International employment disputes - conflicts of law
A detailed look at the international and domestic legal principles that now govern questions of territorial jurisdiction and the applicable law in employment cases.
"The requirement that an employee must ordinarily work in Great Britain to qualify for protection under the Employment Rights Act will cease. This requirement was considered by the Government to be unnecessary and an obstacle to fair treatment in a few cases. In spite of its removal, international law and the principles of our own domestic law will ensure that UK legislation does not apply in inappropriate circumstances."
(From Guidance issued by the Department of Trade and Industry in February 2000 following the repeal of s.196 of the ERA)
The Posted Workers Directive 96/71/EC ("the Directive") requires member states of the European Union to ensure that, in certain prescribed circumstances, workers posted to another member state are entitled to at least the same basic terms and conditions as workers habitually employed in that member state (see The Posted Workers Directive). To implement that directive in the UK, s.196 of the Employment Rights Act 1996 ("the ERA") was repealed by the Employment Relations Act 1999, thus removing the territorial restriction on those who ordinarily work outside Great Britain to enforce their rights under the ERA.
The Equal Opportunities (Employment Legislation) (Territorial Limits) Regulations 1999 similarly amended the territorial restrictions in the Sex Discrimination Act 1975 ("the SDA"), the Race Relations Act 1976 ("the RRA") and the Disability Discrimination Act 1995 ("the DDA"), which prevented those who worked "wholly or mainly" outside Great Britain from bringing claims under those Acts and under the Equal Pay Act 1970 ("the EqPA"). Now only those who work "wholly" outside Great Britain are excluded from bringing a claim.
These developments have greatly increased the significance of complex rules of private international law dealing with questions of both jurisdiction and choice of law in circumstances where an employment dispute is connected with more than one state. It is important to note, however, that the jurisdiction of a court or tribunal of a particular country is determined as a discrete issue under different rules to those that determine the law applicable to the dispute. It does not follow that simply because the courts of a particular country have jurisdiction, the laws of that country should be applied. If the applicable law is not that of the country whose courts have jurisdiction, expert witnesses will give evidence of that law as evidence of fact.
JURISDICTION
The UK is a signatory to both the Brussels Convention and the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (together "the Conventions"), incorporated into English law by the Civil Judgments and Jurisdiction Act 1982 as amended ("the CJJA") - see schedules 1 and 3C respectively. The CJJA has been amended on several occasions on the accession of new contracting states, most recently on the accession of Austria, Finland and Sweden to the Brussels Convention and of Poland to the Lugano Convention1, due to come into force in the UK, in respect of the Brussels Convention, on 1 January 2001. The amendments are not substantive. For the purposes of this article, we refer to the text of the latest version in force.
For the most part, the provisions of the Lugano and Brussels Conventions are identical (this includes the numbering of the articles); the slight differences that do exist are highlighted below.
Issues of jurisdiction in relation to proceedings within the scope of the Conventions are determined by national law only if a defendant is domiciled outside of the contracting states to the Conventions and no contracting state is vested with exclusive jurisdiction under, inter alia, an article 17 written agreement between the parties (see p.5 below). The European Court of Justice ("the ECJ") has held that in matters governed by the Brussels Convention, "national procedural rules applicable to the cases concerned are set aside" (Sanicentral GmbH v Collin).
The Conventions
The Conventions apply to "civil and commercial matters whatever the nature of the court or tribunal" and are thus relevant to the jurisdiction of the courts and tribunals of the signatory states to adjudicate over "civil and commercial" disputes. Employment disputes are of a "civil and commercial" nature for these purposes (Sanicentral).
Member states of the EU (the UK, France, Belgium, the Netherlands, Germany, Spain, Portugal, Italy, Greece, Eire, Luxembourg, Denmark, Finland, Austria and Sweden) are signatories to both Conventions. States of the European Free Trade Association ("EFTA") (Iceland, Norway and Switzerland) are signatories to the Lugano Convention only. Poland acceded to the Lugano Convention on 1 February 2000.
For the purposes of the UK, which is party to both Conventions, s.9(1A) of the CJJA states: "Any question arising as to whether it is the Lugano Convention or [the Brussels Convention] which applies in the circumstances of a particular case falls to be determined in accordance with the provisions of article 54B of the Lugano Convention." Applying that article, the courts should apply the Lugano Convention if:
The Lugano Convention provisions dealing with multiple proceedings in different contracting states in relation to the same cause of action or related actions will apply where proceedings are taking place both in an EU state and an EFTA state (although the practical implications are slight as the Conventions are identically worded in this respect).
