Travel Law

William Norris QC Bernard Doherty Katharine Scott

Choice of Law: Rome II • Regulation (EC) No 864/2007 of the European

Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations.

• Being an EC Regulation, it is “binding in its entirety and directly applicable in all Member States” (Art. 288 of the Treaty on the Functioning of the European Union).

• It will be of universal application: “Any law specified by this Regulation shall be applied whether or not it is the law of a Member State” (Art. 3).

Commencement Rome II applies to events giving

rise to damage occurring after 11th January 2009: Homawoo v GMF Assurances SA (C-412/10).

Article 15: Scope Of Applicable Law

• Once applicable law is selected, which issues does it govern?

• The applicable law does not govern evidence or procedure, which are for the law of the forum (Art. 1(3)).

• General rule: applicable law governs matters of substance.

• Article 15 sets out some matters which courts must treat as matters of substance.

Article 15(c): Damages “The existence, the nature and the

assessment of damage or the remedy claimed” are all to be governed by the substantive applicable law.

Traditional English Law

• Matters relating to the remedy including the assessment of damages are procedural and for the law of the forum.

• Reaffirmed in Harding v Wealands [2006] UKHL 32 [2007] 2 A.C. 1.

What 15(c) Changes • Caps on damages? (Harding v Wealands) • Discount rates for calculation of multiplier?

(Stylianou v Toyoshima) • Deductibility of benefits? (Roerig v Valiant) • Interest? (Maher v Groupama) • Costs?

The limits of Article 15(c)

• Rome II therefore expands the role of foreign law in tort claims litigated in England.

• While English courts continue to employ English rules of evidence and procedure, however, they will not be mere branches of foreign courts.

• Foreign lawyers and insurers remain sometimes surprised by awards made by English courts.

• Wall v Mutuelle De Poitiers Assurances [2012] EWHC 3163 (QB) demonstrates the reason.

Special jurisdiction in matters relating to insurance

• Section 3, i.e. Articles 8-14, of Brussels I provide special rules for “matters relating to insurance.”

• Rationale is the protection of the weaker party (Recital (13)).

• Insurer can be sued by “weaker party” in home courts of weaker party or insurer. Insurer can sue only in home courts of weaker party.

Direct actions against insurers

• Claim in which the injured person brings the action not against the tortfeasor but against the tortfeasor’s insurer.

• In relation to motor case, made obligatory by 4th Motor Insurance Directive.

• Implemented in UK by European Communities (Rights against Insurers) Regulations 2002.

Application of insurance rules to direct actions against insurers • FBTO Schadeverzekeringen NV v Odenbreit (C-

463/06) [2007] ECR I-11321 held that special insurance rules apply to direct actions by injured person against insurer.

• So where the national law permits a direct action against an insurer it may be brought in injured person’s home court.

• That follows from Article 11(2), read in conjunction with Article 9(1)(b).

Chances and risks of avoiding Odenbreit

• Many continental insurers dislike English proceedings (mainly because of costs).

• Can a defendant by issuing proceedings swiftly seise the courts of a different country?

• In many cases, more than one country’s court may in principle have jurisdiction.

• Crucial, since the court first seised will (a) be the first to rule on its own jurisdiction and (b) will keep the case unless it decides it has no jurisdiction: lis pendens rules at Articles 27 – 30.

Chances and risks of avoiding Odenbreit

• What type of action may be available to a defendant?

• Negative declaration. • Potentially available in England: Toropdar

v D [2009] EWHC 567 (QB). • In some European countries, a defendant

not disputing liability can issue proceedings to have damages assessed.

Chances and risks of avoiding Odenbreit

• Where to sue? Under Article 5(3), “the place where the harmful event ... occurred”?

• Article 5(3) is potentially available for claim for negative declaration: Folien Fischer AG v Ritrama SpA (C-133/11) [2013] Q.B. 523.

• Article 5(3) “exists for sound administration of justice and the efficacious conduct of proceedings” (Folien, paragraph 37), not for the protection of the weaker party.

