What? In October 2011, the European Commission
published its proposed Regulation for a Common European Sales Law
("CESL"), an optional sales law to sit alongside the
Member States' existing regimes.
So What? What CESL is, why it is needed and the
criticism it has attracted is discussed below.
The CESL proposal follows the Commission's Green Paper of
2010 which set out a series of possible options for a European
contract law regime and the feasibility study which was published
in May 2011. In order for the Regulation to be adopted it will need
to be approved by the European Parliament and the Council of
Ministers, then published in the OJEU. It would then come into
force 20 days after publication and it is proposed that it would
apply six months after that.
What is it?
The CESL is an optional sales law which will sit alongside the
Member States' existing national regimes and will only apply to
a transaction if both parties voluntarily and expressly agree to
it. It can be used for cross-border contracts where:
at least one party is established in a Member State;
the contract is for a B2C transaction or a B2B transaction
where at least one party is an SME; and
the contract is for the sale of goods or digital content. The
CESL may also be used for contracts for services provided by the
seller that are directly and closely related to the goods or
digital content supplied (e.g. repair or installation), but not for
contracts including any other elements.
Member States will have the choice of also making the CESL
applicable to domestic contracts and/or B2B contracts where neither
party is an SME.
The CESL will cover the life cycle of a contract and includes
provisions on matters such as pre-contractual information to be
provided to the buyer, contract formation, cancellation rights,
delivery and payment obligations and remedies for breach.
Is it needed?
The Commission's rationale for the CESL is:
The different sales laws in the 27 Member States make
cross-border selling complicated and costly, especially for small
businesses. Having one set of rules will facilitate cross-border
transactions in all EU countries by providing certainty and
Consumers will receive the same level of protection in all
Member States which in turn will provide certainty and increase
transparency and consumer confidence; and
Consumers will have a better choice of products at lower prices
because cross-border trade will be easier and so competition will
However, the CESL has been the subject of criticism by many
commentators, including the following:
The legal basis of the CESL is reliance on Article 114 TFEU
which provides for harmonisation of national rules where it can be
demonstrated that disparities in contract law have an actual effect
on market integration and the proposed instrument would actually
contribute to eliminating these. Doubt has been expressed as to
whether this is the case and so there is the potential for
The CESL will give rise to two parallel systems in each Member
State and this will be costly and potentially difficult to
A body of case law to assist with interpretation of the CESL
will need to be built up and there is concern that the courts of
different Member States may interpret provisions differently,
particularly where they contain unfamiliar concepts; and
There is doubt as to whether consumers are really concerned
with legal, rather than practical, issues when buying cross-border
and so whether there would be much take up of the CESL in
The Incoterms rules are internationally recognised standardised terms reflecting business practice in the allocation of tasks, costs and risks in international sales contracts. The ICC has just published the latest version of these rules, Incoterms 2010.
For corporate and financial services clients on both sides of the Atlantic, trade compliance represents a major compliance challenge.
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