The Modified Convention
Although the UK is party to the Conventions, separate legal systems are incorporated within its boundaries (England and Wales; Scotland; and Northern Ireland). It is necessary to allocate jurisdiction within the UK both when the Conventions confer jurisdiction in the courts of the UK (rather than to the courts of a place within the UK) and in the case of a dispute involving, say, an English company and a Scottish claimant. The Modified Convention, set out in Schedule 4 to the CJJA in similar, although not identical, terms as the Conventions, applies for these purposes under s.16 of the CJJA. For the purposes of this article, it will be assumed that the necessary allocation of jurisdiction under the Modified Convention has taken place where the Conventions allocate jurisdiction simply to the courts of the UK.
Interpretation of the Conventions
The ECJ has jurisdiction to give rulings on the interpretation of the Brussels Convention under the 1971 Protocol to that Convention. Where an English court or tribunal is applying the Brussels Convention, it must rule in accordance with the principles laid down by, and any relevant decision of, the ECJ (s.3(1) of the CJJA). The ECJ has no jurisdiction to rule on provisions of the Lugano Convention or the Modified Convention (which although based on the Conventions is a matter of national law). However, when applying the Lugano Convention, courts must take due account of decisions of the courts of other contracting states to the Lugano Convention (Protocol 2 of the Lugano Convention). Further, to ensure uniformity, two declarations to the Lugano Convention ensure that the ECJ will take due account of Lugano Convention case law in Brussels Convention cases and, in Lugano Convention cases, courts of the EFTA states will take account of Brussels Convention case law. When applying the Modified Convention, the courts must take account of ECJ case law on the Brussels Convention (s.16(3) of the CJJA).
The general rule - domicile of the defendant
The general rule under the Conventions is that "persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that State" (article 2). National law on the definition of domicile applies for the purposes of the Conventions (article 52). If under its own national law, a court determines that a party is not domiciled in the state in which the court is situated and needs to determine whether that party is domiciled in another contracting state, it must apply the national law of that state. For example, an English court that has concluded that the defendant is not domiciled in England as defined under English law, would then apply French law for the purposes of determining whether the defendant is domiciled in France.
The CJJA sets out a statutory definition of domicile to be followed by UK courts and tribunals in determining whether or not a party is domiciled in the UK or in a part of the UK or in a non-contracting state (see box on p.4).
Special jurisdiction
Where a defendant is domiciled in a contracting state, article 5 of the Conventions provides, in certain specified circumstances, for special jurisdiction to be conferred on courts of an alternative contracting state. It follows that the claimant may have a choice of forum in which to pursue his or her claim, although the ECJ has consistently held that the derogations set out in article 5 should be strictly construed and interpreted autonomously from national law in order to avoid unnecessary multiplicity of actions. The full provisions of article 5 relevant to an employment dispute are set out in the box on p.5 and discussed further below.
Matters relating to contract
Article 5(1) confers special jurisdiction "in matters relating to contract, in the courts for the place of performance of the obligation in question". In "matters relating to individual contracts of employment", this place is specifically defined. This amendment was incorporated into the Brussels Convention on the accession of Spain and Portugal in recognition of the fact that the employee is the weaker party in socioeconomic terms. Article 5(1) vests special jurisdiction in the courts of the country in which the employee habitually works.
In Mulox IBC Ltd v Geels, the ECJ stressed several factors in relation to contracts of employment: that it was important to ensure adequate protection for the socially weaker contracting party and that such protection was best assured if cases relating to contracts of employment fell within the jurisdiction of the courts in the place where the employee discharges his or her obligations to the employer, as it would be less expensive for the employee to bring or defend a claim against his or her employer.
Although Mulox was decided before the amendment of article 5(1), the ECJ has subsequently referred positively to these observations and to the finding that article 5 of the Brussels Convention does not vest concurrent jurisdiction on the courts of each country in which an employee carries out work. In Rutten v Cross Medical Ltd the ECJ held that article 5(1) referred to the place where "the employee has established the effective centre of his working activities and where, or from which, he in fact performs the essential part of his duties". On the facts, this place was where the employee carried out two-thirds of his work (notwithstanding the fact that he also carried out work in five or six other contracting states), and where he had an office in which he organised his work for his employer and to which he returned after each business trip abroad, albeit that the office was part of his home.
The Rutten ruling shows that it will be possible to establish a place of habitual work even where work is carried out in more than one contracting state. This is important because, if no such place can be established, special jurisdiction is vested in the courts of the place where the place of business that engaged the employee was or is now situated. To protect the employee, the Brussels Convention does not allow the employee to be sued in the courts of that place (although this limitation does not exist under the Lugano Convention).
Thus, in most cases under the Brussels (but not the Lugano) Convention, the employee must always be sued in the courts of the state in which he or she is domiciled or habitually works, subject to any agreement under article 17 (see p.5), unless articles 5(3) or 5(5) also apply (see immediately below).
Matters relating to tort
Article 5(3) of the Conventions vests special jurisdiction "in matters relating to tort" in the courts of the place where the harmful event occurred. This has been interpreted as giving the claimant the choice of bringing proceedings in the courts of the place where the damage occurred or where the event giving rise to the damage took place (Bier v Mines de Potasse d'Alsace).
