Opinion of the Economic and Social Committee on the "Communication from the Commission to the Council and the European Parliament on European contract law" (COM(2001) 398 final)
Date: 2002-07-17
Institutions: European Economic and Social Committee
Subjects: EU law, approximation of laws, contract, single market

7.10.2002

EN

Official Journal of the European Communities

C 241/1

II

(Preparatory Acts)

ECONOMIC AND SOCIAL COMMITTEE

Opinion of the Economic and Social Committee on the ‘Communication from the Commission
to the Council and the European Parliament on European contract law’

(COM(2001) 398 final)

(2002/C 241/01)

On 11 July 2001, the Commission decided to consult the Economic and Social Committee, under
Article 262 of the Treaty establishing the European Community, on the above-mentioned communication.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 26 June 2002. The rapporteur was
Mr Retureau.

At its 392nd Plenary Session on 17 and 18 July 2002 (meeting of 17 July), the Economic and Social
Committee adopted the following opinion by 114 votes to 3, with 3 abstentions.

1. Towards a globalisation law?

1.1.
International trade law must be considered in the
context of the globalisation of trade in goods and services.
Its purpose is to regulate relations between the parties in
international commercial or financial transactions or the cross-
border provision of services. Commercial contracts are subject
to this law, and may also be subject
to certain specific
conventions where they include one or more foreign elements.
For instance, the 1980 Rome Convention (1) on the law
applicable to contractual obligations, which consolidates the
rules on conflicts between laws, is applicable in all Member
States of the European Union.

is the
This law, which is still not comprehensive,
1.2.
product of inter-state initiatives, such as the work by the
United Nations Commission on International Trade Law
(UNCITRAL), and private initiatives proposed by legal or
commercial practitioners, academics or other experts in the
form of studies and theoretical solutions, rules or voluntary
principles or guidelines.

International trade law has been the subject of intensive
1.3.
research work, notably by the International Institute for the

Unification of Contract Law (UNIDROIT, Rome), and at
European level by the Commission on European Contract Law
which, over the last two decades, has framed a set of principles
and provisions aimed at unifying the principles and practices
of the Member States of the Community, in particular ‘conti-
nental’ law and Anglo-Saxon common law, and by a com-
mission of experts (some belonging to both commissions)
which the Parliament has asked to produce a comparative
study of national laws with a view to identifying the common
principles of contract law in Europe.

1.4.
The guidelines drawn up by these commissions of
lawyers or professional organisations remain voluntary. They
are part of a kind of supplementary lex mercatoria which can
be of use to parties and judges. But in Europe recognition of
these private ‘codes’ by national
judges when interpreting
contract clauses, clarifying the intention of the parties or
settling disputes is a problem, while elsewhere, non-State law
can be taken into account, as is the case, for example, under
the Mexico Convention (CIDIP).

( 1) OJ C 27, 26.1.1998.

1.5.
There is a certain contradiction between the principle
of contractual freedom and the choice of law applicable by the
parties, and the territorial reference law of the national judge,
recourse to private arbitrators where
which encourages

C 241/2

EN

Official Journal of the European Communities

7.10.2002

disputes arise. Although arbitrators reach decisions on the
basis of the law, compulsory implementation of arbitration
awards involves recourse to a national judge to enforce the
decision. In other cases, in practice quite rare, national judges
even have a power of review of arbitration awards, comparable
with that of annulment, creating a further contradiction. One
solution could be to enable national judges to use a unified
European framework of principles and rules, if the parties wish,
to interpret the clauses of the contract, or as supplementary
provisions for ruling on obscure matters or those not foreseen
by the parties.

It should be emphasised that important international
1.6.
conventions exist in this area, spearheaded by the work of
UNIDROIT and framed in particular under the aegis of
UNCITRAL.

1.7.
The 1980 Vienna Convention on the international sale
of goods, ratified by many States, including all of the Member
States, (with the exception of the United Kingdom, Portugal
and Ireland) is an extremely comprehensive supplementary
reference that can replace national law if parties choose to use
it to govern their relations. It is widely used in the worldwide
trade in goods.

1.8.
However, the Convention makes no reference to the
pre-contractual phase with regard to the formation of a
contract, and States ratifying it may opt not to be bound by
specific sections (contractual formation, contractual effect).
The core of the convention consists of the reciprocal obli-
gations of the parties — who must be professionals — which
limits its scope. It is important to note that consumer contracts
are therefore not covered.

The sale of goods contract is one of the main types of
1.9.
contract in international trade. It is usually accompanied by
one or more contracts of carriage (the majority of goods being
transported by sea), and insurance contracts covering the
goods transported, etc.

