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Conflict Of Laws Project
CONTRACTS AND NON CONTRACTUAL OBLIGATIONS
Submitted By
Aalim Khan (505)
S.R.Iyalpari(527)
Lakshmi Menon (529)
Shravan Kumar Y (552)
Shreyas B Bhushan (553)
Shruti Kurup (555)
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CONTENTS
Torts…………………………………………………………………….3
Rome Regulation………………………………………………………14
Negotiable Instruments………………………………………………..22
Maritime Law…………………………………………………………..27
Contracts and Non Contractual Obligation………………………….33
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TORTS
An interesting aspect to note about torts regarding the place it occupies in international law is that if
the tort has been committed entirely locally, then lex loci delicti governs it, irrespective of the fact
whether it has or does not possess some foreign element, such as both or one of the parties is
domiciled or resident aboard or is national of another country.1 The foreign law is relevant only is
some aspects. For example, if a tort of defamation has taken place in England against some local
resident, then the English law would apply, but if it has been committed by or against an individual
representing a foreign government, then the plea would be sustained or not depending on the law of
the represented country.
Under English Private International Law of torts, we may observe two distinct decisions, delivered
almost a century apart, one in 1869-70 and the other in 1969-70. The entire realm of torts revolves
around these two decisions. But before proceeding any further and analyzing cases, it would be
pertinent for us to understand the theoretical foundations of the issue at hand.
Choice of Law in Tort: Theoretical Models
The three theoretical models that have been considered in respect of the choice of law in tort have
been:
(i) lex loci delicti - the law of the place where the tort was committed - a place that might be entirely
fortuitous, having no close connection with law of the injured parties, e.g., an aircraft crash in
Germany involving an aircraft made in America, which is operated by an American company and has
British passengers as victims;
(ii) lex fori - the law of the place where the tort is litigated - a model that might encourage forum
shopping, i.e., seeking to litigate in the country having jurisdiction and the most favorable laws as far
as the plaintiff is concerned; and
(iii) The proper law of the tort, i.e., litigating in the country having the closest and most real
connection with the tort. When the tort was committed in England, a consistent line of authority
established that English law, alone, applied. The focus here accordingly, is on the development of the
choice of law in tort when the tort has been committed abroad.
Where the tort was committed abroad, a 'double actionability' test evolved from Phillips v. Eyre2. This
requirement for 'double actionability' meant that to be actionable the act (tort) had to be unlawful both
1 Szalatnay – Stacho v. Fink [1947] I K.B 1
2 (1870) LR 6 QB 1
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in the country where the act was committed and under English law, which unduly favoured
defendants.
Choice of Law in Tort at Common Law When the Tort was Committed Abroad:
(i) 1870-1971. In Phillips v. Eyre3 Willes J stated that: “As a general rule, in order to found a suit in
England for a wrong alleged to have been committed abroad, two conditions must be fulfilled. First,
the wrong must be of such a character that it would have been actionable if committed in England.
Secondly, the act must not have been justifiable by the law of the place where it was done.”
However, there was no consistency in the meaning of a 'wrong' alleged to have been committed
abroad.
(ii) Boys v. Chaplin4 –
The facts of Buys v. Chapliit were as follows. P was injured in a road accident in Malta caused by the
admitted negligence of D. Both parties were normally resident in England, but were stationed in Malta
at the time of the accident as part of H.M. Armed Forces. P sued D in England. The question arose
whether damages were to be assessed by Maltese law (limited to f53 special damages in respect of
financial loss directly suffered and expenditure necessarily incurred) or by English law (under which,
in addition, he could recover f2,250 general damages in respect of pain, suffering and loss of
amenities). The House of Lords unanimously allowed P to recover damages assessed according to
English law. Unfortunately, it has proved exceedingly difficult to extract a ratio decidendi from the
case.
Lord Hodson5 said that the right to damages for pain and suffering was a substantive, not a
procedural, issue and applying the rule of double reference in Phillips v. Eyre, P would fail in his
claim for general damages.6 However, the interests of justice required some qualification of the
general rule. Controlling effect would be given to the law of England which, because of its
relationship with the occurrence and the parties, had the greater concern with the specific issue raised
in the litigation. Lord Guest M took the view that the question in issue related to the quantification of
damages, which was a question of procedural law to be decided by the lex fori. Lord Donovan,”
preferring not to make exceptions to the rule in Phillips v. Eyre, said that once an English court was
competent to entertain an action under the rule in Phillips v. Eyre, it was right that it should award its
3 Supra
4 Cheshire &North, Private International Law, (11th ed., 1987), 519-521; Carter, "Torts in English Private
International Law", (1981) 52 B.Y.B.I.L. 9, 24-25; Briggs, "What did Boys v. Chaplin decide?", (1984) 12
Anglo-Am. L.R 237.
5 At pp. 379-380.
6 This conclusion was reached by Diplock L.J., dissenting, in the Court of Appeal: [1968] 2 Q.B. 1.
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own remedies. Lord Wilberforce affirmed the basic rule requiring actionability as a tort under the lex
fori plus the existence of civil liability as between the actual parties under the lex loci delicti.
However, there were occasions when some qualification to this rule was required. In the present case,
the issue whether recovery should be allowed under a particular head of damages required to be
segregated from the rest of the case, related to the parties and their circumstances, and tested in
relation to the policy of the local rule and of its application to the particular parties. Having done this,
he felt that there was no reason why the English court should not apply its own rule of damages. Lord
Pearson said that, under the rule in Phillips v. Eyre, the substantive law of England plays the dominant
role, determining the cause of action, whereas the lex loci delicti plays a subordinate role, in that it
may provide a justification for the act and so defeat the cause of action, but does not itself determine
the cause of action. In the present case, there was no justification for D’s acts under Maltese law, so
English law applied and P recovered in full. However, he also admitted that an exception to the
general rule might be required in order to discourage forum shopping.
Subsequent decisions have done little to clarify the status of the exception in Boys v. Chaplin.
Although Lord Wilberforce’s speech has on the whole been the most favourably received, there are a
number of unresolved questions. Can the exception apply when the parties are not from the same
state? Will the exception, in addition to allowing the sole application of the lex fori, allow the
application of the lex loci delicti alone or the law of a third country alone? Will the exception apply
even where it has the effect of giving P less recovery than under the general rule, or no recovery at
all? Will the exception apply to issues other than heads of damages, and if so, which issues? Clearly,
the exception is uncertain in ambit and it is unclear what circumstances will justify its use.
(iii) 1971- April 1996 (following Boys v. Chaplin [1971]. as extended in Red Sea Insurance v.
Bouygues [1995].) for all torts other than Defamation.
THE MODERN ENGLISH LAW
Since an action in tort is an action in personam the English court acquires jurisdiction by the mere
presence of the defendant within the jurisdiction or when under Order 11 Rule 1 [h] of the Supreme
Court Rules a writ can be served on the defendant outside the jurisdiction.
General rule
With the exception of defamation which continues to apply the proper law test, s10 Private
International Law (Miscellaneous Provisions) Act 1995 abolishes the double-actionability test, and
s11 applies the lex loci delicti rule subject to an exception under s12 derived from Boys v. Chaplin7
7 (1971) AC 356
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and Red Sea Insurance Co, Ltd. v. Bouygues8. Thus, it is no longer necessary for the case to be based
on a tort actionable in England. The English courts must apply wider international tests and respect
any remedies available under the "Applicable Law" or lex causae including any rules on who may
claim (e.g. whether a personal representative may claim for a fatal accident) and who the relevant
defendant may be (i.e. the English court would have to apply the applicable law's rules on vicarious
liability or the identity of an "occupier" of land).
The first step is for the court to decide where the tort occurred, which may be complicated if relevant
events took place in more than one state. s.11(2) distinguishes between:
• actions for personal injuries: it is the law of the place where the individual sustained the
injury;
• damage to property: it is the law of the place where the property was damaged;
• in any other case, it is the law of the place in which the most significant element or elements
occurred.
The first two tests seem to provide a workable balance between the interests of the claimant and the
defendant by selecting the law of the place in which the claimant suffered the harm, but problems
remain. In Henderson v. Jaouen9 there was continuing damage as the condition arising from original
injury deteriorated. Similarly, in Roerig v. Valiant Trawlers Ltd.10
, where the accident occurred on
board an English ship, the main consequences in terms of loss were felt by the deceased's family in
Holland (their habitual residence), not England. The third rule which will apply in economic torts,
breach of privacy etc., requires a test comparable to the proper law. In Multinational Gas and
Petrochemical Co. v. Multinational Gas and Petrochemical Services Ltd.11
negligent management
decisions were based on financial reports prepared in England. Because the decisions were taken and
the losses were sustained outside England, English law was not the most significant. In Metall and
Rohstoff AG v. Donaldson Lufkin & Janrette Inc.12 action in New York induced a breach of contract
in England where the loss was sustained, so English law was the more significant.
Exceptional Rule
In exceptional circumstances, the lex loci delicti rule is displaced in favour of another law, if the
"factors relating to the parties" or "any of the events which constitute the tort" show that this other law
will be substantially more appropriate. Suppose that an English employer sends an employee on a
business-related journey to Arcadia. During the course of this journey, the employee is injured while
8 SA (1995) 1 AC 190
9 (2002) 2 AER 705
10 (2002) 1 Ll Rep 681
11 (1983) Ch 258
12 (1990) 1 QB 391
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driving a car provided by the employer for this purpose. All the relevant connecting factors favor the
application of English law except that the injury itself was sustained elsewhere. In Edmunds v.
