12 Rome II. The provision seems on occasion relatively complex to handle and is furthermore inconsistent with other provisions VOLDERS B., Afgebroken contractonderhandelingen in het international privaatrecht, thèse dactyl. 2007, p. 336, nr. 539 (to be published by Larcier, Brussels). 12 Articles 4 through 9 Rome II. 13 Articles 10 through 12 Rome II. 14 The Draft Proposal is available at the website of the Group at: (last consulted on 15 February 2008). 15 Refer to MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (BASEDOW J. [et al.]), ‘Comments on the European Commission’s Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernization’, in: RabelsZ. 2004, p. 112. 11

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Bart Volders of the Rome II Regulation. I will revert to this critique after having commented on Article 12 Rome II.

II.

Qualification

The qualification or characterisation of a claim is the first hurdle conflict lawyers should tackle. Pursuant to the new (draft) Rome I and Rome II Regulations, all liability claims arising out of a pre-contractual relationship between the parties, albeit a claim arising out of a culpa in contrahendo within the meaning of Article 12 Rome II or not, are to be characterised as non-contractual.16 This global submission of all claims arising of dealings prior to the conclusion of contract departs from the Tacconi judgement of 17 September 2002 of the European Court of Justice,17 despite the Community legislator expressly arguing to pursue consistency with the Brussels I Regulation. In the latter case, the Court of Luxemburg held that a claim based on the alleged breach of a party’s duty to comply with the standard of good faith and fair dealing prior to the conclusion of the contract falls outside the substantive scope of Article 5, par. 1 Brussels I. The European Court of Justice did, however, expressly reiterate in its judgement that the existence of a contract was not a prerequisite for Article 5, par. 1 Brussels I to apply. A number of authors accordingly conclude that the characterisation of claims arising out of a breakdown of contract negotiations as non-contractual in the Tacconi judgement does not amount to a categorical exclusion of pre-contractual obligations outside the substantive realm of Article 5, par. 1 Brussels I.18 Hence, an exchange of precontractual documents (such as a letter of intent, a memorandum of understanding or a heads of agreement) between the contracting parties prior to the conclusion of the contemplated agreement, may cause in particular circumstances the characterisation of pre-contractual liability claims to shift from the realm of noncontractual obligations to a contractual matter. The proposed global submission in the (draft) Rome I and Rome II Regulations of all claims arising of dealings prior to the conclusion of contract to the realm of non-contractual obligations 16 Refer to Article 1, par. 2 lit. i of the Draft Proposal for a Rome I Regulation (COM(2005) 650 Final of 15 December 2005). 17 ECR 2002, I-7357. 18 STRIKWERDA L., De overeenkomst in het IPR, 2nd edition, Deventer p. 39, nr. 78 ; PERTEGÁS SENDER M. (note 9), p. 186, nr. 5-32; HUET A., case note under ECJ 17 September 2002 (Tacconi c./HWS), in: Clunet 2003, p. 671 (the author refers to a decision of the Court of Appeal of Chambéry of 23 February 1998, reported in: Clunet 1999, p. 188, commentary by HUET A.); MANKOWSKI P., ‘Die Qualifikation der culpa in contrahendo – Nagelprobe für den Vertragsbegriff des europäischen IZPR und IPR’, in: IPRax 2003, pp. 133-135; VEENSTRA K.J., ‘Artikel 5 EEX en afgebroken onderhandelingen’, in: N.T.B.R. 2003, p. 140; VLAS P., case note under ECJ 17 September 2002 (Tacconi c./HWS), in: N.J., 2003, p. 249.

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Culpa in Contrahendo in the Rome II Regulation accordingly seems at square with the principle of party autonomy, pursuant to which the parties can not only freely structure and organise their contractual relationship, but also their pre-contractual dealings. Not all claims arising out of pre-contractual dealings do, however, qualify as claims arising out of a culpa in contrahendo within the meaning of Article 12 Rome II. Within the framework of the Rome II Regulation, claims arising out of dealings prior to the conclusion of the contract are to be split over various choice of law rules, whereby only a particular kind of pre-contractual liability claims enters into the substantive realm of Article 12 Rome II. The notion of culpa in contrahendo of Article 12 Rome II, despite this provision having a certain German flavour to it,19 should furthermore not be confused with its equivalent in German substantive law. Pursuant to the Preamble of the Rome II Regulation, culpa in contrahendo for the purposes of Article 12 Rome II is considered an autonomous concept which is not necessarily to be interpreted within the meaning of national law.20 According to the text of Article 12, par. 1 Rome II, culpa in contrahendo minimally includes the violation of the duty of disclosure and the breakdown of contractual negotiations. Culpa in contrahendo equally covers other non-contractual obligations providing these obligations to present a direct link with the dealings prior to the conclusion of the contract. The direct link which triggers the application of Article 12 Rome II is not defined, nor otherwise clarified in the text or the preparatory documents to the Rome II Regulation. It seems, however, that merely claims which are functionally connected with the contemplated agreement enter into the substantive realm of Article 12 Rome II.21 Absent such direct link, the pre-contractual liability claim does not qualify as a claim arising out of a culpa in contrahendo, but instead is subject to Article 4 Rome II or other relevant provisions of the Rome II Regulation. If, for instance, a person suffers personal injury while a contract is being negotiated, the applicable The notion of culpa in contrahendo was first used by the German scholar R. VON IHERING who published on the subject in 1861 (VON IHERING R., ‘Culpa in contrahendo oder Schadenersatz bei nichtigen oder nicht zur Perfection gelangten Verträgen’, in: Jahrbücher für die Dogmatik des heutigen römischen und deutschen Privatrechts 1861, IV, pp. 1 et seq.). It was, however, an Italian scholar, G. FAGELLA, who first argued that the contracting parties can incur a liability even if the prospective contract would eventually not have been entered into (FAGELLA G., ‘Dei periodi precontrattuali e della loro vera ed esatta construzione significa’, in: Studi Giuridico di Carlo Faddo, Napoli 1906, pp. 298 et seq. and the thorough analysis of G. FAGELLA’s theory by SALEILLES R., ‘De la responsabilité précontractuelle ; à propos d’une étude nouvelle de la matière’, in: RTDCiv. 1907, pp. 705 et seq.). 20 In order to clearly illustrate that the notion of culpa in contrahendo for the purposes of Article 12 Rome II is not to be mistaken with its equivalent in German substantive law, the Community legislator thought it wise to refer in the German authentic text of Article 12 Rome II to ‘Verschulden bei Vertragsverhandlungen’. 21 Compare with MOURA VICENTE D., ‘Precontractual liability in Private International Law. A Portuguese Perspective’, in: RabelsZ. 2003, p. 710; MANKOWSKI P., (note 18), p. 133; MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (BASEDOW J. [et al.]), (note 15), pp. 88-90; LEIN E. (note 8), p. 397. 19

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Bart Volders law is to be determined pursuant to the general choice of law rule for tortuous or delictual obligations of Article 4 Rome II.22

III. Connecting Factors Article 12 Rome II is structured in two limbs. The first limb contains the general rule. Pursuant to Article 12, par. 1 Rome II, the law applicable to a non-contractual obligation arising out of dealings prior to the conclusion of a contract, regardless of whether the contract was actually concluded or not, shall be the law that applies to the contract or that would have been applicable to it had it been entered into. Claims arising out of a breakdown of contract negotiations are accordingly to be assessed pursuant to the law applicable to the contemplated agreement.23 The proposed first limb, which submits claims arising out of pre-contractual dealings to the law applicable to the contemplated agreement, recalls of an idea initially suggested by the French author P. Bourel who argued, back in 1961, to link obligations arising out of pre contractual dealings, albeit non contractual, with the upcoming agreement.24 Such manoeuvre is lenient to the technique of an accessory attachment (rattachement accessoire) of non-contractual obligations. This technique, which has currently been codified, albeit on different terms, in a number of national choice of law rules,25 circumvents the stringent lex loci delicti commissi conflict rule by replacing it with a ‘soziologische Einbettung’26 of the non-contractual obligation. But also the EGPIL suggested in its Draft European Convention on the law applicable to non-contractual obligations, an application of the technique of an accessory attachment of obligations arising out of dealings prior to the conclusion of the contract. The Draft Proposal expressly acknowledges that in determining the country which has the closest connection, the court shall have regard to any 22 This exception recalls of the ‘Bananenschale’ case of the German Supreme Court. Refer to BGH, 26 September 1961, in: N.J.W., 1962, p. 31 et seq. While under German substantive law, the theory of culpa in contrahendo extends to the situation where a person suffers personal injury while a contract is being negotiated, in the majority of other jurisdictions, such liability claims are generally not brought under the umbrella of pre-contractual liability. 23 We will not elaborate in this contribution on a choice of the applicable law prior to the conclusion of the agreement. Refer for further particulars on this issue to VOLDERS B., (note 11), pp. 429 et seq., nrs. 677 et seq. 24 BOUREL P., Les conflits de lois en matière d’obligations extracontractuelles, Paris 1961, p. 149. 25 For a comparative overview, refer to VOLDERS B. (note 11), pp. 380 et seq., nrs. 596 et seq. 26 BINDER H., ‘Zur Auflöckerung des Deliktstatuts’, in: RabelsZ. 1955, p. 48. A fairly similar idea had already been suggested in earlier Dutch scholarly writings. Refer to HIJMANS I.H., Algemeene problemen van het international privaatrecht, Zwolle 1937, p. 61.

