International enforcement law

For the purpose of simplification of the mutual legal assistance inside the European Union was agreed that court decisions of one member state could be enforced in another member state of the European Union. This requires an enforcement clause according to Art. 38 EuGVVO. It is possible to sue against debtor in Germany who is domiciled in a foreign country and then to request that this judgment is enforceable in the country of residence of the debtor and there to proceed with the enforcement. This is very important in a world of increasing international economic relations.

Court decisions of a member state were declared enforceable at law in another member state without the need for a special procedure (Art. 33 Abs. 1 EuGVVO) aside from a few exceptions (cf. Article 34). Such exception could be for example if the acceptance of the judgment incongruous with the public policy of the other member state. Other reasons are serious deficits of the notification of the judgment and the incoherency of the court decision with another earlier judgment between the same parties in the equal case.

But in no case the foreign judgment will be checked on the merits (Art. 36). Objections of the debtor could be only checked in the remedial proceedings and not before abatement of the declaration of enforceability.

Court decisions that are enforceable in a member state shall be enforced in another member state if the judgment has been declared enforceable upon request of the beneficiary (Article 38 paragraph 1). The court, which is considering the application should adopt its decision without delay (Article 41) and examines only the existence of certain formal requirements (Article 53).

For the countries of the EFTA (Iceland, Norway, Switzerland) is the Lugano Convention (LGVÜ) applicable. An enforcement under this revised agreement corresponds mainly with the EuGVVO.

EU-Regulation Rome I

Rome I and II are European Regulations. According to Art.288Sec.2of theTreaty on the Functioning of the European Union they need no transposition into national law, but apply directly. They only concern transnational circumstances (Art. 1 Sec. 1 Rome I and Rome II) and solely contain rules on conflict of law, which point to to the applicable substantive law of each country.

I.         Rome I

1.      Introduction

Regulation (EC) No. 593/2008 of the European Council of 17 June 2008 (short, Rome I) regulates private international law of the European Union in matters pertaining to contractual obligations. It entered into force on 17 December 2009 in all EC Member States except Denmark, and replaced the Rome Convention (in Germany formerly implemented by the now repealed Art. 27 - 37 EGBGB). The Rome I - Regulation applies also for the UK, Ireland and Northern Ireland.

2.      Scope of application

The provisions of the Regulation override the national law of the EU Member States (except Denmark) and take into account the fundamental principle of freedom of choice of law in Europe. In substance, following Art. 1 Council Regulation, the Regulation applies to civil and commercial matters. In particular it applies to tax matters, custom matters, and administrative matters. Other exceptions are listed in Section 2 (eg, arbitration and jurisdiction agreements and obligations arising out of matrimonial property schemes). The Regulation applies to all contracts concluded after 16.12.2009. The repealed Art 27 et seq EGBGB continue to apply for existing contracts.

3.      Principle

If the parties have not agreed to the law of a Country for any contractual claims, the applicable law is determined following Art. 4 Sec. 1 of the regulation. There, different types of contracts are regulated (eg, contract for the sale of goods = law of the country in which the seller has his habitual residence; contract relating to a tenancy of immovable property = law of the country, where the property is situated). Only if the contract cannot be subsumed under the contracts enumerated , the contract is governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence (Art. 4 Sec. 2). Contrary to Art. 4 Sec. 1 and 2, the escape clause in paragraph 3 regulates that the law of the country with which the contract is manifestly more closely connected shall apply. Art. 4 Sec. 4 of the regulation implies, that the contract shall be governed by the law of the country, with which it is most closely connected, when the law applicable cannot be determined pursuant to paragraphs 1 or 2.

