The Common European Sales Law: the latest milestone toward adoption
By Professor Dr. Dirk Staudenmayer and Dr. Claudia Moser
European Commission Directorate-General for Justice, Brussels
In 2011 the European Commission submitted its proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law (COM (2011) 635 final). An initiative of crucial importance for consumers and businesses in the internal market, it aims to facilitate cross-border trade. In Europe, crossborder trade is far from smooth: Up to 90 percent of traders face hurdles to exporting their products to other EU member states. One of these hurdles is the divergence of national contract laws. A trader selling a product to a consumer in another EU country has to respect the mandatory rules of the consumer’s country of residence. This applies even if the parties have chosen another law as the law applicable to the contract (Art. 6 (2) of the Regulation (EC) 593/2008 on the law applicable to contractual obligations (Rome I)). Traders must therefore solicit advice about the relevant foreign laws and adapt their terms and conditions accordingly. This results in estimated costs of €10,000 per company and export member state on average, a heavy burden in particular for small and medium-sized enterprises (SMEs). On the other hand, consumers do not make cross-border purchases because they are uncertain about their rights. Even in cases in which consumers attempt to purchase a product from another EU country, they might encounter traders unwilling to sell their products abroad due to the sheer cost of doing so.
Advantages of the new sales law
Under the Common European Sales Law, companies that choose the Common European Sales Law as the applicable law can sell their products on the basis of one single contract law and one single IT platform across all EU countries. This enables them to save transaction costs and makes it easier for them to offer their products in other countries. Correspondingly, consumers will have more choice at more competitive prices. The Common European Sales Law creates a comprehensive set of sales-law rules that is identical in all EU member states and available in all official languages. It applies as a second regime in addition to national sales laws and does not replace them. Most importantly, this new regime is optional. The contractual parties may agree on it, but are not obliged to do so. They will only choose to apply it if it holds economic and legal advantages for them. Thus, the Common European Sales Law leads to a win-win situation for both contractual parties. The Common European Sales Law can be used for the cross-border sale of movable tangible goods and for the supply of digital content as well as contracts for related services, such as installation or repair of the goods purchased. It contains all of the elements that are essential during the life cycle of a cross-border sales contract, such as rules on the conclusion of a contract, precontractual information requirements, unfair terms control and the rights and obligations of the buyer and seller. A contract can thus be largely based on the Common European Sales Law alone. Only a few areas of contract law are not included in the proposal, either because (a) they are not regarded as being problematic in cross-border contracts, such as rules on representation or set-off, or (b) they are regarded as being particularly sensitive within the national legal system, such as the protection of minors or the moral standards of contracts.
Overall aim: consumer confidence
In order to create consumer confidence and to give consumers the certainty that they are not worse off compared with the protection offered by their national laws, the level of consumer protection offered by the Common European Sales Law is comparatively high. A recent behavioral economics study launched by the Commission has shown that consumers are not afraid of optional systems. Agreeing to the application of an optional instrument does not increase the likelihood of canceling a purchase. The optional instrument does not raise consumers’ concerns about their rights and how to claim them in a cross-border purchase.
Next steps in the legislative process
The Common European Sales Law is now being negotiated in the Council and the European Parliament. Whereas negotiations in the Council are progressing rather slowly, the European Parliament has already adopted its position with a two-thirds majority after the first reading. It welcomes the proposal and stresses its potential benefits for consumers and businesses in the internal market. It also supports the basic policy choices of the Commission, especially with regard to the optional nature of the proposal. The European Parliament also made a number of amendments to the proposal, some of which are purely technical in nature while others contain important political decisions. The main amendments relate to the following aspects:The Parliament wants to limit the scope of the proposal to distance contracts. The term “distance contracts” covers in particular e-commerce. This represents an attempt on the part of the Parliament to take into account the potential of this rapidly growing sector, particularly in cross-border contracts.The Parliament wants to extend the scope of the proposal to all transactions between businesses. Whereas the Commission’s proposal required that at least one company involved in the transaction qualify as an SME, the Parliament would allow two traders, regardless of their size, to choose to apply the Common European Sales Law.In order to address the growing importance of the digital world, the Parliament made a number of amendments in this area as well. These relate in particular to cases where digital content is not paid for with money, but, for example, with personal data. It wants to expand buyer protection in these cases, giving the buyer more or less the full range of remedies available. Furthermore, it proposes specific provisions for restitution in these cases.Following industry criticism of the high level of consumer protection, the Parliament wants to achieve a better balance between the interests of business and consumers. Its amendments, for instance, restrict consumers’ remedies in several areas. For example, the Parliament would only allow the consumer to terminate the contract within two months after having noticed the defect. Thereafter, the consumer would only have such less extensive rights as repair or replacement and only be allowed to terminate the contract if those remedies are not possible or have become unlawful. Another example is that the Parliament wants to shorten the absolute period of limitation, which begins on the date the seller must provide the product, from 10 years to six years. Apart from the long limitation period, there is a short limitation period of two years that begins at the time of actual or expected awareness of the facts as a result of which the right can be exercised.On the other hand, the Parliament’s amendments increase consumer protection in the area of control of unfair terms. The scope of control is extended to the main subject of the contract and to individually negotiated terms. Various clauses on the list with terms that normally are supposed to be unfair but that could be considered fair in specific cases in the Commission proposal, were moved to the list with terms that are always considered unfair. Additionally, the Parliament added a number of clauses to the former list.
Conclusion and outlook
Whether the Council adopts the amendments suggested by the Parliament remains to be seen. In any case, the Commission will continue to follow-up on the negotiations in a constructive manner and work toward an acceptable compromise that would help consumers and traders to fully explore the potential of the Single Market. It is important to note, however, that the adoption of the European Parliament position has marked another milestone in the legislative process toward the adoption of the Common European Sales Law. The Common European Sales Law offers a voluntary, concrete solution to concrete problems faced by companies and consumers. Choice is the key word here. Adoption of the law in the near future would offer economic operators more choices. It will offer those who apply it a win-win situation that both sides can take advantage of if they choose to.