13.01  A notable feature of the Commission’s preliminary draft proposal¹ was the very wide freedom that it offered to contracting and litigating parties to choose the law applicable to non-contractual obligations arising or existing between them. This extension of the principle of party autonomy from contractual to non-contractual obligations was welcome. It was, therefore, disappointing that the Commission in Art 10 of its Proposal moved to restrict the right to choose the law applicable to non-contractual obligations to the period after the dispute had arisen. The Commission explained only that it had followed recent developments in national private international law, referring to the recent Dutch and German codifications, neither of which supported a restriction in the terms put forward. The Dutch rule contained no temporal restriction on party choice,² whereas the German rule allowed party choice following the act giving rise to the non-contractual obligation.³ In the Council’s Rome II Committee, the Commission also expressed the view that sufficient account had been taken of an express choice of law made before the events giving rise to the non-contractual obligation by the specific references to a ‘pre-existing relationship’ in proposed rules for tort/delict and other non-contractual obligations.⁴

13.02  At first reading, the European Parliament supported the extension of party choice to agreements between commercial contracting parties made before the dispute arose. The Parliament’s text required, however, not only that the agreement be ‘freely negotiated’ and that ‘[t]he choice must be expressed or demonstrated with reasonable certainty’, requirements that remain in the final text of Art 14, but also that there be ‘a pre-existing arms-length commercial arrangement between traders of equal bargaining power’, words of such elasticity as to cast doubt on the usefulness of the principle.⁵

13.03  Initially, the UK and Spain stood alone among the delegations in the Council working group in favouring the right to choose the applicable law (p. 541) before any dispute arose.⁶ A Commission note of a meeting of the Council’s Rome II Committee in October 2004 recorded that most Member State delegations did not agree with the proposal to allow party choice for business to business relationships.⁷ Following the European Parliament’s amendment at first reading, however, an overwhelming majority favoured allowing pre-dispute (ex ante‎) agreements in situations not involving employees and consumers.⁸ Three delegations opposed this extension.⁹ The general view at the time was that the conditions on party choice imposed by the Parliament were excessive,¹⁰ and this view was reflected in the amended text produced by the Council’s Rome II Committee¹¹ and adopted as part of the Council’s Common Position.¹² That text was accepted by the Parliament at its second reading stage.

13.05  The text of Recital (31) was agreed in conciliation¹³ as a compromise between the different language used in the Common Position¹⁴ and the EP 2nd Reading Position.¹⁵

13.06  Under Art 14(1), the parties may agree to submit non-contractual obligations to the law of their choice either (a) by an agreement entered into after the event giving rise to the damage occurred, or (b) where all the parties are pursuing a commercial activity, also by an agreement freely negotiated before the event giving rise to the damage occurred. The choice must be expressed or demonstrated with reasonable certainty by the circumstances of the case and shall not prejudice the rights of third parties. This freedom of choice makes an important contribution to legal certainty as to the law applicable to non-contractual obligations in a commercial context. The Regulation, however, seeks to balance the principle of legal certainty with the perceived need to protect weaker parties against oppressive bargains and the wider public interest by imposing certain limits on party autonomy. These limits on party choice are considered in the following paragraphs.

13.07  The freedom of choice conferred by Art 14 does not extend to noncontractual obligations arising out of an act of unfair competition¹⁶ or to non-contractual obligations arising out of an infringement of an intellectual property right.¹⁷

13.08  Art 14(1) requires an ‘agreement’ between ‘the parties’ as to the law applicable to non-contractual obligations. This raises two questions. First, does Art 14(1) have in contemplation the parties to the agreement or the parties to any proceedings that may be brought to enforce a non-contractual obligation for which such an agreement is made? Secondly, is the concept of an ‘agreement’ to be given an autonomous meaning or must it be understood in accordance with the law applicable to the agreement determined in accordance with the rules of private international law of the forum Member State for contractual obligations, i.e. those contained in the Rome I Regime?

13.09  As to the first question, the need for certainty as to the effectiveness of a choice of law provision in a concluded agreement supports the conclusion that ‘the parties’ should be taken to refer to the parties to the agreement as to the law applicable, rather than the parties to the proceedings.¹⁸ Otherwise, if one or more of the parties to an agreement is not pursuing a commercial activity in entering the agreement, the effectiveness of that agreement may depend on the identity of the persons joined as parties to subsequent proceedings concerning non-contractual obligations arising out of that agreement. This view seems consistent with the use of the present tense in Art 14(1)(b) (‘where all the parties are pursuing a commercial activity’) and in the contrast that Art 14(1) makes between ‘the parties’ and ‘third parties’. It also reflects the ECJ’s view as to the meaning of ‘the parties’ in Art 17 of the Brussels Convention, which validates choice of court agreements.¹⁹

