Commission's proposal on the Digital Single Market out

Yesterday, the European Commission published two proposals aimed at harmonising the rules on two aspect of digital economies: sales of goods and provision of so-called digital content. There will be chances to discuss the proposals more in detail in the weeks and months to come (in particular: to what extent can they still be considered as a legacy of the discarded common sales law proposal?). Curious readers, however, will find them on the website of DG justice, accompanied by a number of context documents as well as country factsheets. Exciting times!

EP amendments to the CESL

As we reported earlier, the proposal for an optional Common European Sales Law received strong backing from the European Parliament in a plenary vote on 26 February. The text including the amendments that the EP approved is now available on the Parliament's website (p 83 ff of the document). 

Some of the most remarkable changes suggested include:

- the focus on distance, online contracts, including contracts for the supply of cloud services (recitals 8, 9 and 17a);

- the extension of the definition of 'consumer' to certain dual-purpose contracts (recital 11a and Article 2(f));

-  the extension of the applicability of the CESL to certain mixed-purpose and linked contracts (Article 6(1));

- an explanation of the meaning of 'good faith' within the CESL (Article 2(fe));

- the extension of unfair terms control to all contract terms supplied by the trader (Annex I, Article 82);

- the addition of a number of new terms to the black list on unfair terms (Annex I, Article 84);

- the remedies available in case of non-conformity of digital content (Annex I, Article 107);

- the inclusion of provisions on commercial guarantees (Annex I, Article 177a);

- detailed provisions on the setting-up of a database collecting national judgments on the CESL, possibilities for alternative dispute resolution, the development of model contracts based on the CESL, and the review of the CESL 5 years after its adoption (Annex I, Articles 186a-d).

CESL legislative resolution adopted!

Dear readers, this is it let you know that the European Parliament had just approved the legislative resolution concerning the Common European Sales Law. 

Details concerning the substance of the adopted version will become clearer in the next hours, since some amendments have been adopted and other amendments rejected.
For the moment, it seems that the Parliament restricted the Instrument's scope to distance selling (including, but not limited to, online sales) and that an amendment introducing a notification duty in case of defects has been adopted.
The amendments proposed concerned quite substantive points, so their final "count" might importantly affect the proposal's chance to be approved by the Council during its first reading. Stay tuned!

Tune in on the EP's discussion of the CESL tomorrow

Just a brief update on the plenary discussion and vote on the Common European Sales Law in the European Parliament that has been scheduled for this week. The debate is on the EP's agenda for tomorrow morning and can be followed through the Parliament's website.

CESL in the EP

Next week, on 25 February, the European Parliament will debate the pending proposal for an optional Common European Sales Law; the vote will take place on the day after. As Eric Clive observes on the Edinburgh European Private Law News blog:

'This will be a key test for the proposal. As noted in earlier posts, the Legal Affairs Committee is strongly in favour of the proposed optional European sales law and has put forward a number of useful and constructive amendments, taking full advantage of the input of experts, consultees and stakeholders including, notably, the European Law Institute. However, the (rather divided) Internal Market and Consumer Protection Committee was not so keen on the idea of an optional instrument and has put forward amendments designed to convert the proposed optional instrument into a compulsory instrument, something which has little or no chance of proceeding further.'

European consumer organisation BEUC, furthermore, has reinforced its criticism of the CESL in a call on the Parliament to reject the proposal.

The constructive comments that have been put forward by the European Law Institute's working group on the CESL can be found here.

To be continued...

BEUC's new year's resolutions

Last Friday, European consumer organisation BEUC published a Memorandum for the Greek Presidency of the EU in this first half of 2014. Not surprisingly, BEUC remains very critical of the currently pending proposal for an optional Common European Sales Law (CESL). Other demands include: 

'• Product safety and market surveillance: Consumers’ exposure to unsafe products need to be minimised and market surveillance improved;

• Package travel: The legal protections for holidaymakers who book travel packages need to be modernised;

• Data Protection: An update of EU’s personal data protection rules should strengthen citizens’ protection and control over their own data;

• Key Information Document (KID) for retail investment products: Consumers need to be able to easily compare different kinds of products before deciding how to invest their savings;

• Payment accounts: Bank account fees should become more transparent, switching of accounts made easier and all EU consumers given access to a basic bank account;

• Official controls of food: Transparent controls, independent inspections and tougher enforcement can help restore consumer trust in food and the food chain;

• Medical devices: The revision of the current laws on medical devices should lead to improving the quality and safety of the medical devices sector, thereby restoring consumer trust.'

