An Optional European Contract Law
– Chances and Risks
Prof. Dr. Carsten Herresthal, LL.M., University of Regensburg
I.
Introduction:
Common European Sales Law – a milestone towards a
common European contract law?
1.
A decade without progress in European contract law?
- Communication from the Commission, 11th July 2001 - COM(2001) 398 final
▪ Measures to reduce differences in contract law between Member States
▪ Reduction of obstacles to cross-border trade within the internal market
▪ „Option IV“: comprehensive legislation on the EU level, i.e. regulation with
provisions on general questions of contract law and specific types of
contracts
- Green Paper from the Commission on policy options for progress towards
a European Contract Law for consumers and businesses, 1st July 2010 COM(2010) 348 final
▪ „Option 4“: Regulation setting up an optional instrument of European Contract
Law
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I.
Introduction:
Common European Sales Law – a milestone towards a
common European contract law?
2.
Harmonisation of European contract law: two approaches
- Communication from the Commission: “A more coherent European
Contract Law: An Action Plan”, 12th February 2003 - COM(2003) 68
▪ Improvement of the quality and coherence of European contract law by
establishing a Common Frame of Reference (CFR)
(CFR: common principles, terminology and model rules for the EU Legislator)
- Full harmonisation of contract law: a dead end
▪ Communication from the Commission: "European Contract Law and the
revision of the aquis“, 11th October 2004 - COM(2004) 651
Review of the acquis communautaire in consumer contract law, removal of
inconsistencies, filling of regulatory gaps
▪ Result: Directive on Consumer Rights (adoption on 10th October 2011)
Improvement of consumer rights in distance and off-premises contracts;
full harmonisation, but very limited scope: information, right of withdrawal)
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I.
2.
Introduction:
Common European Sales Law – a milestone towards a
common European contract law?
Harmonisation of European contract law: two approaches (cont.)
- Concept of an optional Common European Contract Law
▪ Substantial opposition of the Member States against the concept of
full harmonisation of contract law by European directives
▪ Improvements and amendments, but no substantial expansion of fully
harmonising directives in contract law
▪ Substitution of (full) harmonisation of contract law by providing for optional
common contract law rules
- Ultimate object of harmonisation: a binding Common European Contract
Law?
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II. Implementation of an optional European contract Law:
status quo
- “Feasibility Study” (May 2011)
▪ Study carried out by the Expert Group on European contract law;
▪ Object: an optional European Contract Law for consumers and businesses
- Proposal for a Regulation on a Common European Sales Law,
11th October 2011 - COM(2011) 635 final
▪ Content:
Regulation (scope, choice of law),
Annex I (optional contract law rules – “Common European Sales Law” CESL),
Annex II (“Standard Information Notice”)
▪ Different title but concurring subject matter of “Feasibility Study” and
“Common European Sales Law”
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III. Proposal for a Regulation on a Common European Sales
Law
1.
Content of the proposed Common European Sales Law (CESL)
a) Limited scope: Sales law and related service contracts
▪ Central aspects of contract Law:
Pre-contractual information and remedies in case of breach of information
duty, conclusion of contract (offer and acceptance), interpretation of contract,
right to withdraw, defects in consent, unfair contract terms
▪ Sales Law:
Obligations and remedies of the parties to a sales contract, conformity of the
goods, specific performance, termination
▪ Service contract Law:
Obligations and remedies of the parties to a related service contract
▪ General provisions of the law of obligations:
Withholding performance, passing of the risk, damages and interest,
restitution, prescription
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III. Proposal for a Regulation on a Common European Sales
Law
b)
Advantages and disadvantages
- Advantages of the limited scope (Sales Law, related service contracts)
▪
▪
▪
▪
Reduced complexity of the project (high complexity of a statutory law of obligations;
“error-prone” process of European legislation)
Sales law partially harmonised by directives (B2C-contracts)
Test of a contract law of limited scope on the internal market (limited financial and
personal expenses)
Limited harmful effects on freedom of contract in case of an excessive level of
consumer protection
- Disadvantages the limited scope (Sales Law, related service contracts)
▪
▪
▪
Frequent application of member states law even with agreement on CESL rules
(assignment, representation, legal capacity, setoff, transfer of ownership, plurality of
parties, ordre public)
Small progress in harmonisation: close to scope and content of aquis directives; no
genuine sales law for the internal market
No nucleus for a European contract law: rules close to sales law not apt for later
generalisation in case of a optional common European contract law
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III. Proposal for a Regulation on a Common European Sales
Law
2.
Fundamental economic concept of CESL
- Basic concept of private law: free market economy
- Constraints of the concept:
▪ Limitation of freedom of contract from the beginning (Art. 1 I CESL)
▪ Multitude of mandatory rules
▪ Multitude of (mandatory) rules on consumer protection
▪ Multitude of general clauses and vague terms
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III. Proposal for a Regulation on a Common European Sales
Law
3.
Fundamental principles in private law: approval by CESL
- General principles of private law in contract law:
Principles substantiated by contract law rules; rules interpreted in accordance
with those principles
- Art. 4 I, II CESL: interpretation in accordance with “objectives and the principles
underlying it“; questions unsettled by the rule „are to be settled in accordance
with the objectives and the principles underlying it“
- General principles independent from Member States private law
- Main general principles of contract law (according to CESL):
▪ Freedom of contract
▪ Primacy of non-mandatory private law rules (Art. 1 II CSEL)
▪ Good faith and fair dealing (Art. 2 I CESL)
▪ Consumer protection
▪ Principle of reliance
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III. Proposal for a Regulation on a Common European Sales
Law
4.
