This is the second in a series of posts aimed to explore the impact of the coronavirus crisis on the phenomena of mobility and exchange that form the constituent elements of private international law, and to discuss the responses that private international law rules provide to the challenges posed by the crisis itself (see the other contributions on the topic by Giovanni Chiapponi and Tomaso Ferrando).
The Covid-19 pandemic is on everybody’s mind. Around the world, countermeasures limit public life and freedom of movement, especially cross-border traffic. This raises the question to which extent Private International Law is relevant and capable of handling this new situation. Here are some provisional thoughts on the potential impact of travel bans and other emergency measures under the Rome I and II Regulation.
Some countries have restricted free movement for persons coming from areas affected by the Corona virus. Austria, for instance, does not allow people coming from Italy into its territory, while the US has just banned travel from Europe. As a result, flights, trains and bus trips have been cancelled.
For courts in the EU (with the exception of Denmark), the law governing these transport contracts is regulated by Art 5 of the Rome I Regulation. The fallback rule is that the law of the habitual residence of the passenger applies (Article 5(2) Rome I). The trickier question, however, is which impact the local law at the place of destination might have on the contract.
EU courts have to search for the answer in Article 9 of the Rome I Regulation. The prohibition to enter the territory of a Member State certainly qualifies as an overriding mandatory rule in the sense of paragraph 1 of the provision. Should the courts of that same Member State decide over the case, they would apply this provision as part of their lex fori (see Article 9(2) Rome I).
The court of another Member State, for instance those of the place of departure, may give effect to the overriding mandatory rules of the state of destination because the contract is to be performed there (see Article 9(3) Rome I). In case the latter has prohibited all travel, this would render the performance of the contract unlawful in the sense of the provision. Mind that the courts of the other states have discretion whether to give effect to the travel ban (see the word “may” in Article 9(3) Rome I).
Cancelled or Postponed Events
The virus has led to the cancellation of events around the world, from congresses to concerts and soccer matches. Usually, the tickets to these events will be subject to the local law where the event takes place.
However, this is not always the case. The parties may have chosen another law (Article 3 Rome I). The consumer protection rules do not interfere with this choice when the event takes place in a state in which the consumer does not have its habitual residence (see Article 6(4)(a) Rome I). In the absence of a choice, the law at the habitual residence of the service provider applies (Article 4(1)(b) Rome I). If it is – as usual – a corporate entity, the law at the place of its central administration governs (Article 19(1) Rome I). These laws may be replaced by that of a branch that has concluded or executed the contract (Article 19(2) Rome I).
If as a result a foreign law governs the contract, the law of the place of the event may be applied as an overriding mandatory rule under the conditions set by Article 9 Rome I. Insofar, the same considerations as for transport contracts apply. Where the law of the event does not call for a full cancellation but rather for some changes, such as a postponement or the shift to another place, this law may be taken into account as the law of the place of performance (lex loci solutionis) under Article 12(2) of the Rome I Regulation.
Cancelled or Delayed Deliveries
Where deliveries of goods were cancelled or postponed, the solution is much the same as for events. The law of the place of performance may apply either as an overriding mandatory provision under Article 9 of the Rome I Regulation or is to be taken into account as lex loci solutionis under Article 12(2) of the Regulation.
An interesting extension of the concept of public policy rules can be observed in China: According to a recent post on Chinese law a Chinese authority is issuing so-called force majeure certificates pretending to absolve Chinese companies from the need to fulfil contracts with foreign parties. The author assumes that courts of the People’s Republic could consider these certificates as part of public policy even in the absence of compulsory government orders.
From an EU viewpoint, the assessment is quite different. European courts apply legal concepts independently of measures taken by administrative authorities. And while compulsory restrictions certainly qualify as overriding mandatory rules, the same is not true for the doctrine of force majeure, which does not meet the requirements of Article 9(1) of the Rome I Regulation.
European courts will therefore follow this concept only where it is part of the law governing the contract, and assess independently whether its conditions are met. They can merely take into account, as a matter of fact, mandatory provisions at the place of performance if the applicable substantive law so allows (see to this effect the ruling of the Court of Justice in Nikiforidis, para 51).
It is hard to identify the source of a Corona infection, but it may not be impossible. A victim may for instance sue the operator of a foreign airport, hospital or hotel for the failure to take appropriate precautions. If both parties are privy to a contract, the law applicable to that contract will decide over the necessary measures, including duties of information and warning in the pre-contractual phase (Article 12 Rome II).
It is also possible that the parties are not contractually bound to each other. Imagine for instance a passenger of a flight suing another passenger who has neglected her infection. Which law applies? EU courts will have to search for the solution in the Rome II Regulation.
A first idea that might spring to mind is to apply Article 7 of the Rome II Regulation, which deals with environmental damages. Yet Recital 24 of the Regulation defines ‘environmental damage’ as ‘adverse change in a natural resource, such as water, land or air, impairment of a function performed by that resource for the benefit of another natural resource or the public, or impairment of the variability among living organisms’. The virus travels mainly by air, but arguably, it does not change this natural resource. Its negative effects are on the health of other individuals. While one may debate this assessment, it seems certain that Corona does not impair fauna’s variation.
