Contract law: this summer’s essential beach reading from the EC

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A sure sign of the beginning of the summer, as fixed as hot weather and crowded airports, is the publication by the European Commission of an important consultation document. They clear their desks before packing their bags, and woe to the rest of us who want to enjoy the summer. We have to spend the holiday months pondering deep European thoughts so as to have our responses ready for the Eurocrats’ return in September.The document just launched this year is a Green Paper on policy options for progress towards a European contract law for consumers and businesses. It is so important that the commission has extended the usual summer deadline to 31 January 2011, to be sure of the widest range of responses. This is the summer’s essential reading, which you should pack along with the suntan oil.

The commission lays out its case for contract law reform in a forthright way. In England and Wales, there is anxiety about reform because it might take money out of the hands of solicitors, given that English law is the default choice in the absence of an EU-wide option. So, it would be interesting for opponents to address the arguments put forward by the commission, as follows: ‘Differences between national contract laws may entail additional transaction costs and legal uncertainty for businesses and lead to a lack of consumer confidence in the internal market. Divergences in contract law rules may require businesses to adapt their contractual terms. Furthermore, national laws are rarely available in other European languages, which imply that market actors need to take advice from a lawyer who knows the laws of the legal system that they are proposing to choose. Partly for these reasons, consumers and businesses, in particular small and medium enterprises (SMEs) having limited resources, may be reluctant to engage in cross-border transactions… Consumers and businesses from small member states might be particularly disadvantaged.’

The Green Paper asks the most basic and thought-provoking questions about the future of a European contract law, under three headings: what should be the legal nature of the instrument of European contract law? What should be the scope of application of the instrument? What should be the material scope of the instrument?

Regarding the legal nature of the instrument, a number of policy options are considered, in descending order of shock to Eurosceptics (if you are a dyed-in-the wool Eurosceptic, pack your blood-pressure medication along with the Green Paper, to avoid claiming on your holiday insurance):

The publication on the web of (non-binding) model contract rules which could be used within the EU.
A (binding or non-binding) ‘toolbox’ for EU lawmakers when they adopt new legislation to ensure better and more coherent rules.
A Contract Law Recommendation that would call on EU member states to include a European contract law into their national legal systems, thereby partly following the model of the United States where all but one of the 50 states voluntarily adopted the Uniform Commercial Code.
An optional European contract law (or a ‘28th system’), which could be chosen freely by consumers and businesses in their contractual relations. This optional law would be an alternative to the existing national contract laws and would be available in all languages. It could apply in cross-border contracts only, or in both cross-border and domestic contracts.
Harmonisation of national contract laws by means of an EU Directive.
Full harmonisation of national contract laws by means of an EU regulation.
The creation of a full-fledged European Civil Code, replacing all national rules on contracts.

The UK MEP, Diana Wallis, herself a solicitor, has thrown her weight behind the contract law initiative, although not behind the last three most shocking options. She says: ‘It is very sad that certain English legal professionals and others, particularly in member states’ justice ministries, are not prepared to get behind the European contract law project at a time when we desperately need to strengthen Europe's internal market and economy. This is a discussion about an ‘option’, it is about choice; not harmonisation… it is about a second, Europe-wide option running on a voluntary basis alongside national law.’

So, forget your Stieg Larssons or Sophie Kinsellas. Take the Green Paper with you to the seaside, and answer the commission’s very interesting questions.

Jonathan Goldsmith is the secretary general of the Council of Bars and Law Societies of Europe (CCBE), which represents over 700,000 European lawyers through its member bars and law societies