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Culpa in Contrahendo in the Rome II Regulation pre-existing or contemplated relationship between the parties,27 such as a prospective contract. Such accessory attachment to the putative law of contract does evidently not amount to a ‘re-qualification’ of the pre-contractual liability claim.28 Apart from this accessory attachment of culpa in contrahendo claims being clear-cut, easy to operate and, therefore, beneficial for legal certainty, there is yet another advantage of submitting claims arising out of a culpa in contrahendo to the law applicable to the contemplated agreement. Since the putative law of contract is to be determined pursuant to the choice of law rules of the 1980 Rome Convention (or, in the near future, pursuant to the choice of law rules of the Rome I Regulation), the particular protection this instrument provides for certain consumer and individual employment contracts similarly extends to the pre-contractual bargaining period of contract.29 The presumed economic weaker contracting parties are accordingly granted legal protection also prior they’re entering into a final agreement. Submitting claims arising out of a culpa in contrahendo to the lex contractus that would have been applicable to the contemplated agreement, does, however, imply that the applicable law will most probably be the law of the state where the party that would have been required to effect the characteristic performance has his habitual residence or its central administration.30 A Dutch party claiming relief for an allegedly illegal breakdown of contract negotiations may accordingly rely upon the stringent standard of good faith and fair dealing of Dutch civil law if this party were to perform the characteristic performance of the prospective agreement, irrespectively the perpetrator being English and English substantive law does not impose any such stringent pre-contractual good faith obligation to the parties prior to the conclusion of the contract. In order to protect a perpetrator unaware of such stringent pre-contractual standard that would be imposed on him by virtue of the law applicable to the contemplated agreement, certain academic writings correctly argue in favour of an extension of the protection of Article 8, par. 2 of the 1980 Rome Convention.31 In certain exceptional circumstances, the English perpetrator which has withdrawn from the pre-contractual negotiations allegedly in infringement of the requirements imposed under Dutch civil law, may accordingly rely upon English substantive law in order to escape from a pre-contractual liability. These exceptional circumstances are to be assessed on a case-by-case basis. In other words: the mere fact English substantive law does not restrict the bargaining parties’ freedom from contract through a general and abstract standard of good Article 3, par. 5 of the Draft Proposal. FRICK J., Culpa in contrahendo. Eine rechtsvergleichende und kollissionsrechtliche Studie, Zurich 1992, p. 223. 29 VOLDERS B., (note 11), p. 403, nr. 637. 30 Article 4, par. 1 juncto par. 2 of the 1980 Rome Convention. 31 Refer to DÖRNER H., case note under BGH 9 October 1986, in: Juristische Rundschau 1987, p. 203; GAUTIER P.Y., ‘Les aspects internationaux de la négociation’, in: RTDCom. 1998, p. 496 ; MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (BASEDOW J. [et al.]), (note 15), p. 90. 27 28

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Bart Volders faith but instead adopts an aleatory view of contract negotiations is, in itself, insufficient to trigger the escape clause of Article 8, par. 2 of the 1980 Rome Convention. Far less convincing, however, is the second limb of Article 12 Rome II. This second limb provides in a fall-back rule that can only to be operated if the law applicable to the claim arising out of a culpa in contrahendo cannot be determined pursuant to the general rule. One may, at the outset, argue this provision most probably will prove superfluous in practice. Considering the very flexible conflict rules of the 1980 Rome Convention (and, although slightly less flexible,32 the choice of law rules of the upcoming Rome I Regulation) which equally determine, via Article 12, par. 1 Rome II, the law applicable to dealings prior to the conclusion of the contract, it seems indeed fairly unlikely that the lex contractus of the upcoming agreement cannot be assessed. A breakdown of contract negotiations at the very beginning may, arguably, hinder the determination of the applicable law to the projected agreement, especially if the contemplated agreement were to be very complex. Breaking off contract negotiations at the outset will not, however, give rise, as a matter of substantive law, to any pre-contractual liability of the perpetrator.33 But also the laddered structure and detailed drafting of Article 12, par. 2 Rome II face criticism. At first sight, the threefold structure of Article 12, par. 2 Rome II is seemingly simply rephrasing the general conflicts rule for torts and delicts of Article 4 Rome II: where the applicable law to the pre-contractual liability claim cannot be determined on the basis of article 12, par. 1 Rome II, it shall be either the law of the country in which the damage occurs, irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occurred34 or, where the parties have their habitual residence in the same country at the time when the event giving rise to the damage occurs, the law of that country.35 Where it is, however, clear from all the circumstances of the case that the non-contractual obligation arising out of dealings prior to the conclusion of a contract is manifestly more closely connected with another country, then the law of this country will apply.36 There is, however, a peculiar difference between both provisions, for which the preparatory documents contain no express explanation. Article 12, par. 2 lit. b Rome II takes indeed as a relevant date for there being a habitual residence the time when the event giving rise to the damage occurs. Article 4, par. 2 Rome II 32 Refer to LAGARDE P., ‘Remarques sur la proposition de Règlement de la Commission européenne sur la loi applicable aux obligations contractuelles (Rome I)’, in: Rev. crit. DIP 2006, p. 103. 33 This is implied by the freedom from contract. Refer to COHEN N., ‘Pre-contractual duties: two freedoms and the contract to negotiate’, in: BEATSON J./FRIEDMANN D. (eds.), Good faith and fault in contract law, Oxford 1994, p. 25. 34 Article 12, par. 2 lit. a Rome II. 35 Article 12, par. 2 lit. b Rome II. 36 Article 12, par. 2 lit. c Rome II.

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Culpa in Contrahendo in the Rome II Regulation on the other hand, requires that all parties have their habitual residence in the same country at the time when the damage occurs. Why the Community legislator prefers in Article 12, par. 2 Rome II the event over the damage is unclear. One may argue that it is difficult to assess, for instance in cases where one party seeks compensation for a breakdown of contract negotiations, the exact time when the damage occurs. The grieved party merely seeks compensation for a pure economic loss. It is, however, wrong to assume that the exact time of the event giving rise to the damage might be more easily to determine. What actually constitutes the event giving rise to a claim arising out of a culpa in contrahendo is indeed interpreted differently in case law,37 which similarly hinders an exact timing of this event.

IV. Conclusion One may argue that the Community legislator made in Article 12 Rome II a valiant attempt of legislating in the area of pre-contractual liability. The referral to the technique of the accessory attachment, allowing for claims arising out of a culpa in contrahendo to be submitted to the law applicable to the contemplated agreement, unarguable provides in a clear-cut and straightforward solution, which can only be applauded. Apart from this, there is, however, very little one should be enthusiastic about. A closer look to Article 12 Rome II reveals indeed a number of shortcomings which, arguably, may hinder the provisions’ practical operation. The usage of a concept such as culpa in contrahendo in a Community law instrument which, although it originates in German substantive law, should in any effect not be mistaken with its German counterpart, may give rise to some salient interpretational difficulties before its substantive scope being well-defined and clear. But also the second limb of Article 12 Rome II, apart from it being illustrative of a particularly poor legislative drafting technique, clearly risks ending up every courts’ ‘Bananenschale’.38

37 For some examples drawn from case law, refer to VOLDERS B. (note 11), pp. 172 et seq., nrs. 285 et seq. 38 Refer to BGH, 26 September 1961, in: N.J.W. 1962, p. 31 et seq.

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RELATIONSHIPS BETWEEN ‘ROME II’ AND OTHER INTERNATIONAL INSTRUMENTS A COMMENTARY ON ARTICLE 28 OF THE ROME II REGULATION Georgina GARRIGA∗

I. II. III.

IV.

Introduction Background of the Article 28 of the Rome II Regulation Content of the Article 28 of the Rome II Regulation A. What is Expressly Provided by Article 28 of the Rome II Regulation B. What is Implicitly Provided by Article 28 of the Rome II Regulation Conclusion

I.

Introduction

Although the phenomenon of interaction between international conventions has been traditionally studied from the public international law perspective and limited to international conventions, since the beginning in the 1950’s, the private international law perspective has also played an important role. In this sense, B. Dutoit and F. Majoros underlined that ‘A l’évidence, les cas des conflits de conventions en droit privé ne cessent d’augmenter. En effet, les conventions bilatérales ou multilatérales ayant, au moins partiellement, le même objet continuent d’éclore à un rythme accéléré’.1 This phenomenon has been expanded even more due to the socalled communitarization of private international law, which added the conflicts between international conventions and community legislation to the traditional interaction.2 Indeed, certain measures adopted by European institutions in the recent past are clashing with international conventions to which Member States became parties before the above-mentioned communitarization. As a consequence, the aforementioned phenomenon occurs with much greater frequency than in the past when B. Dutoit foresaw that ‘L’épée de Damoclès des conflits de conventions ∗

Lecturer in Private International Law, University of Barcelona. ‘Les lacis des conflits de conventions en droit privé et leurs solutions possibles’, in: Rev. crit. dr. int. pr. 1984, p. 22. 2 With respect to the communitarization of private international law, as the bibliography dealing with this topic is so vast, see BORRAS A., ‘Le droit international privé communautaire: réalités, problèmes et perspectives d’avenir’, in: Recueil des Cours 2005, tome 317, pp. 313-536 and the bibliography at 527-536. 1

