Case law Developments in PIL

On the Application of the Rome I Regulation to Highway Tolls – When Germans Travel to Hungary…

… they sometimes forget to buy the compulsory toll ticket (“e-vignette”) in advance or make mistakes when filling out the online form. The company collecting the Hungarian toll – which is incorporated as a plc under Hungarian law – proved to be unforgiving and regularly sues the owners of the cars in German courts.

Twice was the German Federal Court called upon to decide on such actions in a relatively short timespan (judgments of 28 September 2022 – press release discussed by Matthias Weller here – and of 7 December 2022). Both rulings are of particular interest for our blog because the Court applied the Rome I Regulation.

Scope of Application of Rome I

The first issue the Federal Court had to decide was whether the actions were “civil and commercial matters” in the sense of Art 1(1) Rome I. This question had already been answered in the affirmative by the CJEU in another case (C-31/21, Nemzeti Útdíjfizetési Szolgáltató Zrt. v NW), testifying to the serious troubles Germans are in when not driving on their Autobahn.

Contractual Obligation

The second issue was trickier: Was there a contractual obligation?

The Federal Court argues that contractual obligations can arise from the simple act of driving over the highway, which can be constructed as the acceptance of an offer made by the toll service company to enter into a contract. The CJEU had decided as much for the use of a railway (C-349/18 to C-351/18, Nationale Maatschappij der Belgische Spoorwegen (NMBS) v Mbutuku Kanyeba and Others, para 37). It is hard to see why it should be different for highway usage.

The Contract Type

One may wonder which of the categories listed in Art 4(1) Rome I fits the contract over the usage of a highway: Is it a service contract, a tenancy, or another one?

The Federal Court cuts short this debate by underlining that both Art 4(1)(b) and Art 4(2) Rome I will lead to the application of Hungarian law. Undoubtedly, the characteristic performance is provided here by the toll payment company, not by the user. That the contract involves the tenancy of immovable property seems far-fetched, but even so, Art 4(1)(c) Rome I would have yielded the same result.

The Party Bound by the Contract

The Hungarian toll payment service company had not sued the driver, but the person on whose name the car was registered. The question thus arose whether the alleged liability was based on “obligations freely assumed by the defendant towards the claimant”, as required for a contractual obligation (see CJEU, C-334/00, Tacconi).

The Federal Court overcomes this obstacle by leaving it to the law applicable to the contract to decide who is debtor and creditor. It bases this view on Art 12(1)(b) Rome I, according to which the “performance” falls into the scope of this law. According to the Federal Court, this also encompasses the definition of the persons bound by the contract.

While this may be true, it would go too far to allow the law governing the contract to draw any person into its scope. This would be fundamentally incompatible with the requirement of a freely assumed obligation.

In the end, one cannot ignore the practical need to be able to sue the person in whose name the car is registered, as the driver will mostly be unknown. But perhaps this need could as well have been filled by non-contractual liability, which would have resulted in the applicability of the Rome II Regulation.

Punitive Damages?

The most disputed point of both cases concerned the amount that was claimed. Since the defendants had not acquired a proper ticket in advance, they were charged a price that was three times higher than the normal toll. Since in addition they let pass a deadline of 60 days after the first payment reminder, they also had to pay another fee, ratcheting up the bill to 20 times (!) of the normal ticket price.

The defendants claimed that these rules of Hungarian law would violate German public policy. Yet, the Federal Court sees this differently. First, it underlines that German public policy must be applied “in a restrictive manner” in relation to the law of another EU Member State. Second, the Federal Court points out that the relativity of public policy mandates restraint when invoking it, as the case bears only tenuous relations with Germany and all of the facts happened in Hungary.

Most importantly, the Federal Court rejects the defendants’ claim that the additional fees would amount to “punitive damages”, which are incompatible with German public policy. It characterises the increased price not as a penalty, but instead sees the original ticket price as a discount for early payment. Furthermore, it takes the view that the increase of the ticket price in case of later payment is justified by the additional administrative burdens and risks of the toll collection company in enforcing the claim against the user. Most interestingly, the Court also explicitly acknowledges that it is in the legitimate interest of the toll collection company to incentivise voluntary prepayment.

Finally, the Court does not take issue with the second fee, even though it was 20 times higher than the original ticket price. The Court characterises this fee as a (first) contractual penalty. It recalls that such fees are not unusual in German public transport, and thus can hardly be seen as incompatible with German public policy.

Currency of Payment

Although it confirmed the lower courts’ judgments on all other points, the Federal Court nevertheless vacated them because they had awarded payment in euros to the claimants. The Federal Court highlights that the Hungarian toll laws only provide for claims in Hungarian forint, not in euros. It sent back both rulings to the lower courts to enquire whether there are any additional rules of Hungarian law that allow conversion of the debt into a foreign currency.

Final Word

Besides shedding light on a number of aspects of the Rome I Regulation, both cases are also illustrative of a wider point. The German courts have lent a helping hand to the Hungarian toll payment services company in collecting unpaid fees. They have withstood the German residents’ anger over seemingly outrageous Hungarian fees by pointing out that such fees are not incompatible with the German legal system. Even though it is bad news for car drivers, it proves that judicial cooperation in the EU is working.

— Thanks to Paul Eichmüller and Verena Wodniansky-Wildenfeld for reading and commenting a draft of this post.