EU Parliament report backs plan for '28th regime' for consumer contract law

Last summer the Commission said that cross-border consumer trade had not become a fact of EU life because each of the 27 member states had their own contract laws, making it difficult for companies to sell in other countries.

It proposed seven solutions to the problem, ranging from the publishing of non-binding model contracts to a new EU-wide law that would replace countries' own contract laws.

One of the options was for a '28th regime' which could cover cross-border deals. A report produced for the European Parliament's Committee on Legal Affairs by MEP Diana Wallis contains a motion for the Parliament to vote on which backs this measure, called an optional instrument (OI).

The report said that Parliament should combine that approach with another of the Commission's suggestions, the creation of a 'toolbox' of measures that national legislators could use when passing contract laws to increase consistency between member state's laws.

"[The Parliament] favours the option of setting up an optional instrument (OI) by means of a regulation; [and] believes that such an OI could be complemented by a ‘toolbox’ that should be endorsed by means of an interinstitutional agreement," said the proposed resolution for the Parliament.

"[It] believes that a ‘toolbox’ could possibly be put into practice step-by-step, starting as a Commission tool, and being converted, once agreed between the institutions, into a tool for the Union legislator; [and] points out that a ‘toolbox’ would provide the necessary legal backdrop and underpinning against which an OI could operate," it said.

The report said that there is a "clear constituency" of small and medium sized companies (SMEs) which have a need for the legal consistency that a 28th regime would bring, but that efforts must be made to ensure that the system is easily usable by them.

"Whilst an OI will have the effect of providing a single body of law, there will still be a need to seek provision of standard terms and conditions of trade which can be produced in a simple and comprehensible form, available off-the-shelf for SMEs and with some form of trust mark system to ensure consumer confidence," it said.

The report said that the UK's Federation of Small Businesses have estimated that it costs a business €15,000 to conduct e-commerce in another EU country, once translation, implementation and legal costs have been added up.

It said that European Commission research had found that cheaper offers for consumers were often available in other EU countries, but that in the majority of cases cross border sales were not possible. It said that conflicting consumer contract law was one reason for those failures.

"Divergences in contract law discourage businesses, in particular SMEs, from engaging into cross-border trade and keep them from benefiting from opportunities and gains which the Internal Market offers," it said. "Consumers are disadvantaged by limited product choice, higher prices and lower quality due to weak cross-border competition; consumers even may be refused access to cross-border offers altogether."