On 1 July 2010, the European Commission published its Green Paper on European contract law setting out possible practical and legislative actions designed to bring more coherence to contract law across the European Union. The Green Paper considered what should be the legal nature of any instrument of European contract law and set out options that range from a non-binding instrument aimed at improving the consistency and quality of EU legislation, to a binding instrument that would set out an alternative to the existing plurality of national contract law regimes by providing a single set of contract rules. In the United Kingdom, the Ministry of Justice (MoJ) issued a call for evidence on the Commission’s proposals. The call for evidence closed on 26 November 2010 and responses were published on 10 February 2011.

The response of the MoJ amounts to an almost wholesale dismissal of the Commission’s proposals on the basis that they are inappropriate and unnecessary. As such, the MoJ suggests, they give rise to “serious doubts about the EU’s competence under the Treaty to pursue any of them”.  

The MoJ does not feel there is a need for change. It notes that the Green Paper suggests that the current divergence in national contract laws may deter parties from trading across borders, but the Ministry found evidence that pointed to the market operating “very effectively indeed”.  

The MoJ notes that many respondents consider the choice of contract law of little relative importance in determining whether to trade across borders. Instead, most respondents cited other issues as far more important, such as language, currency, shipping costs, local taxation schemes, brand familiarity, concern about lack of understanding of redress and enforcement measures, security for payment, after sales services, etc,.  

As such, in the view of the MoJ, a legislative response does not seem justified on the available evidence and other practical responses are worth considering instead. For example, there is a need to improve the availability of the information about national laws in other languages. Another practical approach would be to provide model contracts in different languages and/or in specific areas of business. These, says the Ministry, may be more effective in practice than the legislative approaches canvassed in the Green Paper.  

COMMENT  

The United Kingdom’s formal position on the radical proposals is that there is no demonstrable need established for any of the options beyond option 1: publication of the results of the Expert Group, and option 2: the creation of an official “toolbox” for the legislator. The Ministry does highlight and comment extensively upon option 4—the ”29th regime”, which is based specifically on a Regulation setting up an Optional Instrument of European Contract Law—on the basis that this is what the Commission has indicated it favours and intends to pursue. The MoJ rejects it on the basis that it is “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. The UK position stands in stark contrast to that expressed in a European Parliament draft report published on 25 January 2011 which accepts that a case for legislative intervention exists and that a 29th regime is indeed the way forward.