13.10  If one or more claimants or defendants in subsequent proceedings was not a party to the original agreement as to the law applicable, the Member State court seised of the dispute must in each case determine (according to the law applicable to the agreement or other relevant rules of private international law²⁰) whether the relevant claimant or defendant has succeeded to the rights and obligations of an original party to the agreement with respect to the non-contractual obligation that the claimant seeks to enforce or which it is sought to enforce against the defendant.²¹ The requirement of succession should, probably, be considered to have been satisfied in the case of an assignee of a non-contractual obligation who seeks to enforce that obligation, even if there has been no separate assignment of the agreement containing the choice of law provision.²²

13.11  As to the second question, Recital (31) provides that ‘[w]here establishing the existence of the agreement, the court has to respect the intentions of the parties’. That, however, does not resolve the question as to the law to be applied in determining the intentions of the parties. As noted, there appear to be two viable solutions.²³ First, to give an autonomous meaning under EC law to the concept of ‘agreement’ in Art 14(1). Secondly, to require the Member State court seised of the dispute to determine questions of consent and interpretation in accordance with the law applicable to the agreement, itself determined in accordance with the rules of applicable law for contractual obligations contained in the Rome Convention and its successor Regulation.

13.12  In this connection, the existing European private international law instruments in the area of civil justice point in different directions. Under the Rome Convention, the existence and validity of the consent of the parties to the choice of the applicable law must be determined in accordance with the law applicable to questions of material and formal validity and the capacity of natural persons in Arts 8, 9, and 11 of the Convention.²⁴ In the case of material validity, Art 8(1) refers to the law that would govern the contract or contractual term if it were valid (the so-called ‘putative applicable law’). As to matters of interpretation, the English courts currently favour the view that the question whether a contractual provision amounts to or imports a choice of law under Art 3 of the Rome Convention ‘should be looked at from a broad Convention-based approach, not constrained by national rules of construction’.²⁵ This view appears to treat the requirement that the parties’ choice be ‘expressed or demonstrated with reasonable certainty’, a requirement that also appears in Art 14(1) of the (p. 545) Rome II Regulation,²⁶ as requiring the meaning of the words used in the contract that are said to constitute a choice of law to be interpreted in an autonomous manner. Even if that view is accepted, however, there appears a strong argument for looking to the law that is claimed to have been chosen, at least for the purpose of confirming the autonomous interpretation of the words used. As the words used by the parties can only be fully understood within the framework of the law that applies to the contract in question,²⁷ and as the distinction between questions of ‘consent’/’validity’ and questions of ‘interpretation’ may depend simply on the way that the question is presented to the court,²⁸ there is much to be said for applying the putative applicable law to questions of identification and interpretation of a choice of law provision under the Rome Convention, as well as to questions of the existence and validity of the parties’ consent to that provision. On this view, the requirement in Art 3(1) of the Rome Convention that a choice of law be ‘expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case’ should be seen as imposing a lower threshold in terms of the certainty required to demonstrate the parties’ agreement and as requiring the court to take account of matters other than the words used by the parties in the supposed choice of law provision.

13.13  In contrast, under the Brussels I Regime, the ECJ and the United Kingdom courts have been moving slowly towards an autonomous concept of ‘agreement’ for questions concerning the existence and validity of a choice of court agreement under Art 17 of the Brussels Convention and Art 23 of the Brussels I Regulation,²⁹ while leaving questions of interpretation and certain other matters to the law applicable to the agreement. Five decisions of the ECJ are of particular significance:

1. 1. In Estasis Salotti v RÜWA Polstereimaschinen, the ECJ emphasized that the requirements set out in Art 17 of the Brussels Convention must be strictly construed. The Court explained that:³⁰

   By making such validity subject to the existence of an ‘agreement’ between the parties, Article 17 imposes on the court before which the matter is brought the duty of examining, first, whether the clause conferring jurisdiction upon it was in (p. 546) fact the subject of a consensus between the parties, which must be clearly and precisely demonstrated.

   The purpose of the formal requirements imposed by Article 17 is to ensure that the consensus between the parties is in fact established.

2. 2. In Sancicentral GmbH v Collin, the ECJ held that it was not open to a Member State court to invalidate a choice of court agreement meeting the requirements of Art 17 by reference to a pre-existing rule of national law excluding the possibility of such choice in employment contracts, even if the agreement in question had been made before the coming into force of the Brussels Convention in that Member State.³¹

3. 3. In Powell Duffryn plc v Petereit, the ECJ ruled that:³²

   The concept of ‘agreement conferring jurisdiction’ is decisive for the assignment, in derogation from the general rules on jurisdiction, of exclusive jurisdiction to the court of the Contracting State designated by the parties. Having regard to the objectives and general scheme of the Brussels Convention, and in order to ensure as far as possible the equality and uniformity of the rights and obligations arising out of the Convention for the Contracting States and persons concerned, therefore, it is important that the concept of ‘agreement conferring jurisdiction’ should not be interpreted simply as referring to the national law of one or other of the States concerned.

