In last few decades, cross-border road traffic has significantly increased. Consequently, the number of accidents where at least one party is not resident of the country of accident has grown proportionally. The visiting victims, i.e. the victims of accidents that occur outside of their state of residence must be aware of the fact that being damaged outside their national borders could influence on the compensation that they could expect. Also, it sometimes differs from the one that they might get if the accident had occurred in their home country (Renda, Schrefler, 2007).
Firstly, it has to be emphasized that there is no systematic unification or harmonisation of tort legislation at international or EU level. Discrepancies among legal systems occur in criteria used to ascribe liability for damage, the assessment of damage, persons entitled to claim, limitation period, etc. Consequently, a legal practitioner who has to settle a claim for damage from a cross-border motor vehicle accident is faced with a problem of identification of law that is applicable for determination of legal foundation of damage, persons entitled to claim and kind of damage that is payable.
Besides states’ private international law (PIL) acts, there are two supranational legal sources that contain such choice of law rules: (a) Rome II Regulation – Regulation (EC) 864/2007 of the European Parliament and of the Council of July 11, 2007 on the law applicable to non-contractual obligations; (b) The Hague Convention on the Law Applicable to Traffic Accidents – Concluded May 4, 1971. Detailed analysis of each of these regulations will not be subject of this article, but the main emphasis will be on determination of choice of law rules for both direct and indirect damage. At the end, there will be an overview of current European Court of Justice (ECJ) case law and possible influences that it might have on further regulation of this matter.
1. Choice of law rules for damage in traffic accident
In relation to non-contractual obligations arising out of a tort, according to Rome II, the main rule is that applicable law shall be the law of the country in which the damage occurs, irrespective of both the country in which the event giving rise to the damage occurred and the country(s) where indirect damage occurs (lex loci damni) (Nagy, 2010). Rome II in the Article 28 gives precedence to the Hague Convention in the countries that are signatories of it (Austria, Belgium, Netherland, Luxembourg, France, Latvia, Lithuania, Poland, Slovakia, Slovenia, Spain). Non-EU countries in Europe in which the Hague Convention is in force are Switzerland, Belarus and countries of former Yugoslavia. Other EU countries directly apply Rome II (Graziano, 2008). The main choice of law rule under Hague Convention is lex loci delicti commissi, i.e. the law of the country where the traffic accident occured. The main rule for determining the applicable law in both Rome II and Hague Convention is similar, but these two acts have different exceptions of the main principle. The exception of the main rule in Rome II is appliance of the law of the place of common habitual residence of the parties, while Hague Convention provides a completely different subsidiary connecting factor, i.e. applicable law under some conditions has to be designated according to the place of registration of vehicles involved in an accident (Graziano, 2008). The Hague Convention contains numerous exclusions which affect its scope. For exemple, it is not applicable in cases of recourse actions between insurers, claims against public automobile guarantee funds, etc. In these cases, the applicable law should be determined according to provisions of states’ PIL acts (Puljko, Macko, 2010).
After the dissolution of Yugoslavia, the Act on the Collision of Laws with Laws of Foreign Nations in Certain Cases is taken over in the legislation of Bosnia and Herzegovina, as well as in Croatia and Serbia, and so far applies unchanged. The general choice of law rule in this PIL act favors the victim in a way that the law applicable may be the law of the place where the harmful act was done or the law of the place where the consequence occurred, depending on which of these two laws is more favorable to the person sustaining damage (Article 28, paragraph 1 of the PIL Act). However, most cases of non-contractual obligations for damages from traffic accidents are excluded from jurisdiction under the PIL Act, due to the fact that the Hague Convention in Bosnia and Herzegovina is in force (Alihodzic, 2014; Saula, 2007).
Above mentioned instruments regulate the scope of applicable law similarly: it does not govern only the basis and extent of liability and its grounds for exclusions, but it also considers the nature and assessment of damage (Papettas, 2013).
When two vehicles of the same registration collide in a foreign country, then we have different solutions depending on the choice of law rule that is applicable. For instance, a vehicle driven by an Austrian driver crashes with a car driven by a Hungarian driver in an accident ocurred in Austria and both vehicles are registered in Slovakia. In this case, Rome II would designate the law of the country of the accident (Austrian law), while the Hague Convention would designate the law of the country of common registration of vehicles (Slovak law) (Nagy, 2010). The existence of dual regime relating to choice of law in the field of cross border motor vehicle accidents is both confusing and complicated. In further text it will be represented how the applicable law sometimes is not the same for all victims from one accident.
2. Direct and indirect damage
By criteria of the persons to whom the tortious action is aimed, the damages could be divided into direct and indirect ones. Direct damage (primary damage) is direct a consequence of an accidental case, and a right on reimbursement has the person to whom the tortious action is pointed, for example, a person who was injured and suffers physical pain. Indirect damage is the loss that suffers another person, e.g. a person who suffers psychical pain because of the death of a close relative.
2.1 Splitting the law under the Hague Convention
Hague Convention in the Article 8 states that the applicable law, among others, determines the persons who have suffered damages and who may claim damages in their own right (Armstrong, 1972). This provision deals with the problem of ascertaining whether a person, other than a ’direct victim’’ can obtain a damage suffered as a consequence of an initial one felt by someone else under the same applicable law. The Hague Convention does not give the answer to this question, but its Explanatory Report does so . It states that the rights of the direct victim equalises with the rights of the indirect ones in the field of applicable law. But, it is very doubtful whether the Explanatory Report, as prepairing work for Hague Convention, should be considered as autonomous source of law in interpretation of a rule as the rule itself, or is it only a subsidiary medium for explaining its content (Tomljenovic, 2012).
