New EU rules on non-contractual disputes come into force

The new rules will change the way that cross border disputes are resolved. English law previously stated that the law governing a dispute will be that of the country where the events constituting the tort occur. That now changes to the law of the country where the damage occurred or is likely to occur. In other words, damage could occur in a different country than where the events giving rise to that damage actually took place.

Parties to a contract can agree what law will apply in relation to their non-contractual obligations, though there are some exceptions.

"Rome II will, for the first time, ensure that an EU wide approach is taken to the law applicable to non-contractual obligations," said Adrian Wood, an EC Law specialist at Pinsent Masons, the law firm behind OUT-LAW.COM. "Parties will be able to agree an applicable law for many types of commonly encountered non-contractual obligations."

"In the absence of a clause agreeing the governing law for non-contractual claims, the applicable law will, in most circumstances, be that of the country in which the damage occurs. This represents a significant departure from the current approach used in the English Courts," he said.

The new rules will apply to a huge number of cases including claims based on product liability; unfair competition; intellectual property, and road accidents. It will apply in all EU member states except Denmark.

The rules treat England and Wales; Scotland; Northern Ireland; and Gibraltar as separate countries and so will govern disputes that could involve those legal systems.

Cases could end up being heard in one court using another country's law, said Wood. "If an English court has jurisdiction to hear a claim that, for example, is subject to French law, then it appears that any remedies the English court wishes to implement could now be those available in French law and not in English law," he said.

Wood said that the new rules would clear up some areas of confusion, but would not make this area of law any easier to manage.

"Rome II certainly offers welcome clarity on some core issues, but does not reduce the degree of analysis required on a case-by-case basis to determine the correct governing law, particularly when the parties are located in different states and the damage occurs in a third state," he said. "If anything, greater upfront attention is needed now to governing law clauses than used to be the case."