A divided panel of the Second Circuit held last week that federal common law, and not Brazilian law, would be applied to a contract for the shipment of goods, notwithstanding the fact that the contract was negotiated, executed, and performed in Brazil, by a Brazilian company and a corporation that regularly conducts business in Brazil, concerning goods that were at all times located in Brazil. Dispositive of the choice of law inquiry was the fact that federal common law would enforce the contract provisions, while Brazilian law would not.

In Eli Lilly Do Brasil, Ltda. v. Federal Express Corp., No. 06-cv-0530 (2d Cir., Sept. 11, 2007), Eli Lilly sued Federal Express in New York for the the value of pharmaceuticals that were stolen in transit between plaintiff’s factory in Brazil to Japan. Defendant raised a limitation on liability contained in the waybill for shipment. On cross motions for summary judgment, Defendant sought to enforce the limitation on liability under federal common law, and Plaintiff sought to apply Brazilian law, asserting that it would invalidate the clause without proof of Defendant’s gross negligence. The District Court applied federal common law, and granted Defendant’s motion.

The Second Circuit reviewed the choice of law decision de novo and, like the court below, “consult[ed] the Restatement (Second) of Conflict Laws” for guidance. Under the Section 6 factors, made relevant through section 188, the balance clearly tilted in favor of Brazil. However:

“[the] recognition that Brazil’s interest . . . is greater than the United States’ cannot be the end of our inquiry or determinative of its conclusion. . . . Which state is most interested under § 188 is a different question from which state has the more significant relationship with the parties and the contract for purposes of [the final choice of law]. . . . In this case, even taking account of Brazil’s superior § 188 contacts, two of the § 6 factors emerge as determinative of United States venue: (1) the relevant policies of other interested states and the relative interest of those states in the determination of the particular issue in dispute, . . . and (2) protection of the parties’ justified expectations. Once Lilly-for whatever reason-asked a United States court to consider its contract, it invited application of the well-settled ‘presumption in favor of applying that law tending toward the validation of the alleged contract.’ . . . This presumption is consistent with the general rule of contract construction that ‘presumes the legality and enforceability of contracts.’ The paramount importance of enforcing freely undertaken contractual obligations, especially in commercial litigation involving sophisticated parties, was obvious to the District Court and is obvious to us. The Restatement expressly provides that the justified expectation of enforceability generally predominates over other factors tending to point to the application of a foreign law inconsistent with such expectation.”

Under Federal common law, unlike Brazilian law, the limitation on the waybill is valid. The Second Circuit upheld the application of the former, and affirmed the decision below.

Judge Meskill filed a dissent. He generally opined tha “[t]he presumption in favor of applying the law that tends to validate a contract is [only] important where the alternative is no contract at all.” Because there was no allegation that the entire waybill would be “completely invalidated” under Brazilian law, Judge Meskill would have vacated the summary judgment and remanded for a decision under Brazilian law. He also acknowledged that “while the federal common law’s presumption in favor of applying the law that tends to validate contracts might mean that the United States has a general interest in validating contracts, the United States still does not have a ‘significant’ or ‘close’ relationship with this contract.” Indeed, the United States’ interest in enforcing contracts arises in any choice of law contract case filed in its courts. Therefore, under § 197 of the Restatement, “Brazil remains as the default jurisdiction whose laws govern this contract of transportation regardless of whether the liability limitation is valid under Brazilian law.”

A link to the decision can be found here.

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Prospective subscribers can view the contents (with abstracts for each article) of the last three volumes on the Hart website. Be sure, however, to use the order form available from this website in order to receive your 10% off.

The one-day workshop titled “Conflict of Laws and Laws of Conflict in Europe and Beyond – Patterns of Supranational and Transnational Juridification” is hosted by the Law Department of the European University Institute and organized by Dr. Rainer Nickel of the University of Frankfurt am Main. It receives support under the FP 6, and makes part of the RECON project which seeks to clarify whether democracy is possible under conditions of pluralism, diversity and complex multilevel governance.

Although, in a view of the topics, this worshop is not a typical conflict of laws event, it might be of interest for the users of this blog too. The workshop website is accessible here and the program containing the list of speakers and topics as well as members of the discussion panel and some other participants is available here.

