International conflicts
Joshua Munro unravels the principles governing jurisdiction and applicable law in EU member states
Jurisdiction rules and applicable law within the EU have evolved considerably from the original Brussels and Rome Conventions. Regulations have consolidated the case law of the European Court of Justice and further rules are being proposed which would further harmonise conflicts of laws with the EU. But for practitioners, determining the correct jurisdiction and the law applicable to a cross-border EU dispute remains a tricky question.
Jurisdiction
Council Regulation EC 44/2001: the Civil Jurisdiction and Judgments Regulation The Civil Jurisdiction and Judgments Regulation (The Judgments Regulation) is incorporated into domestic law by the Civil Jurisdiction and Judgments Act 1982 as amended by the Civil Jurisdiction and Judgments Order 2001 (SI no 3929). The Regulation applies to all member states of the EU, except Denmark, and in respect of all these countries, supersedes the Brussels Convention.
In so far as regards overseas matters (ie, not intra-UK), the Regulation has almost exactly the same effect as the Brussels Convention.
The primary rule of jurisdiction in the Judgments Regulation (Art 2) is that a defendant domiciled in a Regulation state is to be sued in the courts of that state. The critical date for testing whether the defendant was domiciled in England in these cases is the date of the issue of proceedings: Canada Trust Co v Stolzenberg (No 2) [2002] 1 AC 1.
A defendant may only be sued in a regulation state other than that where the defendant is domiciled if special rules apply.
If the parties have a valid agreement that the courts of a member state should have jurisdiction, the terms of that agreement will prevail over any rule, including Art 2.
Domicile
Article 59 of the Judgments Regulation provides that in order to determine whether a party is domiciled in the Regulation state whose courts are seised of the matter, the court shall apply its internal law. If a party is not domiciled in the Regulation state whose court is seised of the matter, then to determine whether the party is domiciled in the courts of another Regulation state, the court shall apply the law of that other Regulation state.
Civil Jurisdiction and Judgments Order 2001, Sched 1, para 9 sets down the rules for determining the domicile of individuals. An individual is domiciled in the UK or a particular part of the UK if he is a resident, and the nature and circumstances of his residence indicate that he has a substantial connection with the UK (or that particular part thereof.)
Article 60 of the Regulation provides a new autonomous rule for the determination of domicile of a company. A company is domiciled at the place where it has its: (a) statutory seat; (b) central administration; or (c) principal place of business. For the purposes of the UK and Ireland, 'statutory seat' means the registered office (Art 60(2)).
Giving jurisdiction to the domestic court
- In matters of contract, if the domestic jurisdiction is the place of performance of the obligation in question, the domestic court has jurisdiction (Art 5(1)).
- In matters of tort, if the domestic jurisdiction is the place where the damage occurred, or where the event that gave rise to the damage occurred, the domestic court has jurisdiction (Art 5(3))
- The domestic court has jurisdiction to determine a dispute arising out of the operations of a branch, agency or other establishment, if the branch, agency or other establishment is situated in the domestic jurisdiction (Art 5(5)).
- The domestic court has jurisdiction, where a defendant is domiciled in the domestic jurisdiction, over a co-defendant in another Regulation state. The domestic court has jurisdiction, where a defendant is sued in proceedings in the domestic jurisdiction, to determine a third party claim by the defendant against a person domiciled in another Regulation state, unless the proceedings were instituted in order to deprive the third party of the jurisdiction of the courts of the country that would otherwise be competent to determine the claim against him.
If proceedings involving the same cause of action and between the same parties have been brought in the domestic jurisdiction and another Regulation state and the courts of that other Regulation state were seised first, the domestic court must stay the domestic proceedings until the jurisdiction of the court first seised is established. Where the jurisdiction of the foreign court is established, the domestic court must decline jurisdiction (Art 27).
The 'same cause of action' is an independent EU law concept. It does not depend on the procedural law of the courts concerned: Gubisch Maschinenfabrik KG v Palumbo [1987] ECR 4861.
This rule applies without regard to the procedural nature of the claim and it is irrelevant, even if true, that the first set of proceedings was instituted for the purpose of forum shopping. Therefore, even in cases where a party seeks a 'negative declaration' in a foreign court, (eg, a declaration that a party is not liable for a road traffic accident), Art 27 will be triggered and the domestic court must decline jurisdiction: The Tatry [1999] QB 515; [1994] ECR I-5439.
Therefore, if it appears in any given case that it is preferable that the courts of another Regulation state should have jurisdiction, it is entirely legitimate for parties to claim such a 'negative declaration' in the courts of another Regulation state. This approach was specifically legitimised by the European Court of Justice in The Tatry. The Court of Appeal in Messier Dowty Ltd v Sabena SA [2000] 1 WLR 2040, confirmed that the English courts would follow the approach of the ECJ in The Tatry. The operation of the Art 27 mechanism is simple and has an objective and automatic character: Ganter Electronic GmbH v Basc Expoliatie Maatschappij BV [2003] ECR I-4207.
If related actions are brought in the domestic jurisdiction and in another Regulation state, and the courts of the other state were seised first, the domestic jurisdiction court may, while actions are pending at first instance, stay its proceedings, or may decline jurisdiction if the court first seised has jurisdiction over both actions and its law permits consolidation of related actions.