Chances and risks of avoiding Odenbreit

• Four types of action by defendant (assume one English and one foreign driver): – Insurer sues in own name. – Foreign driver sues in own name for benefit of

insurer. – Foreign driver sues in own name partly for

own benefit and partly for insurer’s. – Foreign driver sues in own name for own

injuries.

Insurer sues in own name

• As to first, insurer cannot sue in own name using Folien Fischer. –Where a case falls within special

jurisdiction rules, only those rules apply: Article 8(1).

–By special rules, insurer may sue only in defendant’s home court: Article 12(1).

Foreign driver sues in own name for benefit of insurer

• Assume that the foreign driver’s interest is identical to the insurer’s interest. In such a case, can the allegedly negligent driver sue in own name relying on Article 5(3)?

• If the named claimant is merely a proxy for the insurer, there would be an argument that should not be allowed, since it would be a device to evade the protection given to the weaker party.

Foreign driver sues in own name partly for own benefit and partly for insurer’s

• Assume now that the foreign driver is insured but nonetheless has a genuine interest in the litigation. For example: – There is a limit of indemnity under the policy

which the claim might exceed. – There is a large deductible.

• Could the foreign driver be prevented from suing in own name for negative declaration or assessment of damages?

Foreign driver sues in own name for own injuries

• Assume a case in which both foreign and English driver injured.

• Foreign driver can sue English driver in the foreign country under Article 5(3).

• If English driver later sues foreign driver’s insurer in England, English claim might be stayed under Article 28 as a related action.

• More so if liability is genuinely in issue.

Funding: the New CFA regime (post 1st April 2013)

• Section 58A (6) Courts and Legal Services Act 1990 (CLSA) provides that a costs order made in proceedings may not include provision requiring the payment by one party of all or part of a success fee payable by another party under a conditional fee agreement.

• Similar provision is made by the repeal of sections 29 and 30 Access to Justice Act 1999 in respect of ATE insurance premiums and the cost of trades unions etc undertakings as to costs.

• So, from then on the client will have to pay any success fee.

• For claims that are not claims for personal injuries as defined by CPR 2.3, the rules are still the same. The agreement must be in writing, it must not relate to proceedings that cannot be the subject of a CFA, it must specify the success fee and that success fee must not be more than 100%.

• For claims for personal injuries, there are new additional requirements pursuant to section 58 (4A) and (4B) CLSA. Briefly, the success fee must be subject to a maximum limit and that maximum limit must be expressed as a percentage of specified descriptions of damages.

• Failure to satisfy the section 58 conditions will continue to render a CFA unenforceable.

The new CFA regime (2): The Conditional Fees Order 2013

• Article 3 specifies the maximum percentage for all proceedings as 100%

• Article 4 specifies claims for personal injuries as those in respect of which there must be a cap.

• Article 5(1) specifies that at first instance the cap is 25% of the specified damages and 100% in all

other proceedings (e.g. appeals).

• Article 5 (2) specifies the damages that are available for the capped success fee as those general damages for pain suffering and loss of amenity and past pecuniary loss net of CRU that are awarded in the proceedings.

• Interest does not appear to be included and there will be the problem of the very common

situation of lump sum settlements.

• NB the success fee is capped at the GDs and past losses. Other heads of claim do not provide a pool from which the success fee is payable.

The new CFA regime (3): travel claims

• Getting the CFA wrong renders it unenforceable. Caution is therefore required in travel claims where the damages will often be decided in accordance with foreign law where there may be no separate award for GDs or past loss, e.g. where there is a “baremo” or similar which rolls together damages for pain and suffering with loss of earning capacity.

• What should Claimant’s solicitors do? – Entering into a CFA with no uplift avoids the problem. – For CFAs with uplifts two issues need to be considered. The first is the drafting of

the actual CFA. The second is working out and advising the client as to how the cap is going to be calculated where the applicable law may be foreign.

• When drafting the CFA use the wording from the CFO by stating that the uplift is capped at 25% of GDs and past losses.

• Advice to the client as to how the cap on the uplift is to be calculated in the event that the applicable law is foreign should be done in a separate letter of advice. It is likely that some knowledge of the heads of damage likely to be awarded is required at this early stage.

