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exclusively in a country other than that of his habitual residence; and by Art 6(4)(b) in respect of a contract of carriage, other than a contract relating to package travel within the meaning of EC Directive 90/314.156 These exclusions substantially accord with those previously made by Art 5(4) and (5) of the Rome Convention. It is also clear that Art 6 of the Regulation does not apply to insurance contracts, except perhaps for the insurance of a mass risk located outside the EU, since the opening phrase of Art 6(1) gives priority to Art 7.
Since, unlike the definition used by the Rome Convention, Art 6(1) of the Rome I Regulation makes no reference to the supply of goods or services, a sale of financial instruments or securities is no longer excluded by the primary definition. However, as regards financial instruments, transferable securities, and units in collective investment undertakings, complicated exclusions from Art 6 of the Regulation are provided by Art 6(4)(d) and (e). The exclusion by Article 6(1)(d) refers to rights and obligations which constitute a financial instrument, and rights and obligations constituting the terms and conditions governing the issuance or offer to the public and public take-over bids of transferable securities, and the subscription and redemption of units in collective investment undertakings, in so far as these activities do not constitute provision of a financial service. A further exclusion by Art 6(4)(e), along with Art 4(1)(h), refers to contracts concluded within a multilateral system which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments, as defined by Art 4(1)(17) of EC Directive 2004/39, in accordance with non-discretionary rules and governed by a single law.These exclusions are further explained by Recitals 18, 26 and 28–31. In particular, Recital 26 indicates that, subject to these exclusions, financial services such as investment services, and contracts for the sale of units in collective investment undertakings, may fall within Art 6 of the Regulation.
Like the Rome Convention, the Rome I Regulation insists on imposing a territorial requirement for the application of the consumer-protective provisions, designed to ensure that the consumer is guaranteed the protection offered by the law of his country of habitual residence only in cases where the contract or the supplier has a sufficient connection with that country. However, the Rome I Regulation has redefined the necessary territorial connection so as to accord with that used in the Brussels I Regulation. The Rome Convention had utilised a territorial requirement similar to that used by the Brussels Convention. In the Rome I Regulation, the territorial requirement is specified by Art 6(1), which insists that the professional must either (a) pursue his commercial or professional activities in the country where the consumer has his habitual residence or (b) by any means, direct such activities to that country or to several countries including that country, and (in either case) that the contract must fall within the scope of such activities. In this connection, Recital 24 explains that the mere fact that an Internet site is accessible is not sufficient to make Art 6 applicable, but it is a relevant factor that an Internet site solicits the conclusion of distance contracts and that a contract has actually been concluded at a distance, by whatever means.157 In Pammer v Reederei Karl Schlüter and Hotel Alpenhof v Heller,158 the European Court indicated that, to determine whether a trader whose activity is presented on its website or on that of an intermediary can be considered
156See Cases C-585/08 and C-144/09: Pammer v Reederei Karl Schlüter and Hotel Alpenhof v Heller, [2010] ECR I-12527; considered in Chapter 16.
157The new requirement of activities by the supplier in or directed to the consumer’s country replaces the three alternative requirements formerly specified by Art 5(2) of the Rome Convention. The first alternative was that the conclusion of the contract was preceded by a specific invitation addressed to the consumer in the country of his habitual residence or by advertising there, and that he had taken in that country all the steps necessary on his part for the conclusion of the contract. The second alternative was that the supplier or his agent had received the consumer’s order in that country. The third alternative was that the contract was for the sale of goods and the consumer had travelled from that country to another country and given his order there, his journey having been arranged by the seller for the purpose of inducing the consumer to buy. On these requirements, see Case 96/00: Gabriel [2002] ECR I-6367.
158Cases C-585/08 and C-144/09, [2010] ECR I-12527; considered more fully in Chapter 16.
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to be ‘directing’ its activity to the member state of the consumer’s habitual residence, it must be ascertained whether, before the conclusion of any contract with the consumer, it is apparent from those websites and the trader’s overall activity that the trader was envisaging doing business with consumers habitually resident in one or more member states, including the member state of that consumer’s habitual residence, in the sense that it was minded to conclude a contract with them.
