This post was written by Amy Held and Matthias Lehmann.
Prima facie, it does not seem that anyone need be overly concerned about the post-Brexit relationship between the Rome II Regulation and English law. However, such complacency overlooks the continued relevance of the Rome II Regulation, as part of UK domestic law, in the English courts by virtue of s 3(1) of the European Union Withdrawal Act 2018, as amended by reg 11 of the The Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019. These points were recently highlighted by the High Court of England and Wales in Fetch.AI Ltd v Persons Unknown  EWHC 2254 (Comm).
The First Applicant was an English-registered company which alleged that Persons Unknown had, without authorisation, accessed its account with the Binance Exchange and effected a series of transactions at an undervalue, thereby causing it loss in excess of USD 2.6 million. Accordingly, the First Applicant sought several court orders in claims for, inter alia, breach of confidence. As the Respondents were without the English jurisdiction or were otherwise in an unknown location, the First Applicant also required permission to serve proceedings out of the jurisdiction under CPR rr 3.6 and 3.7.
As summarised in Altimo Holdings and Investment Ltd v Kyrgyz Mobile Tel Ltd  UKPC 7;  1 W.L.R. 1804, applications to serve out are subject to a three-limb test. Of these, limb two requires the applicant to show that there is a “good arguable case” against the foreign defendant that falls within the classes of case for which leave to serve out may be given, as set out in PD 6.B para 3.1. In the present case, HHJ Pelling QC (‘the Judge’) was satisfied that there was a good arguable case for breach of confidence, and that the other limbs of the test were made out. Permission was therefore granted.
In this post, we examine from an EU perspective the basis upon which the Judge concluded that, applying Rome II, that English law governed the claim. Our fuller analysis, encompassing an analysis of English substantive law, may be found in Amy Held & Matthias Lehmann, ‘Hacked crypto-accounts, the English tort of breach of confidence and localising financial loss under Rome II’ (2021) 10 JIBFL 708.
The Applicability of Rome II
The Judge referred to the Rome II Regulation (sometimes mistakenly as the “Rome Convention”), given its continued application in the UK pursuant to the EU Withdrawal Act 2018; and considered the bases upon which the English cause of action of breach confidence may properly fall within its scope.
The Judge first (correctly, it is submitted) rejected Article 6 Rome II, distinguishing Shenzhen Senior Technology Material Company Limited v Celgard LLC  EWCA Civ 1293 on the basis that this earlier case concerned a claim for breach of confidence arising from an act of unfair competition within the scope of the Trade Secrets (Enforcement, etc) Regulations 2018. The present case, however, did not concern unfair competition and, in the Judge’s view, Shenzhen Senior Technology Material Company did not form authority for the general proposition under English law and characterisation that all breach of confidence claims fall within Article 6.
The Judge then considered the general rule for tort/delict in Article 4, and found it encompassed a common law claim of breach of confidence. In doing so, the Judge applied the English characterisation of breach of confidence as a common law tort, rather than the civilian characterisation as a privacy or personality rights falling within the exclusion in Article 1(2)(g) Rome II.
Having thus concluded that Article 4 of Rome II applied, the Judge considered the main issue to be identifying “the law of the country in which the damage occurs.” In this respect, the Judge considered the decisive issue to be localising the relevant property, i.e., the cryptocurrency. Citing Ion Science v Person Unknown (Unreported, 21 December 2020) (commentary in A Held, ‘Does situs actually matter when ownership to bitcoin is in dispute?’ (2021) 4 JIBFL 269), the Judge held that the cryptocurrencies were situate at the place where its owner is domiciled. Given that the First Applicant was domiciled in England, the Judge concluded that the relevant property was situate in England. In his opinion, English law therefore governed the proposed claim.
There are at least two issues with this decision from the perspective of Rome II.
First, the approach taken by the Judge in localising loss by reference to the domicile of the owner is inherently circular: identifying the place of damage with the domicile of the owner of crypto assets begs the question of which law determines ownership over crypto assets. This question cannot be answered by referring (again) to the domicile of the owner without entering a vicious circle.
Second, the decision fails to consider the long-standing line of CJEU caselaw that deals specifically with the question of localising financial and/or pure economic damage under the Brussels Ibis Regulation and its predecessors which, pursuant to Recital 7 of Rome II, is to be followed when Rome II applies. As the CJEU ruled in Kronhofer, the ‘place where the damage occurred’ does not “refer to the place where the claimant is domiciled or where ‘his assets are concentrated’ by reason only of the fact that he has suffered financial damage there.” Although the CJEU has given some scope to consider the place of domicile of the injured party (e.g. in Kolassa and Löber), localising pure economic loss nevertheless entails a multifactorial approach taking into account all the facts of the case.
Fetch.AI demonstrates the potential trend for divergence between the CJEU and the English courts as to the application of EU instruments of private international law. As the decision shows, insufficient attention is given even to pre-Brexit decisions of the CJEU, notwithstanding that they are presently binding “retained case law” pursuant to s 6(3) of the European Union Withdrawal Act 2018 on courts in the UK, except the UK Supreme Court, the High Court of Justiciary in certain circumstances, and where Regulations otherwise provide (s 6(4) European Union Withdrawal Act 2018). Accordingly, greater attention should be paid by UK courts to both the express terms of EU instruments of private international law, and the case law of the CJEU on their interpretation.