Is a common sales law for Europe possible?

Nearly 99 per cent of European companies cannot afford to trade across borders because selling abroad means adapting sales contracts for up to 26 different legal systems

The European Commission claims that despite the existence of the single European market, in reality only large multinational companies with armies of legal staff can exploit it to its full potential. Most small businesses - nearly 99 per cent of European companies - cannot afford to trade across borders because selling abroad means adapting sales contracts for up to 26 different legal systems. This costs an average of €10,000 for each additional country – with extra expenses for adapting websites when firms want to sell online through "e-commerce" of nearly €3,000. Consumers also miss out on better deals and a wider choice of products – not just because a trader refuses to sell in their country, this happens to around three million citizens each year, but also because they are uncertain of their rights when buying from abroad.

Now the commission is proposing to introduce a common European sales law that is identical in all member states - allowing firms to use the same contract law whether they sell to one or several EU countries and granting a high level of consumer protection through clear consumer rights. The commission says that the common European sales law will not replace national laws. Rather, it will allow sellers that are considering entering a new market to offer an optional system of contract rules that is identical in all EU countries. Those who do not want to use it can simply continue using the existing national rules.

But, consultation responses to the commission and European ministries of justice have raised concerns about the use of such a law - including that if both consumers and businesses agree on using the common European sales law, the level of consumer protection provided could be lower than that under national consumer protection laws. For example, in the UK, protection is given for credit card holders under Section 75 of the Consumer Credit Act 1974. Also, the use of the proposed law by both consumers and businesses will result in confusion and reduce understanding of both national consumer protection laws and business laws.

Currently, in business to business contracts - parties have the freedom to choose which law governs the contract. The European Association of Craft, Small and Medium-Sized Enterprises has said that the "proposals will do very little in this respect and will actually leave small businesses worse off, if confirmed in their current form. SMEs face diverse issues such as language barriers and tax systems when trading cross-border, while the attitude of consumers in relation to buying from another member state does not depend on legal diversity. The need to adapt and comply with different consumer protection rules in the foreign contract laws was cited as having a 'large impact' on cross-border trade only by 7 per cent of the respondents to the Eurobarometer. Therefore, pretending that the common sales law is a priority and that it will change the status quo is preposterous".

Most businesses usually select their own national law or English law, which is commonly preferred. That means that if the common sales law was approved by member states and the European Parliament, it would have some impact on the strength and the use of English law globally. For example, UK lawyers and international lawyers argue that if EU legislation weakens English law - businesses that choose it may actually switch to a governing law that is not even European; such as New York, Switzerland and Singapore law. It would mean that Europe would lose business in that European laws would be ditched for external laws, which would be seen as more reliable and precise. So European and legal policy experts are asking the commission to slow down and consider through impact assessments what the ramifications will be on all member state economies, national laws and dispute resolution mechanisms of an optional common sales law for Europe - backed by the EU in a regulation.

Paul Abbiati is a fellow of the European Law Institute and an official stakeholder on several European Commission projects