Perhaps the most disappointing feature of the Rome I Regulation is its failure to offer any protection to the ‘mobile’ consumer, who contracts abroad in circumstances where it would be unreasonable to subject the supplier to the law of the consumer’s residence – for example, where an English visitor to France purchases goods at a shop in Paris. Under the Regulation (as under the Convention), the contract is governed by Arts 3 and 4 in the same way as a commercial contract. This is emphasised by Art 6(3) of the Regulation, which specifies that if the territorial requirement is not fulfilled, the law applicable to a contract between a consumer and a professional must be determined pursuant to Arts 3 and 4. Such a result is deeply unsatisfying. It means that the English visitor, buying at a shop in Paris, is vulnerable to an express choice of the law of Haiti. Admittedly Art 3(4) of the Regulation ensures that in such a case the consumer will still benefit from the substantive rules of consumer protection laid down by various EC Directives. However, beyond that he could be deprived of protection which exists under both English and French laws. It is submitted that a far superior solution would have been to give the mobile consumer, despite any choice of law by the parties, the benefit of the mandatory rules for the protection of consumers as weaker parties which are contained in the law of the supplier’s habitual residence.
In view of the particular and detailed provisions of Art 6 of the Rome I Regulation, it is thought that Art 9(2) cannot be invoked for the purpose of consumer protection.159 For Art 6 appears to be intended to deal exhaustively with the protection of consumers as weaker parties, even if its failure to protect the mobile consumer may give rise to doubt as to the adequacy of the protection achieved. But there is no reason why Art 9(2) should not be invoked for the purpose of applying to a consumer contract mandatory rules, the aim of which is to protect the supplier (as by imposing a penal rate of interest where payment is delayed) or the general public interest (as by insisting on a minimum deposit, with a view to restricting credit in the interests of currency stability).
It also seems probable that Art 6 of the Regulation has the effect of eliminating self-limiting rules, such as those specified in the UK by ss 26 and 27(1) of the Unfair Contract Terms Act 1977, which prevent the controls on exemption clauses imposed by the 1977 Act from operating in the case of an international supply contract (as defined by s 26), or in cases where the proper law of the contract is the law of a part of the UK by choice of the parties but the closest connection is with a country outside the UK. For Art 6 is designed to establish a definitive solution to the protection of a consumer as a weaker party, overriding any national legislation dealing with choice of law or with the transnational operation of protective rules; and the continued operation of ss 26 or 27(1) in relation to a protected consumer contract could have the effect of denying the application of British mandatory rules designed to protect weaker parties in a manner inconsistent with the objectives of Art 6.
The harmonisation at Community level of various aspects of substantive law in respect of consumer contracts has been achieved by a series of Directives, and these also contain provisions affecting choice of law. The operation of the Directives is not affected by the Rome I Regulation,
159See the decision of the German Supreme Court in Grand Canaries [1997] NJW 1697, refusing to apply Art 7(2) of the Rome Convention in favour of the purchaser of a timehare, because the territorial requirements specified in Art 5(2) of the Convention were not satisfied. Cf the Giuliano & Lagarde Report, at p 28; and Knofel, Mandatory Rules and Choice of Law:
A Comparative Approach to Article 7(2) of the Rome Convention [1999] JBL 239. See also Moquin v Deutsche Bank (2000) Revue Critique de Droit International Privé 29 (French Court of Cassation).
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since Art 23 specifies that the Regulation does not prejudice the application of provisions of EU law which, in relation to particular matters, lay down conflict rules relating to contractual obligations. Under Directive 93/13, on unfair terms in consumer contracts,160 unfair terms used in a contract concluded with a consumer by a seller or supplier are rendered not binding on the consumer, but the contract continues to bind the parties on the rest of its terms, if it is capable of continuing in existence without the unfair terms. The Directive contains a choice of law provision in Art 6(2),161 which requires member states to ensure that a consumer does not lose the protection granted by the Directive through a choice of the law of a country outside the European Economic Area as the proper law, if the contract has a close connection with the territory of the member states. This ensures that the protection provided by the Directive will be available in certain cases to which Art 6 of the Rome I Regulation does not apply, because the connections referred to in Art 6 of the Regulation are not located in a single member state. For example, where an English consumer purchases goods from a French supplier who is not pursuing activities in or directing activities to England, and there is an express choice of Swiss law.162
Provisions corresponding to Art 6(2) of Directive 93/13 are contained in Art 12(2) of Directive 97/7,163 on the protection of consumers in respect of distance contracts; Art 7(2) of Directive 1999/44,164 on certain aspects of the sale of consumer goods and associated guarantees; and Art 12(2) of Directive 2002/65,165 on the distance marketing of consumer financial services. However, Art 9 of Directive 94/47,166 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis, requires member states to ensure that, whatever the law applicable may be, the purchaser is not deprived of the protection afforded by the Directive, if the immovable property concerned is situated within the territory of a member state.