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Georgina Garriga est décidément trop bien suspendue sur nos têtes (…)’.3 The legislative power of the European Community has therefore increased the conflicts between international measures. Article 28 of the 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 Regulation) reflects this.4 This provision, as set forth below, deals with the interaction between the Rome II Regulation and the international conventions to which Member States became parties before its adoption. Thus, Article 28 of the Rome II Regulation continues, to some extent, the trend initiated by Article 21 of the Convention on the law applicable to contractual obligations, opened for signature on 19 June 19805 (Rome Convention) regulating the relationship among international instruments that set forth conflict-of-law rules. This provision deals with the Convention’s relationship with other international conventions to which contracting States became or can become parties in the future.6 In this respect, Article 21 of the Rome Convention focuses mainly on the Convention’s relationship with The Hague Convention of 15 June 1955 on the law applicable to international sales of goods7 and the Hague Convention of 14 March 1978 on the law applicable to agency,8 giving them precedence. B. DUTOIT’s preface to F. MAJOROS’s book, Les conventions internationales en matière de droit international privé. Abrégé théorique et traité pratique, Paris 1976, p. XVIII. 4 OJ L 199, 31 July 2007. For comments on the Rome II Regulation, see, among others, GARCIMARTÍN ALFÉREZ F.J., ‘The Rome II Regulation: On the way towards a European Private International Law Code’, in: The European Legal Forum 3-2007, pp. I-77-I-91; GARCIMARTÍN ALFÉREZ F.J., ‘La unificación del derecho conflictual en Europa: el Reglamento sobre ley aplicable a las obligaciones extracontractuales («Roma II»)’, in: Diario La Ley 2007, nº 6798, 18 pp.; HAY P., ‘Contemporary Approaches to Non-Contractual Obligations in Private International Law (Conflict of Laws) and the European Community’s ‘Rome II’ Regulation’, in: The European Legal Forum 4-2007, pp. I-137-I-151. 5 OJ C 27, 26 June 1998. On 31 March 2008 the Council presented the final version of the Regulation of the European Parliament and of the Council on the law applicable to contractual obligations (Rome I) aimed to replace the Rome Convention. See 2005/0261 (COD); PE-CONS 3691/07; JUSTCIV 334; CODEC 1401. 6 On the contrary, Article 25 of the Regulation of the European Parliament and of the Council on the law applicable to contractual obligations (Rome I), as it was adopted on 31 March 2008, shall not prejudice the application of international conventions to which Member States already were parties. Thus, Member States are no longer allowed to conclude future international conventions with third States with respect to the same matter. 7 See the text of both conventions at: <www.hcch.net>. As far as this relationship is concerned, see, among others, SERENA ROSSI L., ‘Il problema dei conflitti fra le convenzioni promosse dalla CEE e dalla Conferenza Permanente dell'Aja sulla disciplina internazionalprivatistica delle vendite internazionali’, in: Diritto Comunitario e degli Scambi Internazionali 1986, p. 377; DROZ G.A.L., ‘Regards sur le Droit international privé comparé, Cours général de Droit international privé’, in: Recueil des Cours 1991-IV, p. 392; LAGARDE P., ‘Les limites objectives de la Convention de Rome (Conflits de lois, primauté du Droit communautaire, rapports avec les autres conventions)’, in: Riv. dir. int. priv. proc. 1993, pp. 39-41; BRIERE C., Les conflits de conventions internationales en droit privé, Paris 2001, 3

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II.

Background of the Article 28 of the Rome II Regulation

The origin of Article 28 of the Rome II Regulation dates back to the European Commission Preliminary Draft Proposal adopted on 3 May 2002 and opened to the contributors who were interested in it.9 According to its Article 24, Member States were allowed to apply conflict-of-law rules laid down in preexisting international conventions as long as they dealt with specific matters in respect of those of the Rome II Regulation.10 Thereafter, on 22 July 2003 the European Commission adopted the Proposal for a Regulation of the European Parliament and the Council on the law applicable to non-contractual obligations.11 Its Article 25 embraces the same text previously contained in Article 24 of the Rome II Preliminary Draft Proposal. pp. 197-198; MALAN A., La concurrence des conventions internationales dans le droit des conflits de lois, Aix-Marseille 2002, pp. 278-284. 8 Concerning this relationship, see FERRY C.J., ‘Convention de Rome du 19 juin 1980 sur la loi applicable aux obligations contractuelles, Convention de La Haye du 14 mars 1978 sur la loi applicable aux contrats d’intermédiaires et à la représentation et la loi n. 91593 du 25 juin 1991 relative aux rapports entre les agents commerciaux et leurs mandants’, in: La Semaine Juridique, Édition Entreprise 1993, Vol. 67, p. 154; LAGARDE P. (note 7), pp. 37-38. 9 A list of the contributions to the Preliminary Draft Proposal is available at: For comments on the Rome II Preliminary Draft Proposal of 2002, see, among others, NOURISSAT C./TREPPOZ E., ‘Quelques observations sur l’avant-projet de proposition de règlement du Conseil sur la loi applicable aux obligations non contractuelles «Rome II»’, in: Clunet 2003, pp. 7-38; DICKINSON A., ‘Cross-Border Torts in EC Courts- A Response to the Proposed «Rome II» Regulation’, in: European Business Law Review 2002, pp. 369-388; HAMBURG GROUP FOR PRIVATE INTERNATIONAL LAW, ‘Comments on the European Commission’s Draft Proposal for a Council Regulation on the Law Applicable to Non-Contractual Obligations’, in: RabelsZ 2003, pp. 1-56; FERNÁNDEZ MASIÁ E., ‘Primeras consideraciones sobre el Anteproyecto de Reglamento sobre ley aplicable a las obligaciones extracontractuales (Roma II)’, in: Actualidad Civil, septiembre 2003, 24 pp.; PALAO MORENO G., ‘Hacia la unificación de las normas de conflicto en materia de obligaciones extracontractuales en Europa (Una visión crítica del Anteproyecto de Propuesta de Reglamento «Roma II»)’, in: Derecho Patrimonial Europeo 2003, N. 10, pp. 271-299. 10 Article 24 of the Preliminary Draft Proposal for a Council Regulation on the law applicable to non-contractual obligations of 2002 establishes that: ‘This Regulation shall not prejudice the application of international conventions to which the Member States are party when this Regulation is adopted and which, in relation to particular matters, lay down conflict of law rules relating to non-contractual obligations’. 11 COM(2003) 427 final. For general comments on the Rome II Proposal of 2003 see, inter alia, KREUZER K., ‘La comunitarizzazione del Diritto internazionale privato in materia di obbligazioni extracontrattuali («Roma II»)’, in: Diritto internazionale privato e Diritto comunitario, Milano 2004, pp. 421-447; AMORES CONRADI M.A./TORRALBA MENDIOLA E., ‘XI Tesis sobre el estatuto delictual’, in: Revista Electrónica de Estudios

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Georgina Garriga An amended Proposal was adopted by the European Commission on 21 February 200612 which modified the previous Article 25 giving precedence to the Rome II Regulation over international conventions in cases where all the material aspects of the particular case were located in one or more Member States. Thus, Article 24 meant that in those circumstances the application of The Hague Convention of 4 May 1971 on the law applicable to traffic accidents and of The Hague Convention of 2 October 1973 on the law applicable to products liability would be rejected in favour of the application of the Rome II Regulation.13 However, the difficulty faced in distinguishing the intra-community from the extracommunity situations was the main reason for defeating this text in favour of the previous text embodied in Article 25 of the Rome II Proposal of 2003. Therefore, the current Article 28 of the Rome II Regulation has finally embraced the initial proposal, albeit with some amendments.

Internacionales (www.reei.org) 2004; SYMEONIDES S.C., ‘Tort Conflicts and Rome II. A view from Across’, in: Festschrift E. Jayme, München 2004, pp. 935-954; STONE P., ‘The Rome II Proposal on the Law Applicable to Non-Contractual Obligations’, in: The European Legal Forum 4-2004, pp. 213-229; VAREILLES-SOMMIÈRES P., ‘La responsabilité civile dans la proposition de règlement communautaire sur la loi applicable aux obligations non contractuelles («Rome II»)’, in: Les conflits de lois et le système communautaire, Paris 2004, pp. 185-203; FACH GÓMEZ K., ‘Propuesta de Reglamento del Parlamento Europeo y del Consejo, relativo a la ley aplicable a las obligaciones extracontractuales («Roma II»)’, in: Cuestiones actuales del Derecho mercantil internacional, Madrid 2005, pp. 519-534. For comments on the Article 25 of the Rome II Proposal of 2003 see, among others, BRIÈRE C., ‘Réflexions sur les interactions entre la proposition de règlement «Rome II» et les conventions internationales’, in: Clunet 2005, pp. 677-694; MALATESTA A., ‘The Law Applicable to Traffic Accidents’, in: The Unification of Choice of Law Rules on Torts and Other Non-Contractual Obligations in Europe, Padova 2006, pp. 85-106; MALATESTA A., ‘La legge applicabile agli incidenti stradali nella Proposta di Regolamento (CE) Roma II’, in: Riv. dir. int. priv. proc. 2006, pp. 47-66; STAUDINGER A., ‘Rome II and traffic accidents’, in: The European Legal Forum 2-2005, pp. I-61-I-66; GRAZIANO KADNER Th., ‘La coordination des règlements européens et des conventions internationales en matière de droit international privé: l’exemple des futurs règlements «Rome I» et «Rome II»: appréciation des différents options, critique et proposition’, in: RSDIE 2006/3, pp. 279-293. 12 COM(2006) 83 final. 13 In conformity with article 24 of the Rome II Amended Proposal of 2006: ‘1. This Regulation shall not prejudice the application of multilateral international conventions to which the Member States are parties when this Regulation is adopted and which, in relation to particular matters, lay down conflict-of-law rules relating to non-contractual obligations and of which the Commission has been notified in accordance with Article 26. 2. However, where, at the time of conclusion of the contract, all the material aspects of the situation are located in one or more Member States, this Regulation shall take precedence over the following Conventions: – the Hague Convention of 4 May 1971 on the Law Applicable to Traffic Accidents; – the Hague Convention of 2 October 1973 on the Law Applicable to Products Liability’.

