Fabian Demicoli

Contract Law: Commission considers way forward

As part of the EU's action to tackle bottlenecks in the Single Market and to boost growth, the European Commission carried out a public consultation on bringing more coherence to contract laws in Europe (IP/10/872) – the rules that apply to businesses and consumers buying and selling goods or services. The goal is to make it easier and less costly for businesses, particularly small and medium-sized enterprises (SMEs), to do business abroad and to enable consumers to reap the full benefit of the Single Market while maintaining or improving their protection.

 

"I want both consumers and businesses to benefit fully from our Single Market, without having to navigate a legal maze when buying and selling in another EU country," said Vice-President Viviane Reding, the EU's Justice Commissioner.

Contracts are the essential tool for establishing the terms and conditions of any transaction, either between two businesses or between a business and a consumer. Different rules on contracts complicate cross-border trade. The parties have to find out which law applies and what exactly it means and have to adjust their agreements accordingly. This leads to additional transaction costs for translation and legal advice. Businesses, especially SMEs which make up 99% of the EU's companies, can be deterred from extending their activities to other Member States and often refuse to serve customers there. The lack of competition harms consumers who would often find a better deal buying abroad, particularly on the internet.

On 1 July 2010, the Commission launched a public consultation on different ways to make contract law more coherent. The Commission's Green Paper put forward a range of different policy options from the publication of (non-binding) model contract rules to the creation of a full-fledged European Civil Code, replacing all national rules on contracts.

The Commission will present a follow-up measure to the consultation in the fourth quarter of 2011 on the basis of the public consultation's results and following a thorough impact assessment.

Background

Under the Europe 2020 strategy – launched on 3 March 2010 (IP/10/225) – the Commission is currently tackling bottlenecks in the Single Market to drive economic recovery. The policy options presented in the Green Paper on contract law could help to achieve this strategy. Businesses selling to consumers (B2C) could realise synergy gains by using only one contract and the same IT platform across many Member States. For business to business (B2B) transactions it could lead to overcoming the "lack of trust" factor by putting parties on an equal footing, and achieving cost savings from the reduced need to negotiate applicable law. Consumers would also win by gaining access to a wider range of products and lower prices.

On 12 May, the Commission convened an expert group to transform the so-called "Draft Common Frame of Reference" – a first draft for a European contract law developed by academics over the past years under the EU's Research Programme – into a simple, user-friendly workable solution adapted to the needs of consumers and the reality of the business environment (IP/10/595). The group, which is composed of legal experts and practitioners from all over Europe, is currently meeting once a month in Brussels. The Commission has also convened representatives from European umbrella organisations of industry, retailers, consumers and legal practitioners to discuss the work of the experts as it develops. Upstream involvement of representatives is intended to provide greater opportunity for stakeholder input and to ensure a user-friendly solution.

The public consultation (which closes at midnight today) has been longer than usual to ensure as wide as possible participation in the policy discussion.

For more information

Green Paper on policy options for progress towards a European Contract Law for consumers and businesses:

http://ec.europa.eu/justice/news/consulting_public/news_consulting_0052_en.htm

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