Main shortcomings of CESL
- Very vague content of the rules:
▪ General clauses (“reasonable”; “good faith and fair dealing”; “duty to cooperate”)
▪ Vague rules embracing broad concepts (“substantially deprives the other
party of what that party was entitled to expect under the contract”)
- Inconsistencies (structure of the rules)
▪ General rules with non-exhaustive enumeration of examples vs. mere
examples without general rule;
▪ Multitude of rights to damages vs. one general right to damages
- Contradictions within the rules (e.g. three definitions of unfairness)
- Insufficient structuring (e.g. Art. 45 CESL - right of withdrawal; elements of
duty to inform)
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III. Proposal for a Regulation on a Common European Sales
Law
5.
CESL as a nucleus for European methods of statutory interpretation
- Independent European methods of statutory interpretation:
Genuine methods of interpretation in European law;
CESL is European law (annex of direction)
- Principle of autonomous interpretation (Art. 4 I CESL):
Autonomous interpretation in accordance with its objectives and principles;
no binding authority: interpretation of member states law, PECL, CISG, DCFR
- Shortcoming: neither coherent preamble nor reasons by legislator
Necessity due to content: coherent set of sales law rules
- Approval of judge-made law (“Rechtsfortbildung”)
Art. 4 II CESL: issues „not expressly settled“ are to be settled “in accordance with
the objectives and the principles underlying”
- Approval of lex specialis-rule (Art. 4 III CESL)
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IV. Chances and Risks of an optional CESL
1.
Chances of CESL
- Modern Sales Law (structure adequate to the internal market)
▪ Current economic, technical structure of contractual relationships;
▪ structure of cross border trade; adequate level of consumer protection
- Benefits from uniform rules on the internal market
Reduction of transaction costs; entry of SME to foreign member states markets
- End of total harmonisation
End of excessive harmonisation of national contract law by consumer protection
directives
- Market for contract law
Test of new contract law; development of adequate rules
- Competition of contract laws
Flexibility; possibility to influence member states laws
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IV. Chances and Risks of an optional CESL
2.
Risks of CESL
- Need for the 28th set of rules?
Risk averse market participants (cf. opt out of CISG)
- Disadvantages of EU legislation (instead of member states legislation)
High demands on amendment of CESL; standstill of national contract law
- Direct and indirect transaction costs
▪ Necessity for SME to provide for CESL
▪ “Decade of uncertainty”
- Complexity of adjudication
Limits of CESL; interaction with member states law
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V. Fundamental aspects of Common European Sales Law
1.
Applicability of CESL in Member States legal order
- Regulation (directly applicable)
- Suspension of member states law in the scope of application
- Trigger of applicability: agreement of the parties on CESL
2.
Applicability inter partes
- Agreement of the parties on the rules of CESL (Art. 8 I CESL-Directive; Opt-in by
parties to the contract)
- Prerequisites:
▪ Cross-border contract (habitual residence in different countries with at least
one Member State)
▪ B2C or B2SME
▪ in case of B2C: consumer´s consent in explicit statement separate from
contractual agreement (Art. 8 II CESL-Dir.), no standard term offer of CESL
by business
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V.
Fundamental aspects of Common European Sales Law
3.
Additional options for the Member States
- Availability of CESL for national contracts
- Availability of CESL for B2B (no SME)
4.
Amendment of CESL rules
- Two aspects
▪ Applicability of CESL
▪ Amendment of CESL-rules (as far as possible)
- CESL as model rules in case of amendments by standard terms
5.
Mandatory consumer protection in case of cross border contracts, Art. 6 II
Dir. No. 593/2008 (Rome-I)
- scientific opinion: necessity of explicit rule: possibility to deprive Member States
mandatory consumer protection law
- CESL-Regulation: no deprivation (CESL in both Member States)
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V. Fundamental aspects of Common European Sales Law
6.
ECJ: Court of appeal for the interpretation and completion of CESL
- Functioning of ECJ proceedings
- Deficits: proceedings; capacity of ECJ; competence in private law
7.
Contract law and fundamental rights
- German contract law: embedded in fundamental rights legal order
- Insufficient effects of EU fundamental rights
▪ No fundamental rights adjudication ex officio (on ECJs own motion)
▪ Freedom of contract: no substantial content in ECJ adjudication
▪ EU fundamental rights no „law in action“
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VI. Conclusion
- CESL-Regulation as nucleus of an optional Common European Contract Law
- Market for contract laws
- Improvements of CESL necessary
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Contact:
Prof. Dr. Carsten Herresthal, LL.M.
Attorney-at-Law (NY)
Chair for Private Law, Commercial Law, Corporate Law,
European Law and Theory of Law
Faculty of Law
University of Regensburg
Universitätsstr. 31
D- 93053 Regensburg
mobil +49 / (0)160 - 97861826
Tel. +49 / (0)941 - 9432631 (Sekretariat)
Fax. +49 / (0)941 - 9434965
mail@carsten-herresthal.de
www.carsten-herresthal.de
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