A new law on cross-border sales, due to be unveiled today (12 October), can help dig the EU out of the economic crisis, according to the Commissioner who will present it. Meanwhile business groups ralliy against the proposal, claiming it will hinder, not help small companies.
"There is a lot of talk about crisis. Well, we give an answer to the crisis in order to stimulate trade, boost growth, and increase jobs," the European Commissioner for Justice, Viviane Reding, said at a briefing yesterday (11 October).
The proposal, seen by EurActiv, offers an optional - so-called 28th–regime - to a new sales contract for Europe that will enable individual traders to ‘opt-in’ to use the new instrument when they conduct cross-border sales.
The idea is that businesses which use the system can cut down on the legal costs incurred for adapting to 27 different contract laws as they will have just one system to adhere to.
According to the Commission's findings, only 1 in 10 companies trade across borders, which amounts to a €26 billion loss in potential capital a year.
A coalition of business lobbyists has spoken out against the proposal arguing that it will make the Single Market's legal challenges even more complex and costly as companies try to adopt it.
Meanwhile consumer groups argue that consumers will be left with less protection as businesses can chose between two systems and will likely opt for the law more favourable to them.
Reding yesterday sidestepped any criticism by reiterating that the law would be optional and run in parallel to existing national systems.
“Although the envisaged common sales law is optional, the alleged freedom for SMEs to take up this new regime can be questioned. If it gains popularity, commercial pressure will force small companies to use an instrument that is not balanced and unclear," Luc Hendrickx, Enterprise Policy Director for UEAPME, an SME lobby said in a statement.
“There is of course a political risk in putting it on the table, I have learned something in politics,” according to Justice Commissioner Viviane Reding.
“If you do things as always things are done, and handle things as they have been done, then it’s very comfortable. If a commissioner jumps out of the box and forces the world to think about it, it seems that that is against human rights!” she continued.
"In difficult economic times, the Optional Instrument in European Contract Law is a real example of justice for growth. Of course it has to be the right optional instrument. In this case 'right' means a high level of consumer protection, an easy and user-friendly system for SMEs (…) and most importantly no adverse effects on national law," Diana Wallis, a British Liberal Democrat MEP said in a statement.
Monique Goyens, director-general of the European Consumers' Organisation (BEUC) said in a press release: "We do not support this experimental and risky regulation as it would put business in the driving seat and allow the imposition of a lower level of protection than in the consumer's country."
"By introducing an EU 'law' which is optional for businesses, the national law then becomes merely optional also. This parallel system would increase market uncertainty, confuse consumers and decrease confidence," she added.
Goyens asked "when both Europe's consumers and SMEs have strong reservations, why is this law being pushed regardless?”
"Small businesses already spend too much of their time contending with EU regulation without having to apply two separate regimes of law to different contracts. Consumers are not in a position to make an informed choice by comparing two different sets of complex contract law," said UK Conservative MEP Sajjad Karim.
"The common sales law as envisaged by the Commission is an imbalanced instrument that fails to take into consideration the business reality. For instance, traders would be obliged to provide an additional information note to consumers on the nature and on the ‘salient features’ of the new regime, as well as to answer to their questions on the applicable law. Failure to comply with these requirements would give consumers the right to terminate the contract without any cost implications. This will increase uncertainty for traders, trigger new administrative burdens and de facto transform sellers into legal advisors, the Enterprise Policy Director, Luc Hendrickx for UEAPME, the voice of SMEs in Europe, said in a statement.
“The European Commission proposal for a European contract law regime seems appealing at first glance, but still needs to be carefully assessed. Chambers must consider if the text meets its laudable aim of reducing administrative and legal burdens and offers an appropriate level of consumer protection. Question marks also remain about the value of a regime that may only be applicable to cross-border transactions, not also to domestic ones. On the positive side, an alternative dispute resolution scheme is foreseen and should facilitate dispute management,” said Arnaldo Abruzzini, Secretary General of Eurochambres.
"Consumers should have the right to choose which national laws they feel most comfortable with. Under these proposals all businesses could force consumers into opting for the legal regime that provides them with the least protection," MEPs from the European Conservatices for Reform group in teh European Parliament, Sajjad Karim MEP, Malcolm Harbour MEP and Ashley Fox MEP, said in a joint statement.
- 12 Oct.: European Commission to unveil Draft Regulation of a Common Sales Law