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Out-Law News | 27 Feb 2014 | 3:50 pm | 2 min. read
The Common European Sales Law (CESL) would give trading parties the option of doing business within a new, additional legal framework, rather than within the national laws of the states in which they operate.
The proposed EU-wide contract law is designed to promote cross border online trade and would apply only to distance selling such as internet or phone transactions.
The CESL is intended to introduce a coherent set of rules for the marketing of digital products and related services across the EU and cut transaction costs for sellers and buyers.
The proposal, which has encountered opposition from both the UK and German governments, received strong backing at the European Parliament, with 416 MEPs voting for it to be introduced, 159 voting against it and 65 abstentions.
Vice-President Viviane Reding, the EU’s Justice Commissioner, has now called on the European Council of Ministers to move quickly to adopt the proposal into law.
"Today’s vote by the European Parliament is very good news for Europe and for the digital single market. It's a win-win deal for small and medium sized businesses and for all consumers in Europe: the European Sales Law will cut transaction costs for small businesses while giving Europe’s 507 million consumers greater choice at cheaper prices when shopping across borders," he said.
"I now call upon the Council to proceed quickly and put the European Sales law to a vote so we can deliver this important tool and help Europe's small and medium enterprises become big by expanding across borders without additional costs," she said.
Currently EU businesses and consumers rely on the national contract law of either the seller or the buyer's country, meaning trade across the EU bloc is subject to the 28 member state's individual legal frameworks. The European Commission believes the current situation creates a barrier to trade within the EU single market and makes selling abroad costly and complicated .In a memo released after the vote, the Commission said that businesses wishing to conduct cross-border transactions face an average cost of €10,000 for each additional export market they want to trade in, in order to adapt to the local legal environment. It believes that small and medium sized businesses (SMEs), which represent 99% of all companies in the EU, are particularly hard hit by extra transaction costs.
The Commission believes that CESL would allow businesses to sell their goods on the basis of one single law and single IT platform, resulting in considerable cost savings.
However in November 2012, the UK government criticised CESL proposals,claiming it contained "fundamental flaws in both the principle and practical operation" of the proposed CESL regime. The government said that the proposed new CESL framework would be "both time consuming and cumbersome to negotiate and implement," rather than provide simple solutions for the single market.
Munich-based consumer law expert Joern Fingerhuth of Pinsent Masons, the law firm behind Out-Law.com, said in January last year that German parliament the Bundestag believed that CESL is not in line with EU law. He said that Article 114 of the Treaty on the Functioning of the EU, which the Commission has said provides the basis for its proposals, "does not allow the creation of a separate common sales law on an EU level, but only provides for the option to harmonize existing national law".
The European Commission published its plans for a new, pan-EU contract law in October 2011 after Poland, which then held the presidency of the EU, pushed for the introduction of a new optional instrument for digital trade.
In September last year the CESL proposals received the majority backing of JURI, the EU Legal Affairs Committee.
Following today's vote in the European Parliament, the proposal must now go before the Council of Ministers, whose members must adopt it before it can become law.