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III. Content of the Article 28 of the Rome II Regulation Pursuant to the language of Article 28 of the Rome II Regulation, the Regulation shall not prejudice the application of international conventions to which one or more Member States were parties at the time the Regulation was adopted and which contain conflict-of-law rules relating to non-contractual obligations. Thus, this provision enables Member States to apply conflict-of-law rules established in international conventions existing at the adoption of the Rome II Regulation irrespective of whether or not they deal with particular matters in relation to the Rome II Regulation. However, its second paragraph provides that the Rome II Regulation will take precedence over those international conventions previously concluded among Member States exclusively. The above-mentioned provision deserves two preliminary comments. The first relates to the different treatment applied to the conventions concluded by one or more Member States (1st paragraph) from that applied to the conventions concluded exclusively among Member States (2nd paragraph). This variation clears up the confusion that arose from Article 24 of the Rome II Preliminary Draft Proposal of 2002 and the articles that have been subsequently adopted. According to one interpretation of this provision, existing international conventions should only take priority over the Rome II Regulation provided that all Member States were parties to them. A second interpretation was that existing international conventions would prevail over the Rome II Regulation as long as at least one or more Member States had become party to them without it being necessary that all Member States were parties. In this respect, those Member States would be entitled to apply the particular international convention instead of the Rome II Regulation.14 As pointed out above, the second interpretation has been embraced by Article 28 of the Rome II Regulation. As far as the second comment is concerned, in both paragraphs, Article 28 of the Rome II Regulation only takes into account the existing international conventions. This means that it leaves aside all future international conventions. This exclusion is based on the delicate topic of the division of competences between the European Community and the Member States. The following two paragraphs deal with two separate, but related, matters. The first covers the priority application of international conventions over the Rome II Regulation, taking into account the advantages and disadvantages of such treatment. The second paragraph discusses the priority application of the Rome II Regulation over future international conventions as a consequence of the universal or erga omnes scope of the Rome II Regulation, which attributes to the European Community exclusive external competence with respect to the substantive scope of the Rome II Regulation. 14 Both interpretations were highlighted by KREUZER K. (note 11), pp. 444-445; NOURISSAT C./TREPPOZ E. (note 9), p. 20.

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Georgina Garriga A.

What is Expressly Provided by Article 28 of the Rome II Regulation

To begin, as noted initially, the first paragraph of Article 28 of the Rome II Regulation gives precedence to the international conventions to which one or more Member States were parties on the date the Rome II Regulation was adopted, 11 July 2007, and which laid down conflict-of-law rules relating to non-contractual obligations. Before analyzing the advantages and disadvantages of such a treatment, attention should be paid to the type of international conventions covered by this paragraph. There is no doubt that the above-mentioned Hague Conventions (The Hague Convention of 4 May 1971 on the law applicable to traffic accidents15 and The Hague Convention of 2 October 1973 on the law applicable to products liability16) are embraced by it. In fact, both conventions were quoted expressly from the very beginning of the legislative process. For instance, quotes can be found in the Explanatory Memorandum presented by the Commission of the Rome II Proposal of 200317 and even in the text of Article 24 of the Rome II Amended Proposal of 2006. Furthermore, leaving The Hague Conventions aside, other international conventions establishing conflict-of-law rules in the field covered by the Rome II Regulation should be taken into consideration. Once it is determined which conventions are included within Article 28 of the Rome II Regulation, in order to study its advantages and disadvantages, attention should be paid to the purported goals of the Rome II Regulation. According to its Memorandum, the Rome II Regulation seeks to achieve, among other objectives, certainty as to the applicable law in order to improve the predictability of the outcome of litigation. To sum up, the Rome II Regulation endeavors to unify conflict-of-law rules throughout the European Union in order to designate the same law irrespective of the country under whose courts an action is brought (Recital 6). In other words, the Rome II Regulation seeks to eliminate the forum shopping permitted by the 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 Regulation).18 It should be recalled that the Rome II Regulation is meant to complement the Brussels I Regulation. In this context, the Brussels I Regulation enables the claimant to choose the most suitable jurisdiction for his or her interests on the basis of an extra-contractual claim. Then, the law The following Member States are parties to the Hague Convention of 4 May 1971 on the law applicable to traffic accidents: Austria, Belgium, the Czech Republic, France, Latvia, Lithuania, Luxembourg, Netherlands, Poland, Slovakia, Slovenia and Spain. 16 The Member States which are parties to the Hague Convention of 2 October 1973 on the law applicable to products liability are: Finland, France, Luxembourg, Netherlands, Slovenia and Spain. 17 In accordance with the Explanatory Memorandum: ‘Article 25 allows Member States to go on applying choice of law rules laid down in international conventions to which they are party when this Regulation is adopted. These conventions include the Hague Conventions on traffic accidents (4 May 1971) and product liability (2 October 1973)’. 18 OJ L 12, 16 January 2001. 15

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Relationships between Rome II and Other International Instruments finally applied depends on the previous claimant’s election. From such an outcome, it follows that Rome II Regulation tries to avoid the forum shopping tolerated by the Brussels I Regulation by means of the unification of the conflict-of-law rules. Therefore, rules set out in the Rome II Regulation will be applied by every European court irrespective of whether or not the situation presents connections with Member States and the applicable law is that of one of the Member States. Nevertheless, what could be criticized19 is that the above-mentioned unification has been jeopardized to the extent that the application of international conventions has been allowed in place of the application of the Rome II Regulation. Consequently, three different systems will be applied in the European Union: firstly, the conflict-of-law rules laid down in the Rome II Regulation; secondly, the conflict-of-law rules set out in the aforementioned Hague Conventions; and lastly, the conflict-of-law rules contained in the Danish legislation unless Denmark at some time in the future accepts the conflict-of-law rules laid down in the Rome II Regulation20 because Denmark was neither a party to The Hague Convention of 4 May 1971 on the law applicable to traffic accidents nor to The Hague Convention of 2 October 1973 on the law applicable to products liability. Thus, forum shopping remains in the European Union despite the efforts of the European Union to unify the conflict-of-law rules on the law applicable to noncontractual obligations. Unfortunately, the Rome II Regulation has not, therefore, reached the expected unification proposed for the first time in 1972 by the failed Preliminary Draft Convention on the law applicable to contractual and non-contractual obligations.21 Some authors have criticized the incomplete unification of the conflict-of-law rules laid down in the Rome II Regulation. See, for instance, STAUDINGER A. (note 11), p. I63; PATAUT E., ‘De Bruxelles à La Haye, Droit international privé communautaire et Droit international conventionnel’, in: Mélanges P. Lagarde, Paris 2005, p. 675; MALATESTA A. (note 11), p. 64; MALATESTA A. (note 11), p. 104; NOURISSAT C./TREPPOZ E. (note 9), pp. 24-25; HAMBURG GROUP FOR PRIVATE INTERNATIONAL LAW (note 9), p. 60. 20 According to the Recital 40 of the Rome II Regulation: ‘In accordance with Articles 1 and 2 of the Protocol on the position of Denmark, annexed to the Treaty on European Union and to the Treaty establishing the European Community, Denmark does not take part in the adoption of this Regulation, and is not bound by it or subject to its application’. 21 See ‘Rapport GIULIANO, LAGARDE and VAN SASSE VAN YSSELT’, in: Riv. dir. int. priv. proc. 1973, pp. 198-260. The Rapport has been also published in the European Private International Law of Obligations, Acts and Documents of an International Colloquium on the European Preliminary Draft Convention on the Law Applicable to Contractual and NonContractual Obligations, held in Copenhagen on April 29 and 30, 1974, Tübingen 1975, pp. 230-241. Concerning the Preliminary Draft Convention, see, among others, VANDER ELST R., ‘L’unification des règles de conflit de lois dans la CEE’, in: Journal des Tribunaux 1973, pp. 249-254; VANDER ELST R., ‘Projet de Convention CEE sur la loi applicable aux obligations non-contractuelles’, in: Revue Trimestrielle de Droit Européen 1975, Vol. 11, pp. 187-195; BATIFFOL H., ‘Projet de Convention CEE sur la loi applicable aux obligations contractuelles’, in: Revue Trimestrielle de Droit Européen 1975, Vol. 11, pp. 181-186; 19

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Georgina Garriga On the contrary, the international unification has been safeguarded by the Rome II Regulation insofar as Article 28(1) gives precedence to the existing international conventions. Indeed, this provision entitles Member States to fulfill their previous international obligations without being forced to denounce the aforementioned conventions for breaching the Community law. In this respect, European institutions preferred to maintain international harmony rather than achieve an isolated regional unification. Indeed, D. Opertti Badán stated that ‘No habrá universalismo prestigioso si éste prescinde o enfrenta al regionalismo. Regionalismo y universalismo no son términos contradictorios, pueden llegar a serlo si en cada uno de ellos domina, a su turno, en el regionalismo una visión aislacionista, y en el universalismo una soberbia impositiva’.22 The prevalence of the existing international conventions has permitted Member States to avoid denouncing the international conventions. Thus, European unification of the conflict-of-law rules on non-contractual obligations has been to some extent sacrificed in favour of an international harmony. Lastly, the priority of existing international conventions fulfills the provision set forth in the first paragraph of Article 307 of the European Community Treaty.23 According to the Article: ‘The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more Member States on the one hand, and one or more third countries on the other, shall not be affected by the provisions of this FOYER J., ‘L’avant-projet de Convention CEE sur la loi applicable aux obligations contractuelles et non-contractuelles’, in: Clunet 1976, pp. 555-658; LAGARDE P., ‘Examen de l’avant-projet de Convention CEE sur la loi applicable aux obligations contractuelles et noncontractuelles’, in: Travaux du Comité Français de Droit International Privé 1971-1975, pp. 147-201; NADELMANN K.H., ‘Impressionism and Unification of law: The EEC Draft Convention on the law applicable to contractual and noncontractual obligations’, in: Am. J. Comp. L. 1976, pp. 1-24; IGLESIAS BUHIGUES J.L., ‘Las obligaciones extracontractuales en el Anteproyecto de Convenio CEE y en el Derecho conflictual español’, in: Estudios de Derecho Internacional. Homenaje al Prof. Miaja de la Muela, Madrid 1979, Vol. II, pp. 11231145. 22 ‘There won’t be prestigious universalism if this disregards or conflicts with regionalism. Regionalism and universalism are not contradictory but can be so if an isolationist perspective dominates within regionalism, and imposing sovereignty dominates within universalism’: OPERTTI BADAN D., ‘Compatibilidad e interacción de la Codificación Regional interamericana con los ámbitos de producción jurídica universal y subregional. Balance de los veinte primeros años de la CIDIP’, in: El Derecho internacional privado interamericano ante el umbral del siglo XXI, Madrid 1997, p. 237. See also BONOMI A., ‘Le droit international privé entre régionalisme et universalisme – quelques considerations sur les compétences européennes en matière de droit international privé et leurs effets pour les Etats tiers’, in: RSDIE 2006/3, pp. 295-309. 23 It should kept in mind that the European Community Treaty will be replaced by the Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon, 13 December 2007 once it enters into force (OJ C 306, 17 December 2007). In accordance with the new numbering, the current Article 307 of the ECT will be the Article 351 of the Treaty on the Functioning of the European Union.