Contracts for the carriage of passengers
Articles 5(2) and (3) of the Rome I Regulation apply to contracts for the carriage of passengers. These provisions are new. Under the Rome Convention contracts for the carriage of passengers were treated as ordinary contracts, governed by Arts 3 and 4. In the case of a contract for the carriage of a passenger, Art 5(2) of the Regulation permits the parties to choose the proper law in accordance with Art 3, but restricts the range of laws which are available to be chosen. The parties may choose between the laws of the following countries: the passenger’s habitual residence, the carrier’s habitual residence, the carrier’s place of central administration, the place of departure, and the place of destination. In the absence of such a choice, Art 5(2) provides a presumption in favour of the law of the passenger’s habitual residence, provided that either the place of departure or the place of destination is situated in that country. Otherwise there is a presumption in favour of the law of the carrier’s habitual residence. However, Art 5(3) provides for rebuttal of these presumptions where it
160[1993] OJ L95/29. This was transposed in the UK by the Unfair Terms in Consumer Contracts Regulations 1994 (SI 1994/3159).
161This was transposed in the UK by SI 1994/3159, reg 7.
162In Case C-70/03: Commission v Spain [2004] ECR I-7999, the European Court confirmed that Art 6(2) of the Directive has a wider scope than Art 5 of the Rome Convention.
163[1997] OJ L144/19. As from 13th June 2014, Directive 97/7 will be replaced by Directive 2011/83 on consumer rights; [2011] OJ L304/64. Directive 2011/83 does not contain a specific choice-of-law provision, but Recitals 10 and 58 remit to the Rome I Regulation the determination of its operation in cases where the law applicable to the contract is that of an external country.
164[1999] OJ L171/12.
165[2002] OJ L271/16.
166[1994] OJ L280/83.
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is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than that indicated by the presumptions. In that case, the law of the manifestly more closely connected country applies. Recital 32 explains that, owing to the particular nature of contracts of carriage, specific provisions should ensure an adequate level of protection of passengers, and accordingly that Art 6, on protected consumer contracts, should not apply to such contracts.
Employment contracts
Again in the interest of protecting weaker parties, Art 8 of the Rome I Regulation makes special provision for individual contracts of employment. No express definition is offered, but it is thought that the concept of an employment contract should be given an autonomous EU meaning, inspired by the decisions of the European Court under the Brussels Convention and the Brussels I Regulation. Thus the contract must create a lasting bond which brings the worker to some extent within the organisational framework of the employer’s business, so that the concept does not extend to a contract for professional services, such as those of an architect or lawyer, engaged as an independent contractor to carry out a particular task.167
Article 8(2)–(4) of the Rome I Regulation determines the proper law of an employment contract in the absence of a choice of law made by the parties in accordance with Art 3. The primary rule, laid down by Art 8(2), is that the proper law is that of the country in or from which the employee habitually carries out his work in performance of the contract; and the country of habitual work remains unchanged even if the employee is temporarily employed in another country. Recital 36 adds that work carried out in another country should be regarded as temporary if the employee is expected to resume working in the country of origin after carrying out his tasks abroad. However, if there is no ascertainable country of habitual work, Art 8(3) refers instead to the law of the country in which the place of business through which the employee was engaged is situated. Ultimately, both of these rules are reduced to rebuttable presumptions by Art 8(4), which operates where it appears from the circumstances as a whole that the contract is more closely connected with a country other than that indicated in Art 8(2) or (3), and subjects the contract to the law of that other country.
The reference in Art 8(2) to the country in which or, failing that, from which the employee habitually carries out his work in performance of the contract is evidently designed to adopt the approach followed by the European Court under the Brussels Convention and the Brussels I Regulation.Thus, in cases where the employee carries out his work in more than one country, reference must be made to the place where the employee has established the effective centre of his working activities, at or from which he performs the essential part of his duties toward his employer. For example, a sales manager will habitually work at the office where he organises his work, even though he makes frequent business trips to other countries.168 However, where there is no such permanent centre of activities – for example, because the man worked for the employer as a cook, first on mining vessels or installations in the Dutch continental shelf area, and later on a floating crane in Danish territorial waters – the whole of the duration of the employment relationship must be taken into account. The relevant place will normally be the place where the employee has worked the longest; however, by way of exception, weight will be given to the most recent period of work where the employee, after having worked for a certain time in one place, then takes up his work activities on a permanent basis in a different place.169
167See Case 266/85: Shenavai v Kreischer [1987] ECR 239.
168See Case C-125/92: Mulox v Geels [1993] ECR I-4075; and Case C-383/95: Rutten v Cross Medical [1997] ECR I-57.