   Accordingly, as the Court has held for similar reasons as regards, in particular, the concept of ‘matters relating to a contract’ and other concepts, referred to in Article 5 of the Convention, which serve as criteria for determining special jurisdiction … ,³³ the concept of ‘agreement conferring jurisdiction’ in Article 17 must be regarded as an independent concept.

   In Powell Duffryn, the Court concluded that a clause conferring jurisdiction in the statutes of a company was an ‘agreement’ within the meaning of Art 17 of the Brussels Convention, which bound any shareholder whether or not he had opposed the adoption of the clause or had become a shareholder after the clause was adopted.³⁴ In response, however, to other questions presented by the German court seised of the dispute, the ECJ held that questions of interpretation of the choice of court agreement were to be determined by the national court.³⁵ Accordingly, the Court did (p. 547) not consider that the autonomous concept of ‘agreement’ extended to questions of interpretation.

4. 4. In Benincasa v Dentalkit Srl, the ECJ held that:³⁶

   A jurisdiction clause, which serves a procedural purpose, is governed by the provisions of the Convention, whose aim is to establish uniform rules of international jurisdiction. In contrast, the substantive provisions of the main contract in which that clause is incorporated, and likewise any dispute as to the validity of that contract, are governed by the lex causae‎ determined by the private international law of the State of the court having jurisdiction …

   Article 17 of the Convention sets out to designate, clearly and precisely, a court in a Contracting State which is to have exclusive jurisdiction in accordance with the consensus formed between the parties, which is to be expressed in accordance with the strict requirements as to form laid down therein. The legal certainty which that provision seeks to secure could easily be jeopardized if one party to the contract could frustrate that rule of the Convention simply by claiming that the whole of the contract was void on grounds derived from the applicable substantive law.

   The Court added, referring to Powell Duffryn v Petereit, that it was for the national court to interpret the clause conferring jurisdiction, including as to whether that clause covers any dispute relating to the validity of the contract.³⁷

5. 5. Finally, in Trasporti Castelletti v Trumpy, the ECJ concluded:³⁸

   In Benincasa,³⁹ … , the Court explained that the aim of securing legal certainty by making it possible reliably to foresee which court will have jurisdiction has been interpreted, in connection with Article 17 of the Convention, by fixing strict conditions as to form, since the purpose of that provision is to designate, clearly and precisely, a court in a Contracting State which is to have exclusive jurisdiction in accordance with the consensus between the parties.

   It follows that the choice of court in a jurisdiction clause may be assessed only in the light of considerations connected with the requirements laid down by Article 17… .

   [I]n a situation such as that in the main proceedings, any further review of the validity of the clause and of the intention of the party which inserted it must be excluded and substantive rules of liability applicable in the chosen court must not affect the validity of the jurisdiction clause.

13.15  In that case, Aikens J was faced with the submission that, under German law, jurisdiction agreements were ineffective by reason of the nature of the allegations put forward.⁴¹ It is in that context that his Lordship’s reference to ‘the issue of whether a clause can be valid at all if invoked in a dispute where fraud is alleged’ must be understood. His Lordship was not required to consider the effect of fraud on a party’s consent to the choice of court clause, and cannot be taken to have ruled as to how such an allegation should be addressed under Art 23 of the Brussels I Regulation. This case also demonstrates the difficulty, in practice, of distinguishing between questions of validity and questions of interpretation, as the judge relied on the restrictive approach taken under German law to the construction of choice of court agreements in cases of intentional wrongdoing to support his conclusion that the parties’ choice of German jurisdiction did not extend to the case before him.⁴²

13.16  The issue as to how, within the framework established by Art 23, the question of a party’s consent to a choice of court agreement must be determined was directly addressed by the English courts in Deutsche Bank v Asia Pacific Broadband Wireless, a case in which the defendant argued that the individuals who had signed the contract containing the choice of court agreement did not have authority to represent it. The claimant argued that there was a sufficient ‘agreement’ for this purpose as the formal requirements of Art 23 were satisfied and there were objective indicia of the (p. 549) defendant’s consent, including signature of the agreement, a board minute, and warranties in the contract as to the authority of the persons signing in the defendant’s name. Both Flaux J and the Court of Appeal appeared to accept that questions of consent to a choice of court agreement were to be determined according to autonomous principles of EC law rather than national law,⁴³ but reached opposing conclusions. Flaux J rejected the claimant’s submission but the Court of Appeal accepted it.⁴⁴