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Relationships between Rome II and Other International Instruments Treaty’. Regarding this provision, some authors have highlighted that this paragraph is also applied with respect to the interaction between existing international conventions and the subsequent enlargements of the community competence.24 Notwithstanding, Article 29 of the Rome II Regulation forces Member States to inform the European Commission about the international conventions to which they are parties, as well as their denunciation if this takes place. The denunciation of the Hague Conventions has been put forward as the solution to reach a complete unification of the conflict-of-law rules in the field of non-contractual obligations in the European Union.25 Indeed, the denunciation has been specially recommended due to the complex conflict-of-law systems encompassed in both Hague Conventions.26 Whereas Member States are obliged to inform the European Commission, the Commission is obliged to publish a list of the above-mentioned international conventions and a list of the denunciations, if any occur, in the Official Journal. Finally, as noted previously, Article 28(2) of the Rome II Regulation attributes to the Rome II Regulation priority over existing international conventions concluded exclusively among Member States. On the one hand, this solution proclaims the primacy of Community law. On the other hand, the aforementioned solution sets forth the traditional rule lex posterior derogat priori27 used to work out conflict of international conventions together with the other traditional rules: Lex specialis derogat generali and lex favorabilior.

See, for instance, MEESSEN K.M., ‘The application of rules of Public international law within Community law’, in: Common Market Law Review 1976, pp. 490-491; BOULOUIS J., ‘Le Droit des Communautés européennes dans ses rapports avec le Droit international général’, in: Recueil des Cours 1992-IV, p. 68; WILDERSPIN M./LEWIS X., ‘Les relations entre le Droit communautaire et les règles de conflits de lois des États membres (suite et fin)’, in: Rev. crit. dr. int. pr. 2002, N. 2, pp. 289-313. 25 See PATAUT E. (note 19), pp. 675-676; BRIÈRE C. (note 7), p. 68 and p. 76. 26 The complex conflict-of-law systems embedded in both Hague Conventions has been pointed out by HOFFMANN B. VON, ‘International Law of Non-Contractual Obligations in Europe (European International Tort Law)’, in: European Private International Law, Nijmegen 1998, p. 88 and p. 102. In relation to The Hague Convention of 2 October 1973 on the law applicable to products liability, see von OVERBECK A.E., ‘Les règles de la Loi Fédérale Suisse sur le Droit international privé (LDIP) en matière d'actes illicites’, in: La responsabilidad internacional, Aspectos de Derecho internacional público y de Derecho internacional privado, XIII Jornadas de profesores de derecho internacional y relaciones internacionales, 1989, Alicante 1990, p. 492. With respect to The Hague Convention of 4 May 1971 on the law applicable to traffic accidents see STAUDINGER A. (note 11), p. I-63. 27 On this rule see, among others, MAJOROS F. (note 3), p. 421; SCISO E., Gli accordi internazionali confliggenti, Bari 1986, pp. 163-175; BRIÈRE C. (note 7), footnote 1, pp. 142143. 24

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What is Implicitly Provided by Article 28 of the Rome II Regulation

As already mentioned, Article 28 of the Rome II Regulation only takes into account existing international conventions without mentioning future ones. This can be explained clearly if we connect this omission to the division of competences between the European Community and the Member States. In fact, Article 28 of the Rome II Regulation continues the trend initiated by Article 71 of the Brussels I Regulation when this provision was interpreted as prohibiting Member States from concluding new conventions on the same subject matter with third countries or international organizations. Thus, that provision implies the exclusion of the treaty-making power of the Member States to enter into international agreements with third States or international organizations due to the exclusive competence of the European Community acquired thanks to the adoption of the community measure. Indeed, as noted initially, the communitarization of private international law not only created an enlargement of the scope of the conflict of international instruments but also conferred shared competence on the European Community over the field of private international law. From that, it followed that Member States could only continue to conclude international conventions with third States or international organizations as long as the European Community did not acquire exclusive competence over a determined subject matter. The problem then arises as to how to ascertain whether the European Community has acquired the exclusive competence that would prohibit Member States from exercising their respective treaty-making power. As far as the Rome II Regulation is concerned, the ERTA doctrine, which was established by one of the most far-reaching judgments of the European Court of Justice (ECJ),28 should be applied. In a nutshell, according to the ERTA doctrine the European Community acquires exclusive competence over a determined matter every time the European institutions legislate in a specific field, depending on the nature of the adopted measure. This means that not only the substantive scope, but also the nature of the Community measure, must be taken into account to deterJudgment of 31 March 1971, Case 22-70, European Commission v. European Conseil, in: ECR 1971, pp. 263-284. For comments on this judgment see, among others, RIDEAU J., ‘Note sur l’arrêt de la Cour du 31.3.1971’, in: Recueil Dalloz-Sirey 1972, Jurisprudence, p. 458; WAELBROECK J.V.L., Le droit de la Communauté européenne, Vol. 12, Relations extérieures, Editions de la Université de Bruxelles 1981, pp. 94-126; KOVAR R., ‘La contribution de la Cour de Justice au développement de la condition internationale de la Communauté européenne’, in: Cahiers de Droit Européen 1978, N. 5-6, pp. 527-573; KOVAR R., ‘L’affaire de l’AETR devant la Cour de Justice des Communautés européennes et la compétence internationale de la CEE’, in: Annuaire Français de Droit International 1971, pp. 386-418; GROUX J., ‘Le parallelisme des competences internes et externes de la Communauté Economique Européenne’, in: Cahiers de Droit Européen 1978, N. 1, pp. 3-32; PESCATORE P., ‘External relations in the case-law of the Court of Justice of the European Communities’, in: Common Market Law Review 1979, pp. 618-619; TEMPLE LANG J., ‘The ERTA judgement and the Court’s case-law on competence and conflict’, in: Yearbook of European Law 1986, pp. 183-218. 28

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Relationships between Rome II and Other International Instruments mine if the European Community has acquired exclusive competence. Thus, it is on a case-by-case analysis that the exclusive competence of the European Community must be studied.29 In this respect, the universal character of a community rule grants the European Community exclusive competence over its substantive scope. Nevertheless, the reciprocal nature of the rule leaves Member States room to conclude international conventions provided that they do not affect Community law (Article 10 of the European Community Treaty).30 As a consequence, as far as the Rome II Regulation is concerned, its adoption conferred exclusive competence on the European Community over its subject matter because of its universal application. Member States can, therefore, only enter into international agreements with third states or international organizations as long as the European Community authorizes it. In this sense, Recital 37 of the Memorandum of the Rome II Regulation provides that: ‘The Commission will make a proposal to the European Parliament and the Council concerning the procedures and conditions according to which Member States would be entitled to negotiate and conclude on their own behalf agreements with third countries in individual and exceptional cases, concerning sectorial matters, containing provisions on the law applicable to non-contractual obligations’. As F.J. GARCIMARTÍN ALFÉREZ pointed out, the reason for this recital was an answer to the Member States’ requests for ‘maintaining the possibility of concluding bilateral agreements with third countries, for example, in order to regulate activities in border areas, that may contain conflict-of-law rules’.31

Opinion 1/03, 7 February 2006, of the European Court of Justice summarizes the evolution of the ERTA doctrine as well as its application in the field of private international law. For comments on this Opinion see BORRÁS A., ‘Competence of the Community to conclude the revised Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, Opinion C-1/03 of 7 February 2006: comments and immediate consequences’, in: Yearbook of Private International Law 2006, pp. 37-52; BORRÁS A., ‘Competencia exclusiva de la Comunidad Europea para la revisión del Convenio de Lugano de 1988 sobre competencia judicial, reconocimiento y ejecución de sentencias en materia civil y mercantil. Comentario al Dictamen C-1/03, de 7 de febrero de 2006’, in: iustel.com, Revista General de Derecho Europeo 2006; BORRÁS A., ‘Cooperación judicial en materia civil: competencia exclusiva de la Comunidad Europea para la revisión del Convenio de Lugano de 1988’, in: Revista Jurídica de Catalunya 2006, pp. 879-889; BORRÁS A. (note 2), pp. 482-490. 30 The current Article 10 of the European Community Treaty will be derogated by the Lisbon Treaty. Its content will be set out in the new Article 3 bis of the European Union Treaty. 31 GARCIMARTÍN ALFÉREZ F.J. (note 4), footnote 18, p. I-81; GARCIMARTÍN ALFÉREZ F.J. (note 4), recital 22. 29

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IV. Conclusion Article 28 of the Rome II Regulation has achieved a balance between community law on non-contractual obligations and the existing international conventions dealing with the same subject matter. Indeed, insofar as Article 28 gives precedence to the existing international conventions over the above-mentioned Rome II Regulation, Member States are entitled to continue applying the aforementioned international conventions. Nevertheless, the adoption of the Rome II Regulation has precluded the ability of Member States to enter into international agreements with third States or international organizations regarding issues covered by the Regulation. From this, it follows that the expected unification of the conflict-of-law rules relating to non-contractual obligations in the European Union has not been reached. In this sense, this unification could only be reached if Member States at some time in the future denounce the international conventions.

