European contract law: A Survey on further harmonisation

United Kingdom

In July, the European Commission published its "Communication on European Contract Law" (COM(2001) 398). The Communication is aimed at launching a debate on problems experienced by individuals and companies in cross-border transactions resulting from the divergence of national contract laws and on the need for further-reaching action at EU level in the area of contract law.

We thought it useful to consult individuals interested in contract law on the issues on which the Commission now seeks views.

It is our intention to inform the Commission of the answers to this questionnaire, but on a strict "no-names" basis. Thus, any response you provide to us will not be traceable back to you or your company.

We set out below the issues on which we would value your views. The survey should take only a few minutes to complete as in most cases responses need only be expressed as a "yes" or a "no".

To respond simply either:

  • e-mail marianne.walsh@cms-cmck.com with your responses to issues I-VI below, adding any further comments you may have

  • or if you prefer to complete a hard-copy version, simply print off the survey, complete it and mail it back to us for the attention of Marianne Walsh at CMS Cameron McKenna, Mitre House, 160 Aldersgate Street, London EC1A 4DD.

    All responses should be returned by Friday, 5th October 2001. Should you have any queries regarding this survey or any of the issues it covers please contact Marianne Walsh on +44 (0) 20 7367 2654.

    Thank you in advance for your participation. All respondents to the survey will be sent a summary report of the findings.

    A. The Commission's concerns about contract law in the EU

    Up until now, the European Commission has sought to approximate contract law in the EU on a "piecemeal" basis. Thus, EU legislation has been adopted in relation to certain specific areas of contract law and has related to specific contracts or specific marketing techniques. However, the Commission feels concerned that this "piecemeal" approach to harmonisation might not be able to solve all problems which can arise. The Commission is interested in gathering information on the need for further-reaching EC action in the field of contract law.

    The exchange of goods and services is governed by a contract. Problems in relation to agreeing, interpreting and applying contracts in cross-border trade may therefore affect the functioning of the internal market. In addition, the Commission feels that markets are not as efficient as they could be. For instance, technical developments, such as the Internet and the introduction of the Euro, have not been fully exploited. The Commission now asks: do existing contract law rules meet the current and future needs of businesses and consumers in the internal market, or is EU action required?

    The Commission would like to find out if the divergences of national contract laws obstruct the functioning of the Internal Market and if so, to what extent. Ways in which this can happen include: (i) lack of knowledge of other contract law regimes might discourage companies and individuals from engaging in cross-border transactions; and (ii) disparate national law rules may lead to higher transaction costs, especially as regards information and possible litigation costs. These higher costs may also be a competitive disadvantage, for instance, for a UK supplier competing with a French supplier for a contract with a French company.

    The Commission is also interested in receiving information on practical problems resulting from possible inconsistencies between rules adopted at EU level (such as Regulations and Directives) and from the way those rules are applied and implemented in Member States. For instance, under certain circumstances it is possible to apply both the doorstep selling Directive and the Timeshare Directive with differing results (because the period during which a consumer can exercise his right of withdrawal is of a different length in each). The Commission is also concerned by the differing use of general terms and concepts which can lead to differing results in commercial and legal practice in different Member States.

    B. Options for the future of contract law in the EU

    Responses to the Commission's Communication may show that there are impediments for cross-border transactions. If the Commission finds that these problems cannot be solved satisfactorily through a case-by-case approach, it may consider adopting a horizontal measure harmonising contract law at EU level. The Commission suggests four possible options.

    I. Allow market forces to deal with any problems that may exist

    The Commission states that although the market creates problems of public concern, it also develops its own solutions. For instance, different incentives by Member States and trade associations (eg offering assistance and advice on cross-border transactions) can efficiently channel the market in a specific direction (eg speed up the use of new technologies or encourage new types of commercial practices). Thus, no action should be taken at EU level.