The New CFA Regime (4) Travel Claims

• And for Defendants?

– Will they be entitled to disclosure of anything more than the CFA? In a travel law claim is the fact that the applicable law is foreign sufficient to raise a genuine issue that there has been a breach of s58 CLSA that the court should look into to ensure that the CFA is enforceable?

– If there is a genuine issue about compliance with s.58 then there is a real risk that the Claimant will have to disclose how he/she has calculated the cap on the success fee to satisfy the court there has been no breach.

– Remains to be seen whether the Court will adopt a material breach test as they did under the old CFA Regs.

New proportionality rule The new 44.3 provides (so far as relevant): (1) Where the court is to assess the amount of costs (whether by summary or detailed

assessment) it will assess those costs— (a) on the standard basis; or (b) on the indemnity basis,

but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.

(Rule 44.5 sets out how the court decides the amount of costs payable under a contract.) (2) Where the amount of costs is to be assessed on the standard basis, the court will—

(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and

(b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.

(Factors which the court may take into account are set out in rule 44.4.)

New Proportionality Rule (2) (3) Where the amount of costs is to be assessed on the indemnity basis, the court will

resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party.

... (5) Costs incurred are proportionate if they bear a reasonable relationship to—

(a) the sums in issue in the proceedings; (b) the value of any non-monetary relief in issue in the proceedings; (c) the complexity of the litigation; (d) any additional work generated by the conduct of the paying party; and (e) any wider factors involved in the proceedings, such as reputation or public

importance. ... (7) Paragraphs (2)(a) and (5) do not apply in relation to cases commenced before 1

April 2013 and in relation to such cases, rule 44.4(2)(a) as it was in force immediately before 1 April 2013 will apply instead.

New Proportionality Rule (3) • This applies to cases commenced from 1 April 2013 • The key change is the new 44.3 (2) (a) enables a court to disallow costs that are not

proportionate even if reasonably and necessarily incurred. This may be particularly important in travel claims in which significant input from foreign lawyers and experts can be required even in relatively low value claims.

• There is now a definition of what is proportionate. It focuses on value and complexity but allows for additional work caused by the other side’s conduct as well as wider factors “involved in the proceedings”.

• Judicial training has emphasised the aim both in costs budgeting and in assessments to get costs down.

• The difficulties re proportionality are acute where damages are governed by foreign law and it is not clear what the damages will be under that law.

• Costs budgeting is likely to be even more important therefore in travel law claims, allowing the court to control the extent of the use of foreign lawyers and experts.

• Likely to be considerable practical difficulties in Judges coming to a view as to what is a reasonable amount to allow in each phase of the costs budget for the input required from foreign lawyers and foreign experts.

Miscellaneous funding matters When advising clients on the relative merits of litigating in this jurisdiction or

abroad, practitioners must be aware of the new landscape. Of particular importance are:

• The benefit to Claimants and disadvantage to Defendants arising from QOCS, albeit this is of course subject to exceptions, most importantly CPR 36.

• The benefit to Claimants and disadvantage to Defendants arising from CPR 36.14 i.e. the additional amounts awarded to Claimants who have received a judgment against the Defendant which is at least as advantageous to the claimant as the proposals contained in the Claimant’s part 36 offer.

• The disadvantage to the Claimant and advantage to the Defendant in that the Claimant now has to meet the uplift and any ATE premium out of his/her own pocket.

• In a cost managed case the advantage to both sides in knowing the likely costs exposure from an early stage.

Thirty Nine Essex Street LLP is a governance and holding entity and a limited liability partnership registered in England and Wales (registered number0C360005) with its registered office at 39 Essex Street, London WC2R 3AT Thirty Nine Essex Street's members provide legal and advocacy services as independent, self-employed barristers and no entity connected with Thirty Nine Essex Street provides any legal services. Thirty Nine Essex Street (Services) Limited manages the administrative, operational and support functions ofChambers and is a company incorporated in England and Wales (company number 7385894) with its registered office at 39 Essex Street, London WC2R 3AT