Bad MEPs

As Chantal mentioned already, the European Parliament's JURI Committee approved of the CESL's proposal yesterday. BEUC's reaction to this news was instantaneous and unsurprising. In a statement from yesterday BEUC reproached MEPs as making a bad decision for European consumers, since the 'optional' character of the CESL is seen as increasing complexity for consumers, legal uncertainty and allowing businesses to circumvent national protection measures, therefore, reducing consumer protection. This is an unsurprising result, since even in the progress chart mentioned in the previous post today the European Commission's proposal on the CESL was evaluated as a 'bad' one for consumer protection.

"We hope that MEPs and national governments will stand firm in ensuring just before the Parliamentary elections that the thus far successful history of EU consumer legislation is not devalued. Important national rights should not be undermined." said Ursula Pachl, Deputy Director General of The European Consumer Organisation. (BEUC Statement on JURI committee CESL vote)

CESL moving forward

Yesterday, a large majority of the European Parliament's Legal Affairs Committee (JURI) voted in favour of its rapporteurs' report on the proposal for a Common European Sales Law (CESL). Furthermore, the committee negotiators received a mandate to start negotiations with the Council.

The CESL is meant to facilitate cross-border trade in the EU by providing businesses and consumers with a set of contract law rules they may choose to apply to their sales agreements. JURI is backing the adoption of such an optional instrument for distance contracts, in particular those concluded online. Its amendments to the proposed CESL have been inspired by the European Law Institute's suggestions (on which we reported earlier, 'ELI on CESL').

For more information on the CESL and JURI vote, please refer to the press releases issued by JURI and the European Commission.

What's up with the CESL?

Yesterday, the BEUC- whose critical stance was already known- and Ecommerce Europe, an association of businesses, have sent an open letter to the Legal Affairs (JURI) and Internal Market and Consumer protection (IMCO) committees of the European Parliament inviting them to reject the Commission's proposal for a Common European Sales Law.

The main arguments put forward are that the instrument would increase-rather than reduce- legal complexity, thus confusing consumers, and impose compliance costs on businesses.

The two associations also claim that the Commission should rather address some issues which remained left-out of the Consumer Rights Directive, "namely, legal and commercial guarantees" and "real problems" associated to the concrete operation of e-commerce. 

We will see in the future whether the addressed MEPs will take the direction indicated in the letter and oppose adoption of the CESL.

Legal-economic reflections on CESL

The European Commission's proposal for a Regulation on an optional Common European Sales Law is slowly but steadily making its way through the legislative process. At this time, it is being discussed in different committees of the European Parliament.

Summaries of the discussions that have so far taken place within these committees can be found on the Edinburgh European Private Law News blog. Most recently, Eric Clive reported on the discussion within the Parliament's Internal Market and Consumer Protection committee ('IMCO on CESL briefly'). As becomes clear from this summary, the proposed CESL continues to divide opinions. While some commentators give constructive comments for the amendment of the proposal, others doubt its added value for the facilitation of transactions concluded on the European internal market.

The legal-economic merits of both points of view were discussed at a conference that was organised by Omri Ben-Shahar in Chicago last year (on which we reported earlier). The final versions of the conference papers have now been published in a special issue of the Common Market Law Review and may provide the European Parliament, as well as other interested parties, with insights into the costs and benefits of introducing a CESL and into the dynamics of regulatory competition in European contract law.

CESL and Impact Assessment

In view of coming discussions on the proposed Common European Sales Law Regulation, the European Parliament has requested its Impact Assessment Unit to give an appraisal to the Impact Assessment which the Commission has attached to its 2011 proposal. The result of the Unit's work has now been released.

Starting with the document's conclusions, the evaluation would seem very positive: all in all, "The Commission has made considerable efforts to provide a very detailed and transparent impact assessment in which the arguments are clear and logically structured and the limitations and uncertainties of their analysis is acknowledged."

The Commission bases its proposal on the necessity to reduce transaction costs resulting from legal diversity in contract law in order to foster cross-border (online) trade.  As a consequence, the concept of "transaction costs is central to the Impact Assessment (hence IA). 

The EP's document notices that "the way the Commission calculates transaction costs can validly be the object of criticism and is disputed by numerous stakeholders and academics". This criticism, however, must be measured against the fact that "there is [...] no generally accepted definition of the concept of 'transaction costs' and that the method for calculating such costs in contract law is not yet scientifically established."

Is then everything ok? Not really. At the bottom of the conclusions page, the report accompanies praise of the Commission's "transparency" with regard to its methodology with a remark that, however easy to access, eurobarometer surveys are not a great basis for IAs.The more so, in this case, since the respondents in the studies considered were not asked about the CESL but about a "single European contract law"- not quite the same thing (p. 23).

