European Commission proposes an optional common sales law.
It may surprise some readers but less than 10 per cent of European trade is cross-border with the vast majority of businesses preferring to stick to national borders. With the long-term goal of greater integration and harmonisation, the European Commission has invited consultation on a suggested common sales law (“CSL”). It is hoped that this would assist cross-border trade
The Commission has indicated that the CSL, which is optional, would rank alongside national laws. Member states would not be required to adopt the CSL into national law which means that compliance is voluntary.
Both the Government and the Law Society have voiced concerns about the CSL.
The Commission conducted a survey which found that 55 per cent of companies targeting sales to consumers overseas were deterred from doing so by contract law matters, while 49 per cent of companies trading with businesses offered the same view.
Those in favour of the CSL say that, if introduced, it would herald significant costs savings. The initial costs to businesses to trade in Europe are relatively high because lawyers need to advise on the national laws governing trade in each of the relevant member states.
Critics of the CSL have said that there is a great degree of uncertainty because the proposal is presently a mixture of civil and common law and lawyers in some jurisdictions may struggle to adapt to this form.
The Commission hopes that national courts will deal with much of the litigation. The Commission wants to create an online database of judgments.
Critics suggest this database would fail to provide the bedrock of jurisprudence necessary for the law to be applied evenly across all member states.
The problem is that with 27 member states and an optional law, lawyers are concerned that a consistent bank of case law will not be developed. This will lead to uncertainty and may prove to be no better than the current regime.
The CSL is supposed to offer consumers greater protection of their rights, but if the law is optional it is difficult to see businesses choosing to use CSL instead of national laws which afford lower protection to the consumer.
Some commentators are believe that an optional law is a pre-cursor to bringing in a compulsory law across the European Union.
If mandatory, businesses may simply opt to use, say, New York law over the single European law and English lawyers will lose out. Currently, English lawyers have an advantage over their continental peers because international clients often prefer to contract under English law.
The Commission’s proposal is an interesting development but it seems unworkable in its current form. Here at Bargate Murray we will follow the developments closely and keep you updated in future blog posts.