European contract law: European Commission presents proposal on a Common European Sales Law Regulation | Practical Law

European contract law: European Commission presents proposal on a Common European Sales Law Regulation | Practical Law

The European Commission, on 11 October 2011, published a proposal on a Common European Sales Law Regulation. (free access)

European contract law: European Commission presents proposal on a Common European Sales Law Regulation

by PLC EU
Published on 12 Oct 2011 • European Union
The European Commission, on 11 October 2011, published a proposal on a Common European Sales Law Regulation. (free access)
Speedread

Speedread

On 11 October 2011, the European Commission published a proposal for a Common European Sales Law Regulation. With this proposal, the Commission aims to harmonise the national contract laws of the member states by creating, within each member state's national law, a second contract law regime that is identical throughout the EU and would exist alongside the pre-existing rules of national contract law. The regime would apply to certain types of contracts. The Common European Sales Law is optional. It would apply on a voluntary basis, upon an express agreement of the parties to a cross-border contract.
On 11 October 2011, the European Commission published a proposal for a Regulation on a Common European Sales Law. It consists of a Regulation, an Annex containing the contract law rules (the Common European Sales Law) (Annex I) and a second Annex containing a Standard Information Notice (Annex II). The draft Regulation is accompanied by a Commission Communication, a press release and a memo with frequently asked questions. The Commission states that as the proposed Regulation concerns an European Economic Area (EEA) matter, it should extend to the EEA.
The proposal foresees a comprehensive set of uniform contract law rules, including consumer protection rules, which would form part of the national law of each member state as a "second regime" of contract law. This "second regime" is carefully targeted to those contracts that are most relevant to cross-border trade, and where the need for a solution to the barriers that have been identified is most apparent. According to the Commission proposal, the Common European Sales Law will apply on a voluntary basis, upon an express agreement of the parties, to a cross-border sales contract. The Commission points out that this agreement should not be confused with a choice of the applicable law within the meaning of private international law rules. Instead, this choice is made within a national law which is applicable according to the private international law rules.
The Commission further states that it has chosen for an optional instrument to establish a Common European Sales Law, because it considers that:
  • A non-binding instrument such as a toolbox for the EU legislator or a Recommendation addressed to member states would not achieve the objective to improve the establishment and functioning of the internal market.
  • A Directive or a Regulation replacing national laws with a non-optional European contract law would go too far as it would require domestic traders who do not want to sell across borders to bear costs which are not outweighed by the cost savings that only occur when cross-border transactions take place.
  • A Directive setting up minimum standards of a non-optional European contract law would not be appropriate since it would not achieve the level of legal certainty and the necessary degree of uniformity to decrease the transaction costs.
  • An optional second contract law regime has the advantage that, without replacing the national contract laws in the member states, it allows parties to use one single set of contract law rules across the EU. This self-standing, uniform set of rules has the potential of offering parties a solution to the most prevalent problems which could arise in cross-border situations in relation to contract law. Therefore, for traders this option would eliminate the need for research of different national laws. To help consumers understand their rights in the Common European Sales Law, a standard information notice would be presented to them which would inform them about their rights.
The proposal provides for a review of the application of the Common European Sales Law or any other provision of the Common European Sales Law Regulation, five years after its date of application, taking into account, amongst others, the need to extend further the scope in relation to business-to-business contracts, market and technological developments in respect of digital content and future developments of the Union acquis. For this purpose, the review clause requires that the Commission will submit a report, if necessary accompanied by proposals to amend the Regulation, to the European Parliament (EP), the Council and the European Economic and Social Committee.
According to the proposal, the Commission will, after the adoption of the proposal, set up a database for the exchange of information concerning final judgments referring to the Common European Sales Law or any other provision of the Regulation, as well as relevant judgements of the Court of Justice of the EU. The Commission expects that the costs associated with this database are likely to grow as more final judgments become available. At the same time, the Commission announced that it will organise training sessions for legal practitioners using the Common European Sales Law. The Commission expects that these costs are likely to decrease with time, as knowledge about how the Common European Sales Law works spreads.
On 8 June 2011, the EP plenary session approved a Resolution on policy options for a European contract law for consumers and business (see Legal update, European Contract Law: European Parliament supports European Commission proposal for optional European contract law).
Next steps: The Commission proposal falls under the ordinary legislative procedure and has been sent to the EP and the Council. The Commission states that it will work closely with the EP and the Council and with national parliaments to ensure a swift agreement on the Common European Sales Law in time for the 20th anniversary of the Single Market. The Commission further states that it will also continue to work closely with stakeholders, and notably with the users of the Common European Sales Law, in particular Small and Medium Sized Enterprises (SMEs) and consumers, as well as with the legal profession to achieve a broad acceptance of the Common European Sales Law across the EU. This is because, in view of its optional nature, the success of the Common European Sales Law will in the end depending on whether and to which extent it will be chosen for transactions in the Internal Market.
Background: Differences in contract law between member states hinder traders and consumers who want to engage in cross-border trade within the Internal Market. The obstacles which stem from these differences dissuade traders, in particular SMEs, from entering cross- border trade or expanding to new member states' markets. Consumers are hindered from accessing products offered by traders in other member states. The EU has been working on European contract law for a decade. With its 2001 Communication on European contract law, the Commission launched a process of extensive public consultation on the problems arising from differences between member states' contract laws. As a follow-up, the Commission issued an Action Plan in 2003, proposing to improve the quality and coherence of European contract law by establishing a Common Frame of Reference containing common principles, terminology and model rules to be used by the Union legislator when making or amending legislation. For a chronological overview of the EU work in the area of European contract law, see the legislation tracker on European contract law.
Sources:
If you do not yet subscribe to PLC, you can request a free trial by completing this form or contacting the PLC Helpline.