Jane Nicholls & Anor v Mapfre Espana Compania de Seguros y Reaseguros SA

Interest payable under foreign law may be substantive rather than procedural where it forms part of the claimant’s entitlement to compensation under the applicable law. Under Rome II, the classification is an autonomous question of retained EU law and is not determined by the terminology used in domestic law or expert evidence.

Spanish penalty interest under Article 20 of the Spanish Insurance Act was substantive because it operated as a statutory right, subject to defined exceptions, and was closely connected with damages. It therefore had to be applied as part of the lex causae. The English court could not introduce the Spanish penalty regime indirectly through its discretionary powers to award interest under English procedural law.

These conjoined appeals concerned claims for personal injuries sustained in Spain. Liability and damages assessed under Spanish law were not challenged. The issue was whether interest under Article 20 of the Spanish Insurance Act should be awarded.

The judges below awarded interest at the Spanish rates by exercising their discretion under section 69 of the County Courts Act 1984. Mapfre argued that interest was procedural and governed exclusively by English law as the lex fori. The claimants argued that the Spanish provisions were substantive under Rome II, or alternatively that they were relevant to the English discretion.

1. Appeals dismissed. The awards made below were correct in amount, although reached for the wrong reasons.
2. The distinction between substance and procedure under Rome II is a matter of EU law requiring autonomous interpretation. Article 15 gives the applicable law a broad scope, while the exclusion of procedure and evidence in Article 1(3) is to be construed narrowly.
3. Article 20 of the Spanish Insurance Act created a substantive right to penalty interest. The agreed evidence showed a statutory scheme under which interest accrued at specified rates where the claim had been notified and the insurer had failed to make the required payments. Article 20(8) was an exception to the right, rather than a general discretion to award or withhold interest.
4. The Spanish interest entitlement was closely connected with the assessment of damages and had to be applied as part of the lex causae under Rome II. The court rejected the contrary reasoning in Troke and Sedgwick.
5. If the interest had instead been procedural, it would have been illegitimate to import the Spanish penalty regime through the discretion under section 69 of the County Courts Act 1984 or section 35A of the Senior Courts Act 1981. English procedure had its own rules and sanctions, including Part 36.
6. The lower courts’ exercise of discretion involved a misdirection in law, or alternatively procedural unfairness or irregularity, so appellate intervention was justified under the principles stated in Azam.
7. The additional award under CPR 36.17 was not invalidated by the Spanish interest award. The two measures arose under different legal regimes and were not overlapping sanctions.

• High Court (King’s Bench Division): Conjoined appeals dismissed. The interest awards were upheld, but the reasoning of the courts below was rejected.
• County Courts: Her Honour Judge Bloom and Her Honour Judge Walden-Smith awarded interest by reference to Spanish rates under section 69 of the County Courts Act 1984.