Convention on the Law Applicable to Products Liability

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Convention on the Law Applicable to Products Liability

The Final Act of the Convention was signed on the 21st of October 1972 (Actes et Documents, Douzième session (1972) Tome I).

Analyisis of the Convention on Law Applicable to Products Liability

History of the Convention

The law governing products liability was first suggested as a possible subject for a convention of the Hague Conference at the meeting of the Special Commission on Torts in October 1967. This suggestion was approved at the Eleventh Session of the Hague Conference in October 1968. It was then determined that a draft convention on products liability should be prepared by a Special Commission and that the topic should be one of those considered at the Twelfth Session of the Hague Conference in October 1972.

In implementation of this decision, the Permanent Bureau in November 1969 sent the Member Governments a document which contained:

  • a questionnaire on what should be the scope of the convention and the nature of the applicable law and
  • a report on ‘Products Liability in the Conflict of Laws’ by Mr M. L. Saunders, who was at that time a member of the Permanent Bureau staff. The replies to the questionnaire were assembled by the Permanent Bureau and sent to the Governments.

A Special Commission was then organized. It held its initial meeting in The Hague from September 7-12, 1970 at which time the general field was canvassed and basic decisions made. At the second meeting of the Commission, held in The Hague during the period of March 29-April 5, 1971, the decisions made at the initial meeting were reviewed, and agreement reached on the provisions of a draft convention. Mr G. van Hecke, Professor in the Faculty of Law of the University of Leuven, presided as Chairman over both sessions of the Special Commission. The undersigned served as Rapporteur.

The task of preparing a definitive Convention was entrusted to the First Commission of the Twelfth Session of the Conference, which was likewise chaired by Mr G. van Hecke. Mr W. Lorenz, Professor in the Faculty of Law of the University of Munich, served as Vice-President and the undersigned again served as Rapporteur. The draft convention that had previously been prepared by the Special Commission and the Observations of the Governments on this Convention served as the basis of the discussions of the First Commission. The definitive Convention prepared by the First Commission and approved by the Twelfth Session of the Conference follows the general outline of the draft convention but differs in several important respects.

Commentary

The Convention is concerned exclusively with the law governing products liability in situations where the person claimed to be liable did not transfer the product, or the right to use the product, to the person suffering damage. The Convention does not deal with judicial jurisdiction or with the recognition or enforcement of foreign judgments rendered in a products liability case.

The Convention consists of 22 articles. Of these, the first three are concerned with the scope of the Convention. Articles 4-6 are the most important provisions since they state the rules for determining the applicable law. Article 7 limits the application of articles 4-6 by providing that a defendant shall not be held liable under an unforeseeable law, while article 9 authorizes the court to give consideration ‘to the rules of conduct and safety prevailing in the State where the product was introduced into the market’ as well as to the analogous rules prevailing in the State whose law is made applicable under articles 4-6. Article 8 lists certain important issues governed by the law made applicable by the Convention, while article 10 contains the customary provision on public policy (‘ordre public’).

The Articles

Article 11 provides that the Convention shall be applied without regard to any consideration of reciprocity ‘even if the applicable law is not that of a Contracting State’. Articles 12-14 are concerned with the peculiar problems posed by a State which is composed of several territorial units each with its own rules of law on the subject of products liability. Article 15 states that the Convention ‘shall not prevail over other Conventions in special fields’ which deal with products liability, while article 16 lists the only reservations to the Convention that may be made by a Contracting State. Articles 17-22 are devoted to final clauses.

The scope, or field of application, of the Convention is set forth, as stated above, in articles 1-3. Subject to one important exception, article 1 provides that the Convention shall be applied, ‘irrespective of the nature of the proceedings’, to determine ‘the law applicable to the liability of the manufacturers and other persons specified in article 3 for damage caused by a product’.

