Rome II Regulation : is it time to review EU rules on the law applicable to non-contractual obligations?
The adoption by the European Union (EU) in 2007 of Regulation (EC) No 864/2007, better known as the Rome II Regulation, harmonised at EU level the conflict-of-laws rules applicable to non-contractual obligations between Member States. The European Commission’s report on the application of Rome II, published a few weeks ago, analyses how the Regulation has been applied in the Member States, what challenges have arisen in practice and how Rome II could be improved.
The Rome II framework and basic rules
Rome II determines the law of the country applicable to non-contractual obligations in civil and commercial relations. Rome II applies at EU level, with the exception of Denmark, and is characterised by its universality – the rules set out in the Regulation apply regardless of the residence or nationality of the parties to the dispute. It can also refer to the law of a third country if the rules of the Regulation require it to apply to a particular non-contractual legal relationship. The substantive scope of Rome II is defined in Article 1, explicitly providing for what the Regulation does not apply to, e.g. non-contractual obligations arising out of the violation of privacy and rights relating to the person, including defamation, non-contractual obligations arising out of family relationships and relationships which are considered to have similar effects under the applicable law, including maintenance obligations, etc.
Article 14 of Rome II establishes the right of the parties to agree on the law applicable to their non-contractual obligations. In the absence of such an agreement, Article 4 of the Regulation establishes a three-step general rule: the first part establishes the lex loci damni rule, according to which a non-contractual obligation arising out of a tort is governed by the law of the country in which the damage occurred; the second part provides that where both persons have their habitual residence in the same Member State at the time of the occurrence of the damage, the law of that State applies, not the law of the place where the damage was caused; and the third part provides for an exception based on a close connection. The third part of the escape clause provides that, where it is clear from all the circumstances of the case that the tort is manifestly more closely connected with a party other than those referred to in paragraphs 1 or 2, the law of that other party applies.
Articles 4 to 13 of Rome II lay down separate rules for specific torts (e.g. product liability, unfair competition, environmental damage, etc.), unjust enrichment, pre-contractual relations and negotiorum gestio.
The Commission’s report indicates that, while the Rome II Regulation has largely achieved its objectives, certain areas have highlighted shortcomings that require attention. The main ones are discussed below.
Identified shortcomings and possible changes to Rome II
One of the main shortcomings identified in the report relates to non-contractual obligations arising from breaches of privacy and personal rights, particularly in the digital space. Non-contractual obligations relating to breaches of privacy and personal rights, including defamation, were excluded from the scope of Rome II due to disagreements during the legislative process. One of the main reasons was the need to balance freedom of expression and information with the right to privacy and reputation, a balance which is achieved differently in different EU Member States. These differences and the particular emphasis placed on freedom of expression in democratic societies have ultimately prevented the adoption of a common rule on the law applicable in cases of breach of privacy.
The Commission points out that in case a rule on the law applicable to privacy and personal rights is planned to be included in Rome II, it is necessary to assess in detail the relationship of this rule with the General Data Protection Regulation (GDPR). The issues of the right to redress, which are uniformly covered by the GDPR, would not be affected in practice by the new Rome II rule. However, for aspects of the law that are not covered by the GDPR, this provision may have significant consequences.
In addition, the Commission also stresses the need to assess that the current regulatory framework facilitates the use of prosecution strategies such as strategic lawsuits against public participation, also known as SLAPPs. The Commission stresses that the phenomenon of SLAPPs confirms that choice of law and jurisdiction can lead to abuse and that, therefore, in the context of the consideration of the recast of the Rome II Regulation, the new rule applicable to personal moral rights should apply to all cases of breaches of privacy and rights relating to the person, irrespective of whether they are brought in an abusive manner.
Another problem identified by the Commission relates to collective redress where a group of victims is affected, e.g. cases involving several EU Member States, such as cases of restrictive practices, prospectus liability, mass torts, etc. Where a collective action seeks damages for all victims in a group, the place of occurrence of the damage is determined for each claim and for each victim separately. As a result, a court dealing with collective redress cases may need to apply several different substantive laws to the various claims of the members of the group.
The application of several substantive laws often complicates the assessment of a case, increases the cost and duration of litigation and can discourage consumer movements. On the other hand, the alternative approach of applying different laws depending on whether individual or collective actions are brought for collective redress can affect the clarity of the legal rules, which in turn can reduce legal certainty. In the Commission’s view, if the Rome II Regulation were to be revised, more attention should be paid to the issues discussed.
The Commission has also drawn attention to the need for legal systems to adapt to the challenges posed by the use of artificial intelligence (AI) and ongoing technological progress. As the approaches to dealing with the complexities associated with the increasing use of AI are still under development, it is difficult to assess with certainty at this stage whether Rome II should be complemented by specific rules. Most Member States acknowledged that practical experience in dealing with choice of law issues in IoT cases is limited, and while potential problems were mentioned, they were not specified in detail. In the Commission’s view, the question of the law applicable to choice of law for DI is potentially premature and requires further analysis.
What next?
In the light of the information provided, the Commission plans to carry out a more detailed assessment and consider whether the Rome II Regulation should be amended. If such a need arises, the Commission will consider preparing a proposal to amend or recast Rome II. In addition, the Commission will examine whether further amendments or clarifications are needed in areas where the existing rules are adequate to facilitate their application.
