On 26 February 2014, the European Parliament (“Parliament”) overwhelmingly approved proposals by the European Commission (“Commission”) for a Common European Sales Law (“CESL”). The proposals for CESL aim to create an optional alternative sales law which would allow businesses and consumers to choose whether to contract under national laws or CESL when offering or buying goods across the EU.
The Commission proposed CESL as a way of strengthening the internal market and overcoming fragmented EU national sales laws interfering with cross-border transactions. According to the Commission, CESL will generate export growth of c.€5bn per year. In order to prove attractive to both retailers and consumers, CESL will provide equal or greater consumer protection to existing national and EU laws (and therefore increase consumer confidence), while simultaneously lowering costs and increasing competitiveness for businesses, in cross-border transactions within the EU.
The CESL proposal was first published by the Commission in October 2011 (on the basis of Article 114 of the European Treaty) and, in September 2013, was backed by the Parliament’s Committee for Legal Affairs. To bring CESL into force it will now need to be adopted by the Council of Ministers. As the CESL proposal is in the form of an EU Regulation (rather than a Directive), it will have direct effect throughout the EU six months after coming into force and there will be no requirement for Member States to create national implementing laws
Once in force, CESL will apply only where the following conditions are met:
- both parties must agree, voluntarily and expressly, that CESL will apply to the transaction;
- the transaction must be between a business and either a consumer or another business (where at least one of the businesses is an SME). Member States can, however, choose to makes CESL available for business-to-business transactions where neither business is an SME;
- the transaction must be cross-border with at least one of the parties being established in a EU Member State. Member States can, however, choose to makes CESL available for domestic contracts; and
- the transaction must relate to the sale of moveable tangible goods and/or digital content (including software and music/film downloads), or to the mixed sale of such goods/content and the supply of related services. Digital content is covered irrespective of whether it is stored on a CD/DVD or other tangible medium or supplied as an online download. Importantly, CESL cannot be used where only services are being supplied.
Although CESL is designed to benefit the EU’s internal market, parties may also be able to elect for its application in situations where an EU party is contracting with a party in a non-EU country.
The ability to transact online, both for digital and physical goods, has made it considerably easier for EU consumers to transact with retailers in other EU countries. Although CESL will not achieve the removal of all barriers to such trade, it is hoped that it will increase consumer confidence and lower the cost of cross-border transactions. Whilst certain challenges associated with cross-border transactions will naturally still remain (such as increased delivery times, language barriers and customs issues), digital content retailers in particular should benefit from being able to offer products on uniform legal terms across all EU Member States.
Link to the CESL Proposal: http://ec.europa.eu/justice/contract/files/common_sales_law/regulation_sales_law_en.pdf