    (a) Yes
    (b) No
    (c) Additional comments:

    II. Adoption of a voluntary set of common principles

    This option suggests promoting discussion to identify the principles common to most national contract law rules. The outcome of these discussions could be: (i) a set of common principles, (ii) guidelines, or (iii) specific codes of conduct for certain types of contract. These common principles could be useful as guidelines for national legislators when drawing up legislative initiatives, national courts and arbitrators in their decisions (where the legal issues are not fully covered by binding rules or where no legislative rules exist at all) and contractual parties in drafting their contracts.

    (a) Yes
    (b) No
    (c) Additional comment:

    The Commission also remarks on the current practice whereby a large number of standard contracts are in use in all the Member States. These standard contracts save parties the need to negotiate the contract terms for every single transaction. The Commission suggests that standard contracts could be developed for use throughout the EC.

    (a) Yes
    (b) No
    (c) Additional comment:

    III. Improve the quality of legislation already in place

    The Commission proposes reviewing and amending all relevant legislation with a view to simplifying the legislation and improving its quality. This would involve building on the Commission's current programmes which aim to improve and consolidate existing EU legislation for the purposes of clarity.

    (a) Yes
    (b) No
    (c) Additional comment:

    IV. Adopt new comprehensive legislation at EU level

    This option involves creating a new legal instrument at EU level which could, for example, be an optional model chosen by the contractual parties or a safety net of fallback provisions where parties have not provided a solution for a possible problem in the contract. The Commission states that the choice of instrument depends on a number of factors, including the degree of harmonisation envisaged.

    A Directive would give Member States a degree of flexibility, but may allow differences that might lead to obstacles for the functioning of the internal market. A Regulation would give Member States' less flexibility, but would ensure more transparent and uniform conditions for economic operators in the internal market. A Recommendation would be appropriate if a purely optional model is chosen.

    Regarding the binding nature of the measures, the Commission suggests the following approaches:

    (i) a purely optional model which would apply only where the parties specifically state that it will apply. An example is a Recommendation or a Regulation which applies when the parties agree their contract is to be governed by it.

    (ii) a set of rules which would apply unless their application were excluded within the contract. This could co-exist with national law or replace it.

    (iii) a set of "mandatory" rules whose application cannot be excluded by the contract. This would replace existing national law.

    Do you think that a measure at EU level should be in the form of option (i), option (ii) or option (iii) above?

    Do you have any further suggestions for efficient and effective solutions to the problems identified?

    V. Examples of concrete problems experienced

    The Commission would like to receive information on specific problems encountered by companies as a result of the co-existence of different national contract laws. If you have experienced such difficulties, perhaps you could provide us with the following information:

    1. Have you encountered difficulties in the exercise of your activities as a result of the application of legal rules in EU Member States (other than the country in which the head office of your business is registered)?

    2. If your answer to question 1 is Yes, please indicate which country (or countries) was involved.

    Austria, France, Italy, Spain, Portugal, Greece, United Kingdom, Ireland, Belgium, Luxembourg, Sweden, Denmark, Germany, Finland, Netherlands

    3. Has the application of the contract laws in one or more of these countries been the cause of your experiencing difficulties with regard to contracts, deals or agreements which you have been engaged in those countries?

    4. If so, would you generally describe these difficulties as being:

    (a) of a financial nature (eg the incurring of higher costs owing to information needs and/or possible litigation)

    (b) as a result of inconsistencies between EU measure or from the way they have been implemented

    (c) as a result of a lack of knowledge of other legal regimes

    (d) other

    5. Please describe the arrangements in which the application of the foreign laws made cross-border trade more onerous, or even impossible, as well as the reasons why this was the case.

    VI. Brief description of your business

    Please indicate the following:

    The nature of your business: manufacturer, service provider, financial services provider, salesman, tradesman or consumer.

    Sector of activity:

    The size of your company, based on number of employees:

    less than 50 employees

    between 50 and 200

    between 200 and 500

    between 500 and 1000

    more than 1000?

    Thank you for completing this Survey.