Last October, the European Commission put forward a proposal for a regulation on a Common European Sales Law, the so-called “28th regime.” The Commission pointed out that “contract-law-related obstacles” are “among the top barriers to cross-border trade.” It believes that businesses that want to trade cross border are dissuaded to do it due to the existence of contract law related barriers.
According to the Commission “Differences in contract law between Member States hinder traders and consumers who want to engage in cross-border trade within the internal market.” Consequently, the proposal is intended “to improve the establishment and the functioning of the internal market by facilitating the expansion of cross-border trade for business and crossborder purchases for consumers.” However, in its response to the Commission’s Green paper on policy options for progress towards a European Contract Law for consumers and Business, of July 2010, the UK Government stressed that “there is no reliable evidence available to show that the current arrangements under discussion here, and in particular the current divergence of national laws of contract, cause a problem that affects the proper functioning of the internal market…” In fact, according to the government, "…there is evidence that points to the market operating very effectively indeed.” The Government noted, “This is an area of law where party autonomy is well established and parties to contracts have and do commonly exercise a choice of the most appropriate law for their own circumstances in their commercial transactions.”
Nevertheless, the Commission proposed to establish a Common European Sales Law, which would be a second contract law regime, within the national law of each Member State. This would be, therefore, an alternative EU legal regime applicable in all member states to cross border contracts, running in parallel with the pre-existing rules of national contract law. According to the Commission “This agreement to use the Common European Sales Law is a choice between two different sets of sales law within the same national law.” The Common European Sales Law would apply to cross border contracts on a voluntary basis and if both parties expressly agree to it. It would cover all cross-border business-to-business and business-to-consumer contracts for the sale of goods as well as digital content contracts. Under the draft proposal, the agreement of the parties concerning business-to-consumer transactions would be subject to strict requirements, as consumers “must be fully aware of the fact that they are agreeing to the use of rules which are different from those of their pre-existing national law.” Hence, the consumer's consent to use the Common European Sales Law would only be acceptable in the form of an explicit statement. Moreover, businesses would have to provide information about the nature and features of the Common European Sales Law. The draft regulation provides for a standard information notice to be given to consumers.
The Common European Sales Law would be therefore “a single uniform set of contract law rules” which will have, in all Member States, the same meaning and interpretation. But, it won’t govern matters outside the remit of contract law. Hence, the existing rules of the Member State's civil law that are applicable to contracts will continue to regulate issues such as illegality of contracts. Consequently, the Common European Sales Law would create even more confusion.
The EU's Justice Commissioner, Mrs Reding, said, "The optional Common European Sales Law will help kick-start the Single Market, Europe's engine for economic growth.” Moreover, she said “It will provide firms with an easy and cheap way to expand their business to new markets in Europe while giving consumers better deals and a high level of protection.” Hence, according to the Commission “This proposal is consistent with the objective of attaining a high level of consumer protection” as well as “with the Union policy of helping SME benefit more from the opportunities offered by the internal market.”
However, neither SMEs nor consumers are pleased with the Commission’s proposal. According to Monique Goyens, director-general of the European Consumers' Organisation BEUC "there is no clear evidence that differences of national contract law in Europe are an obstacle to cross-border trade.” She stressed, “This parallel system would increase market uncertainty, confuse consumers and decrease confidence,” Which? has said to the European Scrutiny Committee "(…) there is no evidence to support the European Commission's claim that a common contract law will increase cross-border trade. Secondly, the Sales Law presents a serious risk to UK consumers as it could reduce their rights.” They “believe that the proposal is a waste of time and money and that it should be scrapped." According to Consumer Focus, the 28th regime “will incur significant costs in terms of legislative time and implementation costs for businesses, consumers, enforcement authorities and the legal system.” The Law Society of England and Wales also believes that “The Common European Sales Law has considerable cost implications” as it “would give rise to additional training costs for the legal professions and judiciary across all the EU Member States as well as additional resourcing requirements for the Court of Justice.” In fact, according to the Law Society there is no need for such a system, which could create “a disproportionately large amount of uncertainty for businesses and consumers.”
It is important to recall that last December the House of Commons decided, pursuant to Article 6 of Protocol (No 2) on the Application of the Principles of Subsidiarity and Proportionality, to send to the Presidents of the Council, the European Parliament and the Commission a Reasoned Opinion stating that the Draft Regulation of the European Parliament and of the Council to introduce a Common European Sales Law does not comply with the principle of subsidiarity, for the reasons set out in Chapter 5 of the Forty-Seventh Report of the European Scrutiny Committee.
It is not only consumer groups that are concerned that the 28th regime will not sufficiently guarantee consumers’ rights but also Member States, particularly the UK. In fact, some member states believe that the proposal would entail more bureaucracy and costs for small businesses. According to EurActiv, one EU diplomat said “A number of member states are sceptical about the need for the scheme, its legal basis and its feasibility. The proposal will need to go back to the Commission for further consideration,”
On 14 December, the Justice and Home Affairs Council discussed the proposed Common European Sales Law, according to the Council’s Conclusions there are several aspects “that require thorough discussion”, namely “the personal, material and territorial scope of the proposal, the complexity of linking the proposal with the different national legal systems, the modalities and consequences of choosing the instrument, the consequences of an invalid choice, the consumer protection rules relating to the choice and the reporting obligations of member states, including the envisaged online database of judgments.”
The proposal is subject to the ordinary legislative procedure with QMV required at the Council. The Government is opposed to the proposal but it would have to form a blocking minority to prevent such measure from being adopted. It is important to note that the European Parliament has already showed support for this new optional contract law instrument. Last June, the European Parliament adopted Diana Wallis MEP own-initiative report calling for the introduction of a “28th regime.”
The Commission has proposed an optional regime, however as Ashley Fox MEP noted "Then it will say that the single market requires full harmonisation of contract law at the European level.” Hence, as Ashley Fox said "Before we know it we will have been hoodwinked into conducting all of our contracts according to a single EU legal regime which pays no respect to the different legal traditions across the continent."