The ECJ has defined "matters relating to tort" as covering actions that seek to establish the liability of a defendant and are not related to a contract within the meaning of article 5(1) (Kalfelis v Bankhaus Schroder, Munchmeyer, Hengst and Co. and Others). It has been decided that in those cases in English law where claims may be based alternatively in contract and in tort on the same facts, the claim will, for the purposes of the Conventions, be regarded as contractual in nature (Source Ltd v TUV Rheinland Holding AG).
There is no authority on whether a sex, race or disability discrimination claim against an employer would fall within article 5(1) and hence, outside of article 5(3). Article 5 derogations must be strictly construed and autonomously defined and the House of Lords has held that a claim for restitution of damages arising out of a purported contract which was void did not relate to a contract under article 5(1) because it was not based on a particular contractual obligation (Kleinwort Benson Ltd v Glasgow City Council).
But the ECJ has also recognised that there are separate policy considerations underlying disputes involving contracts of employment. Although discrimination is a statutory tort as a matter of English law, it may be that the ECJ would construe "matters relating to contract" as incorporating discrimination claims for the purposes of the Brussels Convention. Although the place where the discrimination occurs will normally correspond with the place of habitual work, this may not be the case when the employee is on temporary assignment or on a work trip.
Branches, agencies and other establishments
Article 5(5) confers special jurisdiction on the courts of the place in which a branch, agency or establishment is situated, where the dispute arises out of its operations. In Somafer SA v Saar-Ferngas AG, the ECJ stated that article 5(5) includes matters relating to the rights and contractual and non-contractual obligations concerning the actual management of the branch, agency or other establishment itself, such as those relating to the local engagement of staff to work there. The article will apply even where an obligation entered into by a branch is to be performed outside of the state in which it is situated (Lloyd's Register of Shipping v Soc. Campenon Bernard).
The ECJ has held that the terms "branch", "agency" or "other establishment" require that the particular body in question is subject to the control and direction of the parent body and has "the appearance of permanency" (Somafer; De Bloos Sprl v Bouyer SA).
Other bases of jurisdiction under the Conventions
There is also provision in article 6 of the Conventions allowing one of a number of defendants to be sued in the courts of the place where one of them is domiciled (as long as there is a connection between the claims made against each of the defendants of such a kind that it is expedient to determine them together in order to avoid the risk of irreconcilable judgments resulting from separate proceedings (Kalfelis). In each case the defendant in question must be domiciled in a contracting state). On a counterclaim, a defendant may be sued in the court where the original claim is pending (article 6).
Jurisdiction clauses
Under article 17, all of the above rules are displaced where the parties (one or both of whom are domiciled in a contracting state, whether or not this is the defendant) have agreed in writing to submit to the jurisdiction of the courts of a contracting state, and if:
An agreement on jurisdiction will fall within the scope of article 17 even where two courts are designated as having exclusive jurisdiction in relation to a particular type of claim (ie where a clause states that one party shall be sued exclusively in the courts of one state and the other party in the courts of another) (Meeth v Glacetal Sarl). The English courts have also held that where more than one court is selected in a (non-exclusive) jurisdiction agreement, this will fall within article 17 (Kurz v Stella Musical GmbH).
In such circumstances, the court (or courts) chosen will have exclusive jurisdiction in the sense that jurisdiction otherwise conferred by the Conventions is excluded (Kurz). As the ECJ has ruled that the Brussels Conventions override national procedural law on jurisdiction, this could have led to the result that in a Convention case an English employee would be deprived of the protection of sections such as s.203 of the ERA, which prevent parties from contracting out of English employment protection rights. For this reason, the Convention was amended so as to render exclusive jurisdiction clauses ineffective unless invoked by the employee or entered into after the dispute has arisen.
Where neither party is domiciled in a contracting state but an agreement on jurisdiction purports to vest jurisdiction in a contracting state, the courts of other contracting states will have no jurisdiction over the dispute unless the chosen court declines jurisdiction under its own national rules of private international law. This means that a party from a non-contracting state can potentially oust the jurisdiction of all other contracting states by including an English choice of jurisdiction clause in the contract of employment (subject, of course, to the limitations that apply in relation to contracts of employment noted above).
Submission to the Jurisdiction
Article 18 states that "a court of a Contracting State before whom a defendant enters an appearance shall have jurisdiction. This rule shall not apply where appearance was entered solely to contest the jurisdiction ..."
This article overrides article 17 so that it is open to a defendant to waive an exclusive jurisdiction agreement (although in the context of a claim related to a contract of employment the practical impact is not significant as such a clause will not (in most cases) have legal force unless invoked by the employee).