There is no unique attitude in the field of interpretation of Article 4(a), line 2 of Hague Convention, which regulates the applicable law in case of one-vehicle accident when the vehicle is registered in a state other than that where the accident occurred. In such case, the law of the state of registration is applicable to determine liability towards a victim who is a passenger and whose habitual residence is in a state other than that where the accident occurred.
This rule regulates that liability towards a passenger in one-vehicle accident should be determined in accordance with the law of the state of registration of vehicle, providing that the passenger’s habitual residence is also in a country different from the country of accident (Puljko, Macko, 2010). Sometimes the courts interpret this rule stricto sensu, i.e. in case of damage due to personal injury of a passenger in one-vehicle accident abroad, they apply the law of the state of registration. But, in case of a passenger’s death in such an accident, the courts do not apply this law for damage of the passenger’s relatives (indirect victims). This is explained by the fact that the successors are not the victims explicitely stated in Article 4 (a) line 2 of the Hague Convention and that the applicable law towards them should be the law of the place of accident (Tomljenovic, 2012). For example, in the case of a one-vehicle accident that happened in Croatia, in which a passenger died and the vehicle was registered in Slovenia, the Supreme Court of Croatia (VSRH Rev 878/2008-2) decided that the applicable law for material and non-material damage of family members of the deceased should be determined by the main choice of law rule, i.e. the applicable law is Croatian. The Court explained that subsidiary connecting factor (the law of the place of registration) could not be applicable because the family members are not the direct victims explicitely mentioned in Article 4(2) of Hague Convention. Obviously, it is possible that in a case of one-vehicle accident, under the Hague Convention, the applicable law could be splitted to two or more regimes. For instance, the applicable law for compensation of damage of survived passengers could be different than the law for the damage of relatives of the deceased one.
2.2 Rome II - Uniformity of applicable rules
The main principle of Rome II - lex loci damni - poses a question: what exactly the damage is, in order to apply the main rule? Article 2 states that ‘damage shall cover any consequence...’, and article 4(1) excludes indirect consequences as being the base for applicable law (Kunda, 2007). The Final Proposal for Rome II Regulation - COM (2003) 427 says that ‘...the place or places where indirect damage, if any, was sustained are not relevant for determining the applicable law. In the event of a traffic accident, for example, the place of the direct damage is the place where the collision occurs, irrespective of financial or non-material damage sustained in another country.’
In the recent judgement Florin Lazar v Allianz SpA, rendered on December 10, 2015, the ECJ clarified the interpretation of the Article 4(1) of Rome II. The case concerned a traffic accident occured in Italy, which resulted in the death of a Romanian citizen woman with habitual residence in Italy. Some close relatives of the victim, not directly involved in the accident, had brought proceedings in Italy for material and non-material damage suffered as a consequence of her death. All the claimants were Romanian citizens and some of them were habitually residents in Italy, others in Romania. The question for the preliminary ruling was whether, in order to determine the applicable law under Rome II, one should look at the damage claimed by the relatives in their own right, or only at the damage suffered by the woman as the direct victim of the accident. The court seized that the damage suffered by close relatives due to death of a person must be clasified as ‘indirect consequences’ of that accident, with meaning of Article 4(1) and that the applicable law is the law of Italy. The Court referred to Article 2, which provides, as it is said above, that damage should cover any consequence arising out of a tort/delict. Also, the Court referred to Recital 17, which states that in case of a personal injury, the country in which the damage occurs should be the country where the injury was sustained. The Court followed the objective set in Recital 16, that fair balance between the interests of the person claimed to be liable and the person sustaining the damage should be achieved by appliance of the law of the country where the direct damage occured.
By this solution, ECJ confirmed the opinion given by Advocate General Nils Wahl, who stressed that the adoption of the sole connecting factor of the loci damni in Article 4(1) of the Rome II marks the refutation of the theory of ubiquity, since, pursuant to the latter provision, torts are governed by one law. The fact of referring exclusively to the place where the damage was sustained by the direct victim, regardless of the harmful effects suffered elsewhere by third parties, complies with this policy insofar. It prevents the splitting of the governing law with respect to the several issues arising from the same event (Franzina, 2015).
3. Possible solutions
The revising clause of Rome II, Article 30predicted that the Commission has the duty to submit to European Parliament the report on appliance of Rome II until August 2011, which should be consisted, among others, of a study on the relation between Rome II and the Hague Convention. The Commision fulfilled this obligation in 2012 by announcing the Note named Choice of Law for Cross Border Road Traffic Accidents. In this document, it has been proposed to amend the current situation by adopting one instrument which provides a clear set of law rules, preferably in the form of an amendment Rome II which would be directly applicable in all EU Member States (Papettas, 2012).
Until now, such an instrument has not been adopted and the dual regime of choice of law rules in both EU members and non-EU countries is still in force. It is possible that the newest ECJ case law could influence the EU legislator to do the necessary steps with the intention to unify the choice of law rules for non-contractual obligations in field of compensation of damage in cross-border accidents. This unification would increase protection of victims in traffic accidents in EU and it would avoid possibilities of appliance of different rules for direct damage and indirect consequences in a single accidental case.
By Jasmina Djokić
This article was originally published in issue 4.2 of the magazine, which can be accessed here.