Article 7(4) of the Regulation specifies some additional rules which apply to insurance contracts covering risks for which a member state imposes an obligation to take out insurance. By Art 7(4)(a), an insurance contract will not satisfy the obligation to take out insurance, unless it complies with the specific provisions relating to that insurance laid down by the member state which imposes the obligation. Moreover, where the law of the member state in which the risk is situated and the law of the member state imposing the obligation to take out insurance contradict each other, the latter will prevail.200 It is far from clear when a difference will amount to a contradiction for the purpose of this provision. By Art 7(4)(b), by way of derogation from Art 7(2) and (3), a member state may lay down that the insurance contract shall be governed by the law of the member state which imposes the obligation to take out insurance, but the UK has not made use of this permission. By Art 7(5), for these purposes, where the contract covers risks situated in more than one member state, the contract must be considered as constituting several contracts each relating to only one member state.

Torts and restitutionary obligations

The Rome I Regulation (on contractual obligations) is complemented by the Rome II Regulation, which deals with choice of law in respect of torts and restititutionary obligations.201 The Rome II Regulation became applicable on 11 January 2009, and applies to events giving rise to damage (or equivalent consequences) which occur after that date.202

By Art 1(1), the Rome II Regulation applies, in situations involving a conflict of laws, to noncontractual obligations in civil and commercial matters; but not, in particular, to revenue, customs or administrative matters, nor to the liability of the state for acts and omissions in the exercise of state authority (acta iure imperii). Recital 9 explains that claims arising out of acta iure imperii include claims against officials who act on behalf of the state, and liability for acts of public authorities, including liability of publicly appointed office-holders. Recital 11 adds that, since the concept of a non-contractual obligation varies from one member state to another, for the purposes of the Regulation ‘non-contractual obligation’ should be understood as an autonomous concept. Various exclusions from the scope of the Rome II Regulation are specified by Art 1(2) and (3). Many of these resemble exclusions from the Rome I Regulation,203 but there are further exclusions in respect of obligations arising out of nuclear damage, and of obligations arising out of violations of privacy and rights relating to personality, including defamation.204 By Art 3, any law specified by the Rome II Regulation must be applied, whether or not it is the law of a member state. Renvoi is excluded by Art 24, which declares that the application of the law of any country specified by the Regulation means the application of the rules of law in force in that country other than its rules of private international law.

Article 27 specifies that the Regulation is not to prejudice the application of provisions of EU law, which, in relation to particular matters, lay down conflict rules relating to non-contractual

200In contrast, Art 7(2)(ii) of Directive 88/357 merely permitted a member state to stipulate in its law that the mandatory rules of the law of the member state in which the risk was situated or of a member state imposing an obligation to take out insurance could be applied if and in so far as, under the law of those states, those rules had to be applied whatever the law applicable to the contract.

201EC Regulation 864/2007 on the Law Applicable to Non-contractual Obligations [2007] OJ L199/40. It applies in all the member states except Denmark. In the UK, it replaces the choice-of-law rules for torts laid down by Part III of the Private International Law (Miscellaneous Provisions) Act 1995.

202See Arts 2, 31 and 32.

203These relate to family matters, negotiable instruments, company law, trusts, and evidence and procedure.

204See Art 1(2)(f) and (g); Case C-412/10: Homawoo v GMF Assurances, 17 November 2011; and Alliance Bank JSC v Aquanta Corp [2011] EWHC 3281 (Comm).

obligations.205 Article 28(1) provides that the Regulation is not to prejudice the application of international conventions to which one or more member states were parties at the time the Regulation was adopted, and which lay down conflict rules relating to non-contractual obligations; but, by Art 28(2), as between member states, the Regulation takes precedence over conventions concluded exclusively between two or more of them, insofar as such conventions concern matters governed by the Regulation. Thus Art 28 preserves the operation of the Hague Convention 1971 on the Law Applicable to Traffic Accidents, and the Hague Convention 1973 on the Law Applicable to Products Liability, in member states that are party thereto.206

Chapter II (Articles 4–9) of the Rome II Regulation deals with choice of law in respect of torts. It seems clear that the concept of a tort refers to an act which is wrongful, other than by reason of its being a breach of contract or trust, and which therefore gives rise to liability to pay compensation for loss arising therefrom. The main rule, which applies to most types of tort, is laid down by Art 4. The combined effect of Art 4(1) and (2) is to establish a general rule whose operation depends on the existence or otherwise of an habitual residence common to the parties at the time when the injury occurs.207 By Art 4(2), if both parties were habitually resident in the same country, the tort is governed by the law of that country. By Art 4(1), if no such common habitual residence existed, the tort is governed by the law of the country in which the direct injury occurred.The reference is to the place of the direct injury, rather than the place of the wrongful conduct or the place of any consequential loss.208 Then Art 4(3) provides an exception which applies where it is clear from all the circumstances of the case that the tort is manifestly more closely connected with a country other than that indicated in Art 4(1) or (2); in that case, the law of the country of the manifestly closer connection applies. Art 4(3) also specifies that a manifestly closer connection may be based in particular on a pre-existing relationship between the parties, such as a contract, which is closely connected with the tort in question.209

205On the intrusion of a defence under the law of the member state in which a defendant electronic-service-provider’s establishment is located, by virtue of Art 3 of the Directive 2000/31 on Electronic Commerce, [2000] OJ L178/1, and Recital 35 and Art 27 of the Rome II Regulation, see Cases C-509/09 and C-161/10: eDate Advertising v X and Martinez v MGN, 25 October 2011, and Case C-292/10: G v De Visser, 15 March 2012.

