EU consumer conundrum

Lawyers have spoken out against plans to introduce a second tier of contract law across member states.

The new “common European sales” law, proposed by the European Commission this week, would supplement domestic contract law. The aim is to break down obstacles, such as divergent sales laws, which the Commission claims act as a costly hindrance to cross-border trade, particularly for small firms.

The Commission also claims that traders who are dissuaded from undertaking cross-border transactions due to contract law obstacles forgo at least €26bn in intra-EU trade every year. It estimates that 500 million consumers in Europe lose out on greater choice and lower prices because fewer firms make cross-border offers, particularly in smaller national markets.

Member states would be required to make the new EU law available for sale of goods contracts in which a consumer is involved, or where at least one party is a small or medium enterprise (SME). The law would apply only where contracting parties agree that it should.

However, lawyers fear the proposals could create extra legal complexity and effectively undermine consumer rights.

Vanessa Knapp at Freshfields Bruckhaus Deringer says: “The market seems to be pointing to other factors, like language barriers and VAT complexities, to account for any missed cross-border trade opportunities, rather than the absence of contract law uniformity.

“One additional concern for UK businesses is how the new proposals’ key principles of good faith and fair dealing, defined as a standard of conduct characterised by honesty, openness and consideration for the interests of the other party, reconcile with the UK principles of legal certainty and freedom of contract. Many businesses have not yet thought about the difficulties the proposals could bring.”

Peter Lodder QC, chairman of the Bar, said that the Council would continue to challenge the evidential need and legal basis for the implementation of such a contract law. “Different contract laws are not a high-priority for the vast majority of SMEs, particularly in the present economic climate,” he said. “What we can be certain of is that the European sales law will increase costs for all and lead to less certainty in law; a double whammy which is in nobody’s interests.”