Case law Developments in PIL

Swedish Supreme Court: CMR Takes Precedence Over the Rome I Regulation

In a judgment of 14 June 2022 (case T 3379-21) the Swedish Supreme Court held that the United Nation’s 1956 Convention on the Contract for the International Carriage of Goods by Road (CMR) takes precedence over the Rome I Regulation on the law applicable to contractual obligations and that the Convention shall be applied as implemented in the forum State.

CMR contains uniform substantive rules for transport contracts and is applied by all EU Member States as well as several other States around the world. Article 1 of the CMR states that the Convention is applicable to international road transport agreements when either the State from where the goods is transported or the State that is designated for delivery is a CMR State. In practice, the CMR applies to a very large share of road transport contracts in the EU. Nonetheless, it is not exactly clear what relation the CMR and the Rome I Regulation have with each other. Shall the CMR be applied “directly” without the application of the Rome I Regulation or must first the law applicable according to the Rome I Regulation be determined to see e.g. with what potential national reservations the CMR shall be applied?

This issue arose for the Swedish Supreme Court in a dispute over a carrier’s liability for a transport of cigarettes that were stolen during a transit storage. As the theft triggered Swedish excise duty on tobacco for the sending party, the substantive issue was whether the excise duty expenses should be reimbursed by the carrier. It is here noteworthy that out of the 154.565 Euros that the dispute was about, 135.325 Euros were compensation for excise duty and 19.240 Euros were compensation for the loss of the goods.

The extent of the carrier’s liability is regulated in Article 23 of the CMR. According to a compilation of international case law made in the Swedish court of appeal’s judgment, this carrier liability has been interpreted differently in contracting states. Whereas e.g. the UK and Denmark have held carriers to compensate also for excise duties, Germany and the Netherlands have applied a more restrictive approach only allowing for compensation that directly relates to the transport (not including tax levied after theft). In this perspective, an application of the CMR under Dutch law would most probably follow the restrictive approach applied by the Dutch courts. If the CMR was to be applied under Swedish law, the liability issue was more unclear.

In its judgment, the Swedish Supreme Court noted that it normally is the Rome I Regulation that determines the law applicable for contractual disputes in Swedish courts. For the relation between the Rome I Regulation and international conventions, Article 25(1) of the Regulation contains a special conflict rule that gives precedence for multilateral conventions that were already in force when the regulation was adopted under the condition that the convention “lay down conflict-of-law rules relating to contractual obligations”. As the CMR is a multilateral convention that existed when the Rome I Regulation entered into force, a question for the Swedish Supreme Court was whether it also contained a conflict of law rule relating to contractual obligations.

Article 1(1) of the CMR contains a rule on the scope of application for the convention. This rule states that the convention shall be applied to

every contract for the carriage of goods by road in vehicles for reward, when the place of taking over of the goods and the place designated for delivery, as specified in the contract, are situated in two different countries, of which at least one is a contracting country, irrespective of the place of residence and the nationality of the parties.

With references to the Swedish preparatory works from the 1960s and 1970s relating to the Swedish accession to the CMR, the Supreme Court noted that the Swedish legislator had understood the named article as a conflict-of-law rule. The Supreme Court concurred to the legislator’s understanding and added that Article 1 of the CMR can be seen as a unilateral conflict-of-law rule. The fact that not a single Member State notified the CMR as such a convention that could have precedence under Article 25 of the Rome I Regulation back in 2009 when the Regulation was to enter into force, was not mentioned by the court.

Regardless of whether unilateral conflict-of-law rules take precedence according to Article 25, the Supreme Court referred to the CJEU’s judgment in TNT Express Nederland to interpret the meaning of Article 25 in the Rome I Regulation.

In TNT Express Nederland, the CJEU ruled on Article 71 of the old Brussels I Regulation (44/2001), which concerns that regulation’s relationship with international conventions. The CJEU held then that the lis pendens rules in the CMR could take precedence over the Brussels I Regulation on the ground that the lis pendens rules of the Convention

are highly predictable, facilitate the sound administration of justice and enable the risk of concurrent proceedings to be minimized and that they ensure, under conditions at least as favourable as those provided for by the regulation, the free movement of judgments in civil and commercial matters and mutual trust in the administration of justice in the European Union.

Clearly inspired by the TNT Express Nederland judgment, the Swedish Supreme Court held that also the conflict-of-law rules in a convention shall have precedence over the Rome I Regulation if that leads to a high degree of predictability, facilitate the sound administration of justice and ascertains the EU goals on free movement and mutual trust between the judicial authorities under conditions at least as favourable as those provided for by the Rome I Regulation.

With this, in my opinion, somewhat bold analogy from the TNT Express Nederland case, the Supreme Court concluded that CMR takes precedence over the Rome I Regulation and that CMR shall be applied as it has been implemented according to lex fori. In other words, the Swedish Supreme Court applied the CMR without determining the law applicable according to the Rome I Regulation.

In substance, the choice-of-law matter did not affect the liability issue. Just like what was reported to be the case in the Netherlands, also the Swedish Supreme Court embraced the restrictive approach when interpreting Article 23 of the CMR. Therefore, the carrier was not held liable to pay the expenses for the excise duty on tobacco. Even if that conclusion might have been the same under Dutch law, this conflict of public and private international law raises issues that are not just theoretically interesting.

In the Swedish Supreme Court’s case the matter was clearly at heart of the substantive rules of the CMR. However, conventions tend often not to be so thorough that there are no gaps that need to be filled out. Also states ratify conventions with different reservations. In my opinion, these aspects call for at least a subsidiary application of the private international choice-of-law rules.

