Annexes to COM(2010)348 - Green Paper from the Commission on policy options for progress towards a European Contract Law for consumers and businesses - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2010)348 - Green Paper from the Commission on policy options for progress towards a European Contract Law for consumers and businesses. |
|---|---|
| document | COM(2010)348  |
| date | July 1, 2010 |
A "toolbox" in European Contract Law could be the object of an interinstitutional agreement between the Commission, Parliament and Council to make consistent reference to its provisions when drafting and negotiating legislative proposals bearing on European Contract Law. A proposal for an interinstitutional agreement would require negotiations between the three lawmakers before it becomes effective, but it would have added value in its implication of the three institutions which will be required to take its recommendations into consideration while preparing and adopting new legislative instruments.
The disadvantage of any "toolbox" is that it would not provide immediate, tangible internal market benefits since it will not remove divergences in law. Furthermore, a "toolbox" for the legislator could not ensure a convergent application and interpretation of Union contract law by the courts.
Option 3: Commission Recommendation on European Contract Law
An instrument of European Contract Law could be attached to a Commission Recommendation addressed to the Member States, encouraging them to incorporate the instrument into their national laws. Such a Recommendation would allow the Member States to gradually adopt the instrument into their national laws on a voluntary basis. Furthermore, the Court of Justice of the EU would have jurisdiction to interpret the provisions of the Recommendation.
Two possibilities can be envisaged:
a) The Recommendation could encourage the Member States to replace national contract laws with the recommended European instrument. Such an approach has been successfully implemented in the United States, where a Uniform Commercial Code elaborated by experts in commercial law and endorsed by neutral, quasi-public organisations[23] has been adopted by all but one of the 50 states.
b) The Recommendation could encourage the Member States to incorporate the European Contract Law instrument as an optional regime, offering contractual parties an alternative to national law. In those Member States opting for this method, the European optional instrument would stand beside other alternative instruments which can be chosen as the law applicable to contracts, such as the UNIDROIT Principles.
Such a Recommendation would have no binding effects on the Member States and would allow them discretion in how and when to implement the instrument into their national laws. Therefore, this solution bears the risk of an incoherent and incomplete approach between the Member States, which might enact the Recommendation differently and at different moments in time or not at all.
Option 4: Regulation setting up an optional instrument of European Contract Law
A Regulation could set up an optional instrument, which would be conceived as a "2nd Regime" in each Member State, thus providing parties with an option between two regimes of domestic contract law[24].
It would insert into the national laws of the 27 Member States a comprehensive and, as much as possible, self-standing set of contract law rules which could be chosen by the parties as the law regulating their contracts[25]. It would provide parties, primarily those wishing to operate in the internal market, with an alternative set of rules[26]. The instrument could be applicable in cross-border contracts only, or in both cross-border and domestic contracts (see Section 4.2.2 below).
By its very nature, an optional instrument could only constitute a sensible solution to the problems stemming from regulatory divergences if it is sufficiently clear to the average user and provides legal certainty. These are preconditions for building the confidence of the contracting parties in the instrument so that it would be chosen as the legal basis of the contract in the first place. In particular, consumers should be reassured when entering into a contract on this basis that their rights will not be compromised. To be operational from an internal market perspective, the optional instrument would have to affect the application of the mandatory provisions, including those on consumer protection [27].Indeed, this would constitute the added value compared with the existing optional regimes, such as the Vienna Convention, which cannot restrict the application of national mandatory rules.
The optional instrument would need to offer a manifestly high level of consumer protection[28].
Consistent reference to a single body of rules would remove the necessity for judges and legal practitioners to investigate in certain cases foreign laws, which is currently the case under conflict-of-law rules. This could not only reduce costs for businesses, but also alleviate the administrative load on the judicial system.
Such an optional instrument could bring about important internal market benefits without necessitating further in-roads into national law. Therefore, in line with the principle of subsidiarity, an optional instrument could constitute an alternative to full harmonisation of national laws, by offering a proportionate solution to internal market barriers stemming from diverging national contract laws.
On the other hand, a European optional instrument might be criticised for complicating the legal environment. By adding a parallel system, the legal environment would continue to be challenging and require clear information to allow consumers to understand their rights and thereby make an informed decision as to whether they want to conclude a contract on this alternative basis.