Summary - jurisdiction in Conventions cases
It follows that, in general, an English court or employment tribunal would have jurisdiction over proceedings brought by an employee against his or her employer if:
In all but the latter two situations, the English courts or tribunals will not have jurisdiction if exclusive jurisdiction is vested in a foreign court under article 17.
The position is the same if the employer is suing the employee, save that, under the Brussels Convention (but not Lugano), in a matter relating to contract, the employer cannot sue the employee in the courts of the country in which the place of business that engaged him or her is situated.
Technical problem for tribunals?
An employment tribunal could thus take (exclusive) jurisdiction where there is no other connection to the UK save for the written agreement on jurisdiction. This poses a technical problem for the tribunal as to how it would regulate its own procedure as Regulation 8(3) of the Employment Tribunal (Constitution and Rules of Procedure) Regulations 1993 states that:
the rules ... shall apply in proceedings to which they relate where -
(a)the respondent or one of the respondents resides or carries on business in England or Wales; or
(b)had the remedy been by way of action in the county court, the cause of action would have arisen wholly or in part in England and Wales; or
(c)the proceedings are to determine a question which has been referred to the tribunal by a court in England and Wales.
Statutory limitations
The fact that a court or tribunal has jurisdiction does not mean that English law will apply and, even if it does, a particular piece of employment legislation may contain self-limiting provisions, such as the now-repealed s.196 of the ERA. For a list of other territorial restrictions in employment legislation, see the box on p.8.
The Directive
Article 6 of the Directive states: "in order to enforce the rights and conditions guaranteed [under the Directive], judicial proceedings may be instituted in the member state in whose territory the worker is or was posted". Article 58 of the Brussels Convention provides: "This Convention shall not affect the application of provisions which, in relation to particular matters, govern jurisdiction ... and which are or will be contained in acts of the institutions of the European Communities or in national laws harmonised in implementation of such acts." So, a posted worker falling within the terms of the Directive may bring a claim in the English courts to enforce his guaranteed rights. This right is without prejudice to the worker's right to institute proceedings in another state under the Conventions (article 6 of the Directive).
Restricting uncertainty in related actions
Given that the provisions of the Conventions themselves provide for a multiplicity of courts that may hear a dispute in some circumstances by virtue of article 5, a mechanism is required to restrict uncertainty and abuse of process. Article 21 states:
Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Contracting States, any court other than the court first seised [of the matter] shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court.
Article 21 applies regardless of the domicile of the parties to the two sets of proceedings. Without prejudice to the situation where the court second seised of the matter has exclusive jurisdiction under the Convention, the court second seised cannot itself examine the jurisdiction of the court first seised (Overseas Union Insurance Ltd v New Hampshire Insurance Co.).
Both the identity of the parties and the subject-matter of both sets of proceedings must be considered pragmatically. In Turner v Grovit and others, the Court of Appeal applied the ECJ case of Gubisch Maschinenfabrik KG v Palumbo where it stated in relation to article 21 that it "applies where two actions are between the same parties and involve the same cause of action and the same subject-matter". The ECJ found that the test is satisfied when actions arise out of the same contractual relationship.
In Turner itself, the court held that article 21 applied where two sets of proceedings were concerned with the contract of employment and, in particular, the circumstances of its termination. In reaching this conclusion, the court also commented that each of the second set of allegations could have been raised as a counterclaim in the first set of proceedings.
Staying proceedings
Article 22 of the Conventions states:
"Where related actions are brought in the courts of different Contracting States, any court other than the court first seised may, while actions are pending at first instance, stay its proceedings. A court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the law of that court permits the consolidation of related actions and the court first seised has jurisdiction over both actions ... Actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings."
The House of Lords has held that actions were so related where common issues of fact may arise and be decided in two sets of proceedings (Sarrio SA v Kuwait Investment Authority).
In Turner, the High Court also decided that it had power to prohibit by injunction the plaintiff in another jurisdiction from continuing a foreign process where those proceedings were launched for no purpose other than to harass and oppress a party who was already a litigant before the employment tribunal. This is so even though the Brussels Convention applies.
There is controversial authority to the effect that an English court may stay proceedings where the defendant is domiciled in England on the grounds that the courts of a non-contracting state are the most appropriate forum, ie under national jurisdictional rules (Re Harrods (Buenos Aires) Ltd).
Proposed reform of the Brussels Convention
A draft regulation to replace and update the Brussels Convention has been proposed by the European Commission. Under the most significant of the proposed changes:
NON-CONVENTION CASES
Where the defendant is not domiciled in a contracting state, the Conventions will not apply to the question of jurisdiction (article 4), unless, inter alia, exclusive jurisdiction is conferred on the courts of a contracting state under article 17. In these circumstances, states will apply their national rules.
National jurisdictional rules
In England and Wales, the jurisdiction of the High Court or County Court depends on service of the claim form, which depends on the physical presence of the defendant within the jurisdiction, however transitory.
