European Union - European Commission Proposes Optional Common European Sales Law

On 11 October 2011, the European Commission (the “Commission”) published a Proposal for a Regulation on a Common European Sales Law (the “Proposal”). The Proposal provides for a common, yet optional, sales contract law to which companies and consumers could resort in cross-border transactions. Removing the need to adapt sales contracts to up to 26 different national contract laws, the Proposal aims to stimulate cross-border transactions.

The Common European Sales Law foreseen in the Proposal can only be used if the seller of the goods is a trader, which term is defined as “any natural or legal person who is acting for purposes relating to that person’s trade, business, craft, or profession”. In case all the parties to a contract are traders, the proposed Common European Sales Law can be used if at least one of those parties is a small or medium-sized enterprise (“SME”), i.e., a company that (i) employs fewer than 250 employees; and (ii) has an annual turnover not exceeding EUR 50 million or an annual balance sheet total not exceeding EUR 43 million. The Commission justifies this rule by referring to the costs resulting from dealings with various national laws which are particularly burdensome for SMEs. The Commission adds that, in their relations with larger companies, SMEs generally have to agree to apply the law of their contract partner and bear the costs of finding out about the content of the foreign law applicable to the contract and of complying with it.

The Proposal forms an adaptation of the Commission’s proposed Recommendations for a European Contract Law, which were approved by the European Parliament on 7 June 2011 (See, VBB on Belgian Business Law, Volume 2011, No. 6, p. 2, available at www.vbb.com). The Proposal follows a feasibility study of the Expert Group on a Common Frame of Reference in the Area of European Contract Law, which was established by the Commission in 2010. The feasibility study indicated that 99% of the small businesses cannot afford to trade across European Union borders, and that 44% of the consumers do not buy abroad because they are uncertain of their rights.

The Proposal still has to be approved by both the EU Council of Ministers and the European Parliament.