4.      Particular forms of contract

Some types of contracts are specifically mentioned in the Articles 5 - 8 of the Rome I - Regulation. For contracts of carriage (Art. 5) a distinction between the carriage of goods and persons is made. For the carriage of goods the law applicable shall be the law of the country of habitual residence of the carrier, provided that the place of receipt or the place of delivery or the habitual residence of the consignor is also situated in the country. If those requirements are not met, the law of the country where the place of delivery as agreed by the parties is situated shall apply (Art. 5 Sec. 1). For the carriage of persons the law of the country applies where the passenger has his habitual residence, provided that either the place of departure or the place of destination is situated in that country. If these requirements are not met, the law of the country where the carrier has his habitual residence applies (Art. 5 Sec. 2).

As a general rule: Art. 19 stipulates that the habitual residence for companies, associations und legal persons is the place of their central administration. The habitual residence of a natural person acting in the course of his business is his principal place of business.

Paragraph 3 contains an escape clause.

In absence of any choice of law an insurance contract shall be governed by the law of the country where the insurer has his habitual residence (Art. 7 Sec. 2 Sent. 2). Paragraph 3 contains an escape clause.

According to Art. 8 Sec. 2, an individual employment contract shall be governed by the law of the country in which or from which the employee habitually carries out his work in performance of the contract. A temporary relocation of the performance of work has no effect. Where the law applicable cannot be determined, the contract shall be governed by the law of the country where the place of business through which the employee was engaged is situated (Sec. 3). In paragraph 4 there is an escape clause.

In case of consumer contracts (contracts between a consumer and a professional) the contract shall be governed by the law of the country where the consumer has his habitual residence, provided that the professional pursues his commercial or professional activities in that country or at least directs such activities to that country. In absence of these conditions the law applicable to the contract between a consumer and a professional shall be determined pursuant to Articles 3 and 4 (Sec. 3). According to Art. 6 Sec. 4, paragraph 1 shall not apply to certain contracts (see list there).

5.      Expression of Choice

The parties can chose by which law a contract shall be governed (Art. 3 Sec. 1). The choice can be made expressly or be implied. In the latter case, the choice must clearly derive from the rules of the contract or the circumstances of the case. In addition, a real, not merely hypothetical party’s will is necessary. The following elements can be used as evidences of an implied choice of law:

a. Court Agreements

b. a reference to legal norms

c. a close economic and legal relationship between two transactions

d. rather weak forms of evidence: residence and place of business, nationality, currency, language and place of conclusion of contracts

6.      Effectiveness of Choice

The effectiveness of a choice clause is to be determined in accordance to the law that would have been chosen in case of its effectiveness (Art. 3 Sec. 5 in conjunction with Art. 10 Sec 1). Attention should be paid to: avoidance for mistake or fraud, and the terms and conditions.

A choice to a part of the contract is allowed, Art. 3 Sec. 1 Sent. 3.

7.      Form of Choice

The formal validity of the choice of law is independent of the nature of the main contract. However, the choice of law can lead to the invalidity for form of the main contract.

8.      Special situations and exceptions

a. In cases in which the parties’ general terms and conditions contain conflicting choice of law rules (conflicting terms and conditions), external evidence of a choice of law is not apparent. In this case the general rule of Art. 4 applies.

b.  According to Art. 10 Sec. 2 a party can rely to the law of his habitual residence insofar as it concerns the legal meaning of silence (eg, commercial letter of confirmation). 

c. The freedom of choice for transport and insurance contracts is limited (see the lists in Art. 5 Sec. 2 Sent. 3, Art. 7 Sec. 1 Sent. 3).

d. In the context of individual employment contracts, the choice of law may not have the result of depriving the employee of the protection afforded to him by provisions that cannot be derogated from by any agreement under the law that, in the absence of choice, would have been pursuant (Art. 8 Sec. 1 Sent. 2).

e. The same applies to consumer contracts (Art. 6 Sec. 2 Sent. 2). This rule applies not for certain types of contracts (see list in Art. 6 Sec. 4).

EU-Regulation Rome II

Rome I and II are European Regulations. According to Art.288Sec.2of theTreaty on the Functioning of the European Union they need no transposition into national law, but apply directly. They only concern transnational circumstances (Art. 1 Sec. 1 Rome I and Rome II) and solely contain rules on conflict of law, which point to to the applicable substantive law of each country.

