COMMISSION STAFF WORKING PAPER Executive summary of the Impact Assessment
Date: 2011-10-11
Institutions: European Commission
Subjects: commercial contract, consumer protection, contract, corpus juris (EU), goods and services, intra-EU trade, law of obligations, provision of services, purchase, single market, trade restriction

EUROPEAN COMMISSION 

Brussels, 11.10.2011 
SEC(2011) 1166 final 

COMMISSION STAFF WORKING PAPER 

Executive summary of the Impact Assessment 

Accompanying the document 

Proposal for a Regulation of the European Parliament and of the Council on a Common 
European Sales Law  

on a Common European Sales Law 

{COM(2011) 635 final} 
{SEC(2011) 1165 final} 

 
 
 
 
  
 
1.  PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

The European Commission (Commission) has been working on a European contract law since 
2001.  In  July  2010  the  Commission  adopted  a  'Green  Paper  on  policy  options  on  progress 
towards  a  European  contract  law  for  consumers  and  businesses'  (Green  Paper).  The 
Commission's  Work  Programme  for  2011  provides  for  a  legal  instrument  on  European 
contract law as a strategic initiative to be proposed in the last quarter of 2011. 

In April 2010 the Commission set up an Expert Group (EG) to conduct a feasibility study on a 
draft  instrument.  The  study  was  completed  in  April  2011.  An  Impact  Assessment  Steering 
Group met 5 times to discuss the draft Green Paper, the impact assessment (IA) report and the 
feasibility study.   

The  Commission  carried  out  continuous  consultations.  The  Green  Paper  resulted  in  320 
responses  of  a  wide  range  of  stakeholders.  They  allowed  the  Commission  to  identify  and 
address  concerns  relating  to  the  policy  options.  The  Commission  also  created  a  key 
stakeholders  expert  group  representing  business,  consumers  and  legal  practitioners.  It  was 
consulted continuously on the feasibility study to ensure its rules were covering all practical 
problems  and  were  user-friendly.  In  addition,  the  Commission  also  surveyed  business  and 
consumers  through  Eurobarometers  (EB),  the  SME  Panel  and  the  European  Business  Test 
Panel  surveys.  A  workshop  on  contract  law  with  business  stakeholders  was  organised  in 
November  2010.  Commission  officials  also  met  representatives  of  BEUC  and  attended  two 
meetings of the European Consumer Consultative Group (ECCG).  

2.  PROBLEM DEFINITION 

2.1. Introduction 

Differences  in  contract  law  between  Member  States  (MS)  may  hinder  cross-border  trade  in 
the  EU,  by  dissuading  business  and  consumers  from  cross-border  transactions.  Businesses 
involved  in  the  trade  in  goods  that  export  into  other  EU  markets  face  unnecessary  entry 
transaction costs close to €1 billion (bn) every  year. The value of the trade foregone by those 
who  are  dissuaded  due  to  differences  in  contract  law  amounts  to  some  tens  of  billions  of 
euros. 

2.2. Current EU legal framework in the area of contract law 

The  current  legal  framework  in  the  area  of  contract  law  is  characterised  by  differences 
between the national laws.  While a number of EU and international legal instruments have 
been adopted in the area of contract law, there is no uniform and comprehensive set of rules 
that businesses and consumers could use in cross-border transactions in the EU.     

2.3. Problem 1: Differences in contract law hinder businesses from cross border trade 

and limit their cross-border operations 

Currently on average only 9.3% of all EU businesses involved in trade in goods export within 
the EU.. The majority of them (62% in B2B and 57% in B2C) export to no more than 3 other 
MS. One of the reasons for this relatively low level of cross-border trade are the remaining 
regulatory (e.g. differences in tax regulations, contract law and administrative requirements) 
and  practical  barriers  (e.g.  language,  transportation  and  after-sales  maintenance)  to  cross-
border trade. 

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Negative  impact  of contract law differences on cross-border trade: Contract law related 
barriers dissuade some businesses from trading cross-border. 61% of businesses involved in 
B2B and 55% in B2C transactions were often or at least occasionally deterred by contract law 
related barriers. Additionally, 3% of respondents in the business-to-business (B2B) and 2% in 
the  business-to-consumer  (B2C)  EBs  always  gave  up  exports  for  this  reason.  Secondly, 
contract law related barriers lead businesses to limit their cross-border operations: Above 80% 
(both in B2B and B2C transactions) of businesses active in or interested in cross-border trade 
and affected by contract law barriers suggested that they exported to fewer EU countries for 
this reason. The value of failed intra-EU trade as a result of businesses giving up cross-border 
trade due to contract law can be estimated at a range between €26 bn (equivalent to the GDP 
of Lithuania) to €184 bn (slightly mo re than the GDP of Portugal).  