The workshop is scheduled for 21 September 2007 and will take place in a beautiful venue in of the Florence European University Institute, Conference Room, Villa La Fonte, San Domenico di Fiesole. The registration is possible with Marlies Becker (marlies.becker@eui.eu).

Antonio Nicita (Professor of Economic Policy at University of Siena) and Matteo Winkler (LLM, Yale Law School; Ph.D., Bocconi University) have written an interesting paper on the economic analysis of the conflict of laws rules concerning transnational accidents, in particular domestic and supranational rules on tort liability. A preliminary version of the paper (“The Cost of Transnational Accidents: Evolving Conflict Rules on Torts“) was presented on September 13th at the annual conference of the European Association of Law & Economics (EALE), held in Copenhagen.

An abstract has been kindly provided by the authors:

The paper is divided into two parts. In the first part, the authors show the main conflict rules concerning torts at the domestic level: loci commissi delicti (place of accident), lex loci laesionis (place of injury), forum shopping and forum non conveniens, parties’ freedom of choice (before and after the accident), victim’s freedom of choice. Then, the authors describe the problems pertaining to each of these rules. In the second part, they analyse two cases, Bhopal and Amoco Cadiz, and conclude that when State courts are called to settle disputes concerning transnational accidents, they tend to protect their own community from the accident’s consequences, if negative, or alternatively, to discharge the accident’s negative externalities to other States’ community. Both approaches raise problems from the standpoint of externalities regulation: they lead either to underregulation or overregulation.

In particular, Nicita and Winkler maintain that when, like in Bhopal, State courts strictly enforce the lex loci rule, they might both favor the flux of investment towards developing countries – although the damages in favor of these countries’ victims are likely to be undercompensated, or protect the delocalized activities of multinational enterprises, while when courts refer to the lex loci laesionis rule, they are likely to regulate the transnational activity and therefore to increase the costs of compliance borne by multinational enterprises.

As a third case study, finally, the authors examine the EC Regulation on the law applicable to torts, Rome II. According to this Regulation, they point out that there are some underlying policies, that attempt to supersede the policies enforcement by State courts.

The paper is available on the EALE Conference’s website, and will be revised by the authors according to the observations coming from the conference’s public.

On the economic analysis of conflict of laws, see also some of our previous posts at the following links: 1, 2, 3, 4, 5, 6, 7.

In the first meeting held by the European Parliament’s JURI Committee after the summer break (10/11 September), the Rapporteur for Rome I, Cristian Dumitrescu, presented a new set of 43 compromise amendments to the initial Commission’s Proposal, to be discussed within the Committee in order to adopt a final text of the Report for the Parliament’s plenary session. While taking into account the previous works of the JURI Committee on Rome I (see our post here), the Rapporteur drafted these new amendments in view of the final text of the Rome II Regulation and the current discussion on Rome I in the Council (see below). As he states in the justification to amendment n. 2,

[t]he proposed compromise amendments set out in this paper have several aims. First, they are intended to bring the Regulation more closely into line with Rome II as adopted. Secondly, they seek to introduce changes already accepted in the Council working group and hence aim at reaching an agreement with the Council. Thirdly, they propose solutions in areas where the Council has not yet been able to reach agreement. Fourthly, they are designed to facilitate ecommerce by positing solutions lying outside the area of private international law to difficulties which conflict-of-laws rules cannot resolve in themselves. Lastly, the amendments are intended to bring into the public domain, and hence make available for public debate in a democratic assembly, technical changes discussed so far only within the Council. The rapporteur has presented them in order to foster debate within the Committee and negotiations with the Council.

As regards the conflict rules, see compromise amendments n. 21 (Art. 3), n. 22 (Art. 4), n. 23 (new Art. 4a on contracts of carriage), n. 26 (a new, complex Art. 5a dealing with insurance contracts) and n. 27 (Art. 6 on individual employment contracts). Art. 7 on contracts concluded by an agent is deleted (see amendment n. 28).