Simmonds13
it was held more appropriate to displace the lex loci delicti and to apply English law to
the consequences of a road traffic accident in Spain involving two English friends who had travelled
abroad for a short holiday and where the majority of the losses and expenses were suffered in
England. In Morin v. Bonhams and Brooks Ltd.14
a bad buy was made in Monaco as a result of
allegedly fraudulent information "fed" to the buyer in London. The case involved representations
made about the qualities of a classic car auctioned by the defendants in Monaco and bought by the
claimant who had received the brochure which made the alleged misrepresentations in England. He
had, to a certain extent, relied on them in England, by arranging to travel to Monaco for the auction,
and he had suffered loss in England where the car was found not to meet the description in the
brochure. The car had, however, been subject to auction in Monaco where the bid sum was payable.
The court held that the claimant's decision to bid and to commit himself to the purchase that was "by
far the most significant" act, and that was done in Monaco. The judge offered the obiter dicta that had
the claimant made a telephone bid from England, a different judgment would probably have been
made.
Defenses
In an English action on a foreign tort double defenses are available to the defendants. (i) Any defence,
whether substantive or procedural under the lex fori. (ii) any defence under the lex loci delicti with the
exceptional on purely procedural defenses. In Phillip v. Eire15, apart from the general rule propounded
by Wills J, it is evidently a case of defence available to the defendant under the lex loci delicti
commissi. The case is an authority for the proposition that if the defendant is excused from his
liability for the wrong by a retrospective law passed by the country where the the tortuous act was
committed, then the English action against him would fail. The defendants can also avail any defence
available to him under the lex loci delicti commissi at the time of the commission of the act. The
Mary Moxham16
and the Waziristan17
are authorities for this proposition.
Sayers v.International Drilling Co.18
lays down that if the defendant’s liability has been excluded or
restricted by a valid term in a contract with the plaintiff, then it can be successfully pleaded as a
defence to an action in tort. In this case the plaintiff, an Englishman entered into a contract of
employment in England with a Dutch company engaged in off shore oil drilling, under which he was
to be employed as a derrick man on one of the company’s rigs off the Nigerian coast. One of the terms
13 (2001) 1 WLR 1003 14
(2003) 2 AER (Comm) 36 15
1970 6 Q.B. 1 16
1953 1 P.D. 107 17
1953 1 W.I.R. 1446 18
1971 3 All. ER 163
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of the contract specifically provided that by virtue of his employment the plaintiff was not covered by
the workman’s compensation insurance or benefits under the laws of the united kingdom but could
claim compensation out f the fund maintained by the company. Under the contract the plaintiff
accepted this to be the exclusive remedy in lieu of any other claims, rights or actions whether at
common law or any other statute of the United Kingdom. Whilst working on the company’s oil rigs
the plaintiff was injured following to the alleged negligence by the fellow employees. The plaintiff
filed in action in the English court against the Dutch company for damages for the injuries caused to
him on the account of the negligence. The issue was whether the contract was governed by the
English law. The court held that the contract was governed by the Dutch law and not the English law.
MARITIME AND AERIAL TORTS-
The maritime and aerial torts are, by the nature of their location different from island torts.
Maritime Torts- the maritime torts are these which are committed on the high seas. Tortuous acts on
the high seas fall under the following category-
(i) Those acts which are confined to a single ship. Examples of such torts may be assault by
a member of the crew on another or on a passenger or torts committed by a passenger
against another or a member of a crew. They are governed by the law of the flag, as the
ship is considered to be a part of the territory of the country the flag of which it flies.
Thus if a tort is committed on the board of an Indian ship, the matter will be exclusively
governed by the Indian law. But if an action is bought on such a tort in an English tort
then the rule laid in the Boys v. Chaplin would apply. The only difficulty which arises is
in respect of the meaning of the law of the flag in the case of a composite country. It has
been, it is submitted rightly, suggested that it will be the law of the port of registry.
(ii) Those acts which are external to a ship. These refer to those torts which affect person or
property not on board of a ship. Such acts broadly may be of following types- (a)
negligent navigation resulting in a collision with another ship. (b) negligent navigation
resulting in some damages to the property of another such as when submarine cables are
fouled, or when the crew of a fishing boat dispute as to the catch of another boat. In such
cases it is obvious that the general rule cannot be applied. It is an established rule of
English law that in such cases it is general maritime law, as applied by the Admiralty
division of the high court applies whatever might be the law of the flag. In such a case the
requirement is that the tortuous act must amount to tort by the English law and by general
maritime law. Only then an action in an English court can be maintainable. This rule is
not applied when a matter is covered by some international conventions to which England
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is a party. In such a case the matter would be governed by the provisions of the
conventions.
Aerial Torts-
There is no judicial authority in England or India on aerial torts. Aerial torts include torts committed
on the board of an aircraft, collusions in the air between two aircrafts or damage caused to the life or
property due to the crashing of the aircrafts. For the purpose of aerial torts, ‘aircrafts’ includes any
mechanical device capable of flight.
In the absence of aerial torts, the law is sought to be developed either on the analogy of ship or
motorcars. Then under international law, the territorial jurisdiction of the state extends to the air-space
over land and territorial water. This implies that the aircraft is within the territorial jurisdiction of one
state or the other over the air space over which it is flying, except when it is flying on high seas or
over territorial nullius. On this basis it is asserted that whenever a tort is committed on an aircraft or
whenever collusion occurs while a ship is flying over the air space of the country, then the locus
delicti of the tort is that country. Therefore, the choice of the law lies with that country which is the
locus delicti or the law of the country of the aircraft registration. In respect of torts committed when
the aircraft is on high seas, the law applicable to maritime torts seems to be applied to aerial torts too
through analogy. Thus, if a tort is committed on an English aircraft, the lex lici delicti would be the
English common law, and in case of a collusion taking place between two or more planes, it would be
the English maritime law.
To some extend the matter is now governed by the international conventions, the Warsaw conventions
1929-1959 on air transport, the Chicago convention on international civil aviation, 1944 to which
corresponds the English statutes of carriages by air act, 1961 and the civil aviation act, 1949.
Article 28 of the convention on air transport deals with the choice of jurisdiction and lays down that
an action for damages can be bought only in the court of the country where the carriage ordinarily
resides, or has his principle place of business, or has an establishment by which the contract has been
made, or at the place of the destination of the goods. Article 29 provides that the right of damages
shall be extinguished if an action is not bought within two years. The period will calculate under the
lex fori. Similarly the civil aviation act, 1949 lays down certain rules relating to aerial torts. Section
40(1) lays down that no liability shall be incurred for trespass of the air- space. Section 40(2) lays
down that where material loss or damage is caused to any person or property on land or water by or
by a person in, or an article or a person falling from an aircraft while in flight, talking off, or landing
then damages shall be recoverable without proof of negligence or intension as if caused by a willful
act, neglect or default of the owner of the aircraft.
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Indian Law-
The Indian private international law relating to the torts is in a nascent stage of development. It seems
to be evident that as to the jurisdiction of the court, the rules laid down in the civil procedure will
apply. It seems that in a case where a suit for compensation is filed for a tort committed abroad, the
Indian court will entertain an action against a defendant who resides, carries on business or personally
works for gain in India. The residence will also include the presence of the defendant within the
jurisdiction of the court. In short, the court is free here also to give a wide meaning to the word
residence. Thus in a pre independent case, the privy council held that the court at Quetta has
jurisdiction to entertain an action against a defendant who resides in Punjab and carries on business in
Quetta in the respect of a tort committed by him in Persia which follows English law. In the Kotah
Transport Ltd. v. The Jhalawar Bus Service Ltd.19 a suit for damages was filed by the plaintiff
company against the defendant company for damages caused to the plaintiff but by rash and negligent
driving by the defendant’s driver. The main defence of the defendant was that the alleged tortuous act
should constitute an actionable wrong not merely by the law of the Kotah state but also by the law of
the Jhalawar state, the lex loci delicti commissi. The court after the examination of the tort of the
Jhalawar state, found that there was nothing in the law of the state which justified the act of the
defendant and thus the case was decided in favour of the plaintiff.
CHOICE OF LAW FOR QUANTIFICATION OF TORT DAMAGES
In discussing choice of law for determining damages for torts, it is necessary to distinguish between
“heads” of damages and “quantification” of damages under those heads. Heads of damages list the
items for which a court or jury may award damages—medical expenses, lost wages, pain and
suffering, punitive damages, and perhaps others. Quantification of damages measures the proper
amount under each allowable head—how much for pain and suffering?
It is also necessary to focus on the meaning of “substantive” and “procedural” as those terms are used
for choice of law. For “substantive” issues a court applies the forum’s choice-of-law rule to select the
applicable law. “Procedural” in conflicts jargon is simply shorthand for saying that the forum’s rule
applies.
“Procedural” is a term used in many contexts. It may refer to the rules that govern the workings of the
forum’s courts—pleading, preserving objections for appeal, discovery. In the United States it may
refer to a federal court’s freedom to apply a federal rule when the court has subject-matter jurisdiction
because of the parties’ diversity of citizenship and is applying state, not federal, law to “substantive”
issues. Or, as indicated above, a “procedural” issue might be one for which the forum court will not
engage in its usual choice-of-law analysis, but will simply apply its own rule.
19
1960 Raj. 224
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Justice Frankfurter said it as well as anyone:
Matters of “substance” and matters of “procedure” are much talked about in the books as though they
defined a great divide cutting across the whole domain of law. But, of course, “substance” and
“procedure” are the same key-words to very different problems. Neither “substance” nor “procedure”
represents the same invariants. Each implies different variables depending upon the particular
problem for which it is used. Therefore, in deciding when to apply the “procedural” label in the
context of choice of law, the question is: what justifies a forum in insisting on applying its local rule
when under the forum’s choice-of-law rule the law of another jurisdiction applies to all “substantive”
issues? The proper standard is one that balances the difficulty of finding and applying the foreign rule
against the likelihood that applying the forum’s rule will affect the result in a manner that will induce
forum shopping.