Research suggests that bilateral trade between countries which have a legal system based on a 
common origin have a positive effect on trade.  If the contribution of removing differences in 
contract law were to be about 1 percentage point of this positive effect, the increase in intra-
EU trade would be of the order of magnitude of €30 bn.  

2.3.1.  Additional  transaction  costs  stemming  from  differences  in  contract  law 
hinder  cross-border  trade:  The  need  to  apply  different  foreign  contract  laws  generates 
additional  transaction  costs  compared  to  domestic  trade.  These  costs  usually  grow 
proportionately  to  the  number  of  EU  countries  a  business  trades  with.  Businesses  estimate 
their transaction costs for entering one MS between less than €1,000  to above €30,000. These 
costs  have  the  greatest  impact  on  micro  and  small  enterprises,  as  they  constitute  a  greater 
share of their turnover.  

2.3.2.   

The cumulative costs for all currently  exporting EU businesses are between €6 and €13 bn. 
The annual transaction costs amount to approximately €0.9-€1.9 bn.
by  the  year  2020  they  would  accumulate  to  €9- €19  bn  if  the  same  level  of  export  entry 
persists.  

 In the absence of action, 

2.3.3.  Perceived  increased  legal  complexity  hinders  cross-border  trade:  The 
perception  of  legal  complexity  is  an  additional  factor  affecting  the  decision  to  start  cross-
border  trade.  Businesses  considered  for  instance  the  difficulty  in  finding  out  the  foreign 
contract law provisions a top barrier. It ranked 1st for B2C and 3rd for B2B transactions.  

2.4. Problem  2:  Consumers  are  hindered  from  cross-border  purchases  and  miss 

opportunities 

The level of cross-border shopping in the EU remains relatively low with 26% of consumers 
purchasing from another EU country when they travel and 9% from a distance. Barriers on the 
supply and demand side appear to hinder this growth. While the impact of practical barriers is 
gradually decreasing, the importance of the regulatory ones remains high.  

2.4.1.  Contract law differences impact negatively on cross-border shopping: 
Contract  law  includes  rules  protecting  consumers.  The  certainty  about  the  content  of  these 
rules  is  a  major  factor  determining  consumer  confidence  in  cross-border  shopping.  When 
consumers are confronted with different foreign laws, they are uncertain about their rights in a 
cross-border  context.  Indeed,  44%  of  European  consumers  say  that  uncertainty  about  their 
consumer rights discouraged them from purchasing from other EU countries. 

2.4.2.  Consumers miss out opportunities of the single market:  

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A substantial number of consumers who prefer to shop domestically due to uncertainty about 
their  cross-border  rights,  are  often  disadvantaged  by  the  limited  choice  and  higher  prices  in 
their domestic markets. If the 44% of consumers who shop online only domestically and who 
are  uncertain  about  their  cross-border  rights,  would  make  at  least  one  online  cross-border 
purchase, they could save € 380 million. 

On the other hand, consumers who try to access better offers in other MS are often refused a 
purchase by the trader. Almost a quarter of export-oriented European retailers refused to sell 
due  to  contract  law.  The  refusal  of  sales  may  dissuade  proactive  consumers  from  shopping 
cross-border  and  disadvantages  them  economically.  European  consumers  spend  € 42.3  bn 
annually on cross-border purchases. Assuming that within a year the 3 million consumers who 
experienced a refusal to sell were refused an order of a product of an average value of €52 , the 
value of failed transactions would be € 156 million.  

2.5. Need for action at EU level and subsidiarity 

This  initiative  complies  with  the  principle  of  subsidiarity.  The  objectives  of  facilitating  the 
expansion  of  cross-border  trade  for  business  and  purchases  by  consumers  in  the  internal 
market  cannot  be  fully  achieved  as  long  as  differences  in  national  contract  laws  persist.  As 
market  trends  evolve  and  prompt  MS  to  take  action  independently  (e.g.  regulating  digital 
content  products)  regulatory  divergences  lead  to  increased  transaction  costs  and  legal 
complexity  for  business; gaps in the protection of consumers  risk growth. National contract 
laws can only be approximated by adopting measures at EU level. The Union is best placed to 
address the problems outlined above as they have a clear cross-border dimension.  