Option 5: Directive on European Contract Law
A Directive on European Contract Law could harmonise national contract law on the basis of minimum common standards. Member States would be able to retain more protective rules, subject to compliance with the Treaty. It could also be foreseen that the resulting differences are notified to the Commission and then published to increase transparency for consumers and businesses operating across borders.
In respect of business-to-consumers contracts, the Directive would be based on a high level of consumer protection, as required by the Treaty, and would complement the consumer acquis , including the provisions of the future Directive on Consumer Rights.
Such a Directive could decrease legal divergences, by achieving a degree of convergence between national contract laws. This in turn could lead to more confidence, in particular for consumers and SMEs, in venturing to operate across borders. However, harmonisation through directives based on minimum harmonisation would not necessarily lead to uniform implementation and interpretation of the rules[29]. Businesses offering goods and services across borders would still need to abide by the different consumer contractual rules in all those countries. The existing consumer contract acquis demonstrates the limitations of minimum harmonisation directives in reducing regulatory divergences. In business-to-business cross-border contracts, the Directive might not be able to deliver the necessary legal certainty and businesses would thus continue to incur compliance costs.
Option 6: Regulation establishing a European Contract Law
A Regulation establishing a European Contract Law could replace the diversity of national laws with a uniform European set of rules, including mandatory rules affording a high level of protection for the weaker party. These rules would apply to contracts not upon a choice by the parties, but as a matter of national law. The Regulation could replace national laws in cross-border transactions only, or it could replace national laws in both cross-border and domestic contracts (see Section 4.2.2 below).
This solution would remove legal fragmentation in the field of contract law and lead to a uniform application and interpretation of the Regulation's provisions. Uniform contract law rules could facilitate the conclusion of cross-border contracts and present an efficient mechanism for settling disputes.
However, this solution could raise sensitive issues of subsidiarity and proportionality. Replacing the plurality of national laws, in particular if domestic contracts are also covered, with a single set of rules might not be a proportionate measure to deal with the obstacles to trade in the internal market.
Option 7: Regulation establishing a European Civil Code
This solution goes one step further than the Regulation establishing a European Contract Law, in the sense that it would cover not only contract law, but also other types of obligations(e.g. tort law and benevolent intervention). Such an instrument would reduce even further the need to fall back onto national provisions.
Although impediments to the smooth functioning of the internal market exist also in areas of law other than contract law, it is yet to be established to what extent an extensive instrument such as a European Civil Code could be justified on grounds of subsidiarity.
4.2. What should be the scope of application of the instrument?
An instrument of contract law could cover several areas of application.
4.2.1. Should the instrument cover both business-to-consumer and business-to-business contracts?
An instrument could be applicable in all types of transactions, whether business-to-business or business-to-consumer. There are certain general contract law provisions which are relevant to all contracts without distinction, but the instrument could also contain specific provisions, the application of which would only be triggered in certain types of contracts, for example, mandatory provisions ensuring a high level of consumer protection. These would come into play when a transaction involves a consumer and a business party[30].
Separate instruments for business-to-consumer and business-to-business contracts could also be envisaged. In principle, separate instruments could better tackle issues which are specific to these types of contracts and would be easier to elaborate and use. However, the proliferation of instruments bears the inherent risk of overlaps and inconsistencies in the legislation.
4.2.2. Should the instrument cover both cross-border and domestic contracts?
The problems of divergences in laws are normally a trademark of cross-border contracts, where several national or international instruments may come into play. An instrument covering cross-border contracts only, capable of resolving the problems of conflict of laws could make an important contribution to the smooth functioning of the internal market. In business-to-consumer contracts, businesses would be able to operate on the basis of two sets of terms – one for cross-border and one for domestic contracts. Consumers would also be subject to two sets of rules. An instrument applicable to both cross-border and domestic consumer contracts would further simplify the regulatory environment, but would impact on consumers who may not wish to venture into the internal market and prefer to preserve national levels of protection.
On the other hand, in business-to-business contracts where the principle of freedom of contract is paramount, it may be unreasonable to deny the parties the possibility of choosing the European instrument in purely domestic transactions. An instrument covering bothcross-border and domestic contracts could represent a further incentive for businesses to expand across borders, as they would be able to use one single set of terms and one single economic policy.