Pleading, serving process, preserving objections for appeal, and similar issues relating to the day-to-
day operation of courts are properly labeled “procedural” for choice-of-law purposes. Flouting those
rules will affect the outcome, but an attorney is not likely to choose one forum over another to take
advantage of such housekeeping provisions. Discovery rules require more balancing. A forum that
permits massive pre-trial discovery is likely to attract plaintiffs. U.S.-style discovery is one of the
reasons that American forums are magnets for the aggrieved and injured of the world. Nevertheless, it
would be unthinkable to require U.S. judges and lawyers to learn and apply foreign discovery rules.
Discovery is properly labeled “procedural” for choice-of-law purposes.
What about damages? Heads of damages, the items that a court or jury may include in computing the
amount awarded to the plaintiff, are universally regarded as substantive. If the forum’s choice-of-law
rule for torts points to a Mexican state, that Mexican state’s law determines the heads of damages.
Quantification of damages under these heads, however, is regarded as “procedural” and forum
standards apply.
The standard rule treating quantification of damages as procedural makes no sense. Quantification is
the bottom line—what all the huffing and puffing at trial about. The American devotion to jury trials
in civil cases and the tendency of American juries to award “fabulous damages” are the primary
reasons that foreign plaintiffs attempt to litigate their cases in U.S. courts. I have opposed this silliness
but the windmills show little sign of weakening. The United States Supreme Court has indicated the
direction to take. Gasperini v. Center for Humanities, Inc held that federal courts exercising diversity
jurisdiction must apply “the law that gives rise to the claim for relief” to determine whether a jury
verdict awards excessive damages. Other U.S. courts have not taken this hint that quantification of
damages is too important for a “procedural” label. One bit of sanity that survives in this choice-of-law
madness is that courts regard statutory limits on recovery as “substantive.” They apply these limits
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when their choice-of-law rules select the tort law of the jurisdiction where the statute is in force. In
Harding v. Wealands, however, the House of Lords, construing the Private International Law
(Miscellaneous Provisions) Act 1995, has rejected even this limit on the “procedural” label when
quantifying damages. Now to turn to that opinion.
HARDING V. WEALANDS
Mr. Harding, an Englishman, and Ms. Wealands, an Australian, began a relationship in Australia. She
moved to England to live with him. Ms. Wealands returned to Australia to attend a family wedding.
He later joined her for a holiday and to visit her parents. While she was driving in New South Wales
(NSW) with Mr. Harding as a passenger, she lost control and the vehicle turned over. He was badly
injured and became tetraplegic as a result of the injury. Ms. Wealands owned the vehicle and carried
liability insurance issued by an Australian company. Both Mr. Harding and Ms. Wealands returned to
England. A NSW statute places limits on compensation for various damages including lost earnings
and non-economic damages, and in other ways restricts recovery.
Under NSW law the plaintiff would recover about thirty percent less than under English law. The
United Kingdom Private International Law Act 1995 abolished the double actionability choice-of-law
rule for torts and created a presumption that that the law of the place of injury governs unless it is
“substantially more appropriate” to apply some other law. Section 14(3)(b) states that the statute does
not authorize “questions of procedure in any proceedings to be determined otherwise than in
accordance with the law of the forum.”
Mr. Harding sued Ms. Wealands in the High Court of Justice in London. That court ruled that English
law determined the damages. Justice Elias gave two reasons: (1) the NSW caps on damages were
“procedural”; (2) even if damages were substantive it was “substantially more appropriate” to apply
English law because the parties “were living together in a settled relationship and resident in
England,” and “the costs of alleviating the consequences of the accident will be borne in” England.
The Court of Appeal allowed the appeal and applied Australian law. The judges of the Court of
Appeal agreed that it was not more appropriate to apply English law if the NSW statutory caps on
damages were substantive, but they split 2-1 on the issue of whether the caps were substantive, the
majority voting for the substantive classification. With five Law Lords participating, the House of
Lords unanimously allowed the appeal and restored the judgment of the trial court on the ground that
quantification of damages is procedural.
Lord Hoffman stated that he found no ambiguity in the meaning of “procedure” as used in section
14(3)(b) of the Private International Law Act 1995. Procedure in English private international law had
always included all issues relating to quantification of damages. The only authority that statutory
limits on recovery are substantive is found in one of the leading English treatises on conflict of laws:
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But Mr. Palmer, who appeared for the defendant, submitted that in English private international law a
limit or “cap” on the damages recoverable is regarded as substantive. There is, it is true, some
authority for this proposition. The 7th edition (1958) of Dicey’s Conflict of Laws edited by Dr. JHC
Morris, contained the statement, at p 1092, “statutory provisions limiting a defendant’s liability are
prima facie substantive; but the true construction of the statute may negative this view.”
Lord Hoffman rejected this statement in Dicey’s treatise as “too widely stated” because the case cited
by Dicey is only “authority for the proposition that a contractual term which limits the obligation to
pay damages for a breach of contract or a tort, or a statutory provision which is deemed to operate as
such a term, qualifies the substantive obligation.”
Contrary to the House of Lords’ holding in Harding, the Private International Law Act 1995 did not
compel depriving the defendant of statutory limits on damages under the law of the place of wrong. If
the result in Harding is correct it is because, in the wording of the Act, it was “substantially more
appropriate” to apply English law because of the relationship between the parties and their residence
in England.
The real harm of the House of Lords decision is that it makes it less likely that courts will change the
standard rule that characterizes quantification of damages as procedural, and therefore determined by
forum criteria. This standard rule should change to accord with a functional view of “procedural” in
the context of choice of law. This functional view would preclude the procedural label for any rule
that is likely to affect the result in a manner that would invite forum shopping unless it would be
unreasonably difficult for local lawyers and judges to apply foreign law to the issue. More undesirable
still is that Harding v. Wealands extends the procedural characterization of quantification of damages
to the one area where U.S. and Australian courts have had the good sense not to apply it—statutory
limits on recovery.
Fortunately, Harding may have a short life in the United Kingdom. A draft Regulation of the
European Parliament and the Council on the Law Applicable to Non-Contractual Obligations, referred
to as “Rome II,” which seems ready for enactment in 2007, includes among the issues governed by
the Regulation’s choice of law rules “the existence, the nature and the assessment of damage or the
remedy claimed.” This language appears broad enough to include quantification of damages. If so,
this would constitute a desirable reversal of the standard rule treating quantification of damages as a
procedural matter to be resolved under forum standards. The United Kingdom has agreed to be bound
by Rome II.
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ROME REGULATIONS
ROME I REGULATION -Brief Overview
This Regulation applies to contractual obligations in civil and commercial matters in the event of a
conflict of laws. It does not apply to revenue, customs or administrative matters, or to evidence and
procedure.
Nor does the Regulation apply to the obligations relating to the following: a natural person’s status or
legal capacity, family relationships, matrimonial property regimes, negotiable instruments such as
bills of exchange, cheques and promissory notes, arbitration and choice of court, law of companies
and other corporate or unincorporated bodies, the binding of a principal or a company to a third party,
trusts etc. Any law indicated in this Regulation should be applied, even if it is not that of a Member
State.
Freedom of choice
The parties to a contract are to choose the governing law. It may be applied to only a part or the whole
of the contract. Provided that all the parties agree, the applicable law may be changed at any time. If
the law chosen is that of a country other than that relating most closely to the contract, the provisions
of the latter law need to be respected. If the contract relates to one or more Member States, the
applicable law chosen, other than that of a Member State, must not contradict the provisions of
Community law.
Applicable law in the absence of choice
Where the parties have not chosen the applicable law for contracts for the sale of goods, provision of
services, franchises or distribution, it will be determined based on the country of residence of the
principal actor carrying out the contract. For contracts concerning immovable property, the law of the
country where the property is located is applied, except in the cases of temporary and private tenancy
(maximum six consecutive months). In such cases the applicable law is that of the landlord’s country
of residence. In the case of sale of goods by auction, the law of the country of the auction will apply.
With regard to certain financial instruments governed by a single law, the applicable law will be that
law.
If none, or more than one of the above rules apply to a contract, the applicable law will be determined
based on the country of residence of the principal actor carrying out the contract. If, however, the
contract is related more closely to another country than provided by these rules, the law of that
country will be applied. The same applies when no applicable law can be determined.
15
Rules applicable to specific contracts
For the following types of contract, the Regulation lays down options for the selection of applicable
law and determines the law to be applied in the absence of choice:
1. Contracts for the carriage of goods – in the absence of choice, the applicable law will be that
of the country of residence of the carrier, provided that this is also the place of receipt or
delivery, or the residence of the consignor. Otherwise, the law of the country to which the
delivery will be made will apply;
2. Contracts for the carriage of passengers – the applicable law may be chosen from either the
country of residence of the passenger or carrier, the country where the central administration
of the carrier is located, or the country of departure or destination. In the absence of choice,
the law of the country of residence of the passenger will apply, provided that it is also the
place of departure or destination. Yet, if the contract is more closely related to another
country, then the law of that country will apply;
3. A consumer contract between consumers and professionals – The law applicable is that of the
country of residence of the consumer, provided that this is also the country where the
professional carries out his/her activities or to which his/her activities are directed. The parties
may also, based on freedom of choice, apply another law, as long as it provides the same level
of protection to the consumer as that of his/her country of residence;
4. Insurance contracts – in the absence of choice, the applicable law will be that of the country
of residence of the insurer. However, if the contract is more closely related to another country,
that country’s law will apply;
5. Individual employment contracts – the applicable law may be determined on the basis of the
freedom of choice principle, provided that the level of protection granted to the employee
remains the same as with the applicable law in the absence of choice. In the latter case, the
law governing the contract will be that of the country where, or from where, the employee
carries out his/her tasks. If this cannot be determined, the applicable law will be that of the
country where the place of business is located. However, if the contract is more closely
related to another country, that country’s law will apply.