3.  POLICY OBJECTIVES 

The overall objective is to support the economic activity in the internal market by improving 
the conditions for cross-border trade by reducing the barriers caused by differences in contract 
law between MS. The general objectives are to facilitate the expansion of cross-border trade 
for business and cross-border purchases for consumers.  

4.  POLICY OPTIONS  

4.1. Options for type of intervention  

Option  1:  Baseline  scenario  (No  policy  change):  The  current  legal  framework  would  be 
maintained without further EU action. 
Option 2: A toolbox for the EU legislator: This would set out model definitions and rules 
on contract law topics that are likely to be subject to EU legislation. A Commission document 
or an inter-institutional agreement could be envisaged.  
Option  3:  Recommendation  onCommon  European  Sales  Law:  A  Common  European 
Sales  Law  instrument  could  be  attached  to  a  Recommendation  addressed  to  the  MS 
encouraging them to replace (option 3a) or incorporate (option 3b) it into their national laws 
voluntarily,  allowing  them  discretion  on  time,  method  and  extent  of  implementation.  This 
option  may  induce  MS  to  replace  their  national  contract  laws  or  let  them  incorporate  a 
Common European Sales Law instrument as an optional regime. 

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Option 4: Regulation or Directive setting up an optional Common European Sales Law 
instrument: An optional Common European Sales Law could be set up as a 'second regime' 
within each Member State's national civil law.  It would be a comprehensive, self-standing set 
of contract law rules with a high level of consumer protection, which could be chosen by the 
parties as the law applicable to their cross-border contracts. 
Option 5a and 5b: Directive on a mandatory Common European Sales Law: A Directive 
could harmonise the national contract laws of the 27 MS. It would complement the consumer 
acquis and would be based on a high level of consumer protection. The harmonisation may be 
full (5a) or minimal (5b). 
Option  6:  Regulation  establishing  a  mandatory  Common  European  Sales  Law:  This 
would create a uniform set of EU contract law rules in all MS. 
Option 7: Regulation establishing a European Civil Code: This would create a uniform set 
of European civil law rules in all MS. 

Discarded options:  

•  Option 3a: Recommendation encouraging MS to replace national laws. 
•  Option 7: Regulation establishing a European Civil Code. 

These options received hardly any support from stakeholders and are likely to go beyond what 
is  necessary  and  thus  be  disproportionate.  They  also  raise  serious  issues  of  not  meeting  the 
principle of subsidiarity. 

4.2. Options for scope and content  

The  scope  of  a  Common  European  Sales  Law  instrument  could  apply  only  to  cross-border 
transactions or to both domestic and cross-border transactions. The scope could include B2C 
contracts only or also B2B contracts. A narrow substantive content of the instrument would be 
limited  to  core  areas  of  general  contract  law.  A  broad  scope  could  go  beyond  by  including 
specific areas in contract law, such as service contracts and other areas of law, such as non-
contractual liability.  

This impact assessment analyses a combination of the narrow and broad scope areas. It covers 
the vast majority of usual practical problems within the lifecycle of a cross-border contract.  
The analysis focuses on the impacts of substantive provisions which impact upon consumers 
and businesses. 

5.  ANALYSIS OF IMPACTS 

5.1. Main impacts of policy option 1: Baseline Scenario  

The  baseline  scenario  (BS)  would  not  remove  the  additional  transaction  costs  or  reduce  the 
level of legal complexity for businesses who wish to trade cross-border. Competition in the 
internal  market  would  remain  limited,  and  despite  the  adoption  of  the  Consumer  Rights 
Directive divergences between the consumer protection rules of different MS would remain.  

5.2. Main impacts of policy option 2 

5.2.1.   2a: Toolbox as a Commission Document   

The  toolbox  would  be  used  for  the  amendment  of  existing  or  preparation  of  future  sectoral 
legislation. Therefore, compared to the BS, the positive impacts of this option on business and 

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consumers  would  be  indirect  and  also  very  limited.  Moreover,  any  impacts  of  this  option 
would not be felt immediately as negotiations for new legislation or amendments to existing 
legislation  would  take  time  to  achieve.  As  there  is  no  way  of  knowing  whether  and  how 
widely this option would be used and accepted by the Council and Parliament, the impacts of 
this option would not really differ compared to the BS.  