169Case C-37/00: Weber v Universal Ogden Services [2002] ECR I-2013.
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In Koelzsch v Luxembourg,170 the European Court ruled that, under Art 8(2), the country in which the work is habitually carried out must be understood as referring to the place in which or from which the employee actually carries out his working activities and, in the absence of a centre of activities, to the place where he carries out the majority of his activities. Thus, in the case of work in the international transport sector – for example, as a heavy goods vehicle driver – account must be taken of the place from which the employee carries out his transport tasks and receives instructions concerning his tasks and organises his work, the place where his work tools are situated, the places where the transport is principally carried out and where the goods are unloaded, and the place to which the employee returns after completion of his tasks. In Voogsgeerd v Navimer,171 which involved a claim for wrongful dismissal made by a man employed as chief engineer on ships operating in the North Sea, the European Court concluded that, in the light of the nature of work in the maritime sector, where the place from which the employee carries out his transport tasks and receives the instructions concerning his tasks is always the same, that place must be regarded as the place where he habitually carries out his work. It also ruled that the reference by Art 8(3) to ‘the place of business through which the employee was engaged’ must be understood as referring exclusively to the place of business which engaged the employee, not to that with which the employee is connected by his actual employment. The term ‘engaged’ refers only to the conclusion of the employment contract (or the creation of a de facto employment relationship), not to the way in which the employee’s actual employment is carried out; and the relevant factors relate to the procedure for concluding the contract, such as the place of business which published the recruitment notice or carried out the recruitment interview. However, the purely transitory presence in a state of an agent of an undertaking from another state for the purpose of engaging employees cannot be regarded as constituting a place of business.
Recital 36 to the Rome I Regulation indicates that the conclusion of a new contract of employment with the original employer or an employer belonging to the same group of companies as the original employer should not preclude the employee from being regarded as carrying out his work in another country temporarily. This too reflects the approach followed by the European Court under the Brussels Convention and the Brussels I Regulation. Thus, in Pugliese v Finmeccanica,172 which involved an Italian employee who had been recruited by Aeritalia, an Italian company, to work initially for Eurofighter in Germany for at least three years, the European Court ruled that, in a dispute between an employee and a first employer, the place where the employee performs his obligations to a second employer can be regarded as the place where he habitually carries out his work for the first employer, with respect to whom the employee’s contractual obligations are suspended, when the first employer has, at the time of the conclusion of the second contract of employment, an interest in the performance of the service by the employee to the second employer in a place decided on by the latter. The existence of such an interest must be determined on a comprehensive basis, taking into consideration all the circumstances of the case. The relevant factors may include the facts that the conclusion of the second contract was envisaged when the first was being concluded, that the first contract was amended on account of the conclusion of the second contract, that there is an organisational or economic link between the two employers, that there is an agreement between the two employers providing a framework for the co-existence of the two contracts, that the first employer retains management powers in respect of the employee, and that the first employer is able to decide the duration of the employee’s work for the second employer.
The rationale for the final reference in Art 6(2) to the closest connection is less than clear. It is likely that the purpose is concealed discrimination: where the employee habitually works in an EU
170Case C-29/10, [2011] ECR I-1595.
171Case C-384/10, 15 December 2011.
172Case C-437/00: [2003] ECR I-3573.
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country, the presumption will prevail; but where an employee, habitually resident in an EU country, is recruited to work outside the EU for an employer resident in an EU country, the law of the EU country to which both parties belong, or, where they belong to different EU countries, that of the EU country to which the employer belongs, will prevail.173 In any event, for the applicable presumption to be rebutted, a closer connection elsewhere must be clearly demonstrated, and rebuttal is very unlikely if the place of habitual work and the location of the engaging establishment are in the same country.174
By Art 8(1) of the Regulation, an express or implied choice of law by the parties in accordance with Art 3 is effective in determining the proper law of an employment contract, but such a choice operates subject to the rules for the protection of the employee as a weaker party which are contained in the law which in the absence of choice would have been applicable under Art 8(2)–(4), and which under that law cannot be derogated from by agreement.175 The mandatory rules referred to by Art 8(1) are confined to ones whose purpose is to protect employees as weaker parties.The reference does not extend to mandatory rules that are designed to protect employers – for example, by ensuring that they have a right to dismiss, or to make deductions from pay, in certain circumstances – nor to ones which pursue a general public interest – for example, by prohibiting, or subjecting to a licensing scheme, the carrying out of certain economic activities thought likely to endanger the environment.176 In view of the specific and apparently exhaustive character of Art 8, it is thought that Art 9 cannot be used for the purpose of providing further protection to the employee as a weaker party,177 although it can be used for the purpose of applying mandatory formal requirements to contracts of employment.178
The Giuliano and Lagarde Report indicates that the mandatory rules envisaged by Art 8 are not confined to provisions relating to the contract of employment itself, but extend to provisions concerning industrial safety and hygiene, and that Art 8 extends to void contracts and de facto employment relationships.179 Despite this, in Base Metal Trading Ltd v Shamurin180 the English Court of Appeal firmly rejected the argument that the predecessor of Art 8 extended to claims in tort between an employer and an employee arising from things done in the performance of the contract of employment. It was accepted, however, that, in such circumstances, the fact that the contract of employment is governed by the law of a given country is an important connection with that country for the purpose of determining the country with which the tort has the most significant connection, and whose law may, thus, be applicable to the tort, by displacement of the general rule in favour of the law of the country in which the events constituting the tort occurred, under the exception then specified by s 12 of the Private International Law (Miscellaneous Provisions) Act 1995.181 No doubt the same approach will be adopted by the English courts in the context of Art 8 of the Rome I Regulation and Art 4(3) of the Rome II Regulation, which has now replaced s 12 of the 1995 Act.