13.18  It remains to be seen how the concept of ‘agreement’ in Art 23 of the Brussels I Regulation will develop in the future and whether, in particular, Member State courts and the ECJ will accept the challenge of defining the conditions for establishing a party’s consent for this purpose, or will resort expressly or by stealth to national law.⁴⁹ It is submitted, however, that 43 Deutsche Bank AG v Asia Pacific Broadband Wireless Communications Inc [2008] EWHC 918 (Comm), [19] (Flaux J); [2008] EWCA Civ 1091, [23], [30] (cf [32]) (Longmore LJ). Also Knorr- Bremse Systems v Haldex Brake Products [2008] EWHC 156 (Patents), [30] (Lewison J). (p. 550) there are good reasons for not following this approach in relation to Art 14(1) of the Rome II Regulation and for preferring the view that questions as to the parties’ consent to an agreement on the law applicable to non-contractual obligations should be determined in accordance with the law applicable to that agreement under the Rome I Regime. First, unlike Art 14(1), both Art 17 of the Brussels Convention and Art 23 of the Brussels I Regulation contain detailed formal requirements for choice of court agreements. As the ECJ emphasized in Estasis Salotti⁵⁰ and Trasporti Castelletti v Trumpy,⁵¹ it is those formal requirements that provide the foundation for the autonomous approach to Art 23 in terms of determining the validity of choice of court agreements. Within Art 14(1), neither the requirement that the parties’ choice of law be expressed or demonstrated with reasonable certainty nor the requirement that the agreement be freely negotiated, which in any event only applies to agreements concluded before the event giving rise to damage, perform that role. Secondly, agreements on choice of court are excluded from the scope of the Rome Convention and the Rome I Regulation.⁵² Agreements as to the law applicable to non-contractual obligations are not. Accordingly, an agreement within Art 14(1) could be seen as a contract or a term of a contract, the existence and validity of which ought, in principle, to be determined by the law that would govern it under the Rome I Regime if it were valid.⁵³ Thirdly, in practice, an agreement as to the law applicable to non-contractual obligations will frequently be combined in a single clause with an agreement as to the law applicable to contractual obligations.⁵⁴ It seems unsatisfactory for questions of consent to one part of the clause to be determined by reference to different principles from the other. Fourthly, the reference to the common rules of applicable law contained in the Rome I Regime provides greater certainty, and avoids the difficulties inherent in the autonomous approach to the concept of ‘agreement’ in the Brussels I Regime, of separating questions of validity from questions of consent and of developing an autonomous doctrine of consent. Accordingly, the question whether the parties have ‘agreed’ to submit non-contractual obligations to the law of their choice should be determined in accordance with the law applicable to the agreement in question, which will normally be the same law as that which the parties have chosen. Indeed, even if the parties have not chosen the law generally applicable to the contract, the choice of the law (p. 551) applicable to non-contractual obligations should (at the very least) amount to an implied choice as to the law applicable to that term of the contract under Art 3(1) of the Rome Convention and its successor Regulation. Subject to the threshold requirement that the choice of law must be expressed or demonstrated with reasonable certainty by the circumstances of the case,⁵⁵ that law should also govern the identification and interpretation of an agreement on choice of law, including identification of the noncontractual obligations to which the choice of law extends.⁵⁶

13.19  That does not mean, however, that all questions concerning the existence and effect of the parties’ agreement under Art 14(1) will be left to national law. The principle of effectiveness under EC law requires Member State courts to ensure that applicable rules of national law do not render practically impossible or excessively difficult the exercise of rights conferred by Community law.⁵⁷ Accordingly, it will not be open to Member States to impose substantive restrictions as to the parties’ ability to choose the law applicable to non-contractual obligations other than those set out in Art 14(1), including (for example) an absolute prohibition on agreements made before the event giving rise to damage occurred⁵⁸ or a requirement that the choice be express or in a particular language.⁵⁹ Formal requirements may equally be considered to undermine the effectiveness of Art 14(1). For the same reason, it may be argued that the objectives of Art 14 in terms of achieving greater legal certainty and respecting the principle of party autonomy would be undermined if a party could argue that the Art 14(1) agreement is ineffective because it is contained in a contract that is invalid under the law that applies to it, for reasons unrelated to the parties’ consent to the choice of law provision.⁶⁰ The view that agreements on choice of law should be considered to be independent from the contract in which they are contained is consistent with Art 3(4) of the Rome Convention.⁶¹

(p. 552) 13.20  Art 14(1) allows the parties to submit non-contractual obligations to ‘the law of their choice’. A number of points follow from this:

1. 1. It seems clear that Art 14(1) only allows reference to the law of a country,⁶² and not (for example) to general principles of law, Sharia law, or the provisions of the draft Common Frame of Reference concerning non-contractual obligations.⁶³ The same restriction applies under the Rome I Regime.⁶⁴