This damage may result from a defect in the product, from a mis-description of the product or from ‘a failure to give adequate notice of its qualities, its characteristics or its method of use’. The exception is that the Convention does not apply in situations where the product was transferred by the person claimed to be liable to the person suffering damage. The reasons which led to the making of this exception are stated in the detailed discussion of article 1, which appears (in this legal Encyclopedia). Nothing in the Convention would preclude a Contracting State from requiring its courts to apply the provisions of the Convention to issues falling within the scope of the exception. In so requiring, the State would be acting entirely on its own initiative and not by reason of any obligation it incurred by adhering to the Convention.

Article 2 defines three key words in the Convention: product, damage and person. This article makes clear that the Convention is intended to cover all products, whether natural or industrial, new or manufactured or movable or immovable. With one exception, the Convention likewise applies to all kinds of damage, whether these take the form of personal injuries, damage to tangible property (land and chattels) or out- of-pocket (economic) loss. The exception is that damage to the product itself and any consequential economic loss are excluded unless accompanied by other damage.

Finally, article 2 provides that the Convention applies to both natural and legal persons, such as corporations and partnerships.

Article 3 is concerned with the categories of persons whose liability is regulated by the Convention. This article has a broad scope of application. It states that the Convention applies to manufacturers of a product, to producers of a natural product, to other suppliers of a product, such as vendors, bailors and donors, to ‘other persons, including repairers and warehousemen, in the commercial chain of preparation or distribution of a product’, and to the ‘agents or employees’ of the persons mentioned above.

Articles 4-7 are the key provisions of the Convention since they state the basic rules for determining the applicable law. Articles 4 and 5 provide that either the ‘State of the place of injury’ or the ‘State of the habitual residence of the person directly suffering damage’ will be the State of the applicable law if it contains one of two or more designated contacts. So, under article 4, ‘the State of the place of injury’ will be the State of the applicable law if in addition this
State is also the place where the person directly suffering damage had his habitual residence or acquired the product or where the person claimed to be liable had his principal place of business. Under article 5, and ‘notwithstanding the provisions of article 4 . . . the State of the habitual residence of the person directly suffering damage’ will be the State of the applicable law if in addition this State is either the place where the person claimed to be liable had his principal place of business or where the product was acquired by the person directly suffering damage.

Then under article 6, if there is no such combination of contacts as envisaged in articles 4 or 5, the claimant is given an option and, subject to the qualification contained in article 7, may base his claim on the internal law of either the State of the place of injury or the State of the principal place of business of the person claimed to be liable. The qualification contained in article 7 is that liability cannot be imposed by virtue of articles 4, 5 and 6 under the internal law of the State of the place of injury or the internal law of the State of the habitual residence of the person directly suffering damage if the person claimed to be liable ‘establishes that he could not reasonably have foreseen that the product or his own products of the same type would be made available in that State through commercial channels’. (See for effect: discussion of article 7 in this legal Encyclopedia).

It seems reasonable to suppose that the great majority of cases will fall within the scope of either article 4 or article 5. These articles provide for both predictability of result and ease of application, since each calls for the application of the internal law of a State which, usually at least, will be easily identifiable. Likewise, these articles insure against the application of what might be thought to be a fortuitous law by requiring that two important contacts be located in a State before that State can be selected as the State of the applicable law. Then, only in the rare case, where neither the injury nor the habitual residence of the person directly suffering damage is grouped in a State with another one of the contacts mentioned in articles 4 and 5, is the claimant given an option. This option is limited in two ways. At most, the claimant can only choose between two laws, the internal law of the State of the principal place of business of the person claimed to be liable and the internal law of the State of the place of injury. And the latter law may not be chosen if the person claimed to be liable ‘establishes’ lack of foreseeability under the provisions of article 7.

In other words, the Convention may be said to treat with an even hand both the claimant and the person claimed to be liable. Under limited circumstances, the claimant is given the power to choose between two laws. But in no event can the person claimed to be liable be held subject to an unforeseeable law. As a result, there will be situations where the claimant must base his claim on the internal law of the State of the principal place of business of the person claimed to be liable even though he, the claimant, has no connection whatsoever with that State.

