Applicable law under Rome II: non-contractual obligations
This guide was last updated on 29th January 2008.
Liability insurers will be affected by new rules governing which
law applies to cross-border negligence and other liability actions
coming before courts in the EU.
The Rome II Regulation covers disputes arising from
non-contractual obligations, including product liability and
environmental claims. It changes the basic rule currently applied
by most member states to cross-border disputes – that the
applicable law is that of the country where the harmful act was
committed.
As from 11th January 2009, the general rule will be that the
applicable law is the law of the country where damage occurred or
is likely to occur.
The law governing a dispute determines not only questions of
liability (including any limitations and exemptions) but also the
amount of compensation that can be awarded. Since compensation
levels vary from one country to another, where the damage occurred
is likely to have a significant effect on the size of any resulting
liability insurance claim.
The Regulation applies in all EU member states, including the UK
(but not Denmark). Any law specified by the Regulation will be
applied, whether or not it is the law of an EU member
state.
Exceptions
There are some exceptions to the general rule. If both claimant
and defendant are living in the same country at the time the damage
occurs, the law of that country will apply. Or, if the act giving
rise to the dispute is manifestly more closely connected with
another country, that law will apply.
The parties to a dispute have some freedom to make their own
choice of applicable law - either after the event, or (where they
are engaged in a commercial activity) before the event.
But their choice can be overridden in certain circumstances, for
instance, if the law chosen would prejudice compulsory provisions
in the law of another country where "all the elements relevant to
the situation" at the time of the event are located.
Special rules
There are also special rules for certain types of claim. The
first option for a product liability claim, for example, is
the law of the county where the claimant was living at the time the
damage occurred, assuming the product was marketed in that country.
Failing that, it is the country where the product was bought (again
assuming it was marketed there). And failing that, the country
where the damage occurred.
Environmental damage claims fall under the general rule (the law
of the country where the damage occurred) unless the claimant
chooses to base the claim on the law of the country where the event
giving rise to the damage occurred.
Review
There have been concerns that the Regulation might prejudice
victims of road traffic accidents that occur in a different country
from their home because of the different level of damages that
might be awarded.
For the present, the general rule will apply to such claims, but
the European Commission has promised to investigate the issue
further and report to the Parliament and Council before the end of
2008.
The Commission is also to undertake a study into the law
applying to privacy claims and rights relating to personality
(including defamation), which proved too problematic to be included
in the Regulation.
In addition, a general review clause means the whole Regulation
will be scrutinised again by August 2011.
Contact: Fiona Heyes (fiona.heyes@pinsentmasons.com /
020 7667 0243)
See:
The Rome II Regulation on the law applicable to non-contractual
obligations (10-page / 95KB PDF)
