European Commission publishes proposal for an optional Common European Sales Law
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The European Commission has published a proposal for a Regulation on an optional Common European Sales Law. It is envisaged that the Common European Sales Law will exist alongside each Member State’s national contract law as a second, alternative, contract law regime available to consumers in cross-border situations. The Commission has stated that the 27 different sets of contract law rules which currently exist in the EU act as a deterrent for both businesses and consumers to shopping and trading across EU borders.
Justification for proposal
The Commission has justified the proposal on the grounds that companies will benefit from one (optional) uniform regime of contract law in all 27 Member States, as traders will “no longer need to wrestle with the uncertainties that arise from having to deal with multiple national contract systems”.
The Commission believes that, if adopted, the Regulation will also cut transaction costs for companies wishing to trade cross-border, and help small and medium-sized companies to expand into new markets.
Consumers are expected to benefit from having the same level of consumer protection in all Member States, having a wider choice of products at lower prices, and from certainty about their rights in cross-border transactions.
Scope
The Common European Sales Law would apply upon express agreement by both parties to: (i) a cross-border contract, (ii) for the sale of goods, the supply of digital content, or for related services, (iii) where at least one party is established in a Member State of the EU.
It would apply to business-to-consumer, and business-to-business transactions, where at least one party is a small or medium-sized enterprise (SME). An SME is defined as a trader which employs fewer than 250 persons, and has an annual turnover not exceeding €50 million or an annual balance sheet total not exceeding €43 million.
It will not apply to financial services contracts, including online banking services; legal or financial advice provided in electronic form; electronic healthcare services; electronic communications services; or gambling.
The proposed Regulation leaves Member States free to decide to make the Common European Sales Law available to parties for use in purely domestic situations, and to enact legislation making it available for contracts between traders, neither of which is an SME.
Reason for an Optional Instrument
The Commission has proposed an optional instrument on the grounds that “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”.
Comments and Next Steps
The Commission hopes to achieve agreement on the Common European Sales Law within a year. The proposal has been sent to the European Parliament and the Council for approval and adoption in the ordinary legislative procedure and by qualified majority. Once adopted, the Regulation will have direct effect, without the need for a transposing domestic law to be passed.
There may, however, be issues with the EU’s adoption of this proposal. For example, concerns have been expressed about the degree of legal uncertainty that the proposal could introduce in a settled legal environment, and whether the proposal leaves businesses with sufficient freedom to contract. It is questionable whether the current proposal contains sufficient advantages for business to business transactions in order to motivate businesses to use it. The draft Regulation is a complex document, containing 186 articles, which will need to be closely reviewed and debated before it is adopted by the EU.
If the Regulation is adopted, there will also be a significant exercise involved in educating consumers and businesses as to the implications of using this so-called optional Common European Sales Law, in particular to explain the practical differences between that law and existing domestic laws, and the implications if it is used and a dispute arises between the parties.
The Commission has published useful FAQs. on the Common European Sales Law.