II.  Rome II

1.      Introduction

The EC Regulation No 864/2007 of the European Council of 11 July 2007 (short, Rome II) regulates the Private International Law of the European Community for non-contractual obligations. It entered into force on 01 November 2009 in all EC Member States except Denmark (see Art. 1 Sec. 4).

2.      Scope

The provions of the Regulation override the national law of the EU Member States (except Denmark). However, according to Art. 3 all Member States apply to it in relation to Denmark. Rome II applies not within States with more than on legal system (Great Britain, Northern Ireland, Spain).

In substance, the regulation only applies to civil and commercial matters. It does not cover public law matters, and therefore not public liability either. Thus it includes the following areas: tort law, agency without authority, enrichment law and cic.

According to Art. 1 Sec. 2 excluded are:

a. non-contractual obligations  arising under bills of exchange, cheques und promissory notes

b. non-contractual obligations arising out of the law of companies, law of association, and law of the legal person

c. non-contractual obligations arising out of the relations between trustees

d. non-contractual obligations arising out of nuclear damage

e. non-contractual obligations arising out of violations of privacy and defamation

The Regulation applies to all cases where the harmful event occurred after January 10, 2009 (see Art. 31).

3.      Freedom of choice (Art. 14)

According to Art. 14 Sec. 1 the parties may agree to submit non-contractual obligations to the law of their choice. The subsequent choice of law is possible without restriction (Sec. 1a). Before the event arises, parties pursuing a commercial activity can choose freely (Sec. 1b).

In addition, the choice of law shall be expressed or demonstrated with reasonable certainty by the circumstances of the case (Art. 14 Sec. 2 Sent. 1). The rights of a third party are not affected. A determination of choice in the general terms and conditions is illegitimate, in contrast to Rome I concerning non-contractual obligations.

Where all the elements relevant to the situation at the time when the event giving rise to the damage occurs are located in a country other than the country whose law has been chosen, the choice of the parties shall not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement (Sec. 2).

A choice to a part of the contract is illegal (disputed).

4.      General rules

a.      Subrogation (Art. 19)

Where a person (the creditor) has a non-contractual claim upon another, and a third person has a duty to satisfy the creditor (the debtor), the law which governs the third person’s duty applies.

b.  Multiple liability (Art. 20)

The compensation claim of one creditor against another creditor (cf. § 426 Abs. 1 BGB) is governed by the law of the country under whose law the tort claim exists. However, if there is a right of recourse due to subrogation (cf. § 426 Abs. 2 BGB), Art. 19 applies.

c.  Exclusion of renvoi (Art. 24)

Reference to the conflict of law of another country (“renvoi”) is excluded.

d. Relationship with other provisions of Community law (Art. 27)

The Regulation shall not prejudice the application of provisions of Community law.

e. Relationship with existing international conventions (Art. 28)

According to Art. 28 Sec. 1 existing treaties of Member States (list referred to in Art. 29) remain in force. This does not apply to agreements between individual Member States (Sec. 2).

f. Rules of safety and conduct (Art. 17)

In assessing the conduct of the person claimed to be liable, the rules of safety and conduct which were in force at the place and time of the event giving rise to the liability, account shall be taken off. Analogously this also applies to the behavior of the victim in cases of potential contributory negligence.

5.      Tort law

a. The place where damage occurred (Art. 4 Sec. 1)

According to Art. 4 Sec. 1, the only relevant place is the place where the damage occurred (irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur).

Traditionally the conflict of laws of the Member States linked to the place of the civil offence. However, in the German law such a place is the place where the damage occurred and also the place in which the indirect consequences of the event occur, Art. 40 Sec. 1 EGBGB. The casualty has the right of choice. Now the regulation follows another principle.

