The Common European Sales Law (CESL) emerged from its 10 year gestation with the adoption of an Explanatory Memorandum and draft Regulation published by the European Commission in October, 2011.
In the Commission’s view, the CESL would create an optional sales contract law to run in parallel with existing national laws, as a second contract law regime, for use in cross-border transactions (including transactions involving businesses from States outside the EU) for the sale of goods and related services and digital content between business to consumer contracts (where the consumer has given informed consent) and business to business contracts, where at least one of the parties is a small and medium sized enterprise (SME). The underlying purpose behind the CESL is to further remove obstacles to the functioning of the internal market arising from the divergences in national laws which are seen by the Commission as imposing heavy transaction costs on SMEs.
The CESL is stated by the Commission to be based on Art.114 of the Treaty on the Functioning of the European Union (TFEU) which is targeted at the approximation of national law or administrative practice with the aim of establishing or ensuring the functioning of the internal market. The problem is the idea of approximating national law. The Explanatory Memorandum makes it clear in its discussion of proportionality that CESL will be an optional regime in addition to but not replacing existing contract law rules. In other words, the CESL will sit alongside national contract laws which will be unaffected by it. The draft Regulation via its preamble cannot turn itself into a Regulation using the mechanism of Art.14, ultimately a matter for the Court of Justice to rule upon. However, the jurisprudence of Court of Justice seems to be against the Commission in this regard but time will tell.
There is a dichotomy between national and EU law. If adopted the Regulation would be an EU measure having no impact on national contract law, viz national contract law regimes are to remain unaffected but it would be, nevertheless, binding in its entirety and directly applicable in all Member States under Art.288 of TFEU. National courts would apply this regulation, as for other EU laws in any litigation.
A measure can only be adopted under Art.114 if it properly has the object of removing barriers to the internal market. Again, the Court of Justice will have the task of determining whether or not this is in fact the case. The Commission’s rationale is the divergences in national laws impose high costs on businesses and may cause them not to do business in foreign states. Although the CESL is promoted as a single set of harmonized contract rules, it seems clear that this not the case – all aspects of the legal relationship between the parties are not harmonized – it appears that matters such as capacity, agency, illegality, assignment or available defences are not addressed and will need to be consider therefore in light of national laws. It may be that some of the substantive provisions of the CESL such as good faith, may necessitate legal advice on what is required to comply with the obligations imposed and any ensuing litigation likely to arise from the introduction of a new legal regime.
The scope of the CESL has been narrowed, following lobbying by interested parties, to contracts involving distance selling, in particular online transactions.
The European Parliament’s legal affairs committee published its draft report on the CESL in Feb., 2013 which MEPs are to debate and Member States will have the opportunity to propose amendments before the CESL regulation is adopted.