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ROME II: A CENTRIST CRITIQUE Symeon C. SYMEONIDES∗

I. II. III. IV.

V. VI. VII. VIII.

Introduction General Features The General Rule The Exceptions A. Introduction B. The Common Habitual-Residence Rule C. The General Escape 1. The Closer Connection Exception 2. The Pre-Existing Relationship Exception D. Rules of ‘Safety and Conduct’ Environmental Torts Products Liability Party Autonomy Conclusing Thoughts

I.

Introduction

This essay is an abbreviated and centrist critique of the European Union’s new Regulation on tort conflicts known as ‘Rome II’.1 This critique is abbreviated due to the space limitations of this volume;2 and it is centrist because its author’s vantage point happens to fall in the middle of the methodological, philosophical, and even geographical spectrum.3 For example, the author believes that: a choice-oflaw codification is both feasible and desirable,4 even at the multinational level; ∗ Dean and Professor of Law, Willamette University College of Law; LL.B. (Private Law); LL.B. (Public Law) University of Thessaloniki; LL.M., S.J.D. Harvard Law School. 1 See Regulation (EC) No 864/2007 on the Law Applicable to Non-Contractual Obligations, O.J. 2007, L 199, p. 40. 2 For a more extensive critique, from which this essay draws extensively, see SYMEONIDES S., ‘Rome II and Tort Conflicts: A Missed Opportunity’, 56 Am. J. Comp. L. 173 (2008), hereafter referred to as ‘Missed Opportunity’. 3 The author is a dual citizen of a European Union country (Cyprus) and the United States. 4 The author has drafted two choice-of-law codifications and is currently involved in a third. See SYMEONIDES S., ‘Private International Law Codification in a Mixed Jurisdiction: The Louisiana Experience’, 57 RabelsZ 460 (1993); SYMEONIDES S., ‘Les grands problèmes

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Symeon C. Symeonides such a codification should be built around rules,5 rather than open-ended ‘approaches’; and that the main rule for tort conflicts must be some iteration of the lex loci delicti, subject to appropriate escapes. The fact that - as one can safely infer - the drafters of Rome II subscribed to the same or similar premises suggests that this essay should be more supporting than critical of this codification. Indeed, there is much to be praised about Rome II. However, scholarly discourse is enriched, not by praising points of agreement but rather, by identifying and explaining points of disagreement. For this reason, this essay focuses on the latter points. It accepts the drafters’ pragmatic choice of the lex loci delicti as the basic rule, rather than American-style ‘approaches’ and examines whether Rome II provides enough and sufficiently flexible exceptions as to make the lex loci rule less arbitrary and the whole system more workable.

II.

General Features

From the perspective of general choice-of-law methodology, Rome II can be characterized as a traditional system, primarily because of the following three general features: (1) it is primarily a ‘jurisdiction-selecting’ system because the majority of its rules select the state of the applicable law on the basis of that state’s contacts rather than because of the content of its law;6 (2) it does not, consciously or officially, subscribe to the notion that conflicts of laws implicate the policies or interests of the involved states, as opposed to the interests of the litigants involved in the conflict;7 and (3) it takes a negative position toward issue-by-issue analysis because of the drafters’ strong, but in some respects futile, goal of avoiding dépeçage, namely, the application of the laws of different states to different issues in the same case.8

de droit international privé et la nouvelle codification de Louisiane’, 81 Revue critique de droit international privé 223 (1992); SYMEONIDES S., ‘Revising Puerto Rico’s Conflicts Law: A Preview’, 28 Colum. J. Transnat’l L. 601 (1990); SYMEONIDES S., ‘Codifying Choice of Law for Contracts: The Oregon Experience’, 67 RabelsZ 726 (2003). 5 For the content and style of these rules, see SYMEONIDES S., The American Choiceof-Law Revolution: Past, Present and Future (2006), hereafter referred to as ‘The Choice-ofLaw Revolution’. 6 However, Rome II also contains several provisions – such as articles 6(3)(b), 7, 14(2)-(3), 18, and 26 - which, directly or indirectly, permit consideration of the substantive law of the involved state. For discussion, see SYMEONIDES S., ‘Missed Opportunity’ (note 2), at p. 181-183. 7 Yet, in several situations, Rome II indirectly considers or presupposes state interests. See SYMEONIDES S., id., at 183-184. 8 See SYMEONIDES S., id., at 184-185. Nevertheless, several of Rome II’s provisions contain the possibility of dépeçage. See the examples cited at p. 185-186.

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Rome II: A Centrist Critique Although these features cannot be discussed in any detail here,9 they define the methodological identity of Rome II setting it apart from the approaches that have emerged from the American choice-of-law revolution.10 This difference alone is not a good reason to criticize Rome II. Instead Rome II should be judged within the parameters set by, or imposed on, its drafters. This essay aspires to remain within these parameters, but also reserves the right to point out the problems created by them in specific situations.

III. The General Rule Rome II’s central provision is Article 4, which contains the general and residual rules. Paragraph 1 of Article 4 provides that the applicable law shall be the law of the country in which ‘the damage occurs’11 (lex loci damni). This law governs ‘irrespective of the country in which the event giving rise to the damage occurred’ and ‘irrespective of the country or countries in which the indirect consequences of that event occur’.12 Thus, the general rule of Rome II is nothing but a restatement of the traditional lex loci delicti rule, with its ‘last event’ sub-rule. It purports to be as categorical as the corresponding rule of the American First Restatement. However, the key difference is that, Rome II’s version is subject to several exceptions which should have the effect of reducing its arbitrariness in several situations. A proper evaluation of this rule should consist of two steps: (1) examining the results the rule produces in several typical fact-law patterns formed by the alignment of the pertinent contacts (conduct, injury, and parties’ domiciles13) and the content of the laws of each contact state; and then, (2) for cases in which these results are objectionable, examining whether any of the exceptions are applicable. For reasons documented in detail elsewhere,14 as well as later when discussing the exceptions to the lex loci damni rule, the view of this author is that this rule produces functionally defensible results in the following patterns of cases: (1) intrastate torts (namely cases in which the conduct and the injury occurred in the same state) involving conflicting ‘conduct-regu-

9 For full discussion of these features, see SYMEONIDES S., ‘Missed Opportunity’ (note 2), at p. 179-186 10 See SYMEONIDES S., The Choice-of-Law Revolution (note 5), p. 9-121, p. 365-421. 11 Rome II, art. 4(1). 12 Ibid. 13 Hereafter, the term ‘domicile’ is used interchangeably with the term ‘habitual residence’ as used in Rome II. 14 See SYMEONIDES S., The Choice-of-Law Revolution (note 5), at p. 141-263.

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Symeon C. Symeonides lation’ rules (as opposed to ‘loss-distributing’ rules15), regardless of where the parties are domiciled; (2) intrastate torts in which the issue is one of loss distribution and either the tortfeasor or the victim is domiciled in the state of the conduct and injury; and (3) cross-border torts involving either conduct-regulation or loss distribution conflicts, in which: (a) the state of injury prescribes a higher standard of conduct for the tortfeasor or of financial protection for the victim than the state of conduct; and (b) in which the occurrence of the injury in the former state was objectively foreseeable. In the first pattern, the state of both the conduct and injury clearly has a stronger claim than any other state to apply its law to conduct within its borders.16 By adopting the lex loci rule in Article 4(1), Rome II correctly honors this claim. However, as explained later, in one sub-pattern of cases, those in which the parties are domiciled in the same state other than that of the conduct and injury, Rome II takes a backward step. By phrasing the common-domicile exception of Article 4(2) so broadly as to trump the lex loci rule in these cases, Rome II creates a different problem, which may or may not be corrected through the back door of Article 17.17 The second pattern consists of four different sub-patterns, two of which present the direct or true conflict paradigm and the other two the inverse or ‘no interest’ paradigm. Although each sub-pattern presents different dilemmas, the majority of American cases of all methodological persuasions have applied the law of the state that has the two territorial contacts (conduct and injury) and one personal contact (the domicile of one party), regardless of whether that law favors the tortfeasor or the victim. On balance, and for reasons that would take too long to explain here, this result is appropriate in some cases and acceptable in others.18 Under the lex loci damni rule, a court reaches the same result without having to ponder these dilemmas. In summary, in both of the above patterns of intrastate torts, the application of the law of the state of conduct and injury passes the scrutiny of a functional choice-of-law analysis, regardless of whether that law favors the tortfeasor or the victim. Consequently, a jurisdiction-selecting rule like that of Article 4(1) which is

For the origin, meaning, and defense of this distinction, see SYMEONIDES S., The Choice-of-Law Revolution (note 5), at p. 123-140. 16 For documentation and defense of this thesis, see SYMEONIDES S., id., at p. 213220. 17 See infra IV.B. 18 For documentation and defense of this thesis, see SYMEONIDES S., id., p. 162-191. 15