Articles 4-6 represent the one marked departure from the provisions of the draft convention prepared by the Special Commission. This draft convention provided for a hierarchy of laws without any requirement that two contacts be grouped in the State of the applicable law and without giving any option to the plaintiff. Under this draft convention the preferred law was ‘the internal law of the State of the habitual residence at the time of the accident of the person directly injured by the product’. This law was to be applied unless ‘neither this product nor products of the same origin and the same type were available in that State through commercial channels with the consent, express or implied, of the person claimed to be liable’. Then, if this condition could not be met, the draft convention called in the second place, and subject to the same condition, for application of ‘the internal law of the State where the accident occurred’. Finally, if the condition of commercial availability could be met by neither the State of habitual residence nor the State of the place of the accident, the governing law was ‘the internal law of the principal place of business of the person claimed to be liable’.

Article 8 lists certain important issues that are to be determined by the law made applicable by the Convention. The wording of this article makes clear that it is not intended to be exclusive; still other issues should undoubtedly be determined by the applicable law. The article does indicate that the Convention is intended to have a broad scope and to cover at least the great majority of issues in tort that may arise in a products liability case. With one exception, the issues listed in this article are the same as those listed in article 8 of the Convention on the Law Applicable to Traffic Accidents. The exception is that certain issues relating to the burden of proof are included within the list of issues expressly covered by the present Convention; they were not so included in the Convention on the Law Applicable to Traffic Accidents, signed at The Hague, May 4th, 1971.

Article 9 is directed to the situation where the product is introduced into the market in a State other than the one whose internal law is made applicable by articles 4-6. In such a situation, the court is authorized, but not required, to give ‘consideration … to the rules of conduct and safety’ of the first State. The court may also, of course, give consideration, and indeed may give exclusive consideration, to the rules of conduct and safety prevailing in the State whose internal law is made applicable by articles 4-6.

Article 10 follows the practice of the Hague Conference by giving a narrow scope of application to the public policy (‘ordre public’) exception. The article provides that application of a law made applicable by the Convention may only be refused ‘where such application would be manifestly incompatible with public policy (‘ordre public’).’

Article 11 is an important provision since it requires a Contracting State to treat the Convention as a uniform law. Under the article, a Contracting State is required to apply the law made applicable by the Convention without regard to any consideration of reciprocity ‘even if the applicable law is not that of a Contracting State’. Particularly by reason of this provision, the limited public policy (‘ordre public’) exception of article 10 may serve on occasion as a useful safety- valve.

Articles 12-14 are directed to the peculiar problems of States which are composed of territorial units, each with its own rules of law on the subject of products liability.

Under article 12, each of such territorial units ‘shall be considered as a State for the purposes of selecting the applicable law under this Convention’.

Article 13 is designed to avoid imposing upon such a State a greater obligation to apply the Convention than is imposed upon a State with a uniform system of law. This article provides that a State composed of territorial units each with its own rules of law on the subject of products liability shall not be required to apply the Convention in situations ‘where a State with a uniform system of law would not be bound to apply the law of another State by virtue of articles 4 and 5 of this Convention’. The reasons which led to the adoption of article 13 are set forth in the detailed discussion of the article which appears below. Suffice it to say here that one purpose of the article is to free a State with a non-uniform system of law from the obligation of applying the Convention in situations where all essential elements of the occurrence are grouped within its territory.

Article 14 contains a federal-state clause which permits a State composed of units each with its own rules of law on the subject of products liability to declare the Convention applicable ‘to all its territorial units or only to one or more of them’ and to ‘modify its declaration by submitting another declaration at any time’.

Article 15 is designed to avoid conflicts between Conventions. It provides that the Convention ‘shall not prevail over other Conventions in special fields …. which contain provisions concerning products liability’ and to which the Contracting States are or may become Parties.

Article 16 states the only two reservations that can be made by a Contracting State in adhering to the Convention. Pursuant to this article, a Contracting State may reserve the right not to apply the Convention:

  • to issues of prescription and limitation and
  • to raw agricultural products. [1]

Preamble

The preamble is brief in accordance with the practice of the Hague Conference. It makes clear that the Convention applies only in international cases and is concerned only with determining the law applicable to products liability. In other words, the Convention is concerned exclusively with choice of law and does not purport to affect in any way the substantive rules of products liability. Likewise, the Convention does not deal with questions of judicial jurisdiction or with the recognition and enforcement of foreign judgments. [2]

Matters not covered by the Convention

Brief reference will here be made to certain matters, in addition to those mentioned in the second paragraph of article 1, that it was decided should not be covered by the Convention. As to such matters, a Contracting State remains free to apply its own rules of Conflict of Laws.