Scope of the law applicable
The law this Regulation determines as applicable to a contract will regulate interpretation,
performance, penalties for breaching obligations, assessment of damages, termination of obligations,
instructions for actions, and penalties for invalid contracts. The Community law that establishes
16
conflict-of-law rules for contractual obligations relating to particular matters takes precedence over
this Regulation, except in the case of insurance contracts.
The Commission will submit a report on the application of this Regulation to the European
Parliament, the Council and the European Economic and Social Committee by 17 June 2013.
The Regulation will apply to contracts that are concluded as from 17 December 2009.
Background
The Vienna Action Plan of 1998 acknowledged the importance of harmonised conflict-of-law rules in
the implementation of the mutual recognition principle for decisions in civil and commercial matters.
The joint Commission and Council programme of 2000 provides measures for this harmonisation.
The Hague Programme of 2004 reasserted the importance of pursuing work on conflict-of-law rules
for contractual obligations, with its Action Plan providing for the adoption of the Rome I proposal.
This ensuing Regulation replaces the Rome Convention of 1980 on the law applicable to contractual
obligations, transforming it into a Community instrument and modernising it.
ROME II REGULATION
A Summary
This Regulation defines the conflict-of-law rules applicable to non-contractual obligations in civil and
commercial matters, including product liability, negotiorum gestio (acts relating to the affairs of
another person) and culpa in contrahendo (non-contractual obligations arising out of dealings before
the conclusion of a contract). Applicable from 11 January 2009 in all Member States except Denmark,
it does not attempt to harmonise the substantive law of the signatories in the field of non-contractual
obligations, but only their conflict-of-law rules, so that, no matter where in the EU an action is
brought, the rules determining the applicable law will always be the same.
As a general rule, and in order of priority, the law applicable is: the law of the country where the
damage occurs, the law of the country where both parties were habitually resident when the damage
occurred, the law of the country with which the case is manifestly more closely connected than the
other countries. It authorises the parties to choose, by mutual agreement, the law that will be
applicable to their obligation.
Specific rules are provided for certain domains, e.g. product liability and intellectual property, and
certain domains are excluded, notably revenue, customs and administrative matters, the liability of the
State, and matrimonial and family relationships.
17
Defining the applicable law: harmonising conflict-of-law rules in the EU
When the Rome II Regulation comes into application (11 January 2009), it will apply to events giving
rise to damage that occur after it came into force (20 August 2007).
The law applicable to non-contractual obligations under this Regulation governs: the basis and extent
of liability, including the persons who may be held liable, the grounds for exemption from liability;
the limitation or division of liability, the existence, nature and assessment of damage and the remedy
claimed, the measures that the court may take to prevent or end injury or damage and provide for
compensation (within the limits of national procedural law), the transferability of the right to seek
compensation, including by succession, the persons entitled to compensation for damage sustained
personally, liability for the acts of another person, extinction of obligations, and the rules relating to
prescription or limitation based on a period of time.
As a general rule (Article 4), the law applicable to a non-contractual obligation arising out of a
tort/delict is the law of the country in which the damage occurs, regardless of the country or countries
in which indirect consequences of the event may occur. There are, however, two major exceptions: (1)
When the defendant and the claimant are both habitually resident in the same country at the time
when the damage occurs, it is the law of that country that applies. (2) When the event is manifestly
more closely connected with a different country (e.g. deriving from a pre-existing relation between the
parties, such as a contract), it is the law of that country that applies. The Regulation is of universal
application: that is, the law specified is applied whether or not it is the law of a Member State.
The Regulation does provide for some freedom of choice: the parties are free to choose the law
applicable to a non-contractual obligation either by common agreement after the event giving rise to
the damage or, between business people, by an agreement freely negotiated before the event giving
rise to the damage. The choice must be explicit or evident from the circumstances, and must not
prejudice the rights of any third party. This freedom of choice does not apply to infringements of
intellectual property (see below), and cannot be invoked when all the elements relevant to the
situation relate to a country other than the one chosen. Similarly, Community law overrides the law of
a non-EU country, chosen by the parties, when all the elements of the situation are located in one or
more EU Member States.
For unjust enrichment, including undue payments, the applicable law is that governing a pre-existing
relation between the parties, e.g. a contract or a harmful event closely connected with the unjust
enrichment. If there is no such relation, but both parties were habitually resident in the same country
where the event giving rise to the unjust enrichment occurred, it is the law of that country that applies.
18
Failing that, the applicable law is that of the country in which the unjust enrichment occurred or, if the
event is manifestly more closely linked with another country, the law of that other country.
This also applies to negotiorum gestio (the law governing an existing relation between the parties, or
failing that the law of the country of habitual residence, or failing that the law of the country in which
the acts were performed or, finally, the law of the country with which the matter is most closely
connected). As regards culpa in contrahendo (non-contractual obligations arising out of dealings
before the conclusion of a contract), the applicable law is that governing the contract (regardless of
whether the contract was actually concluded or not). The concept of culpa in contrahendo is
autonomous for the purposes of the Regulation, and should not necessarily be interpreted in the sense
of national law. If the law cannot be determined, the applicable law is that of the country in which the
damage occurred, or failing that the law of the country where both parties are habitually resident or of
the country most closely associated with the event.
The Regulation makes specific provision for certain domains:
1. Product liability. The law of the habitual residence of the person sustaining the damage at the
time the damage occurred, if the product is marketed in that country; otherwise, the law of the
country in which the product was purchased; otherwise, the law of the country in which the
damage occurred, if the product is marketed there.
However, if the defendant could not foresee the marketing of the product in one of the other
countries as above, the law applicable is that of his habitual residence. If the harmful event is
closely connected with a different country, then it is the law of that country that is applicable.
2. Unfair competition and acts restricting free competition. For non-contractual obligations
resulting from an act of unfair competition, the applicable law is that of the country in which
competition or the collective interests of consumers are or are likely to be affected, unless the
act affects only the interests of a specific competitor, in which case the general rule laid down
in Article 4 applies. For non-contractual obligations resulting from an act restricting free
competition, the applicable law is that of the country in which the market is or is likely to be
affected. When this applies to more than one country, a claimant suing in the domicile of the
defendant can choose the law of that country, provided that the market in that country is
affected. A claimant suing more than one defendant in the court of the defendant's domicile
can choose the law of that court only if the act restricting competition affects the market in
that Member State.
3. The law applicable in these cases cannot be derogated from by an agreement under Article 14
of this Regulation, which allows the parties to choose the law applicable to a non-contractual
obligation by common consent.
19
4. Environmental damage. The general rule applies, unless the claimant chooses to base his
action on the law of the Member State in which the harmful event occurred.
5. Infringement of intellectual property rights. The law applicable to a non-contractual
obligation resulting from the infringement of an intellectual property right is that of the
country for which the protection was sought. There can be no derogation to this provision.
6. Industrial action. The law applicable to a non-contractual obligation relating to the liability of
a worker, employer or professional association resulting from damage caused by a strike or
lock-out, whether in progress or after the event, is that of the country in which the industrial
action is taken.
Matters excluded
This Regulation does not apply to revenue, customs or administrative matters, to the liability of the
State, or to non-contractual obligations arising out of: family or similar relations, including
obligations of maintenance, matrimonial property regimes and similar, wills and successions, bills of
exchange, cheques, promissory notes and other negotiable instruments, the law of companies, in
relation to e.g. their creation and legal capacity, liability of members, etc. relations between the
settlers, trustees and beneficiaries of a trust created voluntarily, nuclear damage, violations of privacy
and rights relating to personality, including defamation.
Relationship with existing international conventions
The Regulation does not affect the application of international conventions governing non-contractual
obligations to which one or more Member States are parties. Article 29 of the Regulation provides
that the Member States are supposed to notify the Commission of such conventions by 11 July 2008 at
the latest. After that, the Member States are required to notify the Commission of all denunciations of
such conventions. That is why this article is applicable from 11 July 2008, while the Regulation as a
whole is applicable from 2009.
Between Member States, the Regulation overrides conventions concluded exclusively between them
to the extent that these concern the matters it covers.
Review
Not later than 31 December 2008 the Commission will present a study on the situation in the field of
the law applicable to non-contractual obligations arising out of violations of privacy and rights
relating to personality, as regards the freedom of the press and freedom of expression in the media.
20
Not later than 20 August 2011 it will report on the application of this Regulation and may then put
forward any necessary amendments.
Given below is very recent yet an important case decided under the Rome II Regulation –
Bonsall v. Cattolica Assicurazioni [Winchester County Court 2010] –
Interiura UK was instructed to handle a claim on behalf of the Italian motor insurer of a vehicle that
had been travelling between Pompeii and Sorrento in Italy in June 2008. An Italian registered car had
been driving on the wrong side of the road when it had a head on collision with an Italian-registered
coach full of British tourists on a holiday excursion. The resulting collision left many passengers on
the coach injured and suffering a financial loss. Claims were made by the passengers under the 5th
Motor Directive and ROME II in England via Interiura UK. Interiura UK held instructions to handle
the claim from the passengers on a without prejudice basis as representatives of the coach insurer. As
passengers, they were considered innocent parties and liability was not raised in issue.
The defendant insurer’s stance on this matter, and therefore Interiura UK's stance, was that Italian law
applied for establishing liability and that Italian law applied when assessing and valuing quantum. As
expected however, some of the claimants were of the opinion that English law should apply when
assessing damages as the claimants were resident in the England, although it was accepted that Italian
law applied when agreeing liability. Interiura UK argued that the Rome II applied to this case and that
quantification of damages had to be dealt with under Italian law as per Article 31 and 32 of Rome II.