Hence the general rule of Article 4 of the Rome II Regulation applies. The first, rather curious, result is that any claim is governed by the law of the common habitual residence of the sick and the infected person (Article 4(2) Rome II). The dispute between two Italian residents flying on a plane from Frankfurt to Moscow would thus be governed by Italian law, unless there is a manifestly closer connection (Article 4(3) Rome II).
If the parties to the dispute reside in different states, then the law of the place where the damage occurred applies (Article 4(1) Rome II). Airplanes are considered as being part of the territory of the country where they are registered. The suit of a Swedish passenger against a Swiss resident arising out of a flight from Stockholm to Geneva in a plane registered in Ireland would thus be governed by Irish law.
Cross-border infections, for instance by sending contaminated goods or livestock, are also governed by the law of the place of damage (Article 4(1) Rome II) or by the common habitual residence of the parties (Article 4(2) Rome II). Mind you, however, that the rules of safety and conduct at the place where the tortfeasor acted have to be taken into account (Article 17 Rome II). Thus, when infected animals are sent from Rome to Paris, the sanitary restrictions of Italian law would have to be considered by a court in the EU. But this is only the case insofar as they “appropriate”, which gives the judges some leeway.
These results can again be influenced by overriding mandatory rules of the forum (Article 16 Rome II). Whether the court can also apply foreign overriding mandatory rules under the Rome II Regulation is subject to dispute. This should however be allowed given that it is also possible under the Rome I Regulation (Article 9(3) Rome I).
These considerations only concern private international law and leave out interesting questions of substantive law, such as those relating to force majeure, frustration or impossibility, which may be decided differently in each Member State. Moreover, it has already been indicated that they are merely provisional thoughts. It remains to be seen in which exact shape and form conflict-of-laws issues will arise from Covid-19.
Several States across the world are putting in place export bans affecting the sale of face masks and other medical devices which are used to tackle the Covid-19 disease or to fight its spread, as a means to safeguard domestic supply (see, e.g, https://www.thelocal.de/20200304/germany-bans-export-of-medical-protection-gear-over-coronavirus; see also https://www.reuters.com/article/us-health-coronavirus-eu/eu-fails-to-persuade-france-germany-to-lift-coronavirus-health-gear-controls-idUSKBN20T166).
One implication of such bans is that, as regards existing contracts, the seller is legally prevented from effecting delivery and does not incur liability for non-performance.
Bans issued by the authorities of the State whose law governs the contract form part of the lex causae and will normally be enforced as such, including in the State of destination. In the issuing State, the bans will be enforced regardless of the law applicable to the contract, as overriding mandatory provisions.
But what if the implications of the ban are to be assessed by a court sitting in a different country, specifically the country of destination? The answer, as observed in Matthias Lehmann’s post, lies – as far as EU Member States are concerned – in Article 9(3) of the Rome I Regulation. The court seised ‘may’ decide to give effect to the ban (notably for the purposes of assessing the seller’s liability) provided that the ban is part of the law of the State where the contractual obligations ‘have to be or have been performed’, and in so far as they render the performance of the contract unlawful. The latter condition is unproblematic. What about the former? How is the “place of performance” of the seller’s obligations to be determined for the purposes of Article 9(3)? If one were to follow the approach used for Article 7(1)(b) of the Brussels I bis Regulation (a view that several scholars reject), that place may well be located in the country of destination in accordance with the CJEU’s Car Trim formula. Article 9(3) would then be of no avail.
Be that as it may, Article 9(3) of the Rome I Regulation provides that, in considering whether to give effect to the overriding mandatory provisions of a third country, ‘regard shall be had to their nature and purpose and to the consequences of their application or non-application’. What factors should guide the courts of the State of destination in this assessment, in the peculiar context of the export bans issued in connection with the Corona Virus? Viewed from the country of destination, export bans might be perceived as expressing a lack of solidarity on the part of the issuing country (especially where the two countries are not affected by the crisis with the same intensity). Would such a perception be an appropriate ground for a decision not to give effect to the export ban in question? Should the court carry out the above assessment in the same way as it would in a ‘normal’ contractual scenario, or should the extraordinary size and impact of the Corona Virus crisis on public health and the economy have a role to play? Maybe Matthias himself, or other readers of the blog, want to provide their views on this.
A good question. Export bans for medical supplies pose an additional problem that I have not considered in my post. You are certainly right that the courts of the Member States in which they were enacted will follow them (although they shouldn’t for the reasons stated below). Courts of other Member States will rarely face the question whether to give them effect as overriding mandatory rules since the place of performance usually is outside of the exporting country (see Art 9(3), first sentence Rome I). The only exception are the few cases in which the importer organises the transport from the exporting country itself. Even in these circumstances, the courts of the other countries would be unlikely to give the ban any effect because of its purpose and the consequences of its application (Art 9(3), second sentence Rome I). Export bans are potentially counter-productive because they risk the spread of the disease in other countries, which will eventually backfire on the state that enacts them. Moreover, they are testimony to a deep lack of solidarity among Member States, putting them at odds with the principle of sincere cooperation enshrined in primary law (see Art 4(3) Treaty on European Union). If Member States risked to be cut off from essential medical supplies in times of crisis, they would need to build up their own national medical industry, which runs against the idea of a Single Market. Fortunately, the EU Commission is already taking action against such unilateral measures. All the more reason for foreign courts to refuse giving effect to such bans. Even the courts of the country imposing such a ban should refrain from following it in light of the primacy of EU law.
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