2. 2. Under Art 3(1) of the Rome Convention,⁶⁵ the parties to a contract may select the law applicable to the whole or part only of the contract. It is unclear whether, under the Rome Convention, it is also possible to split the law applicable to different issues arising from the same term of a contract, so that (for example) its material validity is governed by one law, its interpretation by a second law, and so forth.⁶⁶ Art 14(1) of the Rome II Regulation, on the other hand, does not expressly permit dépeçage‎ in either of these senses, and this may be thought to reflect a general hostility to dépeçage‎ within the Regulation.⁶⁷ Here, although the principle of party autonomy and the need to respect the wishes of the parties favour allowing the parties freedom to choose the law applicable to a non-contractual obligation on whatever basis they consider appropriate, considerations of legal certainty and the coherence of the law applicable to non-contractual obligations, as well as the use of the singular ‘law’ in Art 14(1) and Recital (31), support a more restrictive approach. Further, it may be noted that Recital (31) was amended in conciliation so as to remove the European Parliament’s proposed reference to ‘a choice as to the law applicable to an issue in tort/delict’.⁶⁸

   (p. 553) On balance, Art 14 should be taken to exclude the possibility of dépeçage‎ for a single non-contractual obligation.⁶⁹ Accordingly, although the parties may, if they wish, choose to subject different non-contractual obligations to different laws, it seems unlikely that Art 14(1) will enable the choice of different laws to govern different parts of the same non-contractual obligation (e.g. damage occurring in different countries) or different issues (e.g. liability and the assessment of damage).

3. 3. Although the parties will normally identify the country whose law is to apply to non-contractual obligations arising between them by name, there appears no reason why they may not do so by reference to objective factors, such as the place of habitual residence of one of them.⁷⁰

13.23  In the case of the choice of the law applicable to non-contractual obligations in other situations, a more cautious approach would seem to be required, if only because the principle of party autonomy for torts and other non-contractual obligations is currently less well developed than for contractual obligations.⁷⁵ If the parties to a commercial contract have limited themselves to saying ‘this contract shall be governed by the law of X’, it may be doubted whether, according to current practice, it can be inferred with reasonable certainty (French: de façon certaine‎) that they intended their choice to extend not only to contractual obligations but also to non-contractual obligations arising out of their contractual relationship. If, however, the parties have expressed their choice of law provision more broadly (e.g. ‘any claim arising under [or in connection with] this agreement’⁷⁶) or if they have coupled a short, standard form choice of law provision with a dispute resolution provision that, on its proper construction extends to noncontractual obligations,⁷⁷ a stronger case can be made for inferring that the (p. 555) parties intended that all aspects of their relationship, or all claims that they had agreed should be brought before a particular court or arbitral tribunal, should be governed by the same law.⁷⁸

13.24  However these principles may develop in the future, the only safe option will remain for the parties to make a choice of law in such a way as to put beyond doubt that they intended that the identified law should govern non-contractual obligations between them arising from their relationship. Professor Briggs has suggested the following wording for a choice of English law:⁷⁹

This Agreement, and the whole of the relationship between the parties to it, is governed by English law. The parties agree that all disputes arising out of or in connection with it, or with the negotiation, validity or enforceability of this Agreement, and the relationship between the parties, and whether or not the same shall be regarded as contractual claims, shall be exclusively governed by and determined only in accordance with English law.

13.25  If a more condensed form is preferred, the following wording may be considered appropriate:

This Agreement and all matters (including, without limitation, any contractual or non-contractual obligation) arising from or connected with it are governed by English law.

13.26  The parties should also consider techniques by which the benefit (and burden) of their choice of law agreement may be extended to related parties, including associated companies, servants, and agents, against whom (or by whom) non-contractual claims might be brought in an effort to circumvent the terms of the contract, including as to the governing law. Again, the following wording is based on that suggested by Professor Briggs:⁸⁰

1. (1)  Each of the parties undertakes to use its best endeavours to prevent persons not party to this Agreement from bringing or continuing against another party to this Agreement, otherwise than in the English courts or in accordance with English law, any action or other proceeding which would, if brought by a party to this Agreement, have been required by this Clause to be brought in the English courts or, as the case may be, in accordance with English law.

2. (p. 556) (2)  Each of the parties hereby agrees and declares that the benefit of this Clause shall extend to and may be enforced by any officer, employee, agent, representative or [group company⁸¹] of each of them as if they were named as a party to this agreement.