Article 31 states that the Rome II principle shall apply to events which result in damage after its 'entry
into force' (20.08.2007). This refers to the application in time. Article 32 refers to the date of
application and states that the regulation shall apply from 11th of January 2009. These 2 articles are
not very clear and rather ambiguous. This has therefore led to different interpretations of the articles
and the date of application of the Rome II regulations and different arguments have been put forward
in order to support each opinion. This in essence is the reason this matter proceeded to trial.
The claimant, Mr Bonsall, decided to be the first to litigate in order to ask the court to decide under
which law damages should be assessed. The proceedings were brought into the English forum as the
claimant was resident in England. Interiura UK's solicitors, acting on behalf of the defendant insurer,
maintained to the court that any quantification of damages dealt with after 11th of January 2009
should be assessed under Italian law, as per Rome II, even if proceedings were issued before or after
this date, and even if the accident occurred before this date. The claimant's solicitors argued that
Rome II does not apply at all to this accident as it only applies to accidents that occurred on or after
11th of January 2009 (and this collision occurred in 2008) or for those matters when proceedings were
issued after 11th of January 2009. It is noteworthy that neither party denied that proceedings in this
trial were issued on 9 January 2009, before the date specified in Article 32.
21
The claimant argued that the only sensible interpretation of Rome II is that it relates to acci-dents that
occurred on or after 11th of January 2009. Otherwise, as was their argument, there will be cases such
as this very one where after 19th of January 2007 until 11th of January 2009, one law will apply and
then after 11th of January 2009 Italian law will apply which is not conducive to smooth case handling
or court cases. The claimant also argued that there may be a case at trial where expert evidence is
given on 10th of January 2009, the case is then adjourned until 11th of January 2009, and then
different expert evidence would be needed as a different law would now apply. This of course would
lead to a shambles in the court. The claimant also included in their argument some publications and
articles that had been produced on this very issue by various barristers and judges. One of these
experts, Professor Briggs (of Oxford University), is of the opinion that Article 31 states that the Rome
II regulation applies from 11th of January 2009, but that from this date accidents which occurred on
or after 20th of August 2007 fall under Rome II and should be handled as such. This is the opinion
that the judge presiding over the trial took, as he stated that if Article 31 and Article 32 are to be
interpreted in exactly the same way, it would say as such in the Rome II agreement itself.
The judge's final words were '...it seems perfectly logical to be able to interpret the regulations as
saying that it applies to events which occurred on or after 20th of August 2007, but that the law in
force applies from 11th of January 2009. In my judgment, the applicable law in relation to the
quantification of damages in this case is Italian law as the quantification will take place after 11th of
January 2009 and the defendant's argument succeeds'.
Under English law, once the judge's decision is made, the claimant can appeal against it if they
disagree with the judge and they feel that they still have a case to disprove the judge. If the claimant
or defendant decided to appeal, another trial would be heard, presided over by a different judge,
usually from the 'Court of Appeal'. However it is interesting that in this case, the third party decided to
not to appeal this decision. This could of course have been for many reasons, economical reasons
being the most likely. Interiura UK / the defendant insurers were awarded costs for the action as they
were the successful party.
The judge's final decision has therefore now become the 'substance' for future claims that would fall
under a similar argument of valuation of damages under a Rome II case. The case law sets precedent
and can be used to argue or defend a future case. This is a substantial advantage and as English levels
of damages are amongst the highest in Europe, this could lead to a significant saving for European
insurers when dealing with a claim against them by a UK resident from an accident that occurred
abroad. It allows for accurate reserving to be placed on such cross-border incidents and thus avoid
claims leakage and overspend.
22
NEGOTIABLE INSTRUMENTS
Negotiable instruments can be defined as unconditional orders or promise to pay, and include checks,
drafts, bearer bonds, some certificates of deposit, promissory notes, and bank notes (currency).
Exchange of goods and services is the basis of every business activity. Goods are bought and sold for
cash as well as on credit. All these transactions require flow of cash either immediately or after a
certain time. In modern business, large number of transactions involving huge sums of money takes
place every day and so, it is quite inconvenient as well as risky for either party to make and receive
payments in cash. Therefore, it is a common practice for businessmen to make use of certain
documents as means of making payment. Some of these documents are called negotiable instruments.
Negotiable instruments, such as, bills of exchange, cheques, promissory notes, etc. have been of great
importance ever since the human beings embarked on trade and commerce. In 1930-31, six
international conventions relating to negotiable instruments were signed in Geneva in order to unify
national laws relating to negotiable instruments.
In the days of ever increasing international trade and commerce, negotiable instruments have become
one of the most significant types of contracts in international law. Since a negotiable instrument
represents a debt, it is regarded as a species of tangible property. The greatest importance of
negotiable instruments lies in the fact that they are negotiable. In the case of Simmons vs. London
Joint Stock Bank20, the nature and characteristics of a negotiable instrument were summarised as; “A
negotiable instrument payable to bearer is one which, by custom or trade (or under statute) passes
from hand to hand by delivery, and the holder of which for the time being, if he is a bona fide holder
for value, has good title, notwithstanding any defect in the title of the person from whom he took it.”
The most striking feature of a negotiable instrument is that the series of contracts, which are entered
into by the parties give rise to several rights and liabilities which are different and distinct from each
other. Thus, the fundamental question that arises is that: are these series of contracts to be regarded as
one single transaction and therefore governed by a single law, or are these to be regarded as a series of
transactions; each of which is governed by a different law, i.e. by “several laws”? Great Britain and
India adopt, as a general rule “the several laws” theory.
It seems to be an established rule that the negotiability of a foreign negotiable instrument depends on
the fact whether it is so recognised by the custom or law of the country where it is sought to be
enforced. The conflict of law rules regarding negotiable instruments have been codified in the English
statute, Bills of Exchange Act, 1882 and in the Indian statute, Negotiable Instruments Act, 1881. The
20
(1891) 1 Ch. 270 on appeal , (1892) A.C. 201
23
provisions of both these statutes are comprehensive but not exhaustive. Thus, they have been
supplemented by judicial decisions also.
English Law:-
If a transfer of negotiable instrument has been made abroad and its validity is disputed in an English
action, the court is confronted with a problem of choice of law. What the choice should be depends
upon the manner in which it is analysed. It may be regarded as raising a question of form or
interpretation to be governed by the Bills of Exchange Act, 1882; or as the transfer of a chattel, in
which case the law of situs will be applicable; or as an assignment of contractual right and therefore
subject to the law governing the contract. The common law authorities which preceded the Bills of
Exchange Act, 1882, show a marked tendency to determine the validity of an endorsement by the law
which governs the original contract of the acceptor or the maker. The relevant sub-sections of the
Bills of Exchange Act, 1882 are as follows:
“Where a bill drawn in one country is negotiated, accepted, or payable in another, the rights, duties,
and liabilities of the parties thereto are determined as follows:
(1) The validity of a bill as regards requisites in form is determined by the law of the place of issue,
and the validity as regards requisites in form of the supervening contracts, such as acceptance, or
indorsement, or acceptance supra protest, is determined by the law of the place where such contract
was made. Provided that:
(a) Where a bill is issued out of the United Kingdom it is not invalid by reason only that it is not
stamped in accordance with the law of the place of issue.
(b) Where a bill, issued out of the United Kingdom, conforms, as regards requisites in form, to the law
of the United Kingdom, it may, for the purpose of enforcing payment thereof, be treated as valid as
between all persons who negotiate, hold, or become parties to it in the United Kingdom.
(2) Subject to the provisions of this Act, the interpretation of the drawing, indorsement, acceptance, or
acceptance supra protest of a bill, is determined by the law of the place where such contract is made.”
The question now is whether these sections are concerned with the subject of transfer at all, and
whether it is possible to ascertain from them the legal system that determines the validity and effect of
an indorsement, or of a delivery, of a negotiable instrument.
There have been only three relevant cases since the Act of 1882 relating to this matter. The first of
these was Alcock vs. Smith21
. In this case, a bill of exchange, drawn by and on English firms, and
21
(1892) 1 Ch. 238
24
payable in England to the order of X, was endorsed and delivered in Norway by X to Y. While in the
hands of Y, it was seized by a judgement creditor in Norway, and in the due course of Norwegian law
was ultimately sold by public auction to Z. In fact, Z had no title to the bill by English law, but,
according to the Norwegian law, the property was duly passed to him as a result of the sale. In an
action subsequently brought in England, it was held that the effect of transactions in Norway must be
governed by Norwegian law, and therefore the title acquired there under by Z must prevail over one
which by English law would have been stronger.
It can be seen that the judgement paid little heed to the statutory provisions, but, in general applied
Norwegian law as the law of the place of acting. It was held that the word “interpretation” in section
72(2) was wide enough to cover the “legal effect” of a contract and that therefore statutory effect had
been given to the principle of the application of the law of place of acting. In the Court of Appeal,
however, no reliance was placed on the Act. The second case was Embiricos vs. Anglo-Austrian
Bank22
. The facts of this case were as follows:
A cheque on a London bank was drawn in Romania in favour of the plaintiffs, who specially endorsed
it there to a firm in London and placed it in an envelope addressed to that firm. The cheque was stolen
from the envelope in Romania by the clerk of the plaintiffs. Three days later, the cheque, bearing an
indorsement which purported to be that of the London firm, but, which was in fact a forgery, was
presented for payment at a bank in Vienna. The Vienna bank cashed the cheque in good faith,
indorsed it to the defendants, who were their London agents, and the latter collected the amount from
the bank on which the cheque was drawn. The plaintiffs then sued the defendants in damages for
conversion. Austrian law provided that, notwithstanding the theft and forgery, the Viennese bank
acquired a good title to the cheque and judgement was given in favour of the defendants. Thus, in this
case, the tile that was acquired under the law of the country where the instrument was situated at the
time of transaction was upheld by the English court.
