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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.

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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 .