Dear Ladies and Gentelmen
I would like to thank you for this invitation. It is a great honor and pleasure for me to share with you my opinion regarding the future of the European contract law.
The Action Plan, presented recently by the Commission contains an undisputed conclusion and a call for more coherent European Contract Law. The reason and importance of actions in this area seems to make a part of an overwhelming consensus. Divergences in national contract laws have a significant and measurable economic side effect. Those differences create the feeling of insecurity and spurr reluctance to undertake cross-border activities. They entail a considerable cost of legal service, which are especially burdensome for small and medium enterprises. The negative effect for the internal market, for which the Polish businesses have been preparing since the conclusion of the European Agreement between Poland and European Communities almost fifteen years ago, is obvious. More coherent contract law remains in the best interest of every Member State of the European Union, including Poland.
The Commission has rightly pointed out two major challenges – a uniform application of the European law and the progressive elimination of the above mentioned implications for the internal market. I would like to add two points of pragmatic nature. Firstly, the national systems of contract law are well rooted. The general principles on which each national system is based constitute a wide foundation for contractual relations in any given country. This legal diversity is a fact that should be taken into account and carefully weighted. Secondly, it is only through practical and concrete solutions that we may arrive at the result acceptable for the businesses and for consumers.
It seems to me that this pragmatic approach is largely shared as number of responses to the July 2001 Communication on the Contract Law as well as the recent draft Action Plan have stressed the importance of the non-mandatory rules and instruments. The European Code of Contract Law is not awaiting us on the next stop of the TGV of European integration. By the way, present Treaties do not provide a framework for such an exercise and in the opinion of many observers the use of horizontal instruments would be inconsistent with the principles of proportionality and subsidiarity. The European Court of Justice has recently confirmed this mainstream opinion.
I know that many, especially among scholars, regret this missed opportunity of the horizontal measures. But I would like to remind you that the Europeanisation of the contract law through the directives has led to some unexpected results. In fact, the implementation of directives, mostly within the area of consumer protection, has caused the fragmentation within the national legal systems. F.i. the remedies in case of the sale of movable goods became different from remedies not for the sale of movable goods both in business and consumer contracts. The general principles of the national legal systems have been put at risk. This proves that the similar endeavour at more large, European scale, has to be approached carefully and orderly.
Support should be given to the initiative of creating an optional instrument based on the restatement approach on the general principles, a kind of the model law built upon several basic, national sources and supplemented by a comprehensive commentary. Such instrument could be very useful in different ways. It can help the coherence of the legal terms, their content and language while revisting the Community instruments. Even the sector-specific legislation may gain the consistency. The Common Frame of Reference can also provide the practitioners with a valuable tool to read the European law and its provisions transposed into national legal systems. It may shed a light on the interpretation on the contracts and thus help the economic operators. It should be regarded as a leading guide to safely conduct cross-border commercial activities. Limiting the scope of the common frame of reference only to the collection of definitions would diminish its usefulness in practice. There is an apprehension that such definitions would remain only theoretical and their real impact on the economic process would be impossible to estimate. As a reasoning of the above mentioned construction it may be also indicated that in the long run economic operators, who are enjoying the freedom of contract shall converge towards the most convenient solutions.
An optional instrument, maybe in some part similar to the UNIDROIT’s principles of international contracts, should be a ready-to-use-tool. This could lower the transaction costs. In comparison with the former model regulations created by the international organisations this new instrument should include a wider information on the specific solutions adopted by the Member States. The European law should be developed in concerto with other international initiatives and influence them to the best possible extent. It is necessary to inform the economic operators about their existence and consequences of use of these specific solutions.
In order to provide legal recognition of the mutual choice of principles of the Common Frame of Reference it is advisable to divide those rules into two groups. First one would include issues traditionally left free for the parties to decide the so-called ius dipositivi. Recognition of such rules would stem directly from the principle of the freedom of contract. The second kind of principles could be formulated, having in mind a future perspective and would consist of principles remaining in the area normally restricted to mandatory regulations. Those rules could be legally binding only in case of the adopting by the parties of an arbitration clause. The use of mandatory rules of domestic legal system is less stringent in the arbitration procedure. Therefore, there is a chance that arbitration courts would become a perfect testing field for this instrument. This, however, requires a proper popularisation of those principles among the stakeholders. There is absolutely necessary a legal research in order to identify the areas of law, which are mandatory or non-mandatory in Member States.
Second key issue, which requires special attention is the form of the principles, listed in the new optional instrument or the Common Frame of Reference itself. As it was pointed out above, the limiting of the scope of the CFR only to major definitions seems to be insufficient for the purpose of this initiative. Major principles should be formulated as clear rules, capable to be used in practice. Only such measure is optimal to achieve the major aim of this initiative, which is the facilitation of cross-border commercial activity and reduction of the transaction costs. A promising idea seems to be the initiative to supplement CFR with examples of model contracts or contract clauses. This could intensify the popularity of this instrument among the small and medium enterprises, however must be preceded by a deepened legal research and a thorough discussion. Their content should reflect the genuine politic and economic reality of the Member States. If not their use would be limited to the circle of academic discussions. The Common frame of reference should provide factual information regarding the major divergences among the legal systems. Such abstract would be helpful for the economic operators as well as for the community institutions.
Third question regards the scope of the Common Frame of Reference. It should be noted that the content is dependent on the approach toward the above mentioned two issues. The core of this instrument should be general rules of contract law and in particular conditions of validity of a contract, as i.e. form of contract, and rules applicable to performance and non-performance of the contract. A special place should be given to the definition of damage and the limits of a proper compensation. Those elements are crucial for the safety of the commercial activities. Within those areas the major divergences remain between the legal systems. The scope may be extended also to the sale of goods and the limitation period in the sale of goods because the consensus regarding those matters was reached in the form of the Convention on the International Sale of Goods and the New York Convention on the limitation period (from 14 June 1974). It seems however to be too early stage for the regulation of other specific kinds of contracts. This could hamper the efforts to reach a wide consensus and may cause an over-regulation.
Separate issues are regulations of consumer protection. This area requires high coherence obtained by setting minimum standards by regulatory instruments. Therefore, activities referring to those matters may be continued in the existing form. The recent experience calls however for more thorough cooperation between the work on the consumer protection directives and the development of the instruments of the international civil law procedure like Rome II.
I wish to point out again the importance of the legal research in the area of contract law. Only by continuing and deepening the research initiatives under way we may obtain the necessary knowledge in order to hammer out more coherent regulations. Although scholars from Acceding States have already participated in some projects, like Lando commission, I am convinced that we need their wider participation. The proper input from 10 out 25 (and even 28 if you count properly the United Kingdom) legal systems has to be carefully taken account of.
In conclusion I wish to underline that the adoption of the appropriate solutions should encourage the entrepreneurs to discover new possibilities in the cross-border commercial activity. This will be beneficial for the economic strength of European Union. There is a chance that the proposed instrument may become a modern lex mercatoria streamlining and shaping this progress. First steps, which have been made, including this conference, evolve in the desired direction and constitute good prospects for this initiative.
Thank you very much for your attention.