Happy New Year from the European Commission?

2012 sees the 20th anniversary of the European Single Market project.  Coincidentally, the anniversary will likely see the adoption of the proposed Common European Sales Law (CESL), a key element in the project.

The CESL is a very unusual, perhaps unique, piece of draft legislation.  It will create an “optional instrument” constituting terms of contracts for the sale and purchase of goods (including digital content and related services) which the parties will be able to opt into in a cross-border B2C context.  If an individual member state so elects, the CESL regime will be available, still on an opt-in basis, in a B2B context, where one of the parties is an SME. 
In practice, businesses will have to decide whether to offer the CESL terms, and the consumer (or SME where applicable) will then have the right to contract on those terms, or those of his home state.  Businesses will not be legally obliged to offer CESL terms.

Reactions have been very mixed, even within the UK. 

The Federation of Small Businesses supports the CESL in principle, believing that it “will help small businesses engaging in cross-border activities to have the option of national law and a Europe-wide regime for their contracts, sitting side-by-side.” 

City and legal profession interests are (to say the least of it) not convinced, believing that it is not justified by any real need, adds nothing of value, constitutes a further regime of law for business to know about and adds unnecessarily to business costs.

Multinational businesses might be expected to favour a regime such as CESL.  Time will tell whether they choose to adopt it, with all the uncertainty associated with its use of vague concepts such as “fair dealing” and “good faith”, compared with the relative certainty of English law. 

The CESL proposal is now with national Parliaments for consideration, but is likely to be adopted by the EU in the middle of 2012.  There will be publicity surrounding its adoption, and there may be a certain amount of consumer and competitor pressure on businesses to make it available, so although its use by businesses will not be legally compulsory, it may not be commercially sensible to ignore it.

For the future, the EU is quite likely to wish to extend the scope of the CESL.  Businesses should therefore be alert for reforms in the area of the addition of services, its extension to domestic contracts, and its extension to B2B contracts, and the possible introduction of compulsory use of the CESL terms.

For further guidance on this topic, please contact Nick Mallett by calling 01293 605036, 07711 037330 or email nick.mallett@dmhstallard.com.  Nick has been closely involved with this process, on behalf of the firm, the Law Society, the City of London Law Society, and the International Chamber of Commerce, over many years, and has represented those organisations in numerous related consultations in Brussels and elsewhere.