To me, it is unfortunate that the CJEU was not given a chance to have a say on the interplay between conventions and the Rome I Regulation. A clarifying judgment on this matter would improve predictability for international civil and commercial matters in the EU.

1 comment on “Swedish Supreme Court: CMR Takes Precedence Over the Rome I Regulation

  1. Pietro Franzina

    Thanks a lot, Erik, for reporting on this. I wonder why the Swedish Supreme Court did not approach the matter from the angle of Article 351 TFEU, rather than Article 25 of the Rome I Regulation.

    According to Article 351(1) TFEU, “[t]he rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more Member States on the one hand, and one or more third countries on the other, shall not be affected by the provisions of the Treaties”. Sweden became a party to the CMR in 1962, i.e., well before it joined the EU, in 1995. This means that nothing in the law of the Union (not just in the Rome I Regulation) prevents Sweden from applying the CMR to any situations within the scope of the CMR itself, regardless of the nature and function of the provisions laid down in the CMR, that is, regardless of whether the CMR should be understood to be a convention that “lays down conflict-of-law rules”.

    The question remains of whether recourse to Article 351 TFEU would be appropriate, in a case like this, in other Member States, namely a Member State for which the CMR entered into force after 1 January 1958. It is unclear, at least to me, whether Article 351 TFEU should be understood to refer to 1 January 1958 regardless of the subject matter of the international agreement concerned. One may argue, in fact, that, when it comes to agreements relating to private international law, the relevant date should not be 1 January 1958 (i.e., when the EEC was born) but rather 1 May 1999, i.e., the date of the entry into force of the Treaty of Amsterdam: the reason for this is that, until the latter date, the Union (or the Community, as it was then) did not have any competence in the field of judicial cooperation in civil matters. Actually, until the Treaty of Amsterdam became effective, Member States of the Union were free, as a matter of EU law, to engage into international relations with third State in the field of private international law: it would be har to understand why the international agreements concluded in this area between a Member State and a third country between 1958 and 1999 would lose, retrospectively, the benefit of Article 351. If indeed Article 351 were to be understood as meaning that, in private international law, the relevant date is 1999, rather than 1958, then all Member States, except for Malta (which joined the EU in 2004 and the CMR in 2007), would be able to assert the primacy of the CMR over EU law (and the Rome I Regulation) based on Article 351 TFEU.

    But let us forget about 351 TFEU for a moment. Would Article 25 of the Rome I Regulation lead to a different outcome? I understand that the reason why the CMR is seen, in the reported ruling, as a convention that lays down “conflict-of-law rules” is that Article 1(1) of the CMR, the purpose of which is to set out the conditions of applicability of the CMR itself, is supposedly (or can be equated to, or works like) a conflict-of-law rule. I don’t believe this line of reasoning, which is not new in itself, is persuasive.

    Whether a convention is one that lays down “conflict-of-law rules” within the meaning of Article 25 of the Regulation depends, of course, on how one reads the latter term. I guess the term “conflict-of-law rule” should be interpreted autonomously. Under an autonomous interpretation, one should understand the expression “conflict-of-law rule” to have the same meaning for the purposes of Article 25 of the Rome I Regulation and for the purposes of Article 81(2)(c) TFEU, which is the rule whereby “the European Parliament and the Council … shall adopt measures … aimed at ensuring … the compatibility of the rules applicable in the Member States concerning conflict of laws …”. This entails that, if the CMR were to be classified among the conventions that lay down “conflict-of-law rules” for the purposes of Article 25 of the Rome I Regulation just because it approaches the issue of its own applicability through a rule that operates like a (unilateral) conflict-of-law rule, one would need to conclude that the Union’s competence to deal with “conflicts of laws” pursuant to Article 81(2)(c) encompasses the power to adopt rules of uniform substantive law, provided only that the applicability of those rules rests on a conflict-like logic.

    If this were right, than the external competence of the Union in the field of judicial cooperation in civil matters would include, in accordance with the co-called ERTA principle and consistent with the rules (and case law) on the Union’s external powers, the power to conclude and/or manage of any international convention laying down uniform rules of substantive law whenever the applicability of such conventions builds on a rule, like Article 1 of the CMR, that recalls the operation of a (unilateral) conflict-of-law rules. Several conventions, including the CISG, would fit into this picture.

    As mentioned above, I don’t consider this outcome would be correct. While I acknowledge that it might be difficult to provide a thorough and clear-cut definition of what a “conflict-of-law rule” is for the purposes of Article 81(2)(c) TFEU and Article 25 of the Rome I Regulation, it seems to me that a distinction must be drawn between substantive harmonisation, on the one hand, and the elaboration of uniform rules aimed on the determination of the applicable law, on the other. The wording of Article 81 and the practice of the EU institutions indicates that Article 81 is concerned, as such, with conflict-of-laws rules in the narrow sense. Admittedly, some substantive harmonisation is possible under Article 81, but only to the extent to which the full achievement of the core aims of judicial cooperation (including the unification of narrow-sense conflict of laws rules) so require.

    If this is true, then Article 25 of the Rome I Regulation should be understood to refer to conventions that lay down rules the purpose of which is to decide conflicts of laws (such as the Hague Conventions of 1955 and 1978 on the law applicable to contracts for the sale of goods, and agency contracts, respectively), as opposed to conventions aimed at harmonising the rules of substantive law. The CMR, being a convention that harmonises substantive law, should accordingly not be characterised, as such, as a convention that lays down conflict-of-law rules. The latter characterisation would make sense, at best, to the limited extent to which the CMR provides that a particular issue be decided in accordance with the law of a given country, as it is the case under Article 32(3).

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