Party Autonomy in Torts. Symeon C. Symeonides

Size: px

Start display at page:

Download "Party Autonomy in Torts. Symeon C. Symeonides"

April Garrison
5 years ago
Views:

1 Party Autonomy in Torts Symeon C. Symeonides

2 Post-dispute agreements are totally unproblematic and should be encouraged. Pre-dispute agreements are inherently problematic because: Before the dispute arises, the parties usually do not contemplate a future tort, and do not know who will injure whom and the nature and severity of the injury. An unsophisticated or weak party may sign a c-o-l agreement uncritically or unwittingly, even when the odds of becoming the victim are much higher than the odds of becoming a tortfeasor. Thus, pre-dispute agreements may facilitate the exploitation of weak parties by, for example, choosing a law that relieves the strong party from the consequences of its own fault. For this reason, they must be policed carefully and must be subject to effective safeguards to reduce the chances of exploitation.

3 Rome II does not provide sufficient safeguards for pre-dispute agreements. Article 14 continues the European tradition (preserved by the presumption of Art. 4.3) in favor of the preexisting relationship between the parties. However, Art. 14.1(b) is problematic. It seeks to protect some weak parties (consumers and employees) but does not protect small commercial actors, such as franchisees. It requires that the agreement be freely negotiated, but this should be a requirement for all c-o-l agreements, not just pre-dispute agreements. The legislative history suggests that the phrase freely negotiated may have been intended to mean individually negotiated, which would exclude standard-form or adhesion contracts, but that is far from sure. The supposed safeguard of the mandatory rules of the state in which all other elements are located (Art. 14.2) can help only if the transaction does not have any foreign elements. Finally, Rome II (and Rome I) polices party autonomy only through the ordre public and mandatory rules of the lex fori (but not the lex causae) and this can be very problematic when the contract also contains a FS clause.

Norway has an opportunity to do a better job than Rome II, for several reasons, but also

Bilateral rule Unilateral rules The unilateral rules will carve out certain types of

, consumer, employment, franchise, insurance, construction) that have specified

The bilateral rules will provide for all other contracts.

both contractual and non contractual disputes, but for pre dispute agreements covering

4 Norway has an opportunity to do a better job than Rome II, for several reasons, but also because it can combine unilateral and bilateral rules, as I described yesterday. Bilateral rule Unilateral rules The unilateral rules will carve out certain types of contracts (e.g., consumer, employment, franchise, insurance, construction) that have specified connections with Norway and will prohibit outbound c o l and FS clauses. The bilateral rules will provide for all other contracts. They will allow both pre and post dispute agreements (both outbound and inbound) for both contractual and non contractual disputes, but for pre dispute agreements covering non contractual issues they should impose specific safeguards, such as requiring: Commerciality; Express and conspicuous inclusion of non contractual issues; Long term relationships (as opposed to one shot transactions, such as sales).

5 If, before the events giving rise to a dispute, the parties entered into an agreement designating the law that will govern the dispute, the agreement is enforceable only if: (1) the agreement does not fall within the scope of articles X, Y and Z (regarding consumers, employees, franchisees, insureds, and one-shot transactions such as sales); (2) the agreement was individually negotiated, expressed in writing, and clearly covers non-contractual obligations; (3) all parties engaged in commercial activity and the agreement was part of that activity; and (4) the application of the designated law is not manifestly incompatible with the public policy (ordre public) of Norway or the country whose law would be applicable in the absence of such an agreement.

6 in Torts Symeon C. Symeonides

7 Post-dispute agreements: No problem In fact, a common form of tacit agreement to the law of the forum has always been allowed in the litigation phase when neither party raises the applicability of foreign law. Pre-dispute Agreements No legislation at the federal or national (i.e. uniform) level. But many states have statutes that prohibit all outbound c-o-l clauses (for both contractual and non-contractual issues) in certain types of contracts (e.g., consumer, employment, franchise, insurance, construction) that have specified contacts with the enacting state Restatement 2d speaks of law chosen to govern the parties contractual rights and duties. Oregon contracts statute: ORS contractual rights and duties. Oregon torts statute: Allows post-dispute agreements choosing Oregon law (ORS (2)). Post-dispute agreements choosing non-oregon law must conform to the requirements of the Contracts statute. See ORS ORS does not sanction, i.e., it does not allow pre-dispute agreements for future torts. Louisiana law: Same as Oregon

8 American Case Law American courts do not seem to doubt the parties power to choose the law that will govern a future tort between them. Courts view this as a matter of contractual intent, which they try to ascertain by examining the wording of the clause. If the wording is broad enough, then courts hold that it encompasses non-contractual issues. Otherwise not. Courts are not at all consistent in interpreting the wording, but The majority of cases held that the wording was not broad enough to encompass non-contractual issues; and Cases finding that the wording includes noncontractual issues tend to scrutinize the clause more closely. The potential harshness on weak parties is mitigated by the fact that: (1) Courts are interventionist and vigilant; and (2) They police party autonomy through the public policy limits of the lex causae (not just the lex fori).

9 Public Policy Overriding mandatory rules Lex Fori 5 Lex Causae

letter=restricted PA Deadly combination with a FS clause Hague COCA exacerbates the problem by requiring the

10 Lex Fori Lex Causae Chosen Law Result 1 a a B Not 2 a b C upheld US EU 3 a B B Upheld* Not upheld 4 a B C Upheld* Not upheld 5 A b A Not upheld upheld 6 A b C Not upheld upheld LEGEND CAPITAL LETTER= Unrestricted PA Lower case letter=restricted PA Deadly combination with a FS clause Hague COCA exacerbates the problem by requiring the application of the PIL of the state of the chosen court for determining whether a FS is null and void (except for capacity)

MANDATORY RULES and PUBLIC POLICY

1 This project is co-financed by the European Union MANDATORY RULES and PUBLIC POLICY Mandatory rules: rules that cannot be derogated from by an agreement. The parties of a contract must observe them.