173For an analogous decision, see Nunez v Hunter Fan Co 920 FSupp 716 (SD Texas, 1996).
174See Base Metal Trading Ltd v Shamurin [2004] 1 All ER (Comm) 159; affirmed [2005] 1 All ER (Comm) 17 (CA). Cf the opinion of Wahl AG in pending Case C-64/12: Schlecker v Boedeker, 16 April 2013, that rebuttal is possible even where an employee carries out the work in performance of the contract not only habitually but also for a lengthy period and without interruption in the same country, if it is clear from the circumstances as a whole that there is a closer connection between the contract of
employment and another country. He considered that important factors, in determining the centre of gravity of the employment relationship, are the country in which the employee paid taxes and social-security contributions, and the basis on which his salary and working conditions were determined.
175See Gasalho v Tap Air Portugal, decided by the French Court of Cassation on 17 October 2000.
176See Duarte v Black & Decker [2008] 1 All ER (Comm) 401, where Field J explained the reference to mandatory rules is confined to specific provisions whose overriding purpose is to protect employees and does not extend to rules contained in the general law of contract, such as the English rules that invalidate covenants in restraint of trade.
177However, the contrary view was adopted by Bot AG in Case C-346/06: Rüffert v Land Niedersachsen [2008] ECR I-1989, and by Langstaff J (in the Employment Appeal Tribunal) in Simpson v Intralinks [2012] UKEAT 0593_11_1506.
178See the Giuliano and Lagarde Report [1980] OJ C282, at p 32.
179[1980] OJ C282, at pp 25–6.
180[2005] 1 All ER (Comm) 17 (CA); affirming [2004] 1 All ER (Comm) 159. See also [2002] CLC 322 (Moore-Bick J).
181See also Johnson v Coventry Churchill [1992] 3 All ER 14; and Glencore v Metro [2001] 1 Lloyd’s Rep 284.
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In any event, it seems clear that, in view of its purpose, Art 8 extends to claims for unfair dismissal or in respect of unlawful discrimination in relation to employment, despite the statutory character of such rights, and that it overrides any self-limiting territorial rule contained in legislation which creates such claims, such as a restriction to cases where the employee’s work is performed in the country in question. Thus the Regulation requires that the country whose law governs, or whose mandatory rules for the protection of employees have overriding effect in respect of, a contract of employment under Art 8 should admit any claim for unfair dismissal, or in respect of unlawful discrimination in relation to employment, which it would (apart from the Regulation) have admitted if the case had been connected exclusively with its own territory. Unfortunately, these obvious points were for a long time disregarded in England.182 However, real progress was made by the decision of Langstaff J (in the Employment Appeal Tribunal) in Simpson v Intralinks.183 He accepted that Art 8 of the Rome I Regulation extends to claims by an employee for equal pay or in respect of sex discrimination. Thus, such a claim, based on the foreign law made applicable by Art 8, can be brought in and determined by a UK Employment Tribunal, at least where the defendant employer is domiciled in the UK and the employee has worked partly in Great Britain.