5.2.2.  2b: Toolbox as an inter-institutional agreement  

Compared to option 2a, the only difference in this option is that in the negotiations for new 
legislation or amendments to existing legislation Council and Parliament would make use of 
the toolbox provided there were no overriding sector-specific reasons. However, as this option 
would only concern national contract law rules which would be modified following revised or 
new EU legislation, costs stemming from differences of national contract laws would largely 
remain. In addition, this option would only have an impact at the earliest in the medium term. 
The  overall  positive  impact  of  this  option  would  therefore  be,  albeit  greater  than  option  2a, 
still rather limited. 

5.3. Main  impacts  of  policy  option  3:  Recommendation  on  a  Common  European 

Sales Law   

This option would only be effective if the Common European Sales Law was incorporated by 
a  number  of  MS  entirely  and  without  amendment  to  the  original  version  attached  to  the 
Recommendation. However, this is highly unlikely. This option would help to a certain extent 
traders in a B2B contract (as they would have the freedom to decide on the law applicable to 
their contract). Therefore these traders would have the opportunity to reduce their transaction 
costs by using the Common European Sales Law of one MS which has best implemented it. 
The same would not be the case for traders in B2C contracts, as they would have to research 
whether  and  where  MS  have  changed  the  Common  European  Sales  Law  with  regards  to 
mandatory consumer protection rules. This means that they would not be able to sell across 
borders  to  consumers  on  the  basis  of  one  single  law  and  would  therefore  incur  transaction 
costs of the type indicated in the BS. Consequently this option would only to a limited extent 
remove the hindrances to cross-border trade identified in the problem definition. 

5.4. Main  impacts  of  policy  option  4:  Regulation/Directive  setting  up  an  optional 

Common European Sales Law 

This option would significantly reduce transaction costs because it would allow businesses to 
use one set of rules for cross border trade irrespective of the number of countries they trade 
with in the EU. The decrease in costs would provide incentives to increase trade which would 
result in more competition in the internal market and give consumers more product choice at a 
lower price.  

€1,500  for  B2B  contracts  (on  average  per 

If  a  business  used  the  optional  Common  European  Sales  Law,  administrative  costs  would 
amount  to  €3,000  for  B2C  contracts  and  to 
enterprise).    Assuming  that  initially  25%  of  current  exporters  decide  to  use  the  optional 
Common European Sales Law, one-off implementation costs would amount to €1.89 billion. 
These costs would be however by far outweighed by the savings which would be made from 
businesses not paying the additional transaction costs for when they trade with more than one 
MS.  This  option  would  result  in  costs  savings  for  new  exporters  and  potential  savings  by 
current exporters which would expand their cross-border sales to new countries. The annual 
savings for new exporters can be estimated at € 150-€400 million while th e potential savings 

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for  current  exporters  could  be  estimated  at  €3.7-€4.3  billion.  Do mestic  businesses  or  those 
which do not choose the optional Common European Sales Law would not face any costs as 
this option would not affect them.  

This policy option meets the policy objectives as it reduces costs for businesses and offers a 
less  complex  legal  environment  for  those  who  wish  to  trade  cross  border  to  more  than  one 
MS. At the same time it provides a high level of consumer protection.   

5.5. Main impacts of policy options 5 and 6 

5.5.1.  Policy  option  5a:  full  harmonisation  Directive  on  a  mandatory  Common 
European  Sales  Law  and  policy  option  6:  Regulation  establishing  a 
mandatory Common European Sales Law 

Compared to the BS, an instrument under these options would have substantial costs attached 
to it. The instrument would weigh particularly heavily on SMEs. Businesses which only trade 
domestically would face a very substantial cost to use the new instrument without an added 
value.  These  businesses  (17,136,213  in  B2B  and  4,420,563  in  B2C)  would  face  a  one-off 
implementation cost of €208.8 billio n to use the new legislation.  

The  instrument  would  create  additional  administrative  costs  for  22  million  businesses,  i.e. 
including those who trade only domestically, which would amount on average per enterprise 
to €2,500 in B2C transactions a nd to €1,500 in B2B transactions . The businesses trading only 
domestically  would  be  required  to  pay  these  costs  with  no  real  financial  gain,  as  this 
advantage  would  only  be  realised  for  those  businesses  trading  across  a  border.  The  one-off 
transactions costs for 22 million businesses (including for those who trade only domestically) 
in the EU would amount to €217 billion.  

However,  the  instrument  would  result  in  cost  savings  for  new  exporters  as  well  as  current 
exporters who would expand their cross-border sales to new countries. The annual savings for 
new exporters would be €0.63-€1.6 billion. Similarly as under option 4, the current exporters 
that would start trading with additional countries could be estimated to have potential savings 
of at least €3.7 – €4.3 billion.  