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Rome II: A Centrist Critique indifferent on its surface to the content of the involved substantive laws is acceptable, besides being relatively easy to apply in the majority of cases. However, in cross-border torts, the same rule produces acceptable results only in those cases that fall within the third pattern, namely cases in which the state of injury has a higher standard than that of the state of conduct. This pattern presents the true conflict paradigm: the state of injury has an interest in protecting victims injured (and often domiciled19) there, while the state of conduct has an interest in protecting tortfeasors acting (and often domiciled) there. On balance, the application of the law of the state of injury is justified (especially when the victim is domiciled there), provided that the occurrence of the injury in that state was objectively foreseeable.20 The lex loci damni rule of Rome II would produce this result, but its failure to include a foreseeability defense may make it unfair to the defendant, depending on the other circumstances of a given case.21 The lex loci damni rule does not produce good results in cases of the converse pattern, namely cross-border torts in which the state of conduct prescribes higher standards of conduct for the tortfeasor than the state of injury.22 Suppose, for example, that blasting operations by a Swiss mining company in the Swiss Alps cause a snow avalanche in the French Alps injuring a group of English tourists. Suppose further that Switzerland imposes a negligence per se rule on mining operators who engage in blasting activities in certain areas or time periods, while France, in order to protect its mining industry, follows an ordinary negligence standard. In such a case, Article 4(1) calls for the application of French law and specifically excludes Swiss law.23 In contrast, if this were an environmental tort, Article 7 would allow the victim to opt for Swiss law.24 The drafters decided not to extend this option (which the Explanatory Report characterizes as ‘the principle of favouring the victim’)25 to other torts, because ‘this solution would go beyond the victim’s legitimate expectations’.26 19 A more refined analysis might conclude that, in loss-distribution (as opposed to conduct-regulation) conflicts, that state’s interest is weaker if the victim is not domiciled there. 20 For documentation and defense of this thesis, see SYMEONIDES S., The Choice-ofLaw Revolution (note 5), at p. 192-200, p. 228-236. 21 See infra V. 22 For documentation and defense of this thesis, see SYMEONIDES S., id., p. 200-202, p. 223-228. 23 Article 17 allows the court to ‘take account’, but not necessarily to apply, the Swiss negligence per se rule on the assumption that it qualifies as a rule of ‘safety and conduct’. See infra IV.D. 24 Art. 7 is discussed infra at V. 25 See Explanatory Report, art. 3 at p. 11, in: Commission of the European Communities, ‘Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Non-Contractual Obligations,’ COM 427 (2003) final, 2003/0168 (COD), Brussels, (Jul. 22, 2003), hereafter referred to as ‘Report’. 26 Report, at p. 11-12.

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Symeon C. Symeonides This, however, is the wrong dilemma. The dilemma is not whether one should favor victims over defendants, but rather whether - in a subject called ‘conflict of laws’ - one should seek to first determine whether the involved laws actually conflict. As in the case of environmental torts, the reason for giving victims a choice is not to benefit victims as such, but rather out of deference to the policies of the state of conduct, which is the only state that has something to lose from the non-application of its law. In this case, Switzerland’s negligence per se rule is intended to deter people from engaging in inherently dangerous operations such as blasting. Because the defendant acted within Swiss territory, Switzerland has every reason to insist in determining the legal consequences of that activity, even if in this case, the injury occurred across the border. The effectiveness of this policy of deterrence would be seriously impaired if exceptions to it were made for out-ofstate injuries. Moreover, in terms of fairness and party expectations, there is nothing unfair in subjecting a tortfeasor to the law of the state in which he acted. Having violated the standards of that state, the tortfeasor should bear the consequences of that violation and not be allowed to invoke the lower standards of another state. Conversely, there is little reason to apply French law. France’s ordinary negligence standard was intended to protect mining defendants who operate within French territory, not foreign operators operating elsewhere.27 In conclusion, there is wisdom in the rules that allow the victim or the court to choose between the laws of the state of conduct and the laws of the state of injury in cases of cross-border torts.28 It is regrettable that the drafters of Rome II have chosen not to adopt a similar rule as they did with regard to environmental torts.

IV. The Exceptions A.

Introduction

As noted earlier, one cannot properly evaluate Rome II without also analyzing the exceptions to its basic rule of lex loci damni. A careful perusal of the whole document reveals that this rule is subject to many more exceptions than are readily apparent. This section discusses four of the ‘general’ exceptions or escapes,

Similar arguments could be made if France, but not Switzerland, limited the amount of damages that could be recovered from mining operators. Again, art. 4(1) would mandate the application of French law, albeit subject to the ‘closer-connection’ escape of art. 4(3). However, for reasons explained later, this escape will not necessarily lead to Swiss law. 28 See e.g.: EGBGB, arts. 40.1, 41; Swiss PIL Act, arts. 133(2), 136-139; Italian PIL Act, art. 62; Venezuelan PIL Act, art. 32(2); Hungarian PIL Act, art. 32(2). 27

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Rome II: A Centrist Critique namely those that apply to all torts, as opposed to those applicable to only specific torts,29 namely: (1) The application of the law of the parties’ common habitual residence, under Article 4(2); (2) The application of the law of a state that has a ‘manifestly closer connection’, under the escape clause of Article 4(3); (4) The ‘taking into account’ (and possible application) of the ‘safety and conduct’ rules of the state of conduct, under Article 17; and (5) The application of the law chosen by the parties before or after the occurrence of the tort, under Article 14.30

B.

The Common Habitual-Residence Rule

Paragraph 2 of Article 4 provides that, if at the time of the injury, the tortfeasor and the victim have their habitual residence in the same country (hereafter ‘common domicile’), then the law of that country applies to the exclusion of the lex loci.31 In adopting the common-domicile exception, Rome II joins the majority of recent private international law codifications and international conventions.32 It also mirrors parallel developments in the United States, but with one important difference: the American cases apply the law of the common domicile only in conflicts between ‘loss-distribution’ rules.33 In contrast, the common-domicile rule of Rome II is much broader because it encompasses not only loss-distribution, but also conduct-regulation issues. This is a serious defect because, contrary to common assumptions, conductregulating rules are not confined to rules of public law or other ‘inconsequential’ rules such as traffic rules, speed limits and red lights; they also extend to rules that impose civil liability to violations of traffic rules or attach presumptions and infe-

For a list of all and discussion of some of the specific exceptions, see SYMEONIDES S., ‘A Missed Opportunity’ (note 2), at p. 192 et seq. 30 Additional general exceptions are the application of the mandatory rules of the forum qua forum, under Article 16, and the non-application of the lex loci (or any other law) when it is manifestly incompatible with the ordre public of the forum, under Article 26. 31 This exception is repeated in several articles applicable to particular torts, but not in Article 7 on environmental torts, or Article 8 on infringement of intellectual property rights. One can infer that the reason for this exclusion is an implicit recognition that cases involving the latter categories of torts implicate broader societal interests that go beyond the interests of the litigants. 32 For citations, see SYMEONIDES S., ‘Missed Opportunity’ (note 2), at p. 194. 33 See SYMEONIDES S., The Choice-of-Law Revolution (note 5), at p. 141-210, 384389. 29

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Symeon C. Symeonides rences of fault that arise from such violations;34 rules that prescribe safety standards for work sites, buildings, and other premises; rules that impose punitive damages; and rules declaring tortious conduct such as ‘interference with contract’ and granting an action against the actor. As a general proposition, a state has an interest in enforcing its conduct-regulating rules even if neither the violator nor the victim is domiciled in that state, and even if both parties are domiciled in the same foreign state. For example, an Austrian motorist involved in an accident in France may not claim exemption from French traffic rules, and if injured by conduct that violates these rules, France may not deny the motorist the benefit of their protection. Even if both parties are domiciled in Austria, France has the exclusive claim in applying its law to the conduct-regulating aspects of the case. To be sure, any argument based on state interests will not find sympathetic ears among the drafters of Rome II or, for that matter, many European commentators. From their perspective, the principal question is whether the application of Austrian law is consistent with the parties’ expectations. This author’s view is that, whatever their actual or presumed expectations about loss-distribution rules, the parties should not expect to carry with them the Austrian conduct-regulating rules when traveling outside of Austria. Yet, because of the broad and unqualified phrasing of Article 4(2) and Rome II’s general hostility toward issue-by-issue analysis and dépeçage, Rome II mandates the application of Austrian law to all, including the conduct regulation, aspects of the case. This result can be avoided only by invoking the ‘closer connection’ clause of Article 4(3) or by ‘tak[ing] account’ of the ‘safety and conduct’ rules of France under Article 17. Unfortunately, as explained below, these escapes are not easily deployable. From a different perspective, the common-domicile rule of Rome II is too narrow in that it applies only when the parties are domiciled in the same state but not when they are domiciled in different countries that have the same laws. The better view is that the latter cases are functionally analogous to common-domicile cases and should be treated accordingly.35 Suppose, for example, that while hunting in Kenya, a French hunter injures a Belgian hunter with whom he has no preexisting relationship. Suppose that French and Belgian law provide the same amount of compensation, which is much higher than that provided by Kenya. This is the classic false conflict in which Kenya has no interest in applying its low Examples include rules providing that a person involved in a collision while driving in excess of the speed limit, or while being intoxicated, is presumed to be negligent, and rules providing that, in a rear-end vehicular collision, the driver of the rear car is presumed to be at fault. 35 The Louisiana codification provides that ‘[p]ersons domiciled in states whose law on the particular issue is substantially identical shall be treated as if domiciled in the same state’. La. Civ. Code Ann., art. 3544(1). This legal fiction, which is particularly useful in cases with multiple victims or defendants, enables a court to resolve these false conflicts by applying the law of the domicile of either party, unless the general escape clause of the codification dictates a different result. For pertinent discussion, see SYMEONIDES S., ‘Louisiana’s New Law of Choice of Law for Tort Conflicts: An Exegesis’, 66 Tul. L. Rev. 677, 759-763 (1992). 34

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Rome II: A Centrist Critique recovery law. In such a case, there is no reason to apply Kenyan law and every reason to apply either Belgian or French law. Yet, Article 4(1) of Rome II mandates the application of Kenyan law, and, unfortunately, none of Rome II’s exceptions to the lex loci rule would be operable in such a case.

C.