In certain specified situations, leave of the court may be granted under Part 6 of the Civil Procedure Rules to serve a claim form outside of the jurisdiction. Such leave is granted at the court's discretion based on whether it can be shown that the English courts are the most convenient forum for hearing the dispute with regard to the interests of the parties and the ends of justice. Once the claim form has been served, a party can apply for the action to be stayed on the basis that the courts of a different state provide the most appropriate and convenient forum on the same basis (the doctrine of forum non conveniens).
The same rules apply to the employment tribunal when it is exercising its jurisdiction to hear contract claims under the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994. One of the conditions allowing the tribunal to take jurisdiction is that the claim is one "which a court in England and Wales would under the law for the time being in force have jurisdiction to hear and determine".
No prima facie limits are set down on the jurisdiction of the employment tribunal to hear statutory claims (although effectively tribunals phrase in jurisdictional terms the territorial limits on an applicant's right to bring a claim in the tribunal under employment legislation). Statutory provisions limiting a party's right to contract out of the jurisdiction of the employment tribunal (such as s.203 of the ERA) will have effect (whereas Conventions rules cannot be invalidated in that way by national law - Sanicentral and see p.5 above).
It is unclear what the position would be in the unlikely situation of an employee who did not work in the UK wishing to bring proceedings for unfair dismissal in the English tribunals against his US employer on the basis that there is an English jurisdiction clause in the contract of employment. Under reg.8 of the Employment Tribunal (Constitution and Rules of Procedure) Regulations 1993 it is unclear what rules of procedure would apply to such a claim. It is possible that a tribunal would invoke common law rules of abuse of process or forum non conveniens to strike it out. The importance of whether or not the tribunal would have jurisdiction in this example lies in the fact that under choice of law rules, "mandatory rules" of the forum (ie England) apply regardless of the law otherwise applicable to a contract. Rights under the ERA are "mandatory rules" for these purposes (see pp.8-9).
CHOICE OF LAW
As we noted at p.1 above, the fact that the courts or tribunals of a particular state have jurisdiction does not mean that they will necessarily apply the law of that state. Separate rules apply to decide the applicable law to apply to a dispute when it has connections to more than one country.
Foreign courts may take jurisdiction over a dispute under the Conventions, if applicable, or under their own rules of private international law. Similarly, such courts will seek to ascertain the applicable law under the Rome Convention (see below) or under their own rules of private international law. In such cases, foreign courts may conclude that they should apply English law, subject to any self-limiting provisions within an English statute. Specialist advice on foreign private international law should be sought in such situations.
Contract
The Contracts (Applicable Law) Act 1990 ("the CALA") incorporates the Rome Convention on the Law Applicable to Contractual Obligations ("the Rome Convention") into English law with regard to contracts entered into on or after 1 April 1991. Contracts entered into before this time continue to be governed by the common law. The Rome Convention applies to "contractual obligations in any situation involving the laws of different countries" (article 1). Further, an English statute affecting a contract will apply (indeed, will only apply) to a contract governed by English law (unless the statute contains "mandatory rules" - see again pp.8-9).
The EU states are signatories to the Rome Convention and the ECJ has jurisdiction to rule on the meaning and effect of its provisions. Article 2 states that: "Any law specified by this Convention shall be applied whether or not it is the law of a Contracting State." Thus, if an English court applying the Rome Convention concludes that the applicable law is that of, say, Peru, it will be bound to apply Peruvian law subject to the exceptions discussed below.
The general rule - the chosen law of the parties
The general rule under the Rome Convention is that: "A contract shall be governed by the law chosen by the parties." This must be "express or demonstrated with reasonable certainty" (article 3(1)). A choice of law will be implied in very limited circumstances. The Official Report on the Rome Convention prepared by Guiliano and Lagarde ("the Guiliano-Lagarde Report"), to which the courts may have regard on issues of interpretation (s.3(3)(a) of the CALA), gives certain examples of situations where a choice of law may be implied (subject always to the circumstances of a particular case). These include:
Law applicable to employment contracts in the absence of choice
Article 6 of the Rome Convention provides for specific rules to apply in the context of contracts of employment. In the Guiliano-Lagarde Report, it was stated that it was necessary to secure "more adequate protection for the party who from the socioeconomic point of view is regarded as the weaker in the contractual relationship". This policy consideration will be relevant in interpreting article 6 of the Rome Convention.
In the absence of choice, express or implied, a contract of employment shall be governed:
In either case, if it appears from the circumstances as a whole that the contract is more closely connected with another country, the law of that country shall govern the contract.