Actions are 'related' if they are so closely connected that it is expedient to hear and determine them together so as to avoid the risk of irreconcilable judgments.
Applicable law: substance
Once jurisdiction has been established, the court must consider what the applicable law is, as regards the substance of the claim.
- Claims in contract
- Claims in tort
The general rule can be displaced, in relation to each or any issue, if it appears, in all the circumstances, from a comparison of the significance of the factors that connect the tort with the country whose law is applicable under the general rule and the significance of any factors connecting the tort with another country, that it is substantially more appropriate for the applicable law to be the law of the other country: s 12, Private International Law (Miscellaneous Provisions) Act 1995. The key word in s12 is 'substantially'.
In Edmunds v Simmonds [2001] 1 WLR 1003, the parties were English. The claimant was injured while travelling as a passenger in a hire-car driven by the defendant in Spain. The car had been hired in Spain. The parties were on holiday in Spain. The car collided with a Spanish lorry. The car was insured by a Spanish insurer. There was no relevant difference between Spanish and English law on liability. It is implicit in this case that the court and the parties, who were both represented by senior counsel, proceeded on the basis that Spanish law was applicable to the issue of liability.
There was a difference between English and Spanish law when it came to the method of assessing the quantum of damages. Spanish law would probably result in a lesser award. Garland J ruled that the quantum of damages was a procedural matter and therefore a matter for English law. He also ruled obiter that even if he were wrong on this, s 12, Private International Law (Miscellaneous Provisions) Act 1995 would have been triggered to make English law applicable to the issue of recoverability of heads of damage, principally because both parties were English and the damages as a consequence of the tort arose in England.
In Hulse v Chambers [2001] 1 WLR 2386, a road traffic accident occurred in Greece. The claimants were English passengers in a car driven by the first defendant who was also English. The second defendant was the Greek insurer of the car. Issues of liability were governed by Greek law. Holland J ruled that the existence of heads of damage was a matter for Greek law, but the quantification of damages was a procedural matter for English law.
Harding v Wealands [2005] 1 WLR 1539 gives further guidance at to the application of s 12 Private International Law (Miscellaneous Provisions) Act 1995. Waller LJ ruled that the general rule in s11 should not be dislodged easily. The facts were that a road traffic accident occurred in New South Wales. The driver was W, an Australian national domiciled in England. The injured passenger was H, was British and domiciled in England. They were common-law husband and wife. W, the female, was driving on a New South Wales driving licence with New South Wales insurance. Liability was conceded. Section 12 was held to have been wrongly applied by the trial judge when deciding the recoverability of damages.
Waller LJ states at para 20: 'where the general law, by virtue of s11 being the law where the tort occurred is also the national law of one of the parties, it will, I suggest, be very difficult to envisage circumstances that will render it substantially more appropriate that any issue could be tried by reference to some other law'.
Arden LJ regarded the place where the negligence occurred as determinative of the applicable law at para 45 and Sir William Aldous agreed with the other two judges.
From the above cases it can be seen that domestic law may govern some issues in a case, whereas foreign law may govern other issues in the same case. Further, matters of procedure, including quantification of damages will always be governed by domestic law.
In cases of road traffic accidents that occur in foreign Regulation states, domestic courts are likely to apply foreign law to issues of
liability. This is primarily because issues of liability involve the standard of conduct of motorists, and the standard of conduct should be determined by the law of the country where the conduct occurs. The foreign country has a legitimate policy and interest to see that its standards are observed.
Continental European jurisdictions generally apply the law of the place where the tort was committed.
In an English Court, rules of foreign law should generally be pleaded. If they are not admitted, then expert evidence of the foreign law should be adduced to prove those rules.
Limitation
Section 1(1) of the Foreign Limitation Periods Act 1984 provides that if the applicable law to an issue in the proceedings is foreign law, the foreign law of limitation applies to the issue. English limitation rules should not be applied except where English law is the applicable law. Section 2(1) of the Foreign Limitation Periods Act 1984 provides that where it would be contrary to public policy to apply the foreign law of limitation, the court will refuse to do so. However, such cases would be rare and exceptional: City of Gotha v Sotheby's, The Times, (8 October 1998). The position is the same under the Contracts (Applicable Law) Act 1990.
Claimant lawyers should therefore beware to issue claims within the foreign limitation period where the issue of liability is likely to be governed by foreign law.
Rome II
On 21 February 2006, the European Commission adopted a 'modified Proposal for the Regulation on the law applicable to non-contractual obligations'. This proposal is referred to as 'Rome II'. It is likely to become the equivalent of the Rome Convention in non-contract cases. The proposed Regulation will impose a system uniform throughout the EU on the determination of applicable law in intra-EU cases. It will supersede current law. It will not apply to specific excluded cases, which include family proceedings and trusts 'created voluntarily and evidenced in writing'.
The proposed general rule under Rome II is that the applicable law will be the law of the country in which damage arises or is likely to arise. However, where the person claimed to be liable and the person sustaining damage are both resident in the same country when the damage occurs, the applicable law will in general be the law of that country. Further, if in all the circumstances of a case the non-contractual obligation is 'manifestly more closely connected with another country, the law of that other country shall apply'.
Joshua Munro is a barrister practising from Hailsham Chambers