When the damage occurs in different States (spread offense or multi-state tort) there is a debate about which law applies. The prevailing opinion follows the so-called mosaic theory, that every place where the damage occurs determines the applicable law for the damages caused in this State. According to another opinion, an emphasis on the focus of the damage has to be formed.

b. Common habitual residence of the parties (Art. 4 Sec. 2)

Where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country applies. This regulation overrides the regulation in Art. 4 Sec. 1.

Regarding the place of the habitual residence applies the same said to Rome I (see Art. 23).

c. Escape clause (Art. 4 Sec. 3)

Contrary to Art. 4 Sec. 1 and 2 the law of the country applies with which the tort is more closely connected. This comes especially in consideration in pre-existing legal relationships (contractual relationships, fiancé offenses).An improper contractual choice of law (Art. 14 lit. a) and an unauthorized choice of law in the terms and conditions (Art. 14 lit. b) can be an accessory connection.

d. Environmental damage (Art. 7)

In case of environmental damage the law is determined pursuant to Art. 4 Sec. 1, unless the person seeking compensation for damage chooses to base his or her claim on the law of the country in which the event giving rise to the damage occurred.

e. Product liability (Art. 5)

In case of an obligation arising out of damage caused by a product, there are special connecting factors which apply in the following order:

1. The habitual residence of the casualty, if the product was marketed in that country
2. The country in which the product was acquired, if the product was marketed in that country
3. The country in which the damage occurred, if the product was marketed in that country

However, Art. 5 Sec. 1 Sent. 2 contains a restriction if and when the producer could not reasonably foresee the marketing of the product. In this case the law of the country applies in which the producer is habitually resident.

f. Infringement of intellectual property rights (Art. 8)

The law applicable to a non-contractual obligation arising from an infringement of an intellectual property right is the law of the country for which protection is claimed. This regulation cannot be derogated from by an agreement (Sec. 3).

6.      Unjust enrichment (Art. 10)

According to Art. 10 there are two different cases:

a. If a non-contractual obligation arises out of unjust enrichment, the law that governs that relationship applies (Art. 10 Sec. 1).

b. Where the law applicable cannot be determined on the basis of paragraph 1, the law of the country where the parties have their habitual residence (Art. 10 Sec. 2) or the law of the country in which the unjust enrichment took place (Art. 10 Sec. 3)applies.

7.      Negotiorum gestio (Art. 11)

If a non-contractual obligation arising out of an act performed without due authority, the same rules apply that regulate the unjust enrichment. Paragraph 4 contains an escape clause. Where the non-contractual obligation arising out of an act performed without due authority is manifestly more closely connected with a country other than that indicated in paragraphs 1, 2 and 3, the law of that other country applies.

8.      Culpa in contrahendo

The law applicable to a non-contractual obligation arising out of dealings prior to the conclusion of a contract is the law that applies to the contract or that would have been applicable to it had it been entered into. Paragraph 2 contains an escape clause, if and when the law applicable cannot be determined on the basis of paragraph 1.

9.      Competition law (Art. 6)

The law applicable to a non-contractual obligation arising out of an act of unfair competition is the law of the country where competitive relations or the collective interests of consumers are, or are likely to be, affected (Art. 6 Sec 1). Where an act of unfair competition affects exclusively the interests of a specific competitor, Article 4 applies (Art. 6 Sec. 2).This regulation cannot be derogated from by an agreement (Art. 6 Sec. 4).

10.     Exception

According to Art. 26 (“order public”) the application of a provision of the law of any country specified by this Regulation may be refused only if such application is manifestly incompatible with the public policy of the forum. The configuration of the criterion “manifestly incompatible with the public policy” can be made with the help of Art. 40 Sec. 3 EGBGB. This concerns the following specific cases:

a.       Disproportionate compensation

b.       Claims that are obviously not a reasonable compensation ("punitative damages")

c.       Unauthorized extension of international agreements

Just as in contract cases the application of so-called mandatory rules of the State are not affected by the Regulation (Art. 16).