Since its Green Paper of July 2010 the European Commission has been working hard to progress its proposals for an optional Common European Sales Law (“CESL“).  The draft text of the CESL was published on 11 October 2011 under the very supportive presidency of Poland.  The initiative has strong support within the European Parliament but faces opposition from a broad range of national parliaments and other key shareholders, including the Ministry of Justice and the Law Society of England and Wales.

At the request of the Ministry of Justice the Law Commission and the Scottish Law Commission have produced joint advice to the UK Government on the potential advantages and disadvantages of the CESL proposal.  The joint law commissions have reached the conclusion that the current draft of the CESL is unnecessarily complex, difficult to understand and therefore seems to fail in its raison d’être of facilitating transactions for the European consumer.

A number of problematic areas arise in relation to the proposals, including the following:

– confining the CESL to cross-border sales means that a trader seeking to standardise its trading on common terms will not be able to do it as intra-state and the state transactions must be governed by laws of a member state;

– a lack of common jurisprudence of CESL law or court infrastructure;

– language and interpretation issues; and

– differing consumer rights and compatibility with Brussels I (the Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters).

The Commission is yet to demonstrate the case that a new body of contract law will encourage cross border trade between Member States.  However, this is the assertion of the Commission and it is for single market reasons that this instrument is being strongly advocated by Commissioner Reding.

The position currently being maintained by the Law Society and the Ministry of Justice is that freedom of choice should be retained and maintained.  Accordingly the so called “mandatory provisions” of the CESL represent the Achilles heel of the proposals: an optional contract law with provisions that cannot be excluded (whether under existing laws of a Member State or under this new regime) is both unattractive and dangerous to legal certainty.

The Law Society is very keen to obtain views and involvement from in-house lawyers in relation to the proposals and will be hosting further discussion groups for you. The Ministry of Justice will also be consulting on these proposals within the next month.  Practitioners are encouraged to review the proposals, respond to the consultation and to contribute to the debate.

At a political level a number of Member States have presented opposition to the proposals (including Germany, Spain, France, Portugal, the Netherlands, Finland, Slovenia and the United Kingdom).  The European Commission’s proposals seem to be moving faster than many Member States wish: there has been growing criticism that too much time has been focused on the technical issues before there has been an appropriate political debate as to whether to undertake this initiative at all  and the legal basis for it.

The legal basis remains a particularly sensitive issue because single market legislation does not involve opt outs for the UK and Ireland but justice and home affairs matters do.  (The UK and Ireland are the two principal common law jurisdictions within the Union).

Commissioner Reding is very keen on this proposal and seems intent on continuing to drive it forward, but it can be expected that political resistance will increase despite the desires of the European Commission and the European Parliament to move very quickly on the matter (particularly from Member States).

To keep posted look at the following:

In-house practitioners have a key role to play in this important debate.   Accordingly, the Ministry of Justice consultation is a key forum for legal practitioners engaged in business to influence the evolving thinking.

Edward Craft