The Commission's Action Plan consultation was published in February last year. It aims to create greater coherence of contract law in Europe, to allow the internal market to function more smoothly.
At present, for example, there is no EU-wide definition of what constitutes a valid contract. Nor is there a definitive rule on the length of a "cooling-off period". Such discrepancies create problems for companies trying to negotiate cross-border transactions.
The Action Plan proposes a long-term strategy based on a mixture of both regulatory and non-regulatory actions. The first set of measures proposed in the Action Plan aim to improve existing EU contract laws. An initial step in this process would be the elaboration of a "common frame of reference" to develop common rules and terminology.
The second set of measures aims to promote the use of Europe-wide standard contract terms, while the third strand of the Action Plan deals with the possible creation of a body of European-level contract law that could be used to facilitate cross-border contracts. The aim would be an optional body of European contract law of wide application rather than a sector-specific instrument. This would exist in parallel to, rather than instead of, national contract laws.
In September last year both the European Parliament and the Council passed resolutions supporting the Action Plan, but the Commission is still looking for comments from bodies such as business and consumer organisations.
The ICC yesterday revealed details of its response to the Action Plan. In a letter to Commissioner Byrne, one of the four Commissioners promoting the Action Plan, dated 23rd October 2003, the ICC expressed concern that the Action Plan would endanger the right for businesses to draft and negotiate contracts with a minimum of government interference, a principle known as "party autonomy".
The ICC also expressed concern, "that the Action Plan is not clear in differentiating between B2C and B2B contractual relationships."
It explained:
"In a relationship between a business and a consumer (B2C) there may be good reasons for protecting the weaker party, such reasons do not exist in a business-to-business (B2B) context."
The ICC considered that the creation of a common frame of reference "could be helpful as a means of achieving consistency of drafting in EU legislation." But it warned that achieving consensus would be difficult, with no guarantee that the terminology would actually be used in transactions.
The ICC welcomed the proposal by the European Commission to promote the elaboration of EU-wide standard contract clauses. The business organization argued that many of the problems companies are currently facing due to the divergences in contract laws can be solved by guidance and by carefully drafted contractual clauses. This, rather than EU-wide legislation, is the right way forward, according to the ICC.
The ICC was also against the proposal for an optional body of contract law, pointing out that optional instruments, such as the UNCITRAL Convention on Contracts for the International Sale of Goods (CISG), already exist. To add another instrument would create confusion, particularly for small and medium-sized enterprises, said the ICC.
While harmonisation of relevant laws can be beneficial to cross-border trade, the ICC considered that it is important to keep in mind that companies base their decisions and business models on current laws and regulations.
At a EU workshop on the Action Plan, Professor Charles Debattista, Vice-chair of the ICC Commission on Commercial law and Practice said yesterday: "Tampering with the text of legal instruments necessarily has a negative side effect that must be balanced against the expected benefits."
"We recommend to the European Commission that the principle "If it's not broken, don't fix it" should be the preferred approach when examining European contract laws", he added.