Questions of jurisdiction and of the recognition and enforcement of foreign judgments are not covered by the Convention. It was felt that the recognition and enforcement of judgments in the products liability area could be handled satisfactorily by the provisions of the general Convention on Recognition and Enforcement of Foreign judgments. It should also be pointed out that the Convention on the Law Applicable to Traffic Accidents contains no rules on either jurisdiction or foreign judgments.

Likewise not dealt with is the effect of a choice-of-law clause in an agreement between the person directly injured and the person claimed to be liable in situations where the former person did not acquire the product from the latter person. Such an agreement can be made before injury, as in the situation where the manufacturer sends a written warranty or guaranty to the purchaser or where a document of guaranty or warranty is enclosed with the product. Such an agreement can also be made after the injury, and in such a situation is more likely to represent a true agreement between the person directly injured and the person claimed to be liable. The Conference did not have occasion to discuss this particular question, but it had previously been determined by the Special Commission that the Convention should not deal with such agreements whether made before or after the injury. Accordingly, the effect of such agreements and of any choice-of-law clause they may contain is left to be determined by private international law rules of the forum.

After considerable discussions, it was also decided that the Convention, contrary to what is done in article 9 of the Convention on the Law Applicable to Traffic Accidents, should not deal with direct actions against insurers. In reaching this decision, the Conference was influenced by the fact that product liability insurance is a relatively new phenomenon in contrast to insurance against liability for automobile accidents.

In addition, it was decided that the Convention should not deal with the law governing recourse actions and subrogation. [3]

Final clauses (articles 17-22)

The so-called Final clauses dealing with the formalities of signature, ratification, accession and entry into force follow the usual pattern. It may be useful, however, to point out a few provisions that were modernised and streamlined.

Although the Convention is open for accession by States non-Members of the Conference, the distinction between Members (at the time of the Twelfth Session) and non-Members was maintained. All Members – even those who sent no delegations to the Session – may sign and ratify the Convention; non-Members can only accede to it (articles 17-18). It was felt that the Conference is a club of nations who agree to strive, in a common effort, to unify rules of private international law and that the difference in procedure should underline the difference in the positions of Member States, and others, as the former had, and the latter had not, participated in the process of unification, an important phase of which is formed by the preparatory stage leading up to the final negotiation.

A new solution was found for defining the dates at which the Convention enters into force and becomes binding on the individual States which ratify it, or accede to it. The Convention refers to the first day of the third calendar month following the deposit of the act of ratification or accession; this avoids uncertainties in calculations which surrounded corresponding articles in previous Hague Conventions. It means that the period of time separating the deposit of the ratification and the entry into force – in order to allow a State to ensure promulgation and publication of the text, and which formerly was sixty days – now varies according to the date of ratification between 59 and 91 days; all ratifications effectuated – e.g. – in the month of May, whether at the first or the thirty-first day of the month, or at some date in between, will lead to an entry into force on the first of August.

The Convention, once entered into force, shall remain so unless denounced; denunciation can only have effect at the end of successive five-year periods, and must be made more than 6 months in advance.

The Convention confers (article 22) on the depositary – the Ministry of Foreign Affairs of the Netherlands – the task of informing all Members of the Conference – whether they have ratified the Convention or not – of occurring signatures, ratifications, accessions, declarations and the like.

For the last few years, the said Ministry has in effect followed this course (in respect of other Hague Conventions) on a purely voluntary basis, even though the corresponding articles only requested that Contracting States be informed. The provision strengthens the idea of the Hague Conference being a standing form of organised collaboration between Member States. [4]

Resources

Notes and References

  1. Explanatory Report by W.L.M. Reese, New York, March 1973, Institute of International Law
  2. Id.
  3. Id.
  4. Id.

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