Out-Law News | 19 Sep 2013 | 5:18 pm | 2 min. read
The Parliament's Legal Affairs Committee (JURI) voted in favour of the CESL proposals earlier this week. CESL, if introduced, would be an optional framework businesses and consumers could agree to adhere to in contracts. Instead of relying on the law of the consumer's country or that of the seller's country, they could choose to use the CESL.
Under the plans backed by JURI, the optional contract law would be able to be used in distance selling contracts only, such as transactions made by consumers over the internet.
"Choosing the right body of law in the internal market is often like participating in a lottery," JURI rapporteurs on the CESL proposals Klaus-Heiner Lehne and Luigi Berlinguer said in a joint statement. "With CESL we will be able to enhance legal certainty in cross-border online contracts. Consumers and traders will finally be able to benefit to the full from the potential the internal market offers."
In October 2011 the European Commission published its plans for a new pan-EU contract law which would be available as a new optional contract law which would exist alongside the existing frameworks that apply in the individual EU member states.
At the time the Commission said that the new law would offer a set of harmonised laws and offer an alternative to the often different contract laws that govern transactions in individual EU member states. CESL, it said, would reduce costs for businesses and give consumers more confidence in their rights and access to cheaper goods.
The Commission said businesses currently spend €10,000 on average in legal costs when expanding into selling in a new country within the EU. CESL law would apply only if both the trader and consumer in a sales transaction opted to use it.
However, the plans have been criticised by the UK Government and have also faced opposition in Germany. The Government said the Commission's proposal contain "fundamental flaws" in both the principle and practical operation of the regime and that it would be "both time consuming and cumbersome to negotiate and implement".
Munich-based consumer law expert Jörn Fingerhuth of Pinsent Masons, the law firm behind Out-Law.com, previously said both the Bundestag and the ruling Coalition Government in Germany view the current CESL proposals as "not sufficient and unnecessary".
However, EU Justice Commissioner called the JURI committee's backing of CESL "a real breakthrough".
"It is an important signal from the European Parliament that the optional Common European Sales Law, as proposed by the European Commission in October 2011, is the right tool for cutting costs for SMEs while giving Europe's consumers more opportunities to shop across borders," she said. "I will continue to work closely with the European Parliament and the Member States to deliver this tool which will help us boost the Single Market, Europe's engine for economic growth and digital competitiveness."
The Commission said that by restricting CESL to distance contracts only, "it strikes a balance between allowing SMEs to market the goods on the basis of one single law and one single IT platform in cross-border trade and the need to ensure consumer confidence through the high level of protection standards".
If businesses and consumers do not both agree to adopt CESL to govern their distance contract, existing national rules would apply.
CESL could not be used in some circumstances, such as to provide the framework for online banking or other financial services. However, earlier this year the Commission set up a new "expert group" which will advise it on whether the cross-border trade of insurance products is being inhibited because of existing EU laws on insurance contracts.