An important exception to the rules laid down by Art 8 of the Rome I Regulation is made by Directive 96/71 on the posting of workers in the framework of the provision of services.184 The Directive applies where an undertaking, in the framework of the transnational provision of services, posts a worker for a limited period to a member state other than the state in which he normally works. Three types of posting are covered. The first is where the undertaking posts workers to the territory of a member state on its own account and under its own direction, under a contract concluded between the undertaking and a service recipient operating in the receiving state – for example, where a Polish undertaking posts Polish workers to Germany, in the framework of a construction sub-contract concluded between the Polish undertaking and a German main contractor.185 The second is where the undertaking posts workers to an establishment or an undertaking owned by the same group in the receiving state. The third is where the undertaking is a temporary employment undertaking or placement agency, and it hires out a worker to a user undertaking established in or operating in the receiving state. In any event, there must be an employment relationship between the undertaking making the posting and the worker during the period of posting. Where it applies, the Directive requires the member states to ensure that, regardless of the law otherwise applicable to the employment relationship, a posting undertaking guarantees to workers posted to their territory the minimum terms and conditions of employment relating to certain matters, such as minimum rates of pay, which are mandatorily applicable in the member state where the work is carried out. Thus, insofar as the Directive applies, the worker receives the benefit of protective rules contained in the law of the country where he temporarily, but not habitually, works.
182On unfair dismissal, see Lawson v Serco [2006] 1 All ER 823 (HL); Bleuse v MBT Transport [2008] IRLR 264 (EAT); Duncombe v Secretary of State for Children, Schools and Families [2011] UKSC 36; and Ravat v Halliburton Manufacturing and Services Ltd [2012] UKSC 1. On
discrimination, see s 1 of the Equal Pay Act 1970 (as amended); ss 6 and 10 of the Sex Discrimination Act 1975 (as amended); ss 4 and 8 of the Race Relations Act 1976 (as amended); ss 4(6) and 68 of the Disability Discrimination Act 1995; and Williams v University of Nottingham [2007] IRLR 660 (EAT).
183[2012] UKEAT 0593_11_1506.
184[1997] OJ L18/1. By virtue of Recital 34 and Art 23 of the Rome I Regulation, since the Directive lays down conflict rules relating to a particular matter, the Directive prevails over the Regulation.
185See Case C-346/06: Rüffert v Land Niedersachsen [2008] ECR I-1989.
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Insurance contracts
Subject to a very minor exclusion,186 the Rome I Regulation applies to all types of insurance contract. The Regulation applies both to life insurance and to non-life insurance, and also to reinsurance. It applies to large risks and to mass risks. It applies regardless of whether or not the insurer or the policyholder is resident or established, or the risk is located, within the EU. In contrast, the Rome Convention had excluded from its scope contracts of insurance (other than reinsurance) covering risks situated within the EU,187 and choice of law for such contracts had been regulated by Art 7 of EC Directive 88/357 (as amended by Art 27 of Directive 92/49) and Art 32 of EC Directive 2002/83.188 As Art 23 makes clear, the Rome I Regulation replaces the choice of law provisions contained in the Directives on insurance. However, the change is more of form than substance, since Art 7 of the Regulation to a large extent echoes the relevant provisions of the Directives.
In the Regulation, Art 7(2) lays down specific rules for determining the proper law of an insurance contract covering a large risk, whether the risk is situated in Europe or elsewhere. Article 7(3) lays down specific rules for determining the proper law of an insurance contract covering a mass risk which is situated within the EU. Article 7(4) provides additional rules for insurance contracts covering risks for which a member state imposes an obligation to take out insurance. However, the Regulation treats an insurance contract covering a mass risk which is situated outside the EU in the same way as an ‘ordinary’ or non-insurance contract.189 Similarly, the Regulation treats any reinsurance contract as an ‘ordinary’ or non-insurance contract, regardless of whether it covers a large risk or a mass risk, and of where the risk is situated.
Article 7 of the Rome I Regulation adopts the distinction between large risks and mass risks now drawn by Article 13(27) and Annex I of EC Directive 2009/138.190 Under this definition, many transport risks are regarded as large risks, regardless of the policy-holder’s business character or size. This applies to damage to or loss of ships, aircraft, or railway rolling stock; damage to or loss of goods in transit or baggage, irrespective of the form of transport; and liability arising out of the use of ships or aircraft, including carrier’s liability. Risks relating to credit or suretyship are regarded as large risks if the policy-holder is engaged in and the risks relate to a business activity, whether the business is large, medium-sized or small. A wide variety of risks are regarded as large risks if the policy-holder is engaged in and the risks relate to a large or medium-sized business activity. For a policy-holder’s business activity to be regarded as large or medium-sized, two of the following three conditions must be fulfilled in respect of the policy-holder or the group to which it belongs: that the balance-sheet total exceeds € 6.2 million, that the net turnover exceeds € 12.8 million, and that the average number of employees during the financial year exceeds 250.The risks regarded as large if the policy-holder’s business activity is regarded as large or medium-sized include damage to or loss of most types of property, including motor vehicles, by various causes, including fire, storm and theft; financial losses of various kinds; and various liabilities, including ones arising out of the use of motor vehicles. The
186The exclusion, specified by Art 1(2)(j), is confined to insurance contracts which arise out of operations carried out by organisations which are not established within the EU, and of which the object is to provide benefits for employed or self-employed persons belonging to an undertaking or group of undertakings, or to a trade or group of trades, in the event of death or survival, or of discontinuance or curtailment of activity, or of sickness related to work or accidents at work.