 Furthermore, reading into the report, less "innocent" deficiencies are to be detected. For instance, the IA considers only a limited set of alternative scenarios, and "contrary to the Commission's IA guidelines, the problem definition does not appear to include a scenario describing how the baseline scenario is likely to develop in the future without any new EU action. (p.17).  further, it has ignored the IA Board's invitation to present stakeholders opinions throughout the Impact Assessment and not only in an Annex (p. 25). The report also notices how the statistics used by the commission "could be interpreted differently to demonstrate the contrary", or the very marginal relevance of contract law-related transaction costs to the (under)development of the internal market. 

What then? Even though the Commission's relaxed used of data should be a matter of concern for all those interested in the evolution of European (not only consumer) law, on this spot we can probably agree with the report that, even if the Commission had very badly overestimated the possible impact of the CESL, "given the optional nature of the instrument,  the situation would just be equivalent to the no EU action scenario". Much ado about nothing, but much more fun for lawyers.

Lawyers buying into CESL's process

Finally, here is a link to Commissioner Reding's most recent speech on the proposal for a Common European Sales Law, given at the occasion of a debate organised by the Council of Bars and Law Societies of Europe (CCBE) for the purpose of 'buying into the process'. On the point of interpretation of the CESL, which is as important for consumers as it is for professional users of the instrument, Reding observed:

'I also envisage a database that enables courts to draw on existing case-law from all Member States. This database - accessible to everybody, but in particular to all legal practitioners, would ensure transparency and a de-facto convergence of relevant case-law. The database would contain national rulings applying Common European Sales Law provisions as well as translated summaries. This would ensure the consistency of application. In time, this database would also remove the necessity for judges to investigate foreign law and compare several laws. This in turn will help to lower litigation costs and shorten the length of proceedings. 

With this in mind, it is reasonable to expect that the vast majority of issues would be resolved by Member States' courts without problematic inconsistencies. And that only a small number of questions would have to be taken to the Court of Justice in Luxembourg. We should also bear in mind that the Common European Sales Law builds on the biggest common denominator of contract law traditions in Member States. Even though the details are new, it would be a rare occurrence that the concepts and approaches underlying the instrument are alien to the courts that will have to apply them. This will limit the risk of fundamentally differing interpretations.

To support us on this journey we also have excellent work by way of commentaries like that edited by Professor Schulze. I thank you for your tremendous efforts in producing this commentary - which can be seen as a very helpful tool in showing others how the Common European Sales Law will work. 

This is only one tool but nevertheless an important pre-cursor of what is taking place: There will be many others including – as mentioned in your position paper – comments which explain the Common European Sales Law article by article as well as suggestions for a digest to be created linking different court cases to each other.'

To be continued...

European Parliament & the CESL

Exactly one year after the Commission launched its proposal for a Regulation establishing a Common European Sales Law (CESL), yesterday the Economic Affairs committee of the European Parliament decided to support it. 

Meanwhile, the Parliament's Legal Affairs (JURI) and Internal Market (IMCO) Committees are also preparing reports due to be finalised in the coming months. 

This is thus only a first step towards a common EP position on the topic. 

However, the CESL proposal might be consistent with the direction indicated by the Internal Market committee through a non-binding resolution which was also adopted yesterday, urging the Commission to take action in the field of online cross-border trade in order to remove the (material and legal) obstacles which hinder exchanges and growth. Does this make a good auspice for the CESL's destiny? Don't miss the next episodes...

ELI on CESL - report available

The report of the European Law Institute's Working Party on the Common European Sales law is now available on the ELI's website. You can follow this link to download the report.

For an informative summary, please refer to Eric Clive's post on the European Private Law News blog.

ELI on CESL

Last week, the Council of the European Law Institute (ELI) endorsed the ELI Working Party's Statement on the proposal for a Common European Sales Law:

'The Working Party critically examined the CESL, making a number of practical recommendations designed to facilitate the achievement of its underlying policy objectives, which include enhancing the viability of the EU’s internal market through facilitating cross-border trade, both in respect of business to consumer transactions and business to business transactions; securing a high and uniform level of consumer protection across the European Union; maximising the opportunities which can accrue to small and medium enterprises (SMEs) from an effective internal market; maintaining the EU’s policy of non-discrimination against consumers and businesses from third countries; and maintaining, except in defined circumstances, freedom of contract.'

The full text of the Statement will be made available on the ELI's website shortly. The site also offers more information on the upcoming ELI conference and general assembly that will take place in Brussels on 28 and 29 of September.

Summer reading

While many legal institutions are taking a Summer break, news on legislative processes and case law is somewhat scarce. Those of you (back or still) at work looking for some reading materials related to consumer issues may therefore take the opportunity to read up on the pending proposal for a Common European Sales Law (CESL) or on the legal, political and economic aspects of the ongoing economic crisis in the EU.

Some relatively recent reading tips on the CESL include:

- Reich and Micklitz, 'The Commission Proposal for a "Regulation on a Common European Sales Law" - Too Broad or Not Broad Enough?'