Concurrent actions
There are no provisions in the Rome Convention dealing with claims which may be framed in both contract and tort (eg in the case of an accident at work caused by the negligence of the employer). Accordingly, it would appear to be open to a claimant to frame their claim in the manner most favourable to them in regard to conflicts of law issues2. For example, a claimant seeking to bring such a claim in the English courts could bring it in contract or tort depending on whether the Rome Convention or the Private International Law (Miscellaneous Provisions) Act 1995 ("the PILMPA") (which deals with tortious claims - see p.11 below) led to a more favourable result.
Non-derogable mandatory rules
Although freedom of contract is the basic tenet underlying the Rome Convention, there are certain limitations on the ability of the parties to choose the applicable law. These take the form of "mandatory rules", defined in article 3(3) as rules which "cannot be derogated from by contract". Examples of mandatory rules in English law are the common law principle that a penalty clause is unenforceable and employment protection rights contained in the ERA (see the box on p.9).
There are various situations in the context of contracts of employment in which the parties' choice of law may be restricted by mandatory rules. Article 3(3) itself provides that where the parties choose a foreign law "whether or not accompanied by the choice of a foreign tribunal" but "all the other elements relevant to the situation at the time of choice are connected with one country only" this shall not prejudice the application of mandatory rules of that country. So, it is not open to an English employer to insert a foreign choice of law clause in its standard contracts of employment for its English work force in order to avoid English unfair dismissal legislation.
Secondly, article 6(1) of the Rome Convention specifically provides that in a contract of employment "a choice of law made by the parties shall not have the result of depriving the employee of the protection afforded to him by the mandatory rules of the law which would be applicable ... in the absence of choice".
These two situations restrict the parties' power to choose the applicable law. Where the mandatory rules give more protection to the employee, they should take effect; where the chosen law provides greater protection, the chosen law should apply. Where the chosen law provides for different rights and remedies to those available under the mandatory rules, it is submitted that the law most favourable to the employee should apply on the same basis, although this may be somewhat harder to identify3.
Mandatory rules of the forum
Finally, article 7(2) of the Rome Convention provides: "Nothing in this Convention shall restrict the application of the rules of the law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to the contract." This definition of mandatory rules is narrower than that under article 3(3) in that the rules must also override the applicable law under the relevant national law. Rules that fall within the narrower definition will also be mandatory rules in the wide sense.
Using the examples cited above, the common law principle on penalty clauses would fall within the wider definition (ie it cannot be derogated from by contract), while ERA rights would also be mandatory rules in the narrower sense. Section 204 of the ERA states that: "For the purposes of this Act it is immaterial whether the law which (apart from this Act) governs any person's employment is the law of the United Kingdom, or of a part of the United Kingdom, or not." It follows that all employment rights contained in the ERA constitute mandatory rules under articles 3(3), 6(1) or 7(2). For further examples of statutory employment mandatory rules, see the box on p.9.
In contrast to the effect of "wider" mandatory rules under articles 3(3) and 6(1), narrower mandatory rules have a more significant effect in that they will apply regardless of whether mandatory rules under the applicable law, either as expressed by the parties or in the absence of choice, are more favourable. This means that the mandatory rules of the forum will apply regardless of whether any of the laws that would otherwise be applicable would be more favourable to the employee. Thus, if an English employment tribunal has jurisdiction, UK mandatory rules will apply and override any applicable foreign mandatory rules, even if less favourable to the employee4.
So, in the example cited in relation to jurisdiction, where there is no other connection to England save for a written agreement on jurisdiction which is invoked by the employee in proceedings against his employer, English mandatory rules will apply to those proceedings as mandatory rules of the forum (article 7(2) of the Rome Convention), which will include rights under the ERA, which now contain no territorial restrictions.
Self-limiting provisions
It is for national law to determine not only that a particular rule is mandatory but also the circumstances in which it will apply. So, a claimant seeking to bring proceedings for unfair dismissal under the ERA where the applicable law of the case is not that of the UK will still have to comply with the relevant conditions laid down under the ERA. Until the repeal of s.196, such conditions included working ordinarily within the UK; although the law of unfair dismissal was a mandatory rule, it was self-limiting in terms of its territorial application. Since its repeal, an applicant may have the protection of the ERA if he or she is temporarily working in the UK or does not work in the UK at all. By contrast, although the race, sex and disability discrimination legislation almost certainly constitutes mandatory rules, an applicant who works "wholly" outside of Great Britain will not be able to avail himself of their protection. See the box on p.8 for other self-limiting territorial restrictions in English employment legislation.
Mandatory rules applied by foreign courts
The UK has opted out of a further provision in the Rome Convention dealing with mandatory rules. Article 7(1) states that effect may be given to mandatory rules of the law of another country with which the situation has a close connection. The courts of foreign states applying the Rome Convention may therefore apply mandatory rules of the UK in foreign proceedings where they believe this test is satisfied.