187See Art 1(3)–(4) of the Convention.
188See [1988] OJ L172, [1992] OJ L228, and [2002] OJ L345. The Directives had been transposed in the UK by the Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations SI 2001/2635, made under the Financial Services and Markets Act 2000.
189It is unclear from Recital 32 and Arts 6(1) and 7(1) whether an insurance contract covering a mass risk situated outside the EU could be treated as a protected consumer contract under Art 6 if otherwise it satisfied the requirements of Art 6.
190[2009] OJ L335/1. These have, from 1 November 2012, replaced Art 5(d) and the Annex of Directive 73/239, as amended by Art 5 of Directive 88/357 and Art 2 of Directive 90/618; [1973] OJ L 228, [1988] OJ L172, and [1990] OJ L330.
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only kinds of non-life risk that can never be regarded as large are accident and sickness benefits (including benefits for industrial injury or occupational disease, or for injury to passengers), legal expenses, and (from 1 November 2012) travelling assistance. Life risks cannot be regarded as large. Risks other than large risks may be referred to as mass risks.
Article 7(2) of the Rome I Regulation specifies the rules for determining the proper law of an insurance contract covering a large risk. By Art 7(1), these rules apply regardless of whether the risk covered is situated within the EU, but do not apply to reinsurance contracts. The primary rule specified by Art 7(2) subjects an insurance contract covering a large risk to the law expressly or impliedly chosen by the parties in accordance with Art 3. This accords with the solution formerly adopted for insurance of risks situated outside the EU by Art 3 of the Rome Convention, and for insurance of large risks situated within the EU by Art 7(1)(f) of Directive 88/357 as amended by Art 27 of Directive 92/49. In the absence of a choice by the parties, Art 7(2) of the Rome I Regulation provides for an insurance contract covering a large risk a rebuttable presumption in favour of the law of the country where the insurer has his habitual residence. However, this presumption will be rebutted where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with another country, and the law of that other country will then apply. These default rules closely resemble those formerly adopted for insurance of risks situated outside the EU by Art 4 of the Rome Convention. They differ, however, from those formerly adopted for insurance of risks situated within the EU by Art 7(1)(h) of Directive 88/357, where the rebuttable presumption was in favour of the law of the member state in which the risk was situated. Where an insurance contract covers a large risk for which a member state imposes an obligation to take out insurance, the additional rules specified by Article 7(4) of the Regulation apply.
Article 7(3) of the Rome I Regulation specifies the rules for determining the proper law of an insurance contract covering a mass risk. By Art 7(1), these rules are confined to cases where the risk covered is situated within the EU, and they do not apply to reinsurance contracts. Under the Regulation an insurance contract covering a mass risk which is situated outside the EU is subject to the same rules as an ‘ordinary’ or non-insurance contract.191 Recital 33 explains that, where an insurance contract covering a mass risk covers more than one risk, at least one of which is situated in a member state and at least one of which is situated in an external country, the special rules on insurance contracts in the Regulation should apply only to the risk or risks situated in the member states. Thus, in such a case, one must split the contract for choice of law purposes into at least two contracts, one covering the European risks and the other the non-European risks. Such an approach had been strenuously resisted (admittedly in the context of large risks) by the English courts in the period before the adoption of the Regulation.192
By Art 7(6), the Rome I Regulation adopts the rules now laid down by Art 13(13) and (14) of Directive 2009/138 as to where a risk is situated.193 The general rule is that, where the policyholder is an individual, the risk is located in the country where he has his habitual residence; or, where the policy-holder is a legal person, the risk is located in the country where its establishment to which the contract relates is situated. For this purpose, where one member of a corporate group takes out an insurance policy covering other companies in the group, another company in the group for whose activities insurance cover is obtained counts as an establishment of the
191It is unclear from Recital 32 and Arts 6(1) and 7(1) whether an insurance contract covering a mass risk situated outside the EU could be treated as a protected consumer contract under Art 6 if it otherwise satisfied the requirements of Art 6.