The instrument could also focus on contracts concluded in the on-line environment (or, more generally, at a distance), although such an approach would not provide an exhaustive solution to internal market barriers beyond that specific context. These contracts constitute a significant proportion of cross-border transactions in the internal market and have the highest potential for growth. Therefore, an instrument tailor-made for the online world could be developed. This could be applicable in both cross-border and domestic situations, or only in cross-border situations.
4.3. What should be the material scope of the instrument?
The material scope of the instrument of European Contract Law could be interpreted in a narrow or in a broad manner. In any case, the instrument should cover mandatory consumer contract law rules, taking the Union acquis as a starting point.
4.3.1. A narrow interpretation of its scope
An instrument of European Contract Law could be limited to rules on: definition of contract, pre-contractual duties, formation, right of withdrawal, representation, grounds of invalidity, interpretation, contents and effects of contracts, performance, remedies for non-performance, plurality of debtors and creditors, change of parties, set-off and merger, and prescription[31]. Its scope could also focus on mandatory consumer contract laws giving rise to internal market barriers and practices causing detriment to consumers and SMEs, such as unfair contract terms.
4.3.2. A broad interpretation of its scope
An instrument of European Contract Law could cover, in addition to the matters listed in Section 4.3.1 above, related topics, such as restitution, non-contractual liability, acquisition and loss of ownership of goods and proprietary security in movable assets.
4.3.3. Should specific types of contracts be covered by the instrument?
In addition to general contract law provisions, the instrument could contain specific provisions for the most prevalent types of contract. The most common and relevant from the internal market perspective is the contract for sale of goods.
Service contracts are also very important. However, given their heterogeneous character, specific provisions will have to be made for specific types of service contracts. For example, the instrument could contain provisions for 'sale-like' service contracts, such as car lease, or for insurance contracts. Furthermore, contracts in the financial services area are of a very specific and technical nature, particularly when concluded between professionals, and need a prudent approach as the legal environment in these areas changes rapidly.
In respect of certain service contracts, model rules have already been proposed by researchers and could serve as inspiration. For example, the DCFR contains model rules for contracts of lease of goods. The Project Group "Restatement of European Insurance Contract Law" elaborated the Principles of European Insurance Contract Law (PEICL) [32]. Assessment of the suitability of the principles is necessary for a decision as to whether and how they are to be applied to financial services contracts.
4.3.4. Scope of a European Civil Code
A European Civil Code would need to cover not only contract law, including specific types of contracts, but also tort law, unjustified enrichment and the benevolent intervention in another's affairs.
5. CONCLUSIONS
The purpose of this Green Paper is to launch a public consultation to gather orientations and views from relevant stakeholders regarding possible policy options in the field of European Contract Law.
This Green Paper will be published on the Commission's website (http://ec.europa.eu/yourvoice/). The consultation will run from 1 July 2010 to 31 January 2011 and is open to any interested stakeholder. Individuals, organisations and countries that intend to participate in the consultation process are invited to send their contributions, in the form of answers to some or all the questions presented in the document and/or as general comments on the issues that are raised in the document.
Contributions received will be published, possibly in a summarised form, unless the author objects to publication of their personal data on the grounds that such publication would harm his/her legitimate interests. In this case, the contribution may be published in anonymous form. Otherwise, the contribution will not be published nor, in principle, will its content be taken into account.
Furthermore, since the launch in June 2008 of the Register for Interest Representatives (lobbyists) as part of the European Transparency Initiative, organisations are invited to use this Register to provide the European Commission and the public at large with information about their objectives, funding and structures. It is Commission policy that submissions from organisations will be considered as individual contributions unless the organisations have registered.
Contributions to the consultation should be sent to: jls-communication-e5@ec.europa.eu.
Enquiries about this consultation can be made at the same e-mail address or at:
European Commission, DG Justice, Unit A2, Rue de la Loi 200, B-1049 Brussels, Belgium.
[1] COM(2001) 398, 11.7.2001.
[2] COM(2003) 68, 12.2.2003.
[3] See also Commission Communication on "European Contract Law and the revision of the aquis : the way forward" - COM(2004) 651, 11.10.2004.
