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Changes in National Civil Law by European standards

When the question if a European Administrative Culture exists is discussed it is important to reflect on the different national cultures of the EU member states. Furthermore, it is indispensable to discuss the possible contributions of the different national cultures to the development of an overall European Culture. Apart from this, it is necessary to see the fact that if one comes to the conclusion that a European Administrative Culture exists, this will influence also the national cultures of the EU member states.

The influence exerted by a European Administrative Culture might be attributed to several factors. One factor is EU legislation. The concept of the European Multi-Level System of Governance implies the fact that the legislation elaborated by the bodies of the EU, for example the Directives and Decrees enacted by the European Commission, have an effect on the top level of governance within the European member states, such as the national governments, but also on the other levels of governance, such as federal states, regions and local authorities. For example, in the federal states of Germany circa seventy per cent of the laws enacted and the decisions taken by the parliaments of the federal states are a consequence of the legislation of the European Union. This example shows that EU legislation has an immediate effect on the everyday policy in the EU member states, and, thus, on the everyday work in the administrations on the different levels of governance within the EU member states. Due to this fact the administrative culture on all levels of governance within the EU member states is influenced to a high degree by the decisions taken in Brussels. This also holds true for the changes of the national Civil Law systems which can be drawn back to legal standards of the EU.        


I. Introduction

In the Common Market the free movement of goods, services and capital is guaranteed. Freedom of movement is also guaranteed for EU citizens. In this context EC law does not make a distinction between barriers regarding these freedoms in the field of public law and in the field of Civil Law. The more effectively a market is running, the more the legal system valid for such a market will be confronted with the claim to minimise the differences between the national regulations for fields of law which are essential for exercising these freedoms and to stipulate common rules as far as possible.

On this basis and on the basis of other objectives the EC has already passed many regulations in the field of secondary law which influence the national civil laws more and more. This is for example true in the field of Consumer Protection, but also other fields are being more and more influenced by European law, such as Liability Law with the Product Liability Directive (85/374/ EEC, as amended by Directive 1999/34/EC) or the legal decisions of the European Court of Justice concerning government liability, Labour Law, the legislation with regard to e-commerce or the legislation for the transport of people and goods. Due to the fact that there are currently 27 EU member states having separate legal systems it cannot be expected that the rules of the EU as a whole will always reflect the national legal systems.

The development of a harmonised European Contract Law has been influenced by different acting parties up to now, such as Members of the European Parliament, members of the legal profession, professional associations and other stakeholders. There are expectations and fears with regard to European Contract Law. What will be the final result of the process of harmonisation? Will there be a binding European Civil Code for all EU member states or is it possible that a rather liberal solution will be the outcome? In the following the process of harmonisation of Civil Law in the EU up to now, the status quo and the probable future development will be described.

II. Importance of Contract Law

Although the rules mentioned before generally only concern special fields of law, for instance, in the cases of Travel or Product Liability also other fields of law are being touched more and more. Contract Law in its entirety is getting more and more into this trend, mainly where the right of consumers or similar matters are concerned. These rights, for instance, touch the field of cancellation of contracts (power of revocation) or other cases of consumer protection. Naturally, the national legislation will eventually be affected by such trends.

It is due to the globalisation of all kinds of transactions that the effects of relations between individuals and economic relations and, thus, also of legal relationships, do not only touch the national sphere of one special country. Since the single European market has been in existence, the national economies of the member states of the European Union have been totally integrated. The introduction of the European single currency, the euro, gave a further impetus to economic integration in Europe. As a result of the developments described the economic effects and legal relationships are noticeable beyond national borders. That means that economic and legal transactions which concern certain EU member states have repercussions on the whole of Europe. These tendencies can be attributed to the technical progress which leads to an enormous reduction of mobility costs as well as to the rapid investments in communication technologies. World-wide free-trade agreements and the establishment of regional internal markets, especially the single European market, have abolished legal barriers for cross-border trade, such as customs duties and other protectionist measures, to a large extent. 

As argued before the priority aim of the economic integration of a certain geographic area, such as the European Union, is the abolition of barriers to trade. This aim is fixed in article 3 of the EC Treaty. Among others in this article there are stipulated the “prohibition of customs duties and of the imposition of quotas for exports and imports of goods and of all other measures having the same effects between the member states” (article 3, a, EC Treaty). Furthermore there is stipulated “the abolishment of all impediments for the free movement of goods, people, services and capital between the member states” (article 3, b, EC Treaty). The existence of different national Contract Laws could conflict with the aims of article 3 of the EC Treaty mentioned before. It may be that different national Contract Laws are different from each other. For example different rights of rescission, different periods of notice and a different degree of consumer protection may be a drawback for harmonisation of the economic conditions within the single European market. This is the reason why the harmonisation of Contract Law within the European Union is of utmost importance.