13.27  The parties’ choice under Art 14(1) shall not prejudice the rights of third parties. For this purpose, third parties should be taken to exclude both the original parties to the agreement and persons succeeding to their rights and obligations with respect to the non-contractual obligation in question.⁸² For example, (1) if a claimant agrees with one co-defendant that the law of State A should apply to non-contractual obligations between them, that agreement may not be taken into account in considering whether, in relation to an action brought by the claimant against another defendant, there is a manifestly closer connection to the law of State A, and (2) if claimant and defendant agree that the law of State B should apply to non-contractual obligations between them, that agreement will be ignored in determining the law applicable to the non-contractual obligation for the purposes of a direct action against the defendant’s insurer under Art 18⁸³ or a contribution claim by the defendant against other persons (not parties to the choice of law agreement) liable to the claimant for the same claim.⁸⁴

13.28  Arts 14(2) and (3) constitute anti-avoidance provisions in the sense that, without requiring any deliberate intent on the part of the parties seeking to choose the applicable law, they prevent an agreement having effect under Art 14(1) from ‘prejudicing’ the application of certain rules that cannot be derogated from by agreement in situations in which the non-contractual obligation is otherwise internalized within a particular country (Art 14(2)) or the Member States party to the Regulation (Art 14(3)).

13.29  Art 14(2) reflects very closely the terms of Art 3(3) of the Rome Convention,⁸⁵ although, in contrast to the latter provision, the Community legislator avoided attributing the label ‘mandatory’ to rules that cannot be derogated from by contract, preferring to reserve that term for provisions that apply irrespective of the law otherwise applicable to the non-contractual obligation.⁸⁶

13.30  Unlike its counterpart in the Rome Convention, Art 14(2) does not explicitly state that the parties’ choice of law is not to be taken into account in determining whether all the elements relevant to the situation at the time when the event giving rise to the damage occurs are located in a single country, although this is a necessary inference. It is less clear what other elements, if any, must be ignored for this purpose. Most significantly, perhaps, the requirement to apply the test prescribed by Art 14(2) ‘at the time when the event giving rise to the damage occurs’⁸⁷ would appear to exclude reference to the country (or countries) in which damage has occurred after that event, unless (perhaps) such damage was likely to occur at the time. Presumably, however, the countries of habitual residence of the person claimed to be liable and the person sustaining damage, as well as the country or countries in which the event giving rise to damage occurs, are relevant elements of the ‘situation’.⁸⁸ It is less clear whether the law applicable to a pre-existing relationship between the parties, or a choice of contractual forum, may be taken into account.⁸⁹ Whichever view is taken, it seems doubtful whether Art 14(2) will have any greater impact than the provision which inspired it.⁹⁰

13.31  According to the Commission, the effect of applying Art 14(2) is that ‘[t]he choice by the parties is not deactivated, but it may not operate to the detriment of such mandatory provisions of the law which might otherwise (p. 558) be applicable’.⁹¹ This suggests that, even if all relevant elements are located in a single country, Art 14(2) only preserves the application of provisions of the law of that country that cannot be derogated by contract if that country’s law would have applied to the non-contractual obligation but for the parties’ agreement under Art 14(1) to submit that obligation to a different law of their choice. That approach seems sensible, particularly if (as submitted above) the country of damage (the principal connecting factor for tort/delict) is not a factor that may be taken into account as ‘relevant to the situation’. That said, the text of Art 14(2) does not clearly support that approach and, on the contrary, could be argued itself to operate as a rule of applicable law in favour of non-derogable rules of the identifi ed country, partially overriding not only Art 14(1) but also any other rule in Chapter II or III that would otherwise apply to the situation.⁹²

13.32  Unlike Art 14(2),⁹³ Art 14(3) is a novelty,⁹⁴ and a curious one at that. Its ostensible purpose is to prevent the parties frustrating the application of mandatory rules of Community law through the choice of the law of a third country.⁹⁵ That seems unobjectionable enough in itself, but an extension of the anti-avoidance rule in Art 14(2) appears unnecessary to achieve this end. Unlike the law of any single country identified by Art 14(2), rules of Community law must be applied by the courts of all Member States in accordance with their terms. Further, as the decision of the Court of Justice in Ingmar v Eaton Leonard demonstrates, EC law is well-equipped to prevent evasion of its legislative rules through the simple expedient of a choice of law clause in circumstances where the situation is closely connected with the Community.⁹⁶ That result can be achieved by a process of construction of EC rules themselves, having regard to their objectives, (p. 559) it being necessary to refer to some dogmatic principle contained in the EC Treaty or another legislative instrument. If, as a matter of its proper construction, it appears that a provision of Community law was not intended to have this overriding effect, it is not clear why the fact that all of the elements relevant to the situation at the time when the event giving rise to the damage occurs (whatever they may be⁹⁷) were located within the Member States (excluding Denmark⁹⁸) should enlarge their scope. Further, if Community law has an overriding mandatory effect, irrespective of the law otherwise applicable to the non-contractual obligation, Art 16 of the Rome II Regulation⁹⁹ suffices to ensure that it takes priority.

