Wednesday, 2 May 2012

CESL in Chicago

Last Friday and Saturday, Joasia and I participated in a conference on 'European contract law: a law-and-economics perspective' in Chicago (that was announced in an earlier post on this blog). The conference considered a wide range of views on the development of European contract law, focusing on the European Commission's proposal for a Regulation on a Common European Sales Law (CESL).

While the proposed CESL met some heavy criticism from speakers from both sides of the Atlantic, suggestions for improvement and for the further development of European contract law took diverging directions. In general, and perhaps not surprising in light of the economic angle of the conference, it appeared that the US speakers were rather sceptical about further-going regulation of consumer transactions in the EU's internal market. The European speakers, on the other hand, mostly sought to combine their criticism with suggestions for the elaboration of measures of EU contract law within the existing acquis communautaire. The different approaches generated a lively debate on general issues (harmonisation, regulatory competition, mandatory rules, optional instruments) as well as specific topics (consumer protection techniques, the doctrine of mistake, remedies, custom, precontractual liability, Eurobarometer surveys).

Some of the main points of discussion were the following:

1. The competitive strength of CESL in comparison to the national sales laws of the EU Member States. In this context, it was noted that according to the Commission's proposal CESL is 'more equal' than domestic laws, insofar as it 'neutralises' Article 6(2) of the Rome I Regulation and thus makes sure that in case parties opt into CESL it will be the only set of rules governing the topics within its scope (no additional consumer laws will apply). In terms of game theory, the European regulator thus acts both as a player within the game (offering CESL) and as arranger of the game (setting the rules). Not optimal from a regulatory perspective, it seems. On the other hand, it can be argued that this is the only way to make CESL work, since its uniformity is meant to make it an attractive option for cross-border transactions.

2. The relatively high number of mandatory consumer protection provisions in CESL. It was put forward that the costs of such a high level of consumer protection will likely be borne by consumers. This would be problematic insofar as there is no differentiation between types of consumers: Consumers who may prefer lower protection in combination with lower prices would be priced out of the high-protection market. Furthermore, weaker consumers who do not invoke mandatory protection rules might pay for the protection of stronger consumers that do (cross-subsidy). On the other hand, it was suggested that once a certain type of protection (eg right of withdrawal) has become part of consumer expectations at the conclusion of a contract, it could be made mandatory. Moreover, it was pointed out that many of CESL's mandatory rules originate from EU Directives that are already in place.

3. Efficiency and social justice in European contract law. The idea that European contract law, including CESL, could appeal or contribute to a shared European identity was considered to be unconvincing by some participants to the conference. The 'thickening' of the moral dimension of European identity through contract law would not be successful if CESL was not used or known by contracting parties. While there is some truth in the latter assertion, it may be submitted (and that is what part of my contribution to the conference consisted of) that the development of European contract law should take into account not only economic factors but also the idea of social justice underlying legislation and adjudication in this field.

The working papers can be found on the conference website and are planned to be published in a special issue of the Common Market Law Review.

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