Again, Austrian law was chosen as being the law of the place of acting, and again the judgements
attributed only trifling importance to the Bills of Exchange Act, 1882. However, Section 72, which
was only a secondary consideration in the above two cases, however, played a decisive part in
Koechlin et cie vs. Kestenbaum23
. In this case, a bill of exchange was drawn in France by X on the
defendants in London to the order of Y, who was X’s father. It was accepted, payable in London, by
the defendants. The bill was indorsed not by the payee, Y, but by X, and was then transferred for
value to the plaintiffs in France. X’s indorsement was affixed on behalf o, and with the authority of,
Y. On presentment, the defendants refused payment, on the ground that the bill did not bear the
signature of Y by way of indorsement.
22
(1905) 1 K.B. 677. 23
(1927) 1 K.B. 616, on appeal, (1927) 1 K.B. 889
25
English law requires that a bill payable to the order shall be endorsed by the payee, or by an agent
who expressly signs pro the payee. French law, however, permits a valid endorsement to be made by
an agent in his own name, provided that he so acts with the authority of the payee. Therefore, whether
the plaintiffs were entitled to payment depended on whether the validity of the endorsement was to be
determined by English or by French law.
BANKES LJ held that the proper law to govern the validity of a transfer had been definitely settled by
the Bills of Exchange Act, s.72, in favour of the law of the place of acting, here, French law. In his
opinion, this legal system was deliberately applied by the Court of Appeal in the Embiricos case long
after the passing of the Act. The bill, he said, was drawn and indorsed in France in a form recognised
by the French law, and therefore it became valid in England by virtue of section 72(1).
It is necessary in stating the law with regard to the transfer of negotiable instruments to deal with both
inland and foreign bills of exchange. An ‘inland bill’ is one which is both drawn and payable within
the British Isles, or one which is drawn within the British Isles upon some persons resident there. The
Bills of exchange Act, 1882, expressly provides that when such a bill is endorsed in a foreign country,
the indorsement shall, as regards the payer, be interpreted according to the law of the United
Kingdom. This also confirms the decision in Lebel vs. Tucker24, and means that the acceptor of an
inland, as contrasted with a foreign, bill is liable only to holders who claim under an indorsement
valid by English law. The enactment, however, is expressly confined to the liability of the payer. The
rule regarding a foreign bill is that whether a transfer is valid or not is determined by the law of the
place where the transfer is effected, i.e. in the words of the Act, “where the contract is made”. Thus,
anyone dealing with a foreign bill of exchange will be in an inferior position as compared to the
person dealing with an inland bill, as the former might find substituted for the person to whom he was
originally liable as acceptor not merely a person to whom the transfer was valid according to English
law, but, also a person to whom the transfer would have been good if made according to the law of the
country in which it was made.
Though the result of this distinction is scarcely satisfactory to the commercial world; it certainly
shows how important it is that as wide unification as possible of the internal laws relating to
negotiable instruments should be effected.
24
(1867) LR 3 QB 77
26
Indian Law:-
In India, Chapter 16 entitled “Of International Law”, of the Negotiable Instruments Act, 1881 deals
with the Indian conflict of law rules relating to negotiable instruments. These rules are not exhaustive
and have to be supplemented by the general rules of private international law.
The Negotiable Instruments Act, 1881, unlike its English counterpart (s.72 of Bills of Exchange Act,
1882); is silent on formalities. However, s.136 of the Act says that an instrument made outside India
will be valid as to the formal validity if it is valid as to form under the Indian law, even if it is invalid
under the foreign law. The Indian law does not contain any exception on the lines in which it is
contained in proviso (a) to sub-section (1) of s.72 of the Bills of Exchange Act, 1882. The Indian
courts follow the law as it prevailed in England before the passing of the Bills of Exchange Act, 1882.
A negotiable instrument which is not void but merely unenforceable under the foreign law for want of
proper stamping is formally valid under the Indian law if it is valid otherwise. On the other hand, if
for want of proper stamp the instrument is void under the foreign law, then no action is maintainable
on such an instrument in an Indian court. Thus, section 136 of the Negotiable Instruments Act, 1881
lays down the rule that the invalidity of an instrument under foreign law does not render it invalid as
to the subsequent contracts entered into in India provided the instrument is formally valid under the
Indian law. However, the provision of the section is confined to persons who become parties to the
instrument by acceptance or indorsement in India. It would not cover a case where a person is sought
to be made liable on the instrument when he had become a party to it in any other country.
Section 134 of the Negotiable Instruments Act, 1881 deals with the material validity of negotiable
instruments. It says that:
“In the absence of a contract to the contrary, the liability of the maker or the drawer of a foreign
promissory note, bill of exchange or cheque is regulated in all essential matters by the law of the place
where he made the instrument, and the respective liabilities of the acceptor and endorser by the law of
the place where the instrument is made payable.”
According to the illustration appended in the section; where a bill of exchange was drawn by A in
California, where the rate of interest is 25 per cent, and accepted by B, payable in Washington, where
the rate of interest is 6 per cent. The bill is indorsed in India and is dishonoured. An action is brought
on the bill against B in India. He is liable to pay interest at the rate of 6 per cent only; but, if A is
charged or made liable as a drawer, A is liable to pay interest at the rate of 25 per cent.
Thus, it is evident that the Indian law makes a distinction between the liability of the maker or drawer
and the acceptor or endorser. In the former case, it is the lex loci actus, that is the law of the place
27
where the instrument is made, which governs the material validity of the instrument, while in the
latter case, it is the lex loci solutionis, i.e. the law of the place where the instrument is made payable,
which governs the essential validity.
As to the definitions of ‘inland instrument’ and ‘foreign instrument’ given under the Indian
Negotiable Instruments Act, 1881 and the definition of ‘inland bill’ and ‘foreign bill’ given in the
English Bills of Exchange Act, 1882, there is a marked resemblance. Section 2 of the Indian statute
defines an ‘inland instrument’ as: “A promissory note, bill of exchange or cheque drawn or made in
India and made payable in or drawn upon any person resident in India shall be deemed to be an inland
instrument.” A ‘foreign instrument’ is defined as: “Any such instrument not so drawn, made or made
payable shall be deemed to be a foreign instrument.” In Kidston vs. Seth Brothers25
, BUCKLAND J.
expressed the view that a bill drawn upon a resident of India is an inland bill irrespective of the fact as
to where it was drawn. It is respectfully submitted that this is not correct. A bill drawn outside India
will be a foreign instrument. One of the distinguishing features of inland instruments and foreign
instruments id that the latter mist be protested for dishonour when so required by the law of the place
where they are drawn, while the former need not be.
MARITIME LIENS
1) Civilian origins of maritime liens
Maritime liens constitute a distinctive and historic feature of modern admiralty law. Their roots
stretch far back to the maritime law of the ancient world and particularly to the medieval European lex
maritima, which, as part of that body of customary, transnational mercantile law (the lex mercatoria),
governed the relations of merchants who travelled by sea with their goods in the Middle Ages.
Originally purely oral, this customary sea law was gradually committed to writing in the medieval sea
codes, which were generally collections of judgments rendered by merchant judges, accompanied by
some loosely-formulated principles thought to be useful in future cases of the same kind.
Of these early codifications, the most important was probably the Rôles of Oléron, dating from the
late twelfth century and composed on the Island of Oléron (off Bordeaux), then the centre of the wine
trade between Aquitaine and England. The influence of the Rôles gradually extended along the whole
Atlantic coast of Europe, southwards to Spain, northwards to England and Scotland and eastwards to
the ports of Flanders and the Hanseatic League, as far as the Baltic coast. Two other important
codifications were the Consolato del Mare, a collection of judgments rendered by consuls who
dispensed maritime justice in the Western Mediterranean, and the Laws of Visby, which rely heavily
25
1930 Cal. 692
28
on the Rôles of Oléron and were first printed in Copenhagen in 1505. These three major Rules
eventually influenced the drafting of the Ordonnance de la Marine of 1681 under Louis XIV, and
later the later commercial codes of France and other civilian jurisdictions.
These early sea codes contained provisions relating to what today are known as maritime liens.
Even in England, the civil law origin of admiralty law, including the law of maritime liens, was
recognized at Doctors' Commons, the admiralty court, where doctors of civil law trained at Oxford
and Cambridge decided maritime cases until Doctors' Commons was dissolved in 1858.
2) Characteristics of maritime liens
Maritime liens became clearly defined in the civil law as "maritime privileges"
("privilèges maritimes" in French) and this character was recognized in common law courts. Sir John
Jervis in The Bold Buccleugh, accordingly defined "maritime lien" in the following terms in 1851:
"Having its origin in this rule of the Civil law, a maritime lien is well defined by Lord Tenterden, to
mean a claim or privilege upon a thing to be carried into effect by legal process; and Mr. Justice
Story... explains that process to be a proceeding in rem... This claim or privilege travels with the
thing, into whosesoever possession it may come. It is inchoate from the moment the claim or privilege
attaches, and when carried into effect by legal process, by a proceeding in rem, relates back to the
period when it first attached."
In the United States, the great Justice Joseph Story had been the first to use the term "maritime lien"
twenty years earlier in The Nestor. As a privilege, the maritime lien was recognized to be a right in the
property of another. Gorell Barnes, J., in The Ripon City, declared:
"... a lien is a privileged claim upon a vessel in respect of service done to it, or injury caused by it, to
be carried into effect by legal process. It is a right acquired by one over a thing belonging to another -
a jus in re alienâ. It is, so to speak, a subtraction from the absolute property of the owner in the thing."
An even more complete characterization of maritime liens was given by Scott, L.J. in The Tolten,
who, also alluding to its nature as a civilian privilege, continued:
"The essence of the 'privilege' was and still is, whether in Continental or in English law, that it comes
into existence automatically without any antecedant formality, and simultaneously with the cause of
action, and confers a true charge on the ship and freight of a proprietary kind in favour of the
'privileged' creditor. The charge goes with the ship everywhere, even in the hands of a purchaser for
29
value without notice, and has a certain ranking with other maritime liens, all of which take precedence
over mortgages."