1.11.
Licences and technology transfers, which are involved
in some international contracts, are mainly covered by the
World Intellectual Property Organisation (WIPO) conventions
and the WTO’s TRIPS agreements on intellectual property
rights related to international trade.

1.12.
A code of international trade, universally applied and
transcending legal systems and cultures, still remains a myth.
Furthermore, given the low levels of ratification of
the
international conventions relating to substantive contract law
issues listed in Annex II of the communication, there is clearly
still a long way to go.

1.12.1.
But it is undeniable that international traders feel the
need for a universal, workable, stable, predictable framework to
promote secure and fair transactions and compliance with the
relevant provisions and principles of international public law
contained in major international conventions and common
law (general principles of law: procedural safeguards, principle
of fairness in contracts, respect for human rights and core
labour standards). Such a jus commun would certainly be
consistent with the internationalisation of business and the
contracts to which this business is subject.

Harmonisation at certain regional or sub-regional
1.13.
levels might seem easier to achieve as an alternative or stage
towards a globalised economic law, which lacks a sovereign
legislative authority or court comparable to national courts,
although the existence of the WTO and its DSB, an inter-
national arbitration mechanism and the International Court of
Arbitration of the International Chamber of Commerce (ICC)
help to fill these lacunae.

1.14.
The Committee would point out that the communi-
cation makes no mention of matters relating to contract law
in the applicant States and possible problems of incompati-
bility. The Green or White Paper being prepared by the
Commission should refer to the legal situation in these
countries.

2. Harmonisation of contract law in Europe

Services, particularly financial services, investments
1.10.
and insurance, are not covered by the United Nations conven-
tions ratified and currently in force, despite initiatives by
UNCITRAL, but a large body of soft law does exist in these
areas. Rules on these matters are also being developed by the
WTO and the case law of its dispute settlement body (DSB),
although these apply only to States, and not to private
individuals directly.

2.1. General considerations

The existence of the Single Market makes harmonis-
2.1.1.
ation of contract law in the European Community seem more
desirable still. For some twenty years, eminent legal experts

7.10.2002

EN

Official Journal of the European Communities

C 241/3

have worked to define a European contract
law which
reconciles ‘continental’ laws with what is commonly known as
English common law, but which might, in view of the direct
effect of European law and recent reforms and statute law,
particularly with regard to the civil procedure and human
rights, more properly be called the law of England and Wales
— or English law,
in the interests of simplicity. Northern
Ireland differs in some respects, while Scotland has its own
law and legal system (which is nonetheless subject to the
higher authority of the judges of the House of Lords), and an
independent Parliament with some legislative powers. Ireland
also has its own system of common law, which is applied in
the framework of a constitution.

2.1.5.
It might also be appropriate to give priority to
supplementing the existing universal law and European law,
used as a starting point for the exercise, and to take account of
the practices and standard contracts which are widely used by
the parties in international contracts, in so far as much of
intra- and extra-European trade is covered by common rules
and contractual principles, and given that many companies
operate in these two spheres.

As is the case in the United States, which has a
2.1.2.
Common Commercial Code (CCC) which serves as a reference
for parties and judges, but where each State has its own law,
there are legal differences within the United Kingdom. Unity
of law is thus not an absolute requirement for a unified market
in these two cases. Such a situation also exists within the
Single Market, but without a uniform code, the role of which
could be played in the future by Community legislation
resulting from the work of the Commission, based on that
of the Commission on European Contract Law and other
commissions working in this area, on cross-border contracts
concluded in the economic area covered by Community law.

2.1.3. With a single currency in the majority of its member
countries and its Single Market, the Community economic
area would indeed be well suited to the creation of a uniform
contract law. But the Commission is unclear — and has asked
our opinion — as to the feasibility and relevance of a European
initiative on this key area of international trade law which,
moreover, may have to be enlarged, to ensure that it remains
consistent,
to encompass a European law on contractual
obligations (with possible civil and criminal liability aspects, in
addition to contractual liability in certain instances of poor
execution or failure to execute the contract, or clauses
incompatible with public policy).

2.1.4. While taking account of existing law in the different
countries concerned, including the applicant States, the Com-
mission should be encouraged to create a unitary law appli-
cable to all types of contract and to all contracting parties,
including end users. A European contract law would be entirely
justified for cross-border contracts.

2.2.

