The Common European Sales Law
In October 2011 the European Commission published a draft regulation on the Common European Sales Law (CESL). The draft regulation, if implemented, could have a significant impact on both businesses and consumers.
What is the CESL?
The European Commission proposal aims to create a set of contractual rules for the cross border sale of goods. In particular the CESL will apply to the sale of goods and related services together with the provision of digital content. Related services will include areas such as maintenance and installation; however financial and legal services will not be included under the ambit of the draft regulation.
The Commission believe that introducing a pan-European contract law will increase the level of cross-border trade between Member States thus strengthening the single market. Currently, the Commission believe the impact of businesses not selling cross-border means consumers are left with fewer choices in their own domestic market.
In addition, the Commission believe introducing a CESL will give consumers higher levels of consumer protection. The Commission are firmly of the opinion that the introduction of the CESL will benefit both consumers and SMEs.
Who will the CESL apply to?
The CESL will apply to business to consumer contracts (B2C) but only where the consumer has given explicit and informed consent. The CESL will also apply to business to business (B2B) contracts but only where one of the contracting parties is a Small/Medium sized enterprise (SME).
An important aspect of the CESL is that it’s an ‘optional’ instrument that will supplement national law therefore it will only apply when it is intentionally chosen by one of the contracting parties.
The scope of the CESL?
As proposed, the CESL will only apply to cross-border contracts and will not apply to domestics contracts.
Currently, the Commission are looking at whether the CESL could be extended to cover insurance contract law and a working group has been set up to investigate this issue further.
The relationship between national law and the CESL?
The CESL is not an all-encompassing code and does not include areas such as transfer of ownership, sanctions, representation and intellectual property law (to name a few). Since there are ‘gaps’ in the CESL it will still be necessary for contracting parties to choose a governing national law to circumvent areas that are not included in the CESL.
Areas of concern arising from the CESL?
From an English law perspective the main potential problem with the CESL is the introduction of concepts such as ‘good faith and fair dealing’. This concept is not typically best suited to arms-length business transactions where parties should be entitled to act within their own interests; ultimately this kind of concept gives rise to legal uncertainty.
Another concern relates to consumer protection. The CESL proposes to create a minimum level of consumer protection across Member States. However, currently there are differing levels of consumer protection in each Member State. For example, in the UK there are very high levels of consumer protection compared to Poland who have low levels of consumer protection. The introduction of the CESL, from a UK consumer using the instrument, will mean a reduction in consumer protection compared to say a Polish consumer who will see an increase in consumer protection.
Support for the initiative?
The UK Government alongside the Law Society of England and Wales don't believe there is sufficient evidence to demonstrate the need for a CESL.
In general, many big companies are opposed to the introduction of the instrument. However SME groups across Europe are generally supportive of the instrument.
Consumer organisations mainly believe the introduction of the CESL is not the best way forward to improve consumer rights (one of the main reasons mentioned above); ironically the Commission believe it is the consumers that will ultimately benefit from the proposal.
Effect on UK practitioners?
The potential effect on practitioners is significant. If and when the new law comes into force everyone from lawyers, judges, consumers and businesses (all types) will have to understand the CESL. Practitioners will potentially have to advise clients on whether the instrument should be chosen and how to comply with it, if chosen.
Potential date of implementation?
This is very hard to determine at the moment as the draft regulation is still at the first reading stage in the European Parliament. After the Parliament have adopted a position on the CESL, the draft regulation will then go to the Council of Ministers (made up of the 27 Member States) where the proposal will be further debated and amended, if necessary.
It seems highly unlikely that the new will be passed by the end of 2013.
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