III. Current Situation of Contract Law in Europe

Harmonisation of Contract Law in the European Union is very difficult because currently each of the 27 EU member states has its own Civil Law system. These legal systems are different from each other and they all are very complex. The 27 EU member states have different legal traditions and different legal cultures. For example, on the one hand there are countries like Germany, Austria, France and Italy which have legal systems derived from Roman law. On the other hand the Anglo-Saxon countries have a case law.  

The process of legal harmonisation in the field of Civil Law in Europe has not been very efficient up to now. The Directives and Decrees adopted by the European Commission within the last two decades only referred to special sectors. This procedure of a gradual harmonisation in Civil Law had the negative effective that it led to fragmentation of Civil Law in the EU in two ways: The effect is that not only the national legal systems – being very different – are influenced by outlandish rules, but the Directives or Decrees themselves are not based on a logical, consequent overall conception, with the consequence that they contribute to contradictions in the national Civil Law systems of the EU member states. It is, thus, possible, that the principles on which a Directive is based depend on the President of the Commission elaborating the Directive and on the legal system with which the President of the Commission is familiar as well as on the different political influences .

What would be necessary is a greater consistency of European legislation. In order to make this clearer, I will give you a few examples and I quote here from a speech held by the German Minister of Justice, Mrs Zypries, on the occasion of the 3rd European Discussion Forum with the topic “Coherence in Contract Law” held in Stuttgart on March 1 and 2, 2007. She cites the case of Internet selling (Distance Selling Directive, 97/8/EC) with the buyer’s right to cancel the transaction within three months as compared to the Doorstep Selling Directive (85/577/EC) where there is no mention of a period in which a sale can be revoked. Furthermore, she mentions that the term “consumer” is defined differently in the Package Travel Directive (90/314/EC) as compared to the Distance Selling Directive .

Another problem exists in cross-border trade because the existing laws make a distinction between a transaction between a business and an individual customer (B2C) and between business and business (B2B). For example a wine merchant from Italy is obliged to apply the consumer-contract law of Poland if he sells wine to the final customer in that country, but not if that customer is a company, in that case Italian law would be applicable. This is a contradiction with regard to the principle of an equal treatment of all legal subjects. The German Civil Code is based on this principle. The distinction between consumers and companies constitutes a barrier for cross-border trade .

These examples show clearly that more coherent rules should be drawn up by the European legislator. This would be of advantage for the quality of the existing and the future European Contract Law. At present, however, the rules touch only special sectors, whereas the general structures are not clearly and generally defined. In this field there is a great need for discussion in order to reach a general consensus.

IV. EC law and national law

The principle that EC law has to be considered with priority in comparison to national legislation has become generally accepted. This concerns not only the so-called decrees which have priority in every case, but also the directives. These, too, claim immediate validity as far as jurisdiction by the European Court of Justice is concerned. If the directives of Brussels are not considered in due time, the state might subject itself to the danger of liability for this neglect. As you can see, EC legislation has a power of its own and there is the tendency to harmonise the structures also as far as national laws are concerned. The European citizens would be highly irritated by great differences between national laws and it would be wise to create a legislation accepted by all subjects of legislation within the EU . This is exactly what is happening already: the German legislator incorporates the EC rules into the national law structure.

V. The Process of Work on European Contract Law

The process of intensive research in the field European Contract Law has already begun at the end of the 1970s. It was Ole Lando who took the initiative to make these researches. He was Professor at the Copenhagen Business School from 1963 to 1992 . He had the special fields of research Contract Law, Comparative Law and International Civil Law . From 1982 to 2001 Ole Lando led a group consisting of an independent body of experts from each member state of the European Union.  This so-called Commission of European Contract Law began to make researches on and to discuss about a future European Contract Law. The project carried out by this group was supported by the European Commission and many other organisations. Later on this group was known as the Lando group. The experts taking part in this group had Europe as their platform and their writings and debates focused on the future of European law. The reason for the creation of this group was that people working in business, in a legal profession or academic lecturers teaching law were confronted with the problem that they needed uniform principles of contract law being valid for all the member states of the European Union and that they needed a concise, comprehensive and workable statement of these principles of contract law for the EU . For example, an entrepreneur may face problems if he wants to make a contract with a company located in another EU member state and if neither of the two parties wishes to apply the law of the other country. A lawyer advising parties to a contract which are located in different EU member states may also have difficulties because the laws might differ from each other. It was the aim of the work of the Lando group to bring about legal rules which were to be helpful to avoid such problems. In 1990 the Lando group presented the first part of the Principles of European Contract Law (hereinafter called PECL).  Between 1992 and 1996 the Lando group had new members. During this period it revised the first part of the PECL and it agreed upon the second part of the PECL . In 1997 the Lando group had again new members. This third group finished its work with the presentation of the third part of the PECL in 2001 . The PECL are “general rules of contract law”  which the entrepreneurs in the European Union can choose for their contracts. That means that the PECL are an option to replace national rules or other international rules which are not binding .

