On 27 June 2024, the English Court of Appeal delivered a judgment in Nicholls v AXA Assistance Group T/A AXA Travel Insurance [2024] EWCA Civ 718, addressing crucial issues under the Rome II Regulation (“Rome II”), which is assimilated EU law in the UK, regarding the classification of interest rates on damages and the principles of subrogation. For a comprehensive read, you can access the link.

Key Ruling on Substantive vs. Procedural Law

The ruling, delivered by Lord Justices Dingemans, Stuart-Smith, and Coulson, concerned personal injuries sustained in Spain and the subsequent legal actions under Spanish law, which was applicable to the torts involved. A central issue in the case was whether the rate of interest on damages should be considered a substantive or procedural matter under the Rome II. Article 1(3) of Rome II excludes matters of evidence and procedure from its scope, while Article 15(c) includes the assessment of damage under substantive law. The Court of Appeal ruled that the issue of the rate of interest falls within the scope of substantive law, a decision that brings clarity to a previously divided lower court opinion landscape.

Spanish vs. English Law on Interest Rates

The court considered the provisions of Spanish Law 50/1980, which penalises insurance companies for delays in compensation payment with an interest rate significantly higher than the statutory rate, against English law, where interest rates on damages are procedural. The judgment concluded that interest rates under Spanish law are intertwined with the assessment of damages and thus are substantive, aligning with Rome II's objectives of uniform substantive law application.

Subrogation Under Spanish and English Law

The court also addressed the subrogation issue, determining that under Article 19 of Rome II, English law governs the right of an insurer to claim repayment of medical and repatriation costs paid on behalf of the victim. This decision highlights the distinction between Spanish and English law in handling subrogated claims and affirms the application of the law governing the underlying insurance contract.

Court’s Reasoning and Interpretation

The court emphasised the need for an independent and uniform interpretation of Rome II, aligned with its objectives to ensure a consistent approach to substantive law across jurisdictions. The decision underlines that a broad interpretation of procedural exclusions could undermine these objectives, and therefore, a substantive interpretation was warranted for the interest rate issue.

Implications of the Judgment

The Nicholls ruling is significant as it resolves a contentious issue in English case law regarding the classification of interest rates on damages. It supports the view that such rates are linked to the overall assessment of damages and should be treated as a matter of substantive law. This judgment sets a precedent for future cases involving cross-border tort claims under Rome II.

Author:  Eva Manolova