Material validity
The existence and validity of a contract or any contractual term is determined by the law that would be applicable under the Rome Convention if the contract or term were valid (article 8(1)). This rule covers issues such as illegality, consideration and mistake. In relation to issues related to consent, a party may rely on the law of the country where he or she is habitually resident to establish that he or she did not consent if it would be unreasonable to rely on the rule in article 8(1) (article 8(2)).
Formal validity
Formal validity would appear from the Guiliano-Lagarde Report to include formal requirements such as the need for a non-competition clause in a contract of employment to be in writing in certain jurisdictions. Under article 9, a contract concluded between parties in the same country is formally valid if it satisfies the formal requirements of that country or the applicable law under the Rome Convention. If the parties are in different countries, the contract will be formally valid if it satisfies the requirements of one of those countries or the applicable law.
Public policy considerations
Under article 16, the application of a rule of the law of any country specified by the Rome Convention may be refused only if such application is manifestly incompatible with public policy.
Summary - choice of law (contract)
English law will apply to a contractual dispute where:
English mandatory laws (such as unfair dismissal under the ERA) will apply where the applicable law under the Rome Convention is that of England and Wales (see above) or, if the applicable law is foreign, where:
The Directive
Article 20 of the Rome Convention provides that the Convention will not affect the application of provisions which, in particular matters, lay down choice of law rules relating to contractual obligations and which are or will be contained in acts of the institutions of the European Communities. To the extent, therefore, that the provisions of the Rome Convention do not allow for posted workers within the scope of the Directive to bring claims to uphold their guaranteed rights under the law of the country to which they are posted, the Directive, and implementing measures in national law, will take effect.
Tort
In England, the PILMPA applies to acts or omissions giving rise to a claim which occur on or after 1 May 19965 for the purposes of identifying the applicable law to be used in determining issues relating to tort. Under s.11, "the general rule is that the applicable law is the law of the country in which the events constituting the tort ... in question occur". Where elements occur in more than one country in a personal injury case, the applicable law is taken to be the law of the country where the individual was when he or she sustained the injury (s.11(2)(a)). The term "personal injury" includes disease or any impairment of physical or mental condition (s.11(3)). In any other relevant case, the law of the country in which the most significant elements of those events occurred is applicable (s.11(2)(c)).
The general rule will be displaced where it is "substantially more appropriate" to apply the law of another country after a comparison of the significance of the factors linking a tort with that other country to those factors linking it with the country whose law would be applicable under the general rule (s.12). Such factors can include those which relate to the parties, to the events constituting the tort or to the circumstances or consequences of those events.
There is nothing in the PILMPA to prevent a claimant choosing to frame a claim in contract rather than in tort where they have a concurrent claim.
The provisions of the PILMPA are without prejudice to the application of mandatory rules which override or modify the normally applicable rules of private international law (s.14(4)). Although not expressly limited to mandatory rules of the forum it is submitted that this limitation should be implied to encourage certainty6. As submitted above, it is likely that the SDA, the RRA and the DDA will constitute mandatory rules for these purposes.
Section 14(3) states that the PILMPA does not authorise the application of foreign law which would conflict with principles of public policy of the forum.
Footnotes
1 See the Civil Jurisdiction and Judgments Act 1982 (Amendment) Order 2000 (SI 2000/1824).
2 Per Dicey and Morris on the Conflicts of Laws, 13th Edition (2000), p.1205.
3 Per Dicey and Morris on the Conflicts of Laws, 13th Edition (2000), pp.1308-9.
4 Per Dicey and Morris on the Conflicts of Laws, 13th Edition (2000), pp.1309-20.
5 S.14 of the PILMPA and the Private International Law (Miscellaneous Provisions) Act 1995 (Commencement) Order 1996 (SI 1996/995).
6 Per Dicey and Morris on the Conflicts of Laws, 13th Edition (2000), pp.1558-9.
7 Per Dicey and Morris on the Conflicts of Laws, 13th Edition (2000), pp.1319-20.
Jurisdiction, the applicable law and employment protection rights under the ERA8
8 See also the flowchart on p.10.
The definition of domicile under the CJJA
Where an individual is domiciled in the UK but has no substantial connection with a particular part, he or she shall be treated as domiciled in the part in which he or she is resident (ss.41(5)).
An individual is domiciled in a non-contracting state where he or she is resident in that state and the nature and circumstances of his or her residence indicate that he or she has a substantial connection with that state (ss.41(7)).
A corporation or association has its seat in a particular place in the UK if it has its seat in the part of the UK in which that place is situated and it has its registered office or some other official address in that place; or its central management and control is exercised in that place; or it has a place of business in that place (s.42(5)).
A corporation or association shall not be regarded as having its seat in a contracting state other than the UK if the courts of that state would not regard it as having its seat there (s.42(7)).
