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UK opposes EU plans for '28th regime' for contract law

No evidence preferred solution would work, says UK

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There is no need to reform European consumer contract law and no evidence to suggest that the European Commission's preferred solution would work, the UK Government has said.

The government has rejected EU plans to harmonise the laws governing consumer contracts and had rejected the very basis of reform, which is that the existence of 27 different member state laws is hampering trade.

"The UK considers there is no reliable evidence available to show that the current arrangements under discussion here, and in particular the current divergence of national laws of contract, cause a problem that affects the proper functioning of the internal market," said the government's response (seven-page/69KB PDF) to an EU consultation on changing the law.

The European Commission has said that cross-border trade in the EU is limited because of the different contract laws governing sales to consumers. It has outlined seven options for change, ranging from non-binding recommendations to a central overhaul of the law that would supercede national laws.

In its response to the European Commission's consultation, though, it said that only two of the non-binding proposals should be adopted: the provision of model contracts that businesses could use; and the creation of a "toolbox" which national legislators could use when revising contract law.

"The UK considers there is no demonstrable need established for any of the options beyond [two limited options]," it said. "None of the other options are considered necessary or proportionate given the lack of evidence of need and the difficulties associated with each of those options. Indeed, the lack of demonstrable need for any of these options gives rise to serious doubts about the EU’s competence under the Treaty to pursue any of them."

The European Commission favours the creation of a new, separate '28th'* system of contract law. But the UK government said that this would be an unnecessary step.

"That position, if it is accurate, seems premature given the paucity of evidence of a problem and the lack of any clarity or detail as to what substance such a regulation might actually contain," said the government's response.

The government said that the European Commission had not shown that there was any problem in EU commerce that would be fixed by closer harmonisation of consumer contract law. It said that it had asked in its own call for evidence for the view of business on that question.

"It was the view of the majority of respondents that there was no compelling evidence of a problem or of a need for any of the legislative options in the Green Paper," it said. "On the contrary, there is evidence that points to the market operating very effectively indeed. This is an area of law where party autonomy is well established and parties to contracts have and do commonly exercise a choice of the most appropriate law for their own circumstances in their commercial transactions."

The UK government said that its research had found that businesses considered currency, tax, shipping and language issues to be far more important ones when considering cross-border trade than differences in consumer contract law.

The government said that businesses had told it that the "option 4" solution of a 28th regime was unlikely to solve any problem that did exist.

"A number of our consultees noted during meetings arranged at the Ministry of Justice that, given the impetus for action is supposed problems arising as a result of the multiplicity and divergence of law, providing yet another, different, law is counterintuitive and bizarre," said the government response. "It has not been established that the new law would be in any way superior to long-established national laws or that providing such a law would deliver any greater benefit than at present."

The response continued: "It may be difficult to quantify but it is clear that a [29th regime] of contract law would 'belong to no one in particular' and would not reflect any particular legal or cultural heritage. Indeed a fundamental first question for the authors of such an instrument might be whether to base it more on the common law perspective, which is currently probably the most commercially attractive approach, or the civil law position, which may be more familiar to EU citizens, The 'Esperanto' approach must at least raise the possibility that it will feel comfortable and familiar to no one and consequently will be rarely used."

An MEP's report for the European Parliament last week backed the Commission's '28th regime' plan, claiming that small- and medium-sized companies would benefit from the clarity that such a law would bring.

* While OUT-LAW.COM has referred to the 28th regime, the UK government’s response called the proposed new contractual framework the "29th regime", taking account of the fact that the existence of Scottish law means that there are 28 legal regimes in the EU’s 27 countries.

OUT-LAW.COM has called the new framework the 28th regime since the European Commission gave it that name a year ago. We will continue to do so both for the sake of consistency and because we think that this term is less confusing and helps to make clear an already complicated concept.

Copyright © 2011, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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