Out-Law Guide | 21 Mar 2008 | 3:43 pm | 2 min. read
This guide was last updated on 27th January 2009.
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 is 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.
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.
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.
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.
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 ([email protected] / 020 7667 0243)
See: The Rome II Regulation on the law applicable to non-contractual obligations (10-page / 95KB PDF)