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. These proposed measures include:
- The publication of non-binding model contract laws, which would not have any endorsement from the Commission and would simply act as a "source of inspiration" for national legislators while drafting or amending legislation.
- A binding or non-binding "toolbox" for national legislators to use when passing national legislation to improve consistency.
- The recommendation to EU member states to incorporate "Community contract law" into their laws.
- A Regulation creating an optional contract law instrument which would be considered to be the "28th regime". The harmonisation of basic principles of contract law through a Directive.
- The full harmonisation of contract law through a Regulation that would replace national contract laws with a uniform set of rules, applicable as a matter of national law and binding on the parties to the contract.
- A Community civil code on contracts which would not only replace national contract law but also harmonise other areas, such as tort law or property law.
The Green Paper was open for consultation until 31 January 2011. To view the Green Paper, please Click Here.
Responses to the Green Paper
There has been to date responses to the Green Paper from the Law Society, the Bar Council, the UK Government and the European Parliament.
Law Society Response
Out of the seven options proposed by the Commission, the Law Society is in favour of developing a non-binding "toolbox" that could be used to improve the quality and consistency of European legislation (Option 2). It does not consider that a need for an optional instrument of European contract law (Option 4) has been established, and actively opposes its introduction. As an alternative, it proposes the creation of EU-endorsed optional standard terms and conditions for use in cross-border contracts. To read the Law Society response, please Click Here.
Bar Council Response
The Bar Council is generally critical of the Commission's proposals. It does not support the development of any EU measure in the contract law field beyond that envisaged in Options 1 and 2, and states expressly that it has considerable doubts that the Lisbon Treaty provides a workable legal basis for the Commission to proceed with any of Options 4‐7. To read the Bar Council response, please Click Here.
UK Government Response
The UK government considers there is no reliable evidence available to show that the current divergence of national contract laws affects the proper functioning of the internal market. The UK therefore favours Option 1 and Option 2. The UK government does not consider that any of Options 3-7 are necessary or proportionate, and raises doubts about the EU’s competence to pursue any of them under the Treaty on the Functioning of the European Union. To read the UK government response, please Click Here.
European Parliament Response
Out of the seven options proposed by the Commission, Parliament favours adopting a regulation establishing an optional European contract law instrument (Option 4) in tandem with a "toolbox" to be used by the European legislators under an inter-institutional agreement between the Commission, Parliament and the Council of the European Union (Option 2). The European Parliament considers that an optional instrument of European contract law should cover both business-to-business and business-to-consumer contracts. To read the European Parliament response, please Click Here.
Since issuing its response, the Committee on Legal Affairs of the European Parliament has announced that it has approved a report endorsing the European Commission's proposal for an optional European contract law instrument, which contracting parties could choose to govern their contract instead of a relevant national law. In addition, MEPs favour the creation of model standard contract terms and conditions based on the European contract law instrument. MEPs believe these would be especially useful for e-commerce and distance-selling contracts.
The European Commission is expected to put forward a formal proposal for an optional European contract law instrument this autumn.