A European Contract Law: a cuckoo in the nest?

A lecture by Professor Hugh Beale from 13th January 2011 at the LSE. This is available as an mp3 download and a video

Outline of the lecture:
Many countries have adopted the Vienna convention on international sales, the “unidroit principles” of international contracts are also successful. Within Europe there have also been “Principles” published by the Lando commission. This is in various volumes and serves to strip away differences in terminology.

Why are these different restatements produced?
Principles can be adopted into specific contracts but they will ultimately always be interpreted according to a national legal system. Arbitrators are not limited to national systems and can choose which principles to apply. This might allow them to function as modern day “lex mercatoria”. The principles can provide a basis for drafting new legislation, as a tool for translation especially via the comparative notes. The way forward might include the creation of a single European wide contract law or civil code. Consumer law acquis in Europe shows some inconsistencies between different directives, this resulted in The principles of existing EC private law. The European commission may introduce a “common frame of reference” partly to improve the existing acquis, as proposed in the 2004 document “the way forward”. There are two different ways of understanding what this would be:

as a guide or toolbox for legislators or courts
Definitions - This would assist in revising the acquis. The commission seems to agree that legal concepts are not defined in regulations. For example giving a right to “damages” it may not be clear whether this would include non-pecuniary losses, such as loss of enjoyment. Drafting legislation - Legislators often just copy out the wording of a directive when they implement it in their jurisdiction. The common frame of reference could be used as a sort of dictionary. Model rules - this could work if the academics make it clear why they think a rule is good and also show the alternatives they have considered. Fundamental principles - this could be ideas like “freedom of contract” or “the need to intervene to protect weaker participants”...very often these pull in opposite directions. Did the DCFR help in the task of improving the consumer rights directive? 8 consumer directives were reviewed to make the new proposal. The DCFR has turned out to be a rather academic document. If you think that it is just a toolbox this may be enough. It provides definitions “should they ever be needed”... The politicians were impatient though...they wanted to revise the consumer acquis immediately without waiting for the CFR to use as a basis. The consumer rights protection actually aims to make life easier for businesses...especially if they are distance selling to people in places where buyers benefit from a high degree of protection...or maybe where they don't even know where the buyer is.

There is a problem with this: If the laws were really harmonised No member state could give higher protection to its consumers. This will be unacceptable to legislators. The likely solution is a “blue button”. This looks like the other sort of use...

as an optional extra legal system – a “28th legal system”.
The expert group has recently been asked to concentrate on a document that will cover only sales of goods. The idea is that it would introduce an optional instrument for cross -border sales....rather like the Vienna convention. But the Vienna convention applies unless you opt out. This would allow consumers to OPT IN to a blue button type transaction. Instalment sales are a problem area because they have to do with credit as well...creates of a lot of other work. The consensus is that it has to contain a high level of consumer protection. Otherwise people will not be attracted unless the option is at least higher than the minimum standards...but not so high as to be unacceptable to businesses. Is the blue button good for UK consumers?

It doesn't make a big difference in Britain. The real question will be for places with more protection like Denmark or Sweden. At the moment some organisations may not wish to offer distance sales to these countries. In the future the "blue button" may allow them to sell on condition that the buyer accepts that the transaction will be carried out under the terms of the optional instrument.

It seems likely that the optional system for international sales would start being used for internal domestic sales as well...that's a potential cuckoo. It could push out the local (national) contract law.

What about if it was used for business to business transactions? Here the question is who might use it....there are advantages:ease of translation, simplicity... but maybe these are not such a problem for large firms. The costs involved now are small for them because they deal in large quantities. Small and medium-sized businesses could benefit more.

What is the optional instrument likely to include?
There was a request to make it short - only 150 articles. This means "it will probably only cover basic general contract law with a few consumer provisions and some stuff on sales." Hopefully the Commission will agree to expand the 150 article limit.

Is this new document a threat to our national legal systems?
It could potentially become important for business to business contracts, and it is likely to be very different to the Anglo-Saxon system. English contract cases often involve sophisticated businesses in high value transactions, and this may have led to a more individualistic approach. The CFR may have a higher requirement of good faith and greater protection against unfair contract terms. However if it is an optional instrument then there is no need to be so worried about it. It would be suitable for smaller and less sophisticated businesses who would prefer more protection which English law tends not to provide. All the documents are presently in English only so it could turn out to be a good opportunity for the UK legal profession.

terminology
directive: acquis: vires SME small and medium-sized enterprises.

Related links
PanGloss - blog posting on an earlier presentation by Prof. Beale A Comparative analysis of Consumer law in the EU produced at the University of Bielefeld