Existing elements of a European contract law

2.2.1.
The Committee wishes to point out that there is
already a large body of Community legislation in the sphere of
private law, detailed in Annex I of the communication, which
tends towards harmonisation of national rules on contracts,
both directly and in a more indirect manner. Annex III provides
a structured overview of this body of law and of binding
international commitments relating to contracts.

2.2.1.1. We might question whether the Community is
competent to draw up a European contract law (understood in
the wider sense of consumer law, law on commercial contracts
and contract and tort law and the liability arising therefrom).
But its obligations concerning the protection of consumer
rights and its powers with regard to completion of the Single
Market certainly give it a solid basis for proposing initiatives
pertaining to cross-border contracts.

2.2.2.
European consumer law is particularly advanced
with regard to contracts concerning goods and services. It
operates from a broad perspective, often extending from the
bid through to civil contractual liability. The obligation on the
seller to provide information (labelling,
information), and
product liability are specified. Consumer protection is now the
subject of a substantial body of law, although shortcomings
still exist in certain areas (e.g. consumer credit and home
loans).

Contractual

2.2.3.
relations between professionals are
covered in various national laws and European law, in certain
specific circumstances, from the perspective of protection of
the weakest party or the party that is financially dependent on
the ‘principal’ of the contract. As in consumer law, the aim is
to provide enhanced protection to a party deemed to be more
vulnerable in order to ensure the equality between the
to the exercise of
contracting parties which is essential
contractual freedom, a universal principle of contract law in
liberal economies.

C 241/4

EN

Official Journal of the European Communities

7.10.2002

2.3.

Problems relating to the wording of legislation

Such problems are commonplace both at Com-
2.3.1.
munity and national levels. Legal texts may be the product of
political consensus, their initial succinctness may be compro-
mised by various amendments and their wording is not always
sufficiently clear or specific.

2.3.2.
At European level, the very nature of directives,
which lay down the objective to be achieved, leave considerable
latitude for Member States to use their own national legal
notions and concepts which, in different legal systems, may
have a different meaning. Texts are translated from and into
different languages, each laden with its own legal culture, and
compromises sometimes favour vague expressions which can
be interpreted in different ways by national laws, which can
work to the detriment of the desired harmonisation.

many pieces of legislation, looks like a real legal fiction. Each
year, tens of thousands of pages are published in official
journals. They may take the form of numerous amendments
to previous texts where it would have been preferable to
publish a new, consolidated version to enable the new law
applicable to be more easily understood. The Committee has
called repeatedly for legislation to be simplified in the interests
of its users (1).

2.3.6.
Recommendations or the exchange of information
on good practice could also help improve the drafting of
legislation.

2.3.7. With regard to contract law, it is the parties who are
responsible for the clarity or obscurity of the clauses of a
contract, at least for the non-mandatory clauses. At least one
of the parties is responsible in the case of standard-form
contracts. The directive on unfair terms in consumer con-
tracts (2) put an end to a number of questionable practices in
standard-form contracts in particular, which unfortunately are
sometimes badly drafted using terms that the other party finds
difficult to understand. Some clauses may be written in tiny
print. Specific basic rules of form are needed to protect the
weakest party.

2.3.3.
The sectoral nature of most Community texts could
upset the harmony of each country’s domestic law if the
amendments made by transposition resulted in badly coordi-
nated sectoral rules being superposed in one area of the law.
The wording of national law may encounter the same kind of
problems as those faced by Community law (amendments,
compromise, vague wording with the meaning left to readers
and interpretation or assessment by judges).

2.4.

Similarities and differences between instruments and insti-
tutions

These considerations offer further bases for reflection and
action with a view to overcoming certain legal difficulties.
They should be developed in a more consistent manner, either
in connection with the publication of a White or Green Paper
announced by the Commission, or in a legislative proposal at
a later date.

2.3.4.
Thus the burden of seeking the necessary coherence
is left to legal theorists, professors in university lectures or
compilations of guiding principles such as those drawn up by
UNIDROIT and other ad-hoc bodies, and especially, in practice,
to case law, which may be inspired by academic works.

a) U n i f i c a t i o n

— Treaties (unifying clauses: areas falling within the sphere

of Community competence);

— regulations;

— decisions;

2.3.5.
Once a sufficient set of rules has been compiled, the
legislative bodies within the parliamentary institutions should
examine a branch or area of the law for consistency, with a
view in particular to structuring and codification or simplifi-
cation and to harmonising international, European and
national rules on rules of origin, taking care to draft clearly, in
order to make the law truly accessible to citizens, who are
bound by the rule of nemo censitur (ignorance of the law is
no defence), a principle which, when considered in relation to

— ECJ (judgments and references for preliminary rulings);

— standard contracts and clauses.