Consumer contracts (Art. 5) are dealt with in the new package only as regards the scope of the exclusions (Art. 5(3): see amendments nn. 24 and 25), but the whole provision was redrafted by the Rapporteur in a separate compromise amendment presented in June (compromise amendment n. 1: see our post here). However, the Rapporteur remains quite sceptical as regards the effectiveness of the protection afforded by a conflict rule, and he states in new Recital 10a (compromise amendment n. 14) that

[w]ith […] reference to consumer contracts, recourse to the courts must be regarded as the last resort. Legal proceedings, especially where foreign law has to be applied, are expensive and slow. The introduction of a mechanism to deal with small claims in cross-border cases is a step forward. However, the protection afforded to consumers by conflict-of-laws provisions is largely illusory in view of the small value of most consumer claims and the cost and time consumed by bringing court proceedings. It is therefore considered that, particularly as regards electronic commerce, the conflicts rule should be backed up by easier and more widespread availability of appropriate online alternative dispute resolution (ADR) systems. The Member States are encouraged to promote such systems, in particular mediation complying with Directive …/…, and to cooperate with the Commission in promoting them.

As it was the case for Rome II, some controversial issues have been moved by the Rapporteur in the Recitals accompanying the Regulation: see for instance compromise amendments nn. 5 and 6 (new Recitals 7a and 7b) on the choice of non-State bodies of law as the applicable law, and compromise amendment n. 19 (Recital n. 15) on the relationship between the Regulation and Community law.

On the Council’s side, a complete text of the Rome I Regulation has been recently made publicly available in the Register (doc. n. 11150/07 of 25 June 2007). It was drafted in June by the outcoming German Presidency and the Portuguese Presidency on the basis of the meetings of the Committee on Civil Law Matters during the first semester 2007 and the comments made by delegations.

It contains the text of the compromise package agreed by the Council in April 2007 (doc. n. 8022/07 ADD 1 REV 1: see our post here) and a proposed wording for the provisions that were left over. The latter include Art. 4a on contracts of carriage – three options are proposed as regards carriage of passengers -, Art. 5 on consumer contracts, Art. 5a dealing with insurance contracts, Art. 8 on overriding mandatory provisions, Art. 13 on voluntary assignment and contractual subrogation.

For better readability, the compromise package is presented in italics; a number of footnotes completes the text, highlighting doubts raised by the delegations and provisions which need further discussion or clarification.

The adoption of the Report on the Rome I Proposal is expected in the EP’s JURI Committee in one of the forthcoming meetings. According to current forecasts (subject to frequent changes: please refer to the Rome I OEIL page), the vote at first reading in the Parliament’s plenary session is scheduled on 28 November 2007; a political agreement on common position is expected in the Council in the last JHA session under the Portuguese Presidency, on 6 December 2007.

From the conference website: The seminar will focus on significant developments since 2005, when the last ERA seminar was held at the Office for Harmonisation in the Internal Market (OHIM).

In the field of designs, the Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs enabling the international registration of community designs and to which the European Union has just acceded will be presented and its consequences discussed. Concerning spare parts, progress on discussions relating to the proposal for a Directive amending Directive 98/71/EC on the legal protection of designs (COM(2004)582) will be analysed.

Concerning trademarks, the seminar will focus on conflicts of laws, in particular within the framework of the Internet. The implications of the Rome II proposal on the law applicable to non-contractual obligations will form an integral part of the discussions.

At a jurisprudential level, the most significant community case law on invalidity decisions concerning trademarks and designs will be presented.

The last part of the seminar will be dedicated to the mechanisms aiming to reinforce intellectual property rights. The conference will provide an overview of the transposition of the Enforcement Directive 2004/48/EC. The implications of the proposed directive on criminal measures aimed at ensuring the enforcement of intellectual property rights (COM(2005)276 final) will also be discussed. Experts from OHIM, academics and practitioners will be invited to give their point of view.

Target audience: Lawyers in private practice and in-house counsel, civil servants of national and European authorities responsible for trademarks and designs, judges, academics

This conference to be held in Alicante, 22-23 November 2007, is organised by ERA. The conference programme can be downloaded from the conference website.

From the conference website: In 2004 the Hague Programme set the direction for the EU in the second phase of its development of a common policy on asylum, migration and borders. Two years later, in June 2006, with a comprehensive package of Communications, the European Commission took stock of the progress made and assessed the level of implementation of the Hague Programme at EU and national level. In presenting this package of measures, the Commission wished to stimulate and structure the discussion with the Member States and the other Institutions on new policy initiatives and on possible ways to improve the functioning of Freedom, Security and Justice policies.