13.33  This leads to the question as to how Art 14(3) works when the test that it lays down is satisfied. On one view, it simply clears the way for Community law to be applied to a particular situation if (and only if) it would have applied but for the parties’ choice of law, whether as part of the otherwise applicable law or, if the law of a non-Member State would otherwise apply, as an overriding mandatory provision of the law of the forum (this last possibility explaining, with reference to EC directives, the words ‘where appropriate as implemented in the Member State of the forum’¹⁰⁰). On the other hand, Art 14(3) could itself be argued to operate as a rule of applicable law giving overriding effect to Community law in all situations and referring (in the case of directives) to the implementing legislation in the forum State, irrespective of whether another Member State’s law would otherwise apply to the non-contractual obligation. This outcome is difficult to defend, but the possibility that Art 14(3) will be taken to have this effect cannot be excluded.¹⁰¹

13.34  Art 14(1) presents two options in terms of the timing of the parties’ agreement. First, after the event giving rise to damage, any parties may choose the law applicable to non-contractual obligations arising between them as a result of that event (Art 14(1)(a)). Secondly, before the event giving rise to damage, parties pursuing a commercial activity may choose the law (p. 560) applicable to non-contractual obligations between them by an agreement freely negotiated (Art 14(1)(b)). The references in Art 14(1)(a) and (b) to ‘event giving rise to damage’ must not be understood as restricting Art 14(1) to non-contractual obligations arising out of tort/delict. Instead, ‘damage’ must, in accordance with Art 2(1), be taken to refer to ‘any consequence arising out of tort/delict, unjust enrichment, negotiorum gestio‎ or culpa in contrahendo‎’. On this basis, the ‘event giving rise to damage’, although not separately defined in Art 2, should be taken to refer:

1. (a)  in the case of tort/delict, to the act, omission, or other event for the consequences of which the defendant, or a person for whose acts the defendant is liable, is claimed to be responsible;¹⁰²

2. (b)  in the case of unjust enrichment, to the event (normally a transfer of value from the claimant) giving rise to the defendant’s enrichment;¹⁰³

3. (c)  in the case of negotiorum gestio‎, to the intervener’s act;¹⁰⁴

4. (d)  in the case of culpa in contrahendo‎, to the act in the course of dealings prior to the conclusion of a contract for the consequences of which the defendant is claimed to be responsible.¹⁰⁵

13.35  The reference to the time of the event giving rise to damage does not require that a dispute has arisen between the parties, or even that the parties are aware of that event. Nevertheless, it is to be expected that agreements of this kind will usually be concluded after a dispute has arisen, and in contemplation of litigation.

13.36  There is no reason, in principle, why an agreement of this kind cannot be made by an exchange of pleadings during litigation. Art 14(1) requires, however, that the parties’ choice must be expressed or demonstrated with reasonable certainty by the circumstances of the case, and this may require some caution on the part of Member State courts. If, in a case involving a non-contractual obligation, the claimant asserts that the ‘law of Y applies to this claim’, the primary purpose of that statement is to assert that this is the law that applies to that obligation under the rules in Chapters II and III (p. 561) of the Rome II Regulation. It may be, however, that the statement can also be taken as an offer, if the defendant will agree, to fix the law applicable by reference to Art 14(1) of the Regulation.¹⁰⁶ If, therefore, the defendant positively admits that the law of Y applies, that would arguably be enough to demonstrate with reasonable certainty a binding agreement between the parties to that effect. If the defendant responds to that assertion, without admitting that the law of Y applies, there can be no agreement. If the defendant does not respond, he should not, it is submitted, be treated as having agreed that the law of Y should apply under Art 14 of the Regulation, even if the rules of pleading treat his failure to respond as a deemed admission.¹⁰⁷

13.37  Art 14(2)(b) requires all of the parties to the agreement (13.09 above) to be pursuing a commercial activity. That test must be satisfied with reference to the time, and having regard to the subject matter, of the agreement. For these purposes, ‘commercial activity’ should be considered to include any activity with a commercial or professional purpose. The absence of a reference to ‘professional activity’, in contrast to both Art 15 of the Brussels I Regulation and Art 6 of the Rome I Regulation, should not be taken to require a distinction to be drawn between those acting commercially and those acting in the pursuit of a profession. As Recital (31) and the Commission Amended Proposal makes clear,¹⁰⁸ the conditions imposed by Art 14(2)(b) are intended to protect weaker parties, primarily consumers and employees, and should not apply to commercial or professional contracts.¹⁰⁹ The ECJ’s case law concerning the consumer contract provisions of the Brussels Convention also suggests that, if a person acts partly for commercial or professional purposes and partly for his own private purposes, the commercial purpose should predominate, unless it is so limited as to be negligible in the overall context of the agreement.¹¹⁰