(1) OJ C 48, 21.2.2002; OJ C 125, 27.5.2002; CES 634/2002 fin.
(2) OJ C 116, 20.4.2001.

7.10.2002

EN

Official Journal of the European Communities

C 241/5

b) H a r m o n i s a t i o n

— legal pluralism (historical, cultural) and differing national
legal and contract law, concepts discrepancies in inter-
national private law;

— Treaties (harmonisation clauses: areas of shared com-
petence and pillars or areas of a primarily inter-govern-
mental or national nature);

— directives with a direct or indirect effect on contract law
(such as directives on liability for faulty goods or unfair
terms in contracts);

— recommendations, resolutions;

— introduction into national law of foreign legal concepts
(horizontal
incomplete
transfers), with the risk that
transfer or concepts will not be properly understood, but
superposed on national law rather than being properly
integrated;

— international conventions (vertical transfers);

— proposals for international or regional standardisation:
UNIDROIT, Commission on European Contract Law,
judges and
offering consistent rules to which parties,
arbitrators can refer;

— the case law of international courts (few solutions in the
case of private law as it mainly concerns inter-state law)
and case law of European courts (CFI, ECJ, ECHR);

— legal writings, European conferences of legal experts, in-

service training of legal and trade professionals;

— international arbitration (the ICC list, private experts’
practices); problem of the scope of arbitration case law,
and access thereto in view of the fact that it is not
published (it may also remain confidential if the parties
so wish) and receives scant attention from legal writers;

— ‘Soft law’ (case law of the international organisations’
supervisory bodies, guides, compilations containing prin-
ciples of international and regional
intergovernmental
and professional institutions with an influence on con-
tractual provision, dispute settlement, etc.).

c) D i f f e r e n c e s a n d d i s p a r i t i e s

— increasing diversity of legal transactions, particularly with
regard to contracts (sale of goods and dematerialised
services over the Internet, electronic signatures, shared
property, factoring);

— training and recruitment of judges, differing curricula
experiences and jurisdiction according to the case con-
cerned (contract law cases are heard in the criminal,
civil, commercial or even administrative court in certain
countries);

— university teaching: instruction in other systems, empha-
sis placed on comparative law and international and
European private law in the common core of curricula; a
key factor in promoting harmonisation — or obstructing
it in the case of omission or neglect;

languages,

— drafting of European texts: the wording must be clear in
all
in spite of the difficulties created by
different perceptions of terms used and the situations
covered in the different national legal systems. There is a
risk that legislation will be liable to different interpret-
ations in its transposition and application in law. The ECJ
must therefore play a pivotal role in interpretation and
unification, although its intervention may be preceded by
a period of legal uncertainty;

— drafting of national law. In particular where the transpo-
sition of directives is concerned, the wording can differ
from the original meaning intended by the European
legislative authority. Transposition can upset the internal
legal harmony of the area of national law affected by
secondary legislation, or even create a duality or differing
solutions,
legislative authority takes a
restrictive view of transposition and does not take account
of the need for a legal balance between the national
provisions modified by transposition and those which
are not modified. National law may thus become more
complex and less consistent.

if the national

— Treaties: competence limited to certain specific areas

(competition, consumer law);

The Committee is concerned at the continued — not
2.5.
to say exponential — proliferation of legislation, sometimes of
unnecessary complexity, which is a cause for concern for legal

C 241/6

EN

Official Journal of the European Communities

7.10.2002

professionals, firms (for whom this proliferation can result in
substantial expense) and citizens who only have a partial
knowledge of the existing law.

Increasing legislative intervention in contract law, in
2.6.
particular with regard to consumer and employment issues, is
intended to supplement the public policy clauses that are
common to contracts and relatively similar between Member
States, in ensuring respect for the principle of equality between
parties. This interpretation can also be applied to other types
of contract where one party is in a situation of relative
weakness or subordination in relation to the other,
(the
principal of the contract), such as sub-contracting, franchising
or exclusive distribution.

2.7.
The principle of equality is also a fundamental principle
of primary law, which has served as the basis for numerous
anti-discrimination laws and has had a marked influence on
the gradual creation of a European contract law. It runs
through the whole of secondary legislation and can constitute
an additional justification for Community legislative initiatives.

2.8. With regard to European consumer law, the idea that
consumers are in a subordinate situation in relation to sellers,
(as principals of the contract) and must thus be provided with
adequate protection runs, quite rightly, through all Community
legislation.