The  instrument  would  increase  competition  in  the  internal  market  and  lead  to  a  decrease  in 
prices.  Consumers  would  benefit  from  an  increased  choice  of  products  at  a  lower  price. 
Although the instrument would provide a high level of consumer protection, the replacing of 
national  legislation  could  mean  that  some  consumers  may  lose  protection  in  some  specific 
cases compared to their existing national law.  

MS would be likely to find these options politically very difficult to agree and to implement 
as  they  would  eliminate  domestic  laws  and  legal  traditions.  Although  the  instrument  would 
harmonise  existing  contract  law  legislation  and  eliminate  transaction  costs,  it  would  create 
other substantive disadvantages which would not only be of monetary value. Therefore taking 
these and the monetary costs into account they outweigh by far the benefits of the instrument.  

5.5.2.  Policy  option  5b:  A  minimum  harmonisation  Directive  on  a  Common 

European Sales Law  

MS  could  implement  this  Directive  going  beyond  its  consumer  protection  level.  As 
level  of 
experience  with  existing  minimum  harmonisation  Directives  shows, 

the 

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implementation  could  maintain  a  considerable  number  of  differences  in  national  contract 
laws. This option would to a certain extent reduce transaction costs and increase the level of 
consumer protection allowing consumers to have more confidence to purchase across borders.  

However, as set out in options 5a and 6, there would be a very substantial one-off cost borne 
by  domestic  and  cross  border  traders  as  they  would  have  to  adapt  their  contracts  to  use  the 
new law. This cost would affect all businesses involved in the trade in goods, irrespective of 
their desire to trade cross-border. In addition, due to the nature of minimum harmonisation, 
there would still be some extra costs for businesses when trading cross border to consumers 
arising  from  the  necessity  to  research  the  levels  of  consumer  protection  in  other  MS. 
Therefore,  whilst  there  may  be  a  worthwhile  investment  for  B2B  cross  border  transactions, 
those performing B2C cross-border contracts as well as trading only domestically would have 
to pay very substantial additional costs without a clear added value.  

6. COMPARATIVE ASSESSMENT OF OPTIONS 

The comparative assessment shows that that option 4 (an optional Common European Sales 
Law),  5a  (full  harmonisation  Directive  on  a  mandatory  Common  European  Sales  Law)  and 
option 6 (Regulation establishing a mandatory Common European Sales Law) best meet the 
policy  objectives.  However,  the  costs  attached  to  options  5a  and  6  are  significant  when 
compared to the other options because all businesses involved in the trade in goods in the EU 
would  need  to  adapt  to  a  new  legislative  framework.  In  particular,  they  would  create  a 
financial burden which will not be compensated by any benefits for the businesses who only 
trade  domestically  and  for  whom  cross  border  transactions  costs  do  not  create  a  problem. 
Therefore  this  is  not  a  proportionate  measure  for  the  reduction  of  the  contract  law  related 
obstacles to cross-border trade. Options 5a and 6 also have little support from MS.  

The preferred policy option is therefore option 4 which would meet the policy objectives in 
terms  of  reducing  legal  complexity  and  transaction  costs.  Exporters  who  decide  to  use  the 
optional  Common  European  Sales  Law  would  initially  face  certain  transaction  costs. 
However,  this  option  would  be  chosen  voluntarily  by  businesses.  To  businesses  starting  or 
extending their trade cross-border it would bring significant costs savings. Businesses trading 
domestically or those who decide not to use the optional Common European Sales Law when 
exporting would not face any costs as this option would not affect them.   

This  option  would  also  ensure  a  high  level  of  consumer  protection  which  would  increase 
consumer certainty and confidence about rights in cross-border shopping. It would contribute 
to  the  cross-border  trade  and  competitiveness  of  the  EU  economy  and  would  benefit  the 
consumer  by  greater  choice  of  products  and  better  prices.  As  this  option  would  be  chosen 
voluntarily  by  businesses,  it  would  not  impose  additional  burdens  but  bring  significant  cost 
savings for businesses extending their trade cross-border. 

7. MONITORING AND EVALUATION ARRANGEMENTS  

The Commission will launch a monitoring and evaluation exercise to assess how effectively 
the Common European Sales Law will achieve its objectives. This exercise will take place 4 
years  after  the  date  of  application  of  the  instrument.  The  intention  is  for  the  exercise  to 
precede and feed into a review process which will examine the effectiveness of the Common 
European Sales Lawinstrument.  

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