192See American Motorists Insurance v Cellstar [2002] 2 Lloyd’s Rep 216 and [2003] ILPr 22 (CA); Travelers Casualty v Sun Life [2004] Lloyd’s Rep IR 846; and CGU International Insurance v Astrazeneca Insurance [2005] EWHC 2755 (Comm).
193[2009] OJ L335/1. These provisions have, from 1 November 2012, replaced Art 2(d) of Directive 88/357 and Art 1(1)(g) of Directive 2002/83.
CERTAIN PARTICULAR TYPES OF CONTRACT |
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policy-holder who obtains the insurance cover.194 However, there are three exceptions. In the case of insurance of buildings, or of buildings and their contents under the same policy, the risk is located in the country where the property is situated. In the case of insurance of vehicles of any type, the risk is located in the country of registration. In the case of policies of a duration of four months or less, covering travel or holiday risks, the risk is located in the country where the policyholder took out the policy.
In the case of an insurance contract covering a mass risk situated within the EU, Art 7(3) of the Rome I Regulation allows the parties a limited freedom to make an express or implied choice of the proper law in accordance with Art 3. By Art 7(3)(i), the law chosen must be one of the following:
(a)the law of a member state where the risk is situated at the time of conclusion of the contract;
(b)the law of the country where the policy-holder has his habitual residence;195 (c) in the case of
life assurance, the law of the member state of which the policy-holder is a national; (d) for insurance contracts covering risks limited to events occurring in a single member state other than the member state where the risk is situated, the law of the member state in which the events are to occur; and
(e) where the policy-holder pursues a business activity, and the insurance contract covers two or more risks which relate to such activities and are situated in different member states, the law of any of those member states, or the law of the country of habitual residence of the policyholder.196 In certain cases Art 7(3)(ii) extends the range of choice by reference to the conflict rules of a member state whose internal law may be chosen under Article 7(3)(i). It enables parties to choose another law where this is permissible under the conflict rules of the member state in which the risk is situated, or in which the policyholder has his habitual residence, or in which is located one of the risks relating to a business activity of the policyholder.197 This constitutes an exception to the exclusion of renvoi by Art 20 of the Regulation. Where an insurance contract covers a risk for which a member state imposes an obligation to take out insurance, the additional rules specified by Art 7(4) apply.
Article 7(3)(iii) of the Regulation provides a default rule, applicable to an insurance contract covering a mass risk situated within the EU, where no valid express or implied choice of law has been made by the parties. The contract is then governed by the law of the member state in which the risk is situated at the time of conclusion of the contract. This is a firm rule, without any exception in favour of a manifestly closer connection.198 By Art 7(5), for this purpose, where the contract covers risks situated in more than one member state, the contract must be treated as constituting several contracts, each relating to only one member state.199 Where an insurance contract covers a risk for which a member state imposes an obligation to take out insurance, the additional rules specified by Art 7(4) apply.
194See Case C-191/99: Kvaerner v Staatssecretaris van Financiën [2001] ECR I-4447; and American Motorists Insurance v Cellstar [2003] ILPr 22 (CA).
195See American Motorists Insurance v Cellstar [2003] ILPr 22 (CA).
196Art 7(3)(i) of the Regulation broadly follows Art 7(1)(a)–(c) and (e) of Directive 88/357 and Art 32 of Directive 2002/83. However, the Regulation refers to a corporate policyholder’s habitual residence, determined in accordance with Art 19, rather than its central administration as such.
197Art 7(3)(ii) of the Regulation broadly follows Art 7(1)(a) and (d) of Directive 88/357 and Art 32 of Directive 2002/83. See also American Motorists Insurance v Cellstar [2003] ILPr 22 (CA), and Evialis v Siat [2003] 2 Lloyd’s Rep 377.
198This contrasts with Art 7(1)(h) of Directive 88/357, under which, if no valid choice had been made by the parties, the contract was governed by the law of the country, from among those from which choice was permissible, with which it was most closely connected. The contract was rebuttably presumed to be most closely connected with the member state in which the risk was situated. See Credit Lyonnais v New Hampshire Insurance [1997] 2 Lloyd’s Rep 1, where the Court of Appeal adhered to the presumption, and applied English law, that of the corporate policyholder’s secondary establishment to which the contract related, rather than French law, that of the policyholder’s central administration.
199This contrasts with Art 7(1)(h) of Directive 88/357, under which a severable part of the contract which had a closer connection with another country, among those from which choice was permissible, could by way of exception be governed by the law of that other country.