3. Areas for further consideration and recommen-

dations

mainly concern transnational companies and are linked to the
new international division of labour and the growth of trade,
but increasingly also concern medium-sized firms in certain
sectors of the economy (international finance, services related
to new technologies,
international brokerage, international
consulting, etc.).

3.3.
The moral and social values of any given country no
longer have a place in reference law or supplementary
legislation. These are increasingly giving way to the principles
— more universal, less linked to a particular culture or society
— of good faith and cooperation in the execution of contracts
which only concern the parties, in what is a more individual-
istic and independent approach. The European principles of
contract law drawn up by the ad-hoc commission are not
based on a European economic and social public policy, which
does nonetheless exist, and are not rooted in a sovereign
framework, which only exists at European level to a limited
extent.

A future European contract law should seek to avoid
3.3.1.
these pitfalls. It should make progress, while remaining firmly
rooted in the legal principles of private law common to all
Member States, European socio-economic public policy and
the European social model. National courts should be given
competence to supervise these contracts and settle disputes on
the basis of European contract law.

formats and international

SMEs and SMIs are increasingly familiar with standard
3.4.
document
trade law, and are
extending their use to their cross-border activities. Unnecessary
intervention in these relations should be avoided, except to
avoid possible abuse, and it is important not to create an
excessive number of specifically European conditions, so as
not to create obstacles to economic relations between Euro-
pean and non-European firms.

3.1.
As a result of globalisation, we are witnessing the
development of a ‘soft law’, and dispute settlement mechanisms
which are essentially private in nature and operate mainly
between firms, but also sometimes between firms and States
where international financial contracts are concerned. The
1980 Vienna Convention on contracts for the international
sale of goods (CISG) offers a supplementary framework in a
legal situation which is dominated by the ‘will of the parties’
(which in practice can express the interplay of market forces).

3.5.
Creation of a uniform, general European contract law,
for example by means of a regulation, a solution the Committee
considers preferable in order to avoid disparities, could be a
lengthy process and require further studies, but it should
be based on the work already carried out by the various
commissions and institutions referred to previously and on
current international rules and practice.

3.2.
Contractor-legislators, within the limits, clearly, of
privity of contract, also have a choice of judge (normally a
quasi-judiciary arbitrator, who has the power to determine the
legal position, and, less frequently, a judge operating in a
framework of national sovereignty with the authority to take
an enforceable decision, possibly leading to sanctions). These
trends, largely regulated in a non-binding manner by the ICC,

3.6.
Initially, in the medium term, if the parties so wished
they could choose for their contract to be subject to European
law. At a later stage, in the longer term, and after possible
assessment and amendment, European contract law would
become the common law, although parties could choose
another law, thereby preserving the principle of contractual
freedom.

7.10.2002

EN

Official Journal of the European Communities

C 241/7

3.7.
A European contract law should cover the pre-contrac-
tual phase, the formation of the contract, the conditions of
validity, fulfilment or non-fulfilment of the obligations, means
of payment, etc. It would serve as a reference for subsequent
legislative proposals having some bearing on contractual
issues. In addition to the legal certainty it would create, its
existence would also reduce some transaction costs.

3.8. While it would serve as a basis of legal principles and
rules applicable to all contracts, the proposal for a European
contract law should contain specific or more detailed pro-
visions relating to certain contracts or consumer protection.

3.9.
National judges must then settle disputes on the basis
of this law if the parties have chosen to abide by the new
European contract law in their contractual obligations.

3.10. Micro-enterprises and craft businesses, particularly
those operating in a market almost exclusively limited to a
local or regional area, above all lack the financial resources
and specialised expertise necessary on those occasions when

Brussels, 17 July 2002.

they wish to conclude cross-border contracts. Both for these
businesses and for consumers, the choice of a European
law, would be an
contract law, rather than their national
important guarantee in terms of legal certainty. A European
law would enable them to plan their economic relations in the
Single Market with greater legal certainty.

For consumers, the choice of a European contract
3.11.
law, rather than their national law, would be an important
guarantee in terms of legal certainty in specific cross-border
transactions where their national law would not necessarily
apply.

3.12.
Although the Committee fully endorses the Com-
mission’s approach with regard to the exclusion of family and
employment law, which is closely linked to legal tradition,
history and the social structure in each of the Member
States, it nonetheless considers that cross-border employment
contracts should not be totally excluded from consideration,
since they raise considerable problems of conflict between
laws and/or jurisdiction.
it appropriate,
European employers’ and workers’ organisations could address
and make proposals on this issue.

they consider

If

The President

of the Economic and Social Committee

Göke FRERICHS