CJEU Adds Requirements for Application of Overriding Mandatory Provisions
On 5 September 2024, the CJEU delivered its judgment in HUK-COBURG-Allgemeine Versicherung II (Case C-86/23) and established a number of requirements limiting the application of overriding mandatory provisions under Article 16 of the Rome II Regulation.
The judgment makes it clear that the Court considers that these new requirements are equally applicable in the context of the Rome I Regulation.
Background
In 2014, a Bulgarian woman died in a car accident in Germany. Her husband was driving the car and was intoxicated. Both were residents in Bulgaria, but their daughters lived in Germany, and the car was insured in Germany.
The German insurer only offered € 5,000 to the daughters (there are some inconsistencies in the judgments of the CJEU in this case: one refers to the daughters of the victim, the other to the parents of the victim) for their psychological loss. The daughters initiated proceedings in Bulgaria and relied on a Bulgarian statute which is much more generous for secondary victims and could result in compensation of around € 60,000.
Under the Rome II Regulation, however, German law applied as the law of the place of the damage. The Bulgarian statute could apply as an overriding mandatory provision, however. The Bulgarian Supreme Court asked the CJEU whether it could apply Bulgarian law on this ground.
Judgment
The judgment is important, because the CJEU answers that there are a number of requirements for characterising a national statute as an overriding mandatory provision, and that most of these requirements do not appear in the text of Article 16.
Proximity
The CJEU first establishes that overriding mandatory provisions can only be applied if there are sufficient geographical connections between the case and the forum.
In this case, Bulgarian courts should thus verify whether the case is sufficiently connected to Bulgaria. The Court does not say, however, that the case should be more closely connected to Bulgaria than Germany.
The requirement is, to my knowledge, novel. However, in practice, an overriding mandatory provision should define, either expressly or implicitly, its geographical scope, and thus rely on a connecting factor. Which should typically satisfy the requirement.
Is it Enough to Apply German law?
The second requirement is that the forum should verify whether the application of the overriding mandatory provision is absolutely necessary to achieve its goal. This is not new, but the Court draws a novel consequence from this obligation: the forum should verify whether the application of the law designated by the choice of law rule (here, art 4 Rome II) suffices to achieve the goal served by the mandatory provision.
This novel consequence is very interesting from a doctrinal point of view. It leads to the conclusion that overriding mandatory provisions are not rules of immediate application, but only rules of necessary application. The forum should not apply such rules simply because the protected interest dictates it. It should first look at the foreign law and check whether its application also serves the relevant interest.
Public interest
The third requirement is borrowed from the Rome I Regulation. Overriding mandatory provisions should be applied to protect a public interest. The CJEU rules that this does not exclude that such provisions aim at the protection of the individual interests of a category of persons, but the forum should then verify that these individual interests correspond to a public interest.
Special case: transposition of EU Directives
Finally, the CJEU recalls its decision in Unamar, but clarifies that, in this case, the relevant rules are not transposed from an EU Directive.
Thanks. Not a million miles away from Boys v Chaplin [1971] AC 356). The law of the relevant place allows damages for physical injury and medical expenses, but as to anything else, basically tells the claimant to grin and bear it (no damages for pain and suffering under the law of Malta; little, and maybe no, damages for psychological harm in German law). The court trying the case simply rebels at what it sees as an intolerable state of affairs when this foreign law is to be applied to a local victim. The Court seems well aware that there is nothing it can do to prevent the local court applying its own law; the ‘tests’ it prescribes for application are more face-saving than they are substantial, and they are such that the local court can simply, er, confirm that they are all satisfied before proceeding to do what it was always going to do. Sub sole nihil novum.
Thanks for your comment, Adrian.
I deliberately avoided to focus on the particular case and facts. I think that the Bulgarian courts will not find that they are terribly constrained by the judgment and will easily justify the applicability of Bulgarian law. Which is why, I think, the judgment is really important for the abstract requirements it lays down, which are likely to be litigated for years in very different cases where they might constrain courts…
A very civilian way of looking at it, I guess, not terribly focused on the ratio decidendi !
Thanks for the interesting post. I have expressed a similar view in my monograph (Place of Performance, Hart, 2020) that the provisions of Article 9(3) of Rome I can only apply where there is proximity.
Thanks Chukwuma. Note that the reason why the judgment is important is that it is concerned with overriding mandatory provisions of the forum, i.e. Art. 9(2). The application of foreign mandatory provisions is so controversial that there was always going to be many requirements. Indeed, Art 9(3) expressly provides that the mandatory rule should be one of the country of performance (courtesy of the British).