Jurisdiction and governing law – Rome II
What does it do?
Applied since 11 January 2009, Rome II allows parties to contractually agree a governing law for non-contractual obligations. It harmonises the rules by which the applicable law to non-contractual disputes is determined and brings greater legal certainty, in particular in cases of tort.
Rome II also ensures a reasonable balance between the interests of the person alleged to be liable and the person who has suffered damage.
To whom does it apply?
Rome II applies to all EU Member States except Denmark.
Scope of Rome II
Rome II applies to situations involving a conflict of laws to non-contractual obligations in civil and commercial matters.
It does not apply, in particular, to revenue, customs or administrative matters, or to the liability of the State for acts and omissions in the exercise of State authority (Article 1(1)). Certain other matters are also excluded, for example, matrimonial property issues and family relationships; company law issues, and defamation and privacy (Article 1(2)).
Article 2 provides guidance as to what is to be understood by ‘non-contractual obligations’ and provides that damage shall cover any consequence arising out of, among others, a tort. The Regulation also applies to pre-emptive actions of non-contractual obligations that are likely to arise or where damage, or an event giving rise to damage, is likely to occur.
Four elements are necessary for Rome II to apply:
- A situation involving a conflict of laws
- A civil and commercial matter
- A non-contractual obligation and
- A ‘non-excluded’ matter.
The applicable law is determined on the basis of where the damage occurs, or is likely to occur, irrespective of the country or countries in which the act giving rise to the damage occurs (Article 4).
This is, however, subject to two exceptions:
- If the parties have the same habitual residence at the time of damage, the law of that country shall apply.
- Where the tort is manifestly more closely connected to a country other than where the damage occurs (or where both parties reside), the law of that other country will apply.
It should be noted that there are also specific rules for certain specific areas, such as, for example, product liability, where damage has been caused by defective products (Article 5), or intellectual property where there has been an infringement (Article 8).
If pursuing a commercial activity, parties can agree what law will determine an event giving rise to the damage. Parties can also agree what law will apply after the event that gave rise to the damage (Article 14).
For insurance contracts, Rome II facilitates direct action being brought against an insurer. It allows a person who has suffered damage to bring a claim directly against the insurer of the person liable to provide compensation, if the law applicable to the non-contractual obligation or to the insurance contract so provides (Article 18).
The ratified Withdrawal Agreement between the EU and the UK provides for a transition period up to 31 December 2020. The abovementioned principles, therefore, currently remain in force in the UK.
The principles set out under Rome II (and Rome I) will continue to apply after the transition period ending 31 December 2020, as the UK has introduced legislation to incorporate the two regimes into domestic UK law - ‘The Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.)(EU Exit) Regulations 2019’. This UK legislation will come into force on exit day.