IP, Technology & Data

Following the draft regulation published by the European Commission last November, the Ministry of Justice has opened a consultation on the proposed European sales law.

The intention behind the proposed European sales law is to provide an (optional) pan-European contract law for business to consumer and business to (SME) business contracts for goods, digital media and goods/services. The European Commission thinks that this will benefit SME business and consumers by allowing them to opt for contracting under a new European wide set of rules rather than the law of another member state.

Problems with the new rules
I am quite sceptical about this proposal. For one, it appears to be replacing one set of (potentially) unfamiliar rules with another. Despite the regulation being watered down from the Commission’s original proposals, a number of other problems remain:

  • The new rules will have no jurisprudence in terms of how they are to be interpreted. You may end up going back to square one in relation to basic issues such as whether or not a manufacturer was liable for promises made in adverts for flu remedies, and the losses arising out of late repairs to crankshafts for mills. Words and phrases that previously had legal certainty may no longer mean what people think they do.
  • The alternative would be to attempt to codify several hundred years of case law – no small task. And which country’s common law do you use to do this? This means that any business opting to use the new rules would be trading several hundred years of case law for uncertainty and principles that may be unknown to the business’s “home” laws. In B2B contracts I wonder how comfortable a business would be contracting under a completely new law (for starters, contract lawyers across Europe would need to become familiar with it). In any event, in many multinational contracts, English law is often used on the basis that many businesses (and lawyers and courts) are familiar with it.
  • The new rules will only cover certain areas of the supply of goods of services. But contracts contain provisions dealing with many other laws – for example, intellectual property rights, data protection, confidentiality, employment laws, to name but a few. Whilst many of these may implement European directives, each is often subject to a degree of discretion by the relevant member state. So again, many of the clauses will need to be specific to one particular country’s legal system.
  • What language would be used? If the contract is written in a language unfamiliar to one of the contracting entities then advice is still going to have to be sought from a local lawyer, to advise the party on what the contract says. And means.

Optional law
Finally, and most importantly given the concerns listed above, use of the law will be optional. So neither of the groups that will supposedly benefit from the new rules can mandate that they apply. In practice, it will be up to the retailer/service provider to amend its standard terms to incorporate the new rules.

One of the MEPs supporting the proposal, Diana Wallis, states that the new law should give consumers a higher level of protection than that offered in many member states. Given that the governing law in B2Consumer contracts is almost always decided by the business, I can’t see why any business would voluntarily adopt the new laws in its consumer contracts.

And that is before we even go into reviewing the rules themselves.

The proposal is an admirable attempt to further promote the single market, but I can’t help but feel that this will go the same way as Esperanto.

UK Criticism
And it’s not just me. The Bar Council, the Law Society, the Scottish and English Law Commissions, and even the consumer watchdog Which? have all raised concerns.

In response to this, the MoJ is therefore seeking views on the effectiveness of the proposed new rules, and the costs of operating two parallel contract laws. If you deal with customers (or suppliers) elsewhere in Europe, and have views on the effectiveness of a new set of rules, the MoJ would like to hear from you.

The consultation is open until 21 May 2012.

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