Mathilde Codazzi, who is a master student at the university Paris II Panthéon-Assas, contributed to this post.
In a judgment of 9 February 2022, the French Cour de cassation ruled that the “relationship existing between the parties” required by Article 10(1) of the Rome II Regulation in order to apply the law governing this relationship to a claim of unjust enrichment cannot be found in a contract existing between one of the parties to the non-contractual obligation and a third party, nor in the performance by a party of obligations arising from mandatory provisions of the law applicable to the said contract.
Article 10(1) of the Rome II Regulation reads:
If a non-contractual obligation arising out of unjust enrichment, including payment of amounts wrongly received, concerns a relationship existing between the parties, such as one arising out of a contract or a tort/delict, that is closely connected with that unjust enrichment, it shall be governed by the law that governs that relationship.
Background
Pursuant to a decision of German courts, a German notary was ordered to pay damages to a French bank for failure to comply with his obligation of due diligence (‘obligation de vigilance’: the judgment does not elaborate on this point). The notary’s claim against his civil liability insurer, German company HDI Versicherung, was rejected on the ground that the insurance contract did not cover damage intentionally caused by the insured party. However, pursuant to a German federal statute which requires the insurer to compensate even such damage, HDI Versicherung still compensated the bank. HDI Versicherung then sought to recover from the notary’s professional society (Chambre des notaires) and its insurer, but its claim was rejected by German courts on the ground that it had not been brought within the contractual time period. HDI Versicherung eventually brought a claim for unjust enrichment against the bank in France to obtain restitution of the amount paid under § 812 of the German Civil Code.
Ruling of the Metz Court of Appeal
In a judgment of 30 June 2020, the Court of Appeal of Metz ruled that German law applied to the action for restitution of payment wrongly received pursuant to Article 10(1) of the Rome II Regulation, on the ground that the compensation was paid by reason of the relationship existing between HDI Versicherung and the notary and of the event giving rise to the damage suffered by HDI Versicherung and the notary was governed by German law, and that the payment had occurred pursuant to mandatory provisions of German law.
The bank appealed and argued that German law cannot apply to the non-contractual obligation between the notary’s insurer and the bank as there was no existing relationship between them.
Ruling of the Cour de Cassation
The French Supreme Court ruled that neither a contract concluded by one of the parties to the non-contractual obligation with a third party, nor the performance of obligations imposed by mandatory provisions of the lex contractus of that contract could characterize the “relationship existing between the parties” in the meaning of Article 10(1) of the Rome II Regulation. Hence the law governing the contract could not apply to the unjust enrichment claim.
It held:
the relationship existing between the parties to the non-contractual obligation cannot result from a contract concluded by one of the parties with a third party, nor from the performance by a party of obligations arising from the contract imposed by the law applicable to this contract.
Assessment
The scope of the judgment is narrow. The only issue before the Court was whether the lower court had properly applied Article 10(1). The language of the provision clearly clearly limits its scope to existing relationships between the parties to the quasi-contractual claim. The lower court had applied it outside of its scope, and was wrong for this reason alone.
It would have been good to know how the Cour de cassation would have applied the other paragraphs of the Article 10, but it did not need to for the purpose of deciding the appeal, and unsurprisingly did not.
Article 10(2) provides for the application of the law of the common habitual residence of the parties, and was thus irrelevant for this case as well. Article 10(3) then provides for the application of the “law of the country in which the unjust enrichment took place“. It seems clear that this would have designated France, where the French bank had received the payment.
Finally, Article 10(4) provides for a common and general exception clause. In this context, it seems that the contract between HDI Versicherung and the notary should have been highly relevant. Article 10(4), however, provides that the exception clause should only be applied if the non-contractual obligation arising out of unjust enrichment would have been manifestly more closely connected with a country other than the country otherwise designated under Article 10. Would it be so in this case?
The case is one of those cases in which the special rule of article 10(1) cannot be applied because the enrichment is unrelated to a pre-existing obligatory relationship between the enriched party and the impoverished one.
Other examples concern physical “accession, union, admixture, specification” in real rights.
Here the rule was not applicable as a consequence of the triangular relationship between the different parties involved (a result of the intertwined relationships which gave rise to the enrichment).
As you recall, all cases for which Art. 10(1), does not apply, fall under paragraphs (2), (3) and (4) of Article 10, which list a series of other connecting factors. These are not presented in a hierarchical order since article 10(4) may well overcome all others (in conformity with the philosophy of the Regulation). It is a real pity that the French Court abstains from identifying French law as competent by virtue of Article 10(3) since – leaving a doubt – it allows future decisions applying German law on other grounds of Article 10. If it were the case, and German law were consider applicable, this decision would have caused a damage to the German party, beyond appearing at odds with basic principles of procedural economy.
I also wish the court had addressed the issue of the applicable law under other provisions, but to its credit, it probably required findings of facts that it could not make. This was clearly the case for the application of the exception clause, and also possibly for the determination of the place of enrichment: should it be the place of the residence of the recipient of the payment? Should it be the place where the account on which the payment was made was held? The Cour de cassation could probably not simply apply those rules without the relevant factual information.