13.39  Accordingly, it appears that this wording was intended to exclude situations in which a choice of law provision was imposed by one party on another without giving the other a reasonable opportunity to negotiate the terms of that provision. It should not be taken to have any wider meaning, as requiring (for example) the absence of misrepresentation or any other factor affecting consent. These are primarily matters for the law applicable to the agreement.¹¹⁴

13.41  Accordingly, the fact that a contract containing a provision dealing with the law applicable to non-contractual obligations is in a standard form (e.g. a market standard for a specific type of market instrument) will not automatically take it outside Art 14(1)(b) if every party had an opportunity to influence its terms, and in particular the choice of law provision.¹¹⁷ The person presented with that form of agreement need not have taken up that opportunity. Indeed, in practice, there may be no discussion of boilerplate provisions such as jurisdiction and choice of law provisions. If, however, the party who presents a form of contract states, at the outset, that the choice of law provision or the boilerplate language generally is ‘nonnegotiable’, that may provide a strong indication that the agreement as to the law applicable was not ‘freely negotiated’ under Art 14(1)(b) of the Regulation.

13.42  Under Arts 31 and 32, the Regulation shall apply from 11 January 2009 to ‘events giving rise to damage which occur after its entry into force’. The uncertainty generated by these provisions as to the temporal effect of the Regulation has been discussed in Chapter 3.¹¹⁸ Art 14 raises its own problem, as to whether the rules that it contains should apply to determine the effectiveness of agreements as to the law applicable to non-contractual (p. 564) obligations concluded before 11 January 2009, or whether pre-existing national rules (for example, those under German and Dutch law to which the Commission referred¹¹⁹) should continue to apply. There appear to be strong reasons for applying Art 14 in all cases.¹²⁰ First, unlike the Rome Convention and the Rome I Regulation,¹²¹ the temporal effect of the Rome II Regulation is not defined by reference to the date of conclusion of an agreement. Secondly, although it seems correct to test the validity of such agreements by reference to the circumstances prevailing at the time they were entered into and by reference to the law applicable to them under the Rome I Regime,¹²² such agreements operate in a procedural context in relation to the enforcement of non-contractual obligations before Member State courts. The principal consequence of an agreement of this kind occurs when a Member State court seised of a dispute is asked to determine the law applicable to a non-contractual obligation in accordance with the rules contained in the Regulation, at which time the existence of an agreement within Art 14(1) may constitute one of several possible connecting factors pointing towards application of the law of a particular country. The date of that determination should, therefore, be the relevant date for the purposes of considering the effectiveness of the parties’ choice of law. Very similar reasoning was deployed by the ECJ in Sanicentral v Collin¹²³ in rejecting the argument that pre-existing national rules should continue to determine the validity of a choice of court agreement entered into before the coming into force of the Brussels Convention. Thirdly, the continued application of national rules to agreements concluded before 11 January 2009 would result in wide differences in approach between Member States, jeopardizing the uniformity that the Rome II Regulation seeks to achieve. Some Member States do not validate such agreements at all; others impose conditions as to the nature of the agreement¹²⁴ or its timing.¹²⁵ That disparity of approach is unacceptable, particularly as non-contractual obligations may for many years continue to arise in relation to agreements concluded before 2009.

13.43  The recognition that parties in a commercial relationship may choose the law applicable to non-contractual obligations arising between them not only after but also before a dispute has arisen is undoubtedly one of the key defining features of the Rome II Regulation, which will likely give it a wider resonance internationally. It has been applauded by some, but criticized by others. One commentator has gone as far as suggesting that, as a result of Art 14:¹²⁶

[P]arty autonomy has thereby become the primary conflicts rule for non-contractual claims in the commercial sector. No doubt, legal certainty for the parties is the winner.

13.44  On the other hand. Professor Symeonides regrets what he sees as ‘only minimal scrutiny’ of fairness of ‘pre-tort’ agreements on applicable law and suggests:¹²⁷

As with some other freedom-laden ideas, Article 14 may well become the vehicle for taking advantage of weak parties, many of whom are ‘parties’ to ‘commercial’ relationships. The argument that the ‘mandatory rules’ of paragraphs 2 and 3 of Article 14, or the ordre public‎ exception of Article 26 will protect the weak parties is overly optimistic because of the high threshold these provisions require before they become operable.

13.45  It may, however, be questioned whether either of these predictions will be realized, at least in the short term. On the one hand, commercial practice concerning the drafting of agreements will likely take some time to adjust to the newly created freedom to choose the law applicable to non-contractual obligations. On the other, the application of national rules concerning consent to a choice of law provision and restrictions on party autonomy that Art 14 contains, particularly for ex ante‎ agreements, appear more than sufficient to enable courts to protect weaker parties against the abuse of a dominant bargaining position.(p. 566)