In consequence, one may say that a traditional maritime lien is a secured right in the "res", i.e., in the
property of another (ordinarily the ship, but sometimes the cargo, freight and/or bunkers as well),
deriving from the lex maritima and the civil law; which arises with the claim, without registration or
other formalities; which travels with the vessel surviving its conventional sale (although not its
judicial sale); which remains inchoate until it is enforced by an action in rem; and which, when so
enforced, gives the lienor's claim priority in ranking over most other claims, notably ship mortgages.
In this sense, the maritime lien is a very different animal from the common law possessory lien, (or
the similar possessory lien of the shipbuilder and ship repairer) which are purely a rights of retention
of another's property until a debt relating to that property retained is paid. Those rights are lost if the
creditor loses possession of the property in question.
II. Maritime Liens as Sources of Conflicts of Law
In order to understand conflicts of law in the realm of maritime liens and related maritime claims, one
must first become a "comparativist", in order to grasp the differences between the competing national
laws. In fact, any study of the conflict of laws presupposes a comparative law analysis. Similarly,
comparative law cannot be studied exhaustively without examining the conflicts rules of the
jurisdiction in question, because those rules are themselves part and parcel of that national law.
Conflicts of maritime lien laws are easy to perceive through the lens of comparative law.
1) The differing scope of "maritime liens"
In England and Commonwealth countries, the term "maritime lien" applies only to a select group of
maritime claims, being seamen's wages, master's wages, master's disbursements, salvage, damage
(caused by the ship), bottomry and respondentia. These are known as "traditional maritime liens".
Other maritime claims resulting from services supplied to the ship or damages done by the ship,
notably claims for "necessaries" provided to the vessel (e.g. bunkers, supplies, repairs, and towage), as
well as claims for cargo damage, for breaches of charterparty and for contributions of the ship in
general average, do not give rise to "traditional maritime liens" in the U.K. and Commonwealth
countries, but only to "statutory rights in rem". The latter are simply rights granted by statute to arrest
a ship in an action in rem for a maritime claim. Unlike traditional maritime liens, statutory rights in
rem do not arise with the claim; they do not "travel with the ship" (i.e. they are expunged if the vessel
is sold in a conventional sale before the action in rem is commenced on the claim concerned); and
30
they rank after, rather than before, the ship mortgage in the distribution of the proceeds of the vessel's
judicial sale.
In the United States and civil law jurisdictions (e.g. France), however, claims for necessaries, cargo
damage and general average, among others, are granted full status as maritime liens by the relevant
national legislation, and/or by international conventions binding those States,thus resulting in conflict
of laws when such claims are asserted in maritime proceedings before United Kingdom and
Commonwealth courts, where they have no maritime lien status according to the lex fori.
2) Other maritime claims
To understand maritime lien conflicts, one must also be familiar with a few other categories of
maritime claim. First come "special legislative rights", a category of claim (not always recognized by
maritime law authors) arising under modern national statutes, particularly with respect to harbour and
dock dues, wreck removal and pollution. These statutes confer upon governments or their agencies
special rights such as detention and sale of the ship, often coupled with a right of priority on the sale
proceeds. In other cases, the statutes provide expressly for certain claims to be secured by a maritime
lien with a very high priority. Such rights usually outrank even the costs of arresting and selling the
ship, as well as the "traditional" maritime liens. They are also sanctioned by international conventions
on maritime liens and mortgages.
Another type of maritime claim consists of the costs of seizing or arresting the ship and of preserving
it pending the completion of the suit and its judicial sale. In France, such law costs (frais de justice),
as well as the costs of the judicial sale and the distribution of the proceeds, and the costs of
maintenance of the vessel under seizure (custodia legis), are treated as conferring a privilège maritime
(maritime lien) superior to other maritime liens enumerated in Law No. 67-5. In the U.K., Canada and
the U.S., on the other hand, costs of arrest and sale and expenses in custodia legis do not constitute
"traditional" maritime liens, but are understood as a separate class of maritime claim, outranking such
liens. And, of course, there are ship mortgages, which almost always compete with the other
categories of maritime claim for priority when a ship is sold in a judicial sale.
III. The United Kingdom - The Lex Fori
1) The Halcyon Isle decision
As a result of the Privy Council's 1980 decision in The Halcyon Isle, it is now settled that the lex fori
alone governs the recognition and ranking of foreign maritime liens in the United Kingdom. The
31
decision arose out of the repair of a British ship subject to a ship mortgage in a Brooklyn, New York
shipyard. The vessel sailed away withoutpaying for the repairs. The mortgage was then registered, no
notice of the mortgage ever having been given to the repairman. The mortgagee ordered the ship to
Singapore, where English law prevailed, and had it arrested, resulting in competing claims by the
mortgagee and the repair yard to the proceeds of the judicial sale. The majority three of the five Law
Lords who decided the case, reversing the Singapore Court of Appeal, refused to recognize as
maritime liens any claims which differed from the six "traditional" maritime liens recognized in
England. In consequence, the ship repairer's claim ranked below that of the mortgagee, because the
repairman's U.S. maritime lien for repairs (being one type of "necessaries" supplied to a ship) was not
a maritime lien in England, but was secured there by a mere statutory right in rem which did not travel
with the ship and which ranked after the mortgage. One senses in this attitude a quest for an easy and
predictable solution, perhaps mixed with a tinge of traditional English disdain for foreign law. From a
more juridical standpoint, the majority decision was based on the notion that maritime liens, in the
conflict of laws, are "procedural" remedies, rather than "substantive" rights. Speaking for the majority
in The Halcyon Isle, Lord Diplock held that maritime liens involve "... rights that are procedural or
remedial only, and accordingly the question whether a particular class of claim gives rise to a
maritime lien or not [is] one to be determined by English law as the lex fori." Very different is the
minority view of the Lords Salmon and Scarman who dissented. Citing various precedents, and in
particular the English Court of Appeal's decision in The Colorado29 (which involved a conflict of
ranking between a French ship hypothèque and a claim for repairs done in Wales), they held:
"A maritime lien is a right of property given by way of security for a maritime claim. If the Admiralty
court has, as in the present case, jurisdiction to entertain the claim, it will not disregard the lien. A
maritime lien validly conferred by the lex loci is as much part of the claim as is a mortgage similarly
valid by the lex loci. Each is a limited right of property securing the claim. The lien travels with the
claim, as does the mortgage and the claim travels with the ship. It would be a denial of history and
principle, in the present chaos of the law of the sea governing the recognition and priority of maritime
liens and mortgages, to refuse the aid of private international law."
The substantive character of maritime liens was thus properly understood as grounded in the very
nature of the concept itself as a property right, emanating from the lex maritima and the civil law. The
two dissenting Law Lords therefore held that the proper law (or lex causae) of the foreign maritime
lien merited recognition, even if the domestic law denied maritime lien status to the equivalent claim
arising in England. They cited various authorities for their view, including the decision of the
Supreme Court of Canada in The Ioannis Daskalelis, which will be reviewed below.
32
2) Weaknesses of the lex fori rule
To a large extent, this procedural/substantive debate about maritime liens reflects the fact that in
England, maritime claims are not codified. No statute expressly states that such and such a maritime
claim gives its creditor a maritime lien. Rather, the pertinent statute, the Supreme Court Act 1981,32
at sect. 20(1) and (2), merely sets forth a list of maritime claims subject to the Admiralty jurisdiction
of the High Court of Justice, some of which are secured by maritime liens and others of which are
secured, if at all, by mere statutory rights in rem. This fixation with jurisdiction-oriented statutory
drafting hearkens back to the centuries of conflict between the High Court of Admiralty and the
common law courts in England, as well as to the historic importance of the forms of action in that
country. Such a "jurisdictional" approach reinforces the "procedural" view of maritime liens in the
conflicts thinking of English jurists.
In addition to the misconstruing the maritime lien as a procedural remedy rather than a substantive
property right, the majority decision invites forum shopping. It also defeats the expectations of
necessariesmen, who should be entitled to assume that when they conclude and perform contracts for
supplying or repairing a vessel in a jurisdiction like America that grants them the status and priority of
maritime lienors, their claims, arising out of such contracts, will be honoured as full-fledged maritime
liens throughout the world, even in countries where the same claim would have a different character
and a lower priority. The lex fori rule of The Halcyon Isle rather thinly veils an exaggerated solicitude
for protecting mortgagees (usually large banks) from the claims of ship suppliers. New conflicts rules
should not, however, be crafted so as to favour banks at the expense of other claimants against the
proceeds of the "forced sale" of an arrested vessel. Nor should the lex fori be permitted to displace the
law of the jurisdiction most closely connected with the parties and their transaction, which in this case
was quite clearly American law.
3) The influence of The Halcyon Isle
The Halcyon Isle has had an unfortunate effect on judicial thinking outside the U.K., particularly in
some of the countries of the Commonwealth and in some former British colonies, where English
admiralty law still prevails. In South Africa, for example, in Transol Bunker B.V. v. M.V. Andrico
Unity,a Panamanian ship obtained supplies in Argentina at the request of the charterers (thus giving
rise to a maritime lien in Argentina). When the vessel was later arrested in South
Africa, that country's Supreme Court, Appellate Division, held that it lacked jurisdiction in rem
(which went even further than the Privy Council in The Halcyon Isle, where at least jurisdiction was
accepted), because English law as at November 1, 1983 (as declared in The Halcyon Isle) did not
33
recognize a maritime lien for necessaries. The closer connection of the case to Argentina was ignored,
in reliance on a jurisdictional incorporation of a foreign (English) law based on the narrow (and
controversial) three-totwo ruling of the Privy Council. The Cyprus Supreme Court, in Hassanein v.
