On 22 July 2003 the European Commission adopted a Proposal, known as Rome II, for a Regulation governing conflict of laws for non-contractual obligations. The Proposal will be of particular significance for online publishers concerned about their exposure to foreign claims for defamation, invasion of privacy, intellectual property infringement and other similar liabilities.
The internet, because of its inherent cross-order reach, presents the most difficult issues in conflict of laws today. Traditional rules were written on the basis of assumptions that no longer apply in the online world. Yet, extraordinarily, the discussion in
Rome II contains not a single mention of the internet or e-commerce. This lack of e-awareness will disappoint the online community, who can be expected to redouble their efforts to ensure that law reform in this area is e-friendly. The online business community will be supporting country of origin-oriented rules, which limit their exposure to foreign laws, and resist country of destination-oriented rules.
Rome II is a parallel project to the Commission Green Paper adopted on 14 January 2003 setting out options for a Regulation defining choice of law rules for contractual obligations (‘Rome I’).
The Rome II Proposal addresses liabilities including intellectual property, unfair competition, defamation, privacy and product liability.
The proposed general rule is that the applicable law would be that of the country in which the damage arises or is likely to arise, irrespective of (a) the country in which the event giving rise to the damage occurs and (b) the country in which the indirect consequences of the event arise. This is a destination-oriented rule. The significant factor would be the place of damage, which logically would be the country in which the plaintiff had a reputation. If more than one, the law of each country in which damage occurred would apply to the damage suffered in that country.
Two general exceptions are proposed. First, if claimant and defendant both have their habitual residence in the same country when the damage occurs, the non-contractual obligation would be governed by the law of that country. Second, notwithstanding the general rule and the habitual residence exception, if the ‘centre of gravity’ of the dispute is more closely connected with another country, the law of that country shall apply. This occurs if it is clear from all the circumstances of the case that the non-contractual obligation is manifestly more closely connected with another country.
While stopping short of permitting parties who have a pre-existing relationship to pre-agree a choice of law for non-contractual obligations, the proposal states that a manifestly closer connection may be based on a pre-existing relationship such as a contract that is closely connected with the non-contractual obligation.
The general rules are proposed to apply to violations of privacy and rights of personality (including defamation), but with a further qualification. The qualification is that the law of the forum shall apply where the application of the law resulting from the general rules would be contrary to the fundamental principles of the forum as regards freedom of expression and information.
Online publishers keen to see country of origin-oriented rules will view with concern the proposed application of the general rules to defamation and privacy.
The general rules would not apply at all in a number of specific cases for which the Proposal suggests special rules. These include unfair competition and intellectual property.
For the purposes of the Proposal unfair competition includes a wide variety of wrongs including passing off, breach of confidence and inducing breach of contract, as well as claims for unfair competition in those countries that recognise such a cause of action. The Commission proposes that the applicable law be that of the country where competitive relations or the interests of consumers are or are likely to be affected. This is palpably a destination-oriented rule.
The proposed rule for national intellectual property rights is that the applicable law shall be that of the country for which the protection is sought. For unitary rights such as the Community Trade Mark or Community Designs, the applicable law is that set out in the relevant Community legislation or, failing that, the law of the Member State in which an infringing act has been committed.