The European Commission Green Paper on European Contract Law “ A benevolent intervention in anothe

The EC has published its Green Paper on a suggested “European Contract Law” and contributions to the consultation are invited. The consultation runs to 31 January 2011 and is open to “any interested stakeholder”. Presumably, this means anyone at all.

The Green Paper comes after a number of activities by the EC in connection with the possible construction of a European Contract Law and, no doubt, the EC would say it builds upon these earlier efforts. These include the 2001 Communication on European Contract Law; the Action Plan in 2003; and the Commission’s Proposal for a Directive on Consumer Rights published in October 2008. The Action Plan of 2003 proposed the establishment of a Common Frame of Reference and these “principles, definitions and model rules …” were published in Munich in 2009.

The Paper suggests that a European Contract Law (“ECL”) may be of value to consumers because of the additional transaction costs and legal uncertainty for businesses said to arise from differences in national contract laws. It suggests these may lead to a lack of consumer confidence and a reluctance on the part of small and medium enterprises (“SMEs”) to engage in cross border transactions. Little in the way of empirical studies is referred to in support of these propositions. The Paper also suggests, surprisingly, that an ECL could help st the EU recover from the economic crisis. This curious proposition is not explained at all.

In addition, the Paper makes comparisons with certain international conventions such as the Vienna Convention on International Sales of Goods (ratified by 74 countries but not the UK, Portugal and Ireland). It suggests also that an ECL, if sufficiently user friendly and legally certain, could serve as a model for other economic groupings such as the Association of Southeast Asian Nations or the more recently established Union of South American Nations. It would be interesting to know what investigation and analysis, if any, the EC has made into the various contract and commercial laws that apply in the member countries of the other international organisations identified. Again, without explanation or any obvious logic, the Paper suggests that by assisting other international organisations “which have taken the Union as a model for regional integration”, the European economy could achieve a competitive advantage. One has to ask, “Why?”

The Paper suggests that an ECL could be either nonbinding or binding, in the latter case setting out an alternative set of Contract Law Rules to the various national regimes throughout the EU. It is suggested that the ECL could be attached to a Commission Recommendation addressed to the Member States, encouraging them to incorporate the ECL into their national laws. An analogy is made with the USA where their Uniform Commercial Code has been adopted by all but one of the States comprising the USA. The Paper proposes a number of options including publication of the results of the Expert Group, an official “toolbox” for the legislator, the Commission Recommendation on ECL (mentioned above) and a Regulation setting up an Optional Instrument which would give Member States an option either to keep their existing Domestic Contract Law or to replace it with the “comprehensive and, as much as possible, selfstanding set of Contract Law Rules which could be chosen by parties as the law regulating their contracts”.

The Paper recognises that, to have any chance of significant takeup, the new ECL would have to be sufficiently clear to the average user and provide legal certainty. One of the benefits said to accrue to parties whose contracts are subject to English law is that, because of the common law basis of binding legal authorities from the courts, legal advisers on English law are able to explain the meaning of prospective contracts to their clients with a considerable degree of “legal certainty”. It is hard to believe that any lawyer practising in the EU will be able to satisfy his or her clients that they will achieve greater legal certainty making contracts pursuant to the ECL than they will achieve making contracts subject to, say, English, German or French contract laws. In part, this is acknowledged by the Paper which recognises that, “by adding a parallel system, the legal environment would continue to be challenging ….”

An underlying feature of the Paper is the suggestion that the parties who might most benefit from the new ECL would be consumers and SMEs. One might have thought that they would be the parties with least interest in a new ECL and it would be interesting to see the outcome of an EU Survey of, say, 5,000 consumers and SMEs answering the question, “Do you consider you would you benefit from the implementation of a new European Contract Law?” Options 6 and 7 of the seven different possibilities for an ECL identified in the Paper are those which go furthest down the path of establishing binding European laws on the Member States. Option 6 contemplates a Regulation establishing the ECL and replacing diverse national laws with a uniform European set of laws, including mandatory rules affording a high level of protection for the weaker party. These would apply to contracts not by choice of the parties but as a matter of national law. Unsurprisingly, the Paper recognises that this “solution” could raise sensitive issues of subsidiarity and proportionality. The final option, number 7, goes to the heady heights of establishment of a European Civil Code. This would “reduce even further the need to fall back onto national provisions.” The Green Paper recognises that this could be problematic. Nevertheless, it is said that a European Civil Code would need to cover not only contract law, but tort, unjustified enrichment and “the benevolent intervention in another’s affairs”.

It is anticipated the Green Paper will provoke an interesting range of comments.

If you have contributions, please send them to jlscommunicatione5@ec.europa.eu

Alternatively, you may enquire by writing to the European Commission, DG Justice, Unit A2, Rue de La Loi, 200, B1049 Brussels, Belgium.


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