- Eidenmüller and others, 'The Proposal for a Regulation on a Common European Sales Law. Deficits of the Most Recent Textual Layer of European Contract Law'

- Hesselink, 'The Case for a Common European Sales Law in an Age of Rising Nationalism'

Readers interested in economics and political science may want to consult Professor Eichengreen's reading list. Personally, I would add Sylvia Nasar's 'Grand Pursuit: A Story of Economic Genius', which beautifully recounts the development of economic theory from Dickens's times till today.

Topics of the month

Consumer organisation BEUC's topic of this month is...the proposal for a Common European Sales Law (CESL). On its website, representatives of various institutions and organisations give their opinions on the proposed optional instrument. While some praise the instrument for its potential to enhance consumer protection, others support BEUC's suggestion to develop other types of regulation for cross-border consumer contracts in the EU. Members of the EP even announce the preparation of an alternative approach, which will take the Consumer Rights Directive as its basis. To be continued...

Another topic of this month that may interest consumers is/was (depending on national preferences) the European football championship. To answer a question to which my brother drew my attention, I think under some circumstances it is still possible to send back orange t-shirts that were bought at a distance. Although it will be quite difficult to maintain that the product did not meet consumer expectations (unfortunately, the law does not always correspond to our feelings), football fans who received their shirts around the starting date of the tournament should be just in time to make use of their right of withdrawal from the sales contract under the Distance Selling Directive (without penalty, which in Dutch cases usually is something to be grateful for).

Between Scylla and Charybdis - Secola 2012 on principles and rules

Last Friday and Saturday, the majority of authors of this blog attended the Secola conference on 'Principles and specific rules in European contract law'. In the beautiful setting of the Aula Magna of the University of Messina (Sicily), different aspects of this theme were discussed. 

The speakers posed some intriguing questions on the role of principles in European private law and the possible future development of such principles, for instance in the context of the application of a Common European Sales Law (CESL).  These included:

- the concept of freedom of contract and its limits (Salvatore Patti)

- the role of the principle of proportionality in European private law - given its flexible nature, how can this principle facilitate access to the internal market and how does it affect the balancing of interests in private legal disputes? (Gary Low and Caroline Cauffman)

- the role of the principle of effectiveness - can Article 47 of the EU Charter of Fundamental Rights be applied to the review of national legal remedies, in order to upgrade remedies for the breach of EU law via a consistent interpretation of national laws? (Norbert Reich)

- general principles derived from the acquis communautaire (Elise Poillot)

- the role of principles in codification processes - to what extent does the proposed CESL require judges to make law and, in particular, do we expect the Court of Justice of the EU to fill in all blanks within CESL's scope? (Simon Whittaker)

- principles of law in soft law instruments, such as PECL and Unidroit (Jan Kleinheisterkamp)

- principles and rules - following a Dworkinian approach, to what extent can principles of European private law yield specific rules and legitimize the solutions to 'hard cases'? (Pietro Sirena and Yehuda Adar); in my opinion a very interesting approach, though it raises many questions (some of which I also struggled with myself in a paper prepared for last year's Utrecht conference on principles and law)

- the principle of efficiency and European contract law - why should the principle of efficiency be followed when drafting and applying measures of European contract law, such as the CESL? (Horst Eidenmüller); a perspective that raised eyebrows among some of my Amsterdam colleagues who attended the conference, for (social justice) reasons explained (to a certain extent) here and here

- unjustified enrichment (Carlos Ignacio Gómez Igüerre)

- good faith and reasonableness - submitting that both concepts match with a solidaristic view of (European) contract law, how can they be made operative in, for instance, the case law of the Court of Justice of the EU? (Emanuela Navarretta)

The proceedings of the conference are planned to be published in Secola's series of conference books.

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.

L&E of CESL

On Friday 27 and Saturday 28 April 2012, the Institute for Law and Economics of the University of Chicago Law School will host a conference on 'European Contract Law: A law-and-economics perspective'. The contributions to the conference will, among other topics, assess the newly proposed Common European Sales Law:

'The movement to harmonize European contract law generated various proposals for uniform statutes and optional instruments, culminating by the recent Draft Common European Sales Law. This ambitious reform envisions a uniform Sales Law for Europe with strong consumer protections, enacted by every member nation. Transactors will be able to choose this law to govern their transaction in place of existing contract law.

The Chicago conference brings together a group of leading scholars from Europe and from the University of Chicago, exploring the law and economics perspectives of the proposed harmonization. Is such an optional statute a desirable regulatory tool? What economic goals might it serve? Are the protections enacted in it suitable? What can be learned from the American experience with uniform commercial laws?'

More information and the programme can be found on the conference website.