Choice of Law

• Author: International Law Group
• Pages: 4-7

Page 4

For many years, T&N and its subsidiaries were making and selling asbestos-based products. Federal Mogul Corporation (FMC) took them over in 1998 and since then the T&N group has been part of the FMC group. T&N and its subsidiaries have other viable businesses, mainly in making automotive parts.

In October 2001, confronted by a storm of asbestos-related claims, T&N and 132 subsidiaries applied to the English Court of Chancery for administration orders. On the same day, those companies together with FMC and 22 U.S. affiliates filed in U.S. federal court for Chapter 11 relief under the U.S. Bankruptcy Code.

In asbestos-related diseases, a substantial time passes between an individual's exposure to asbestos and the onset of any disease. The mean latency period for mesothelioma, for example, is 40 years and the first damage, which is the development of the first malignant cell, takes place about 10 years before the first appearance of symptoms.

Thus, under English law, no cause of action in negligence may accrue until many years after both the exposure to asbestos and any causative acts or omissions of T&N. In the great majority of cases of exposure to asbestos, no ailment of any sort develops.

T&N is vulnerable to a substantial number of personal injury claims in the United Kingdom. Thus, U.K. claims pending on 1 October 2001 have a value of £ 14 million and estimated future claims, have a current discounted value of about £ 229 million. On the other hand, the U.S. District Court, after a contested hearing involving expert evidence, has put the current discounted value of all pending and future claims before it at $9 billion.

Many claims in the U.K. are by former employees, whereas almost all the U.S. claims are, or will be, product liability tort claims. The legal basis upon which successful U.S. claims have rested turned on a failure to warn, either under strict products liability law or under the law of negligence.

The administrators have filed the present application on the assumption that there are, or may be, material differences in the substantive tort laws of England and the U.S. applicable to the U.S. Asbestos Claims (USACs).

The administrators' application seeks to have this court rule on four issues of conflicts of law, as they would apply to asbestos-related personal injury claims against T&N with respect to USACs.

The first point assumes that the relevant act or omission giving rise to a particular USAC took place before May 1, 1996 but that the resulting damage did notPage 5 come about until after that date. The issue that arises first is: will the choice of law applicable to the claims in England be governed by the common law or by the Private International Law (Miscellaneous Provisions) Act (the 1995 Act). The answer depends on the meaning of section 14 of the Act. One of the main purposes of the Act was to do away with the English law of "double actionability."

The second issue postulates that the common law would control the choice of law applicable to a claim. The question then arises as to whether the...