This forum will look at the challenges presented by these measures in the field of Asylum and Immigration. It will discuss the perceived need for the EU to manage migration flows more effectively with special emphasis on the global approach to migration. The continuing attempts to set up a common asylum policy acceptable to all EU member states will also be discussed. Furthermore, the role and powers of the Frontex agency in combating illegal migration will be scrutinised with reference to specific problems concerning the management of operational cooperation at national level. Whilst looking mainly to the future, the seminar will also review from a legal perspective the achievements of EU immigration and asylum policy since Tampere in 1999. The present forum follows the pattern of the “First Forum on Asylum and Immigration: Challenges of the Hague Programme” in Rome on 25-26 November 2005, which was co-ordinated by ERA and the Italian Ministry of the Interior.

Target audience: Asylum and immigration lawyers and judges, ministry officials, academics, NGO’s.

This conference to be held in Milan, 9-10 November 2007, is organised by ERA in cooperation with Prof. Bruno Nascimbene, University of Milan. The conference programme can be downloaded from the conference website.

From the conference website: The European Traffic Law Days have established themselves as a forum for professional training and the exchange of experience between traffic law experts. The congress will provide experts in liability and insurance law with an opportunity to obtain a comprehensive overview of current developments in European traffic law relevant to daily practice.

The main emphasis of this year’s event will be on the development of case law in the European Union on punitive damages. A working group will be set up, initially to determin the status quo, on the basis of which the fundamental problems involved in punitive damages will be discussed. Further topics are: Experience of the implementation of the fifth Directive; Elements of a sixth Directive (discussion on the progress achieved with the suggestions made during Trier VII); Minor accidents (improved enforcement of low-value claims involving traffic accidents abroad); The statute of limitations (European Parliament initiative); Rome II, the Regulation that governs the law applicable to traffic accidents abroad; The introduction of the recording of accident data Europe-wide; Simpler registration of motor vehicles abroad. Finally, current developments in European law and initiatives and developments in the harmonisation of European civil law will be discussed.

Target audience: All persons professionally involved in traffic law.

This conference to be held in Trier, 17-19 October 2007, is organised by ERA in cooperation with the Institute for European Traffic Law. This event will take place for the eighth time and will continue to be organised on an annual basis. The conference programme can be downloaded from the conference website.

From the conference website: Lawyers are required to deal ever more with legal questions arising from cross-border family and parental responsibility cases. The following topics will be discussed:
Parental responsibilities: The application of the Brussels II Regulation in judicial practice in the Member States; Hague Convention on protection of children and Brussels II bis; Family mediation; Opportunities and limitations of cross-border mediation in family matters.
Cross-border supervision: Hague Convention on international protection of adults. Current developments in the member states: Divorce and its consequences; Descent and custody; Recognition of formalised same-sex relationships in Europe; Current issues in Europe; New legal framework for marriage issues in the EU; Regulation of matrimonial property regime on the Community level; Developments in European law of succession.

Target audience: Lawyers, especially those specialising in family law and law of succession, notaries, judges, academics.

This conference to be held in Trier, 1-2 October 2007, is organised by ERA. The conference programme can be downloaded from the conference website.

From the conference website: The conference will be devoted to the practical analysis of certain Community legislative instruments and initiatives of great importance for notary practice, such as: The “Brussels I” Regulation on the jurisdiction, recognition and enforcement of judgements in civil and commercial matters; The Regulation creating a European Enforcement Order for Uncontested Claims; The European Judicial Network in Civil and Commercial Matters; The Network of the Notariats of the European Union; The Regulation on the service of documents and the Regulation on the cross-border taking of evidence in Europe; The proposed “Rome I Regulation” on the law applicable to contractual obligations; Mediation in civil and commercial matters and the role of civil law notaries. Target audience: Civil law notaries of all EU Member States.

This conference to be held in Trier, 12-13 November 2007, is organised by ERA in cooperation with in cooperation with the Council of the Notariats of the European Union (CNUE). The conference programme can be downloaded from the conference website.