The Hellenic Island26
, found, again relying on The Halcyon Isle, as well as earlier precedents, that a
claim for bunkers supplied to the vessel in Egypt, which claim enjoys maritime lien status there under
national law, could not be recognized in preference to the claim of a Singapore-registered first
preferred mortgage against a Singapore ship. The reason was because the Cypriot Courts of Justice
Act 1960 imported into Cyprus English Admiralty law as of August 15, 1960, which law then
recognized no such lien. In The Betty Ott v. General Bills Ltd.27, New Zealand's Court of Appeal also
invoked The Halcyon Isle in refusing to recognize an Australian ship mortgage as equivalent to a ship
mortgage registered in New Zealand, simply because the mortgage had not been registered in New
Zealand (and this, despite the very similar terms and conditions governing ship mortgages and their
registration in Australia). In consequence, the Australian mortgage was subordinated to an equitable
charge resulting from a debenture issue. The Betty Ott judgment underlines to what absurd lengths the
principle of The Halcyon Isle can lead. The Privy Council's majority decision nevertheless continues
to be invoked in New Zealand's case law. Unfortunately, Australia itself joined the club of Halcyon
Isle jurisdictions in
1997, when its Federal Court, in Morlines Maritime Agency Ltd. & Ors v. The Skulptor Vuchetich28,
rejected the necessaries claim of a U.S. container lessor under a lease agreement, although the contract
itself expressly provided for a maritime lien to secure the claim. No such lien could qualify for
recognition in Australia, where, as the Court held, only the six "traditional" English maritime liens
existed. Singapore, as well as Malaysia, have also referred to The Halcyon Isle in recent decisions,
some of which, however, are purely domestic maritime law judgments not involving any conflicts.
MIXED ISSUES INVOLVING CONTRACTUAL AND NON
CONTRACTUAL OBLIGATIONS
Contracts
No element of the law is more confusing than that under the conflict of laws and the conflict between
the places of making and performance of a contract where such places are not the same. This
confusion is mainly caused as a result of the existence of a number of choice of law that courts have
26
[1989] 1 C.L.R. 406 (Cyprus Supr. Ct.). 27
[1992] 1 N.Z.L.R. 655 (N.Z. C.A.). 28
1998 AMC 1727 (Fed. Ct. Aust. 1997).
34
developed and applied over the years in contract cases. Law governing contracts apply to the parties
regardless of the fact that which conflict of laws rule is applied.
Courts have recognized that there may be a “false conflict.” To resolve a conflict of law issue, the
court must determine whether there is a true conflict exists between the application of differing states’
laws. Under general conflict of laws principles, if the laws of the two jurisdictions produce the same
result on a particular issue presented, then there is a false conflict. Under this condition, the court
must avoid the choice-of-law question29 and apply the presumptive local law. If a true conflict of
laws exists, a court must then determine which state has the greater interest in the application of its
law30
. Under the most significant relationship test used in choice of law cases, courts must take into
account31
• Place of the alleged contracting or where the relationship is centered;
• Place of negotiating the alleged contract;
• Place of the alleged performance;
• Place of the subject matter; and
• Place(s) of incorporation and business of the parties.
It can be seen that courts have abandoned the traditional conflict-of-laws rules. Instead, courts
adopted the rules regarding the rights and duties of the parties with respect to an issue in contract are
determined by the local law of the state which has the most significant relationship to the transaction
and the parties. This rule is known as significant relationship rule. In addition to being referred to as
the “significant relationship” rule, this is also referred to as the center-of-gravity theory, the interest
weighing or choice-influencing theory, the grouping of contacts theory. Under this rule, courts apply
the law of the state with the most significant or substantial contacts with the parties and the
transaction underlying the lawsuit in the absence of a valid contractual choice of law. One of the
traditional conflict-of-laws rules that many courts abandoned in favor of the significant relationship
rule is that the construction and validity of a contract are governed by the law of the place where it is
made.
It is to be noted that some courts have stated that the parties to a contract may effectively agree as to
that state whose law will govern the validity, construction, interpretation, and effect of the contract.
Some courts have reasoned that there is no justification for precluding parties to a contract from
29 Underhill Inv. Corp. v. Fixed Income Disc. Advisory Co., 319 Fed. Appx. 137, 140 (3d Cir. Del. 2009)
30 Hammersmith v. TIG Ins. Co., 480 F.3d 220 (3d Cir. Pa. 2007)
31 ] Underhill Inv. Corp. v. Fixed Income Disc. Advisory Co., 319 Fed. Appx. 137, 140 (3d Cir. Del. 2009)
35
stipulating that the laws of any jurisdiction must govern the rights and obligations of the parties, if
they are not against public policy.
Other Non-Contractual Obligations
As noted initially, negotiorum gestio as such is not known to the common law, indeed he who
performs another’s duties or renders him services might well be regarded an “officious intermeddler,”
to whom no compensation is due Culpa in contrahendo, which the German émigré Friedrich Kessler
sought to introduce into American legal thought,104 also never took hold. Appropriate cases were
solved with a variety of constructs drawn from both tort and contract law (e.g., estoppel, a concept
originating in equity jurisprudence).
The common law did, of course, address unjust enrichment. The theoretical bases of solutions,
however, were equally varied. It is a welcome feature that the Rome-II Regulation deals with all three.
The solutions are consistent with its other provisions. For negotiorum gestio, Art. 11(1) selects the
law of the underlying contract or tort relationship. When this does not furnish a solution, subsequent
paragraphs refer to the common habitual residence, then to the place where the act was performed,
and ultimately pick up the escape clause of Art. 4(3). For culpa in contrahendo (Art. 12), the
primarily applicable law is that which governs the contract or would have governed it if it had come
about. Failing a resolution, Art. 12(2) then picks up Art. 4 in its entirety.106 Art. 10 for unjustment
enrichment follows a similar pattern, selecting first the law governing the underlying relationship,
failing that the common domicile (as in Art. 4(2)), then the place where the enrichment took place,
and ultimately once again the escape clause of Art. 4(3).
Public Policy and Mandatory Rules
There are at least two problems of interpretation. Do they differ qualitatively, i.e. what is the threshold
for their application, and when are rules of the forum (or another legal system’s) “mandatory?” Art.
26 provides that the law of a country applicable under the Regulation “may be refused only if such
application is manifestly incompatible with the public policy … of the forum.” The Introductory
Recital para. (32), further speaks of “exceptional circumstances.” Both the exceptional nature of the
exception and that the threatened national policy is deeply held are common ground among legal
systems, One of the classic formulations in the United States is Judge (later Justice) Cardozo’s: “The
courts are not free to refuse to enforce foreign rights at the pleasure of the judges, to suit the
individual notion of expediency and fairness. They do not close their doors unless help would violate
36
some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted
tradition of the common weal.”32
The concept of “mandatory rules” is one of the most difficult (and uncertain) in European conflicts
law. In contrast to the Rome Contracts Convention’s Art. 7(1), Art. 16 only addresses the mandatory
rules of the forum (= Art. 7(2)) of the Rome Convention). The title of Art. 16 refers to “overriding
mandatory provisions”, emphasis added), its text speaks of forum rules that “are mandatory
irrespective of the law otherwise applicable to the non-contractual obligation.” There are no
definitions or illustrations.
In the practice under the Rome Contracts Convention, a distinction has evolved between mandatory
rules of the forum that are local (and would not apply in the face of an otherwise applicable foreign
law) and those that are international. Perhaps the use of the qualifier “overriding” in the title of Art.
16 is meant to reflect and continue the differentiation. It seems that, as in the case of the public policy
exception, each state decides for itself which of its rules are internationally mandatory. Application of
the forum’s own rule, without the possibility of a different resolution elsewhere, may raise, just as in
the public policy case, the due process concerns (from the American perspective) noted above.
The Rome-II Regulation is a major achievement, unifying for the first time the conflicts law for non-
contractual obligations of 26 of the EC’s 27 Member States. There are shortcomings, as there were
bound to be, both in coverage (e.g., defamation, media delicts) and in drafting that may lead to
interpretative difficulties (e.g., with respect to quantification of damages and review of punitive
damages). Over thirty years ago, efforts failed to produce a conflicts convention dealing, in one
instrument, with both contracts and non-contractual obligations because of disagreement on the non-
contractual obligations part. The result was the Rome Convention on contracts conflicts. Now,
conflicts law with respect to noncontractual obligations has overtaken contracts and is binding
Community law in the form of the Rome-II Regulation. To preserve the historical record, a “Rome-I”
Regulation on contracts conflict is nearing completion.
An important factor for the successful completion of the work on Rome-II was, no doubt, acceptance
of the realization that not everything could be regulated or formulated to everyone’s satisfaction at the
same time. The Community’s conflicts law thus is not complete. Indeed, the shortcomings noted in
the main text and in the preceding paragraph are major: resolution of the defamation (and media
liability) issue is very much needed; the current state of the quantification-of damages issue is wholly
unsatisfactory (because of the forum shopping it will surely entail), but also quite an intractable
puzzle, as discussed: hence, the inclusion of Art. 30, calling for a general review in four years and for
32
Loucks v. Standard Oil Co. of New York, 224 N.Y. 99, 120 N.E. 198 (1918)
37
the completion of a study on the omitted subject of defamation by the end of 2008. How well Rome-II
addresses conflicts problems within its coverage will evolve over the next four or more years as a
result of legislative amendment or correction and the emergence of case law, especially by the
European Court of Justice that will shape its interpretation. As it stands, the Regulation fits well
within the traditional European conflicts system while providing some added flexibility and by
breaking new ground – for some legal systems – by making special provisions, fitted to the needs and
interests at stake in particular areas of law for specific non-contractual .