Special jurisdiction - article 5
"A person domiciled in a contracting state may, in another Contracting State, be sued:
- in matters relating to a contract, in the courts for the place of performance of the obligation in question; in matters relating to individual contracts of employment, this place is where the employee habitually carries out his work, or if the employee does not habitually carry out his work in any one country, [the employer may also be sued in the courts for the place where the business which engaged the employee was or is now situated]" (article 5(1)).
Note: The Lugano Convention is worded identically save that for the words in square brackets there is substituted: "this place shall be the place of business through which he was engaged".
- "in matters relating to tort ... in the courts for the place where the harmful event occurred" (article 5(3)).
- "as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place in which the branch, agency or other establishment is situated" (article 5(5)).
Jurisdiction clauses - Article 17
"If the parties, one or more of whom is domiciled in a Contracting State, have agreed that a court or courts of a Contracting State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have exclusive jurisdiction. Such an agreement conferring jurisdiction shall be either-
(a) in writing or evidenced in writing; or
(b) in a form which accords with practices which the parties have established between themselves ...
Where such an agreement is concluded by parties, none of whom is domiciled in a contracting state, the courts of other contracting states shall have no jurisdiction over their disputes unless the court or courts chosen have declined jurisdiction.
...
In matters relating to individual contracts of employment an agreement conferring jurisdiction shall have legal force only if it is entered into after the dispute has arisen or if the employee invokes it to seise courts other than those for the defendant's domicile or those specified in Article 5(1)."
Territorial restrictions in employment legislation
"The following provisions of this Act do not apply to employment where under his contract of employment an employee works, or in the case of a prospective employee would ordinarily work, outside Great Britain -
In Part III (rights in relation to trade union membership and activities) -
Sections 137 to 143 (access to employment)
Sections 146 to 151 (actions short of dismissal)
Sections 168 to 173 (time off for trade union duties and activities)
In Part IV, sections 193 to 194 (duty to notify the Secretary of State of certain redundancies)."
... applies to a data controller in respect of any data only if -
the data controller is established in the UK and the data are processed in the context of that establishment; or
the data controller is established neither in the UK nor in any other EEA state but uses equipment in the UK for processing the data otherwise than for the purposes of transit through the UK.
Each of the following is to be treated as established in the UK:
-an individual who is ordinarily resident in the UK;
-a body incorporated under the law of any part of the UK
-a partnership or other unincorporated association formed under the law of any part of the UK;
-any person who maintains in the UK an office, branch or agency through which he carries on any activity; or a regular practice.
...
(b)is working, or ordinarily works, in the UK under his contract ...
Employment statutes which contain "mandatory rules"
The following statutes state that, for the purposes of the relevant Act, "it is immaterial whether the law which is the law applicable to the contract is the law of any part of the United Kingdom or not" (and are thus mandatory rules in both the wide and narrow sense):
The Transfer of Undertakings (Protection of Employment) Regulations 1981 apply notwithstanding that the transfer is governed by foreign law or that the employment of any person employed in the transferred undertaking is governed by any such law, provided that the transferred undertaking was situated in the UK immediately before the transfer (reg.3).
The SDA, RRA and DDA do not contain express wording dealing with the issue. Dicey submits that "it would seem axiomatic that these Acts be applied irrespective of the law applicable to the contract" (ie that they are mandatory in both the wide and narrow sense) and that the National Minimum Wage Act 1998 also constitutes a mandatory rule7.
To the extent that employment legislation inserts new provisions into the ERA, these rights will be mandatory (eg the "whistleblowing" provisions inserted by the Public Interest Disclosure Act 1998).
Jurisdiction of the Employment Tribunal to hear claims brought by an employee under the ERA
CASE LIST
Bier v Mines de Potasse d'Alsace [1976] ECR 1735
De Bloos Sprl v Bouyer SA [1976] ECR 1497
Gubisch Maschinenfabrik KG v Palumbo [1987] ECR 4861
Kalfelis v Bankhaus Schroder, Munchmeyer, Hengst and Co. and Others [1988] ECR 5565
Kleinwort Benson Ltd v Glasgow City Council [1999] 1 AC 153
Kurz v Stella Musical GmbH [1992] Ch. 196
Lloyd's Register of Shipping v Soc. Campenon Bernard [1995] ECR I-961
Meeth v Glacetal Sarl [1978] ECR 2133
Mulox IBC Ltd v Geels [1994] IRLR 422
Overseas Union Insurance Ltd v New Hampshire Insurance Co [1991] ECR I-3317
Re Harrods (Buenos Aires) Ltd [1992] Ch.72
Rutten v Cross Medical Ltd [1997] ECR I-57/[1997] ICR 715
Sanicentral GmbH v Collin [1979] ECR 3423
Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32
Somafer SA v Saar-Ferngas AG [1978] ECR2183
Source Ltd v TUV Rheinland Holding AG [1998] QB 54
Turner v Grovit and others [1999] IRLR 638