[4] COM(2008) 614, 8.10.2008.
[5] Von Bar, C., Clive, E. and Schulte Nölke, H. (eds.), Principles, Definitions and Model Rules of European Private Law. Draft Common Frame of Reference (DCFR), Munich, Sellier, 2009.
[6] Some of those have been inspired by principles and model rules produced by the Association Henri Capitant and Société de législation comparée ("European Contract Law. Materials for a Common Frame of Reference : Terminology, Guiding Principles, Model Rules", Ass. H. Capitant et SLC, 2008, Sellier European law publishers).
[7] The network, entitled 'Commission on European Contract Law', was composed of academics from all the Member States and activated, under the chairmanship of Ole Lando, between 1982 and 2001.
[8] The Vienna Convention has been ratified by 74 countries so far. Notable exceptions, among the EU countries, are the United Kingdom, Portugal and Ireland.
[9] For example, the Organisation for the Harmonisation of Business Law in Africa has been working on developing a Uniform Act on Contracts largely inspired by the UNIDROIT Principles of International Commercial Contracts. The UNIDROIT Principles and PECL have also inspired the Chinese Contract Act of 1999.
[10] Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (OJ L 177, 4.7.2008, p. 6).
[11] Council act of 2 December 2009, No 17024/09.
[12] COM(2010) 2020, 3.3.2010.
[13] See Communication from the Commission, "A Digital Agenda for Europe" - COM(2010) 245, 19.5.2010.
[14] For example, the Association of Southeast Asian Nations (established in 1967), or the recently established Union of South American Nations (2008).
[15] Commission Decision of 26 April 2010 setting up the Expert Group on a Common Frame of Reference in the area of European Contract Law (OJ L 105, 27.4.2010, p. 109).
[16] E.g. delivery problems with postal services, problems with payments.
[17] See, for example, Special EUROBAROMETER 292 (2008) and Flash EUROBAROMETER 278 (2009).
[18] See, for example, the Clifford Chance Survey in European Contract Law, (2005).
[19] Similar conflict-of-law rules which aim at protecting the weaker party exist in respect of other types of contracts, such as for example insurance contracts and contracts of carriage, see Article 7 and 5 respectively of the Rome I Regulation.
[20] See Communication from the Commission on Cross-Border Business to Consumer e-Commerce in the EU - COM(2009) 557, 22.10.2009.
[21] COM(2008) 614.
[22] For example, on remedies for breach of information duties.
[23] The Uniform Commercial Code is frequently revised and approved jointly by the Uniform Law Commission, which has the aim of drafting and promoting the enactment of uniform state laws, where uniformity is practical and desirable, and by the American Law Institute, which produces influential scholarly work to clarify, modernise and improve the law.
[24] See also Opinion of the European Economic and Social Committee, INT/499, 27.5.2010.
[25] This set of contract law rules would form part of each Member State's national law also for the purposes of private international law.
[26] See Mario Monti's Report to the President of the European Commission "A New Strategy for the Single Market", 9 May 2010: "The advantage of the 28th regime is to expand options for business and citizens operating in the single market: if the single market is their main horizon, they can opt for a standard and single legal framework valid across Member States". See also the recommendation of the Report to the European Council by the Reflection Group on the Future of the EU 2030, "Project Europe 2030: Challenges and Opportunities", May 2010: "Action should be taken to provide citizens with the option of resorting to a European legal status (the "28th regime") which would apply to contractual relations in certain areas of civil or commercial law alongside the current 27 national regimes".
[27] It would be necessary to articulate in the instrument itself the relationship with the provisions of the Rome I Regulation.
[28] See Article 12 of the Treaty on the Functioning of the European Union.
[29] For this reason, the Monti Report recommends that harmonisation should be pursued through Regulations, p. 93.
[30] For reasons of consistency, the instrument of European Contract Law will have to complement the relevant consumer acquis , by integrating its requirements, including progress made on consumer protection in the internal market in the Consumer Rights Directive.
[31] This terminology taken from the DCFR is indicative only and does not pre-empt either the structure or the terminology of the instrument.
[32] Principles of European Insurance Contract Law, Munich, Sellier, 2009.