On 1 July 2010, following a number of research studies, the European Commission published its Green Paper outlining various proposals for harmonising contract law within the European Union.
The Commission believes that greater harmonisation of contractual laws across Member States will encourage more businesses to transact within the European internal market. Currently, it is thought that the costs related to the inconsistency of contract laws across Member States deter many undertakings from engaging in cross-border activities. In particular, the Commission believe that consumers and businesses from smaller Member States are disproportionately disadvantaged.
In order to address this perceived problem, the Commission's Green Paper sets out various alternative proposals for Community measures which aim to harmonise, to varying degrees, the contract laws across EU Member States. These proposed measures include:
- Publishing model contract principles to provide guidance for both national and European legislators when drafting contractual legislation. The Commission hope that such principles will also be used by parties drafting the terms and conditions of contracts;
- By way of a Communication or Commission Decision, providing model principles as an official reference tool, agreed by the EU institutions, to ensure the coherence and quality of contractual legislation;
- Including a European contract law instrument within a Commission Recommendation, encouraging Member States to gradually adopt the harmonising measures into their national laws on a voluntary basis;
- Adopting a Regulation containing an optional harmonising instrument, conceived as a 2nd contractual regime in Member States. This proposal aims to provide parties with a choice of two regimes of domestic contract law; with the second, harmonised regime specifically aimed at parties wishing to operate across the internal market;
- Passing a Directive on European Contract Law, requiring the harmonisation of Member States' contract laws on the basis of minimum common standards;
- Adopting a Regulation to establish a European Contract Law which replaces the various national laws with a single European set of rules; and
- Adopting a Regulation that establishes a full European Civil Code – not only relating to contract law, but also replacing other laws of obligation, such as delict.
This is not an uncontroversial area, with many parties holding varying views as to the appropriate level of harmonisation. Indeed, many of the proposals raise potential concerns relating to the important EC law principles of proportionality and subsidiarity. Some parties even question the desirability of contractual harmonisation at any level.
The Green Paper is open for consultation until 31 January 2011, and the Commission are keen for interested stakeholders to respond, whether this is to the questions presented in the Paper or, more generally, by providing comments on the issues raised by the Paper.
The Consultation on the Green Paper can be accessed here.
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