The General Escape

Paragraph 3 of Article 4 provides an escape from both the lex loci rule of paragraph 1 and the common-domicile rule of paragraph 2. Echoing similar escapes found in recent European codifications and international conventions,36 this escape authorizes the court to apply the law of another country if ‘it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with [that other] country’.37 Paragraph 3 provides an example by stating that a manifestly closer connection ‘might’ be based on ‘a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question’.38 Despite serious reservations about the scope and wording of this particular escape, this author applauds the drafters for including an escape in the final version of Rome II. Indeed, escapes clause are necessary in any less than perfect statutory scheme. Because perfection is not for this world, and modern legislatures have increasingly begun to recognize their fallibility, escapes have become a common feature of almost all recent codifications.39 As Aristotle recognized many centuries ago, any pre-formulated rule, no matter how carefully or wisely drafted, may, ‘due to its generality’,40 or because of its specificity, produce results that are contrary to the purpose for which it was designed. This ‘is a natural consequence of the difference between law making and law application’.41 The question here is to what extent this escape will help cure the deficiencies of the general rules of Rome II.

36 For a comparative discussion, see SYMEONIDES S., Private International Law at the End of the 20th Century: Progress or Regress?, 1999, at p. 31-35, hereafter referred to as ‘Progress or Regress’. 37 Rome II, art. 4(3). 38 Id. 39 For comparative discussion, see SYMEONIDES S., Progress or Regress? (note 36), at p. 21-35. 40 ARISTOTLE, Nicomachean Ethics, V. x 7. 41 HAY P., ‘Flexibility Versus Predictability and Uniformity in Choice of Law’, 226 Recueil des cours 281, 291 (1991-I).

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The Closer Connection Exception

Unfortunately, the phrasing of the escape is problematic because, like those in other European codifications:42 (1) it is phrased in exclusively geographical or quantitative terms that are not correlated to an overarching principle; and (2) it does not permit an issue-by-issue evaluation. In one sense, it is logical that a system of geographically-based rules also relies on geography when formulating escapes from those rules. Rome II is such a system because most of its dispositive rules depend on the place in which a single critical event occurred, or in which one or both parties reside. Very few nongeographical factors affect the choice, and the content of the conflicting laws is a factor that appears only in some narrow exceptions. Having relied on geography in erecting this system, the drafters may have felt bound to also rely on geography to handle the exceptional cases and overcome the inevitable impasses. Thus, if the geographically chosen place of injury or of the parties’ common domicile turn out to not have a significant connection, one must search for a place that has a ‘closer’ connection. This logic, however, will rarely overcome the inevitable impasses. Escapes are designed to cure the rule’s deficiencies, not reproduce them. To intelligently employ the escape, one must know the reasons for which the drafter made the choices embodied in the rule and the values and goals the rule seeks to promote. To simply say that one should look for a ‘closer’ connection gives courts little meaningful guidance and entails the risk of degenerating into a mechanical counting of physical contacts. This risk is reduced when the escape is correlated to the overarching principles that permeate the rules,43 and/or when the escape allows an issue-by-issue evaluation.44 Without these features, the escape is bound to be employed in a largely quantitative fashion, which will resolve only the easiest of conflicts. For example, a quantitative employment of the escape will not resolve the aforementioned Kenyan hunting accident case involving a French and a Belgian hunter. The second major problem with the escape is its failure to allow an issueby-issue deployment and evaluation. As it is, the escape contemplates situations in which the entire ‘tort/delict’ is ‘manifestly’ more closely connected with another country. Paragraph 3 of Article 4 not only avoids using the dirty word ‘issue’ but See SYMEONIDES S., ‘Missed Opportunity’ (note 2), at p. 197-198. A statement in Recital 14, which speaks of the need to ‘treat individual cases in an appropriate manner’ and to ‘do justice in individual cases’, could serve as such an overarching principle. However, this is an uphill argument, which – besides the subordinate placement of this statement in a recital rather than in the text of Rome II – is made even more difficult by the fact that the statement does not seem to accurately describe the philosophy embodied in the rules of Rome II. 44 For examples of how this can be done, see the escapes contained in Section 146 of the Restatement (Second) of Conflict of Laws, and Article 3547 of the Louisiana codification, both of which are discussed in SYMEONIDES S., ‘Missed Opportunity’(note 2), at p. 198-199. 42 43

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Rome II: A Centrist Critique also avoids (perhaps unintentionally) the phrase used in paragraph 1, which speaks of the law applicable to ‘a non-contractual obligation arising out of a tort/delict’.45 Thus, the escape does not even permit the court to look separately into the possibly multiple obligations that may arise from the same facts, such as (but not only) when the case involves multiple tortfeasors or victims. Instead, the phrasing of the escape forces the court to only look at the tort as a whole. If the court finds that the tort as a whole has a closer connection with another country, then the court is authorized to displace the otherwise applicable law in its entirety and replace it with the law of that other country. Thus, the escape is an ‘all or nothing’ proposition; and therein lies its most serious flaw. This flaw will make the escape unavailable in all but the extreme cases. For example, in the above snow avalanche hypothetical, it would be difficult to convince a court that ‘the tort/delict’ (as opposed to the specific issues of negligence per se or damages limitations) is ‘manifestly’ more closely connected with Switzerland. Even if the victims’ domicile, England, also allowed unlimited damages, the court could not avoid the application of French law because the connection with England (which Article 4(1) a priori condemns to a state of insignificance) will probably not qualify as ‘manifestly’ closer than the connection with France. The same would be true with other issues affecting the victim’s recovery. Suppose, for example, that the avalanche caused the death of one of the English tourists, and one of the issues in the case is who is entitled to compensation for his wrongful death. Suppose that French law provides that compensation is due to the victim’s surviving spouse and children together, whereas English law provides that compensation is due to the surviving spouse to the exclusion of the children. Under Article 4(1), the applicable law shall be the law of the country in which ‘the damage occurs’ (France) ‘irrespective of the country or countries in which the indirect consequences of that event occur’ (England). Article 15 reiterates that in such a case, French law will apply to virtually all issues likely to arise in tort litigation, including ‘[which] persons [are] entitled to compensation’ and ‘whether a right to claim damages or a remedy may be transferred, including by inheritance’.46 Yet England is the country most intimately involved and has the strongest claim to apply its law to this issue. Rules designating the beneficiaries of a wrongful death action reflect a society’s assumptions regarding how a person’s death impacts his survivors and which of his survivors are likely to have the greatest need for compensation. These assumptions and value judgments belong to the society in which the victim lived, not to the society in whose territory the injury occurred. In Rome II’s terminology, England is ‘manifestly more closely connected’ with regard to the issue of wrongful death beneficiaries, even if its connections with regard to other issues may not be the closest. Yet, the phrasing of the escape clause does not permit this focus on the specific issue, and therefore it does not allow a court to cure the rule’s deficiency.

45 46

Rome II, art. 4(1) (emphasis added). Rome II, art. 15 (f) & (e).

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Symeon C. Symeonides Similar problems are encountered in employing the ‘manifestly closer connection’ escape to cases falling within the scope of the common-domicile rule, especially those in which, as noted earlier, that rule is either too broad or too narrow. In the case of the French traffic accident involving two Austrians, one could argue that, with regard to issues of conduct and safety, France has a ‘manifestly closer connection’ than Austria, and thus, French law should govern. The problem with this otherwise sound argument is that it runs against the restrictive and holistic wording of the escape, which does not allow an issue-by-issue analysis and instead speaks of the whole ‘tort/delict’, as opposed to certain aspects of it, as being more closely connected with another country. This wording makes it difficult to argue that the entire tort is more closely connected with France, while also being governed by the law of Austria. The same problem exists in the case of the Kenyan hunting accident involving the French and Belgian hunters. Because the escape is worded in geographical terms, and the hunters are not domiciled in the same country, geography would work in favor of, not against, the lex loci. One provision that can help in the French, but not the Kenyan, accident case is Article 17, which allows a court to ‘take account’ of the ‘safety and conduct’ rules of the state of conduct. However, as discussed later, this provision offers only limited relief. A more nuanced escape clause would soften the common-domicile rule and produce more rational results, not only in the above cases, but also in other exceptional cases, or in cases in which that rule adversely affects the rights of third parties. The latter problem is illustrated by two hypotheticals. The first involves a single-car accident in Portugal caused in part by faulty road conditions and resulting in injury to the car’s Spanish passenger. The passenger sues the local Portuguese authority responsible for maintaining the road, and that authority then impleads the car’s Spanish driver for contribution and indemnification for his fault in the accident. The driver and passenger are married to each other and Spanish, but not Portuguese, law prohibits interspousal suits. In such a case, one could argue that the local authority’s claim for contribution falls outside the scope of the common-domicile rule,47 but if the argument fails, the only way to avoid Spanish law would be by stretching the wording of the ‘closer connection’ escape. In the second hypothetical the local authority is not involved, the car was rented in Portugal, and the laws are reversed so that Portuguese, but not Spanish, law prohibits interspousal lawsuits. The injured passenger sues the driver and the car’s insurer invoking Spanish law, while the insurer denies coverage invoking Portuguese law. Again, if the insurer’s obligation for coverage falls within the scope of the common-domicile rule,48 then the only way to avoid Spanish law The argument would be based in part on art. 20 of Rome II, which provides that, if a creditor has a claim against several debtors who are ‘liable for the same claim,’ the question of that debtor’s right to demand compensation from the other debtors ‘shall be governed by the law applicable to that debtor’s non-contractual obligation towards the creditor’. 48 The pertinent Rome II articles for answering this question are articles 18 & 19. Art. 18 is not particularly helpful, except perhaps indirectly, because it only applies to the victim’s right to ‘directly’ sue the tortfeasor’s insurer (i.e., without joining the tortfeasor) and not to the merits of the suit. The article allows the victim to chose between the law 47

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Rome II: A Centrist Critique would be through the difficult road of employing the ‘closer connection’ escape. In conclusion, while both the adoption of the common-domicile rule and the inclusion of an escape clause in Article 4 are significant steps in the right direction, both the rule and the escape would have benefitted from more nuanced drafting. In the final analysis, a good escape clause can bring substantive improvements to even a poor rule system, in addition to helping attain the