206The UK is not a party to these Hague Conventions.

207By Art 23(1), as regards a company or other body, corporate or unincorporated, its place of central administration must be treated as its habitual residence; but where the event giving rise to the damage occurs, or the damage arises, in the course of operation of a branch, agency or other establishment, the location of that establishment must be treated as its habitual residence. By Art 23(2), as regards an individual acting in the course of a business activity on his own account, his principal place of business must be treated as his habitual residence.

208On Art 4(1), see Hillside (New Media) Ltd v Baasland [2010] EWHC 3336 (Comm), where Andrew Smith J held that gambling losses sustained by a punter were suffered at the bookmaker’s domicile, at which the punter’s account with the bookmaker was situated; and Alliance Bank JSC v Aquanta Corp [2011] EWHC 3281 (Comm), where, in the context of a claim against corporate controllers and their associates for conspiracy to defraud their company by causing it to acquire US Treasury notes and charge them as security for loans by other banks to the conspirators, Burton J regarded the place where the notes were when the other banks foreclosed as the place of injury.

209On Art 4(3), see Naraji v Shelbourne [2011] EWHC 3298 (QB), where Popplewell J ruled that, in the case of negligent surgery, the place where the surgery was carried out will constitute the place of injury and its law will not be displaced where it is also the place at which the defendant surgeon resides and practises. In the case of a claim for negligent aftercare following surgery, the patient’s residence may constitute the place of injury, but the law of the place where the surgery was carried out and the defendant

resided and practised will apply under the exception.The case was decided under ss 11 and 12 of the Private International Law (Miscellaneous Provisions) Act 1995, but the reasoning seems equally applicable under Art 4 of the Regulation. See also Hillside (New Media) Ltd v Baasland [2010] EWHC 3336 (Comm); and Innovia Films v Frito-Lay [2012] EWHC 790 (Pat), where Arnold J applied English law under Art 4(3) to a claim for breach of an equitable obligation of confidence by an English company which, acting through its employees, had devised the confidential information in England and had disclosed the information to the defendant,

a Texas company, partly in (or at least from) England and partly in Texas. In the case of conspiracy by corporate managers, along with others, to defraud their company or its investors, Art 4(3) will usually subject the various torts involved to the law of the place where the principal managers involved resided and the conspiracy was initiated, even if subsequent steps to carry out the fraud took place elsewhere; see Fiona Trust v Privalov [2010] EWHC 3199 (Comm), and FortressValue Fund v Blue Skye Fund [2013] EWHC 14 (Comm); cf Alliance Bank JSC v Aquanta Corp [2012] EWCA Civ 1588.

A minor qualification to these rules is made by Art 17, which specifies that, in assessing the conduct of the person claimed to be liable, account must be taken, as a matter of fact and insofar as is appropriate, of the rules of safety and conduct that were in force at the place and time of the event giving rise to the liability.210 Other exceptions are specified by Art 14, which (subject to some safeguards) enables parties to make an agreement choosing the law applicable to a tort claim between them, and by Arts 16 and 26, which make savings for the stringent public policy and the overriding mandatory rules of the law of the forum.

Particular rules for certain torts are laid down by Arts 5–9 of the Rome II Regulation. The relevant torts are product liability, unfair competition, restriction of competition, infringement of intellectual property, environmental damage, and industrial action. As regards product liability, Art 5 establishes a cascade of five choices of law rules, to be applied in descending order until a solution is identified. If both the victim and the defendant were habitually resident in the same country at the time when the injury occurred, the applicable law is that of the common habitual residence. Otherwise, the applicable law is that of the country in which the victim was habitually resident when the injury occurred, if the product was marketed in that country, and unless the defendant could not reasonably have foreseen the marketing of the product, or a product of the same type, in that country. Otherwise, the applicable law is that of the country in which the product was acquired, if the product was marketed in that country, and unless the defendant could not reasonably have foreseen the marketing of the product, or a product of the same type, in that country. Otherwise, the applicable law is that of the country in which the injury occurred, if the product was marketed in that country, and unless the defendant could not reasonably have foreseen the marketing of the product, or a product of the same type, in that country. Otherwise, the applicable law is that of the country in which the defendant was habitually resident. However, by way of exception to the five foregoing rules, where it is clear from all the circumstances of the case that the tort is manifestly more closely connected with a country other than the country whose law would be applicable under those rules, the law of that other country applies.211

As regards torts arising out of an act of unfair competition, Art 6(1) applies the law of the country where competitive relations or the collective interests of consumers are, or are likely to be, affected. However, where an act of unfair competition affects exclusively the interests of a specific competitor, Art 6(2) subjects the claim to the main rules laid down by Art 4.212 As regards torts arising out of a restriction of competition, Art 6(3) applies the law of the country where the market is, or is likely to be, affected. As regards infringements of intellectual property rights, Art 8 applies the law of the country in which the act of infringement was committed. As regards torts arising out of environmental damage, Art 7 effectively creates a rule of alternative reference, in favour of the law of the place of direct injury, or the law of the place of the defendant’s conduct, whichever is more favourable to the plaintiff. As regards industrial action, such as strike action or lock-out, Art 9 applies the law of the country where the action is to be, or has been, taken, subject to an exception in favour of the law of a common habitual residence, where this exists.

210As an obvious example of the operation of Art 17, one may envisage a claim between persons habitually resident in England, arising from a road accident in France. Although under Art 4 liability will be governed by English law, as that of the common habitual residence, in determining whether a driver has acted with reasonable care, as his duty under English law requires, one must take account of the French rule of the road that specifies that normally the correct course is to keep to the right, rather than (as in England) to the left, side of the road.

211On Art 5, see Stone, Product Liability under the Rome II Regulation, in Ahern & Binchy (eds), The Rome II Regulation on the Law Applicable to Non-Contractual Obligations, Martinus Nijhoff, 2009, pp 175–97.

212In Force India Formula One Team v 1 Malaysia Racing Team [2012] EWHC 616 (Ch), and Innovia Films v Frito-Lay [2012] EWHC 790 (Pat), Arnold J recognised that a claim for breach of an equitable obligation of confidence in respect of technical or commercial information falls within Article 6(2), since it arises from acts of unfair competition that affect the interests of a specific competitor, See also Alfa Laval Tumba v Separator Spares [2012] EWHC 1155 (Ch).

Articles 15 and 22(1) of the Rome II Regulation ensure that a wide range of issues are subjected to the law which is applicable to a tort by virtue of Arts 4–9. These include the admissibility and assessment of damages, since Art 15(c) refers to the existence, the nature and the assessment of damage or the remedy claimed. Thus, the law which governs the tort must be applied to all issues concerning the assessment of the damages to be awarded, including mere quantification, except insofar as the proper law lacks any rule on the issue that is sufficiently definite to enable a court elsewhere to apply it with reasonable confidence and accuracy.213 As regards the availability to a tort victim of a direct action against the tortfeasor’s liability insurer, Art 18 admits such a claim where either the law applicable to the tort or the law applicable to the insurance contract so provides; but the option is limited to the admissibility of the direct action, for the scope of the insurer’s obligations is determined by the law governing the insurance contract.214

The Rome II Regulation also deals with restitutionary obligations. These differ from torts in that a restitutionary obligation may arise without there being any wrongful act on the part of the defendant, and that a restitutionary obligation is designed to restore or transfer to the claimant a benefit which has been obtained by the defendant, rather than to compensate the claimant for an injury or loss which has been suffered by the claimant. Article 10 of the Regulation applies to non-contractual obligations arising out of unjust enrichment. Article 10(1) and (4) apply to cases where the restitutionary obligation concerns a relationship existing between the parties, such as one arising out of a contract or a tort, which is closely connected with the unjust enrichment. In such cases, Art 10(1) provides a rebuttable presumption which subjects the restitutionary claim to the law which governs the existing relationship; but Art10(4) provides an exception, which applies where it is clear from all the circumstances of the case that the obligation arising out of unjust enrichment is manifestly more closely connected with another country and subjects the claim to the law of the country with which it is manifestly more closely connected.215

In stand-alone cases, where there is no existing relationship between the parties from which the applicable law can be derived, Art 10(2) and (3) create a presumption subjecting an obligation arising out of unjust enrichment to the law of the country in which both parties had their habitual residence when the event giving rise to unjust enrichment occurred, if such a common residence existed; or in the absence of such a common residence, to the law of the country in which the unjust enrichment took place. This evidently refers to the country in which the immediate benefit was received. However, Art 10(4) applies where it is clear from all the circumstances of the case that the restitutionary obligation is manifestly more closely connected with another country than that indicated in Art 10(2) and (3), and subjects the claim to the law of the country with which the obligation is manifestly more closely connected.

Article 11 deals with non-contractual obligations arising out of acts performed without due authority in connection with the affairs of another person. It resembles Art 10, except that in standalone cases where there is no common habitual residence Art 11(3) refers to the law of the country in which the unauthorised act was performed, instead of the law of the country in which the unjust enrichment took place.

Article 12 of the Rome II Regulation applies to non-contractual obligations arising out of dealings prior to the conclusion of a contract, regardless of whether the contract was actually concluded

213This accords with the approach adopted by the Court of Appeal, but ultimately rejected by the House of Lords, in Harding v Wealands [2005] 1 All ER 415 (CA), reversed [2006] UKHL 32.

214Art 18 is more favourable to the victim than the traditional English rule, which probably referred the admissibility of a direct action to the proper law of the insurance contract. See The Hari Bhum [2005] 1 Lloyd’s Rep 67 (CA), affirming [2004] 1 Lloyd’s Rep 206.

215See also Alliance Bank JSC v Aquanta Corp [2011] EWHC 3281 (Comm).