It is due to the introduction of the PECL that entrepreneurs within the EU have a higher degree of freedom of legal agreement as far as cross-border contracts are concerned.

In 2005 an Excellence Network for high-level research in the field of law was founded by the European Commission. Seventeen universities and research institutes, among others institutes of the German universities Bielefeld, Osnabrück and Hamburg, from eight European countries and circa 150 academics from almost all EU member states are taking part in this project. Until 2009 the Excellence Network will be supported with 4.3 million euros coming from the Sixth Framework Programme for Research and Technological Development of the European Commission. The Excellence Network can be regarded as a “network of networks”. Several research groups on European Contract Law are co-operating under the roof of the Excellence Network. There are to be mentioned two research groups in Germany. First of all, there is the “Study Group on a European Civil Code” led by the legal academic Christian von Bar from the University of Osnabrück. This research group is continuing the work of the Lando group. Furthermore, there is the “Research Group on the Existing EC Private (Acquis Group) led by Professor Hans Schulte-Nölke from the University of Bielefeld. Professor Schulte-Nölke is also co-ordinating the work of the whole Excellence Network. The Acquis Group was founded in 2002. The acquis communautaire consists of many individual legal acts and judgements deriving from many different fields of politics and which have various goals. It is difficult to get an overview of these legal documents. Therefore, the Acquis Group has the task to draw up the structures of the rules of European Civil Law included in Community Law and to make these rules usable for the codification of law. Apart from these two research groups, many other academics, many independent research institutes and academic organisations from Germany, among others the Max-Planck-Institute for Foreign and International Civil Law are involved in the work of the Excellence Network.

Another research group is the European Group on Tort Law which is also known as the “Tilburg Group”. This group was founded in 1992. It is a group of scholars in the field of tort law. During their regular meetings the members of the group discuss important issues of tort law liability as well as the new  and the future developments concerning the law of tort. The Group elaborated a collection of Principles of European Tort Law which are comparable with the Principles of European Contract Law elaborated by the Lando Group. The European Group on Tort Law works in co-operation with the European Centre of Tort and Insurance Law, which is based in Vienna. 

The European Court of Justice is by tradition in favour of a systematic procedure for drawing up principle standards for a European Contract Law.

VI. Historical Development of European Contract Law

The discussion process on harmonisation of Civil Law in the European Union began as early as in the 1980s. From the end of the 1990s the bodies of the EU concentrated more intensively on harmonisation of Civil Law. The first milestone was the Council of the European heads of state and government in Tampere in 1999. In the framework of this Council the claim for more convergence in the field of Civil Law in the EU was expressed .

Since 1989 the European Parliament has passed several times declarations with regard to the establishment of a European Contract Law . It passed resolutions with regard to this field of law in 1989, 1994, 2001 and 2003. The European Parliament has already expressed that it favoured a harmonisation in European Contract Law in 1989 and 1994. It demanded that the European Council and the European Commission should harmonise the different national Civil Laws to a far-reaching extent . In 1999 the European Parliament asked members of the “Study Group on a European Civil Code” to elaborate a study on European Contract Law . Furthermore, in 2001 the European Parliament claimed for the establishment of a codification on the basis of an ambitious timetable to be carried out by the European Commission . In 2003 the European Parliament vehemently backed the work of the European Commission in the field of European Contract Law and the European Parliament asked the European Commission to intensify its work .

The European Commission published three Communiqués dealing with European Contract Law. In 2001 the European Commission discussed the legislation of the European Community in this field of law which was incoherent and limited to special sectors. The European Commission proposed four options for future initiatives in the field of Contract Law: Option 1 was the proposal to create no further legal acts and trust on the self-regulating power of the market, option 2 foresaw the draft of common principles in Contract Law, which was to lead towards a harmonisation of the national legal systems, option 3 was the proposal of an improvement of the quality of existing legal rules. The European Commission argued that the acquis communautaire included contradictions and that generally valid definitions for central legal terms were missing and in option 4 the European Commission laid down the possibility of establishing new comprehensive legal rules which were either to replace national laws or to be applicable simultaneously with national laws .

In 2003 the European Commission presented an “Action Plan” for a “coherent European Contract Law”. It included the results of the process of consultation initiated by the European Commission’s Communiqué in 2001. The solution the European Commission presented now was based on options 2 and 3 of the first Communiqué. The sectoral approach was to be maintained and additions to the existing rules should only be made if a need was evident. Apart from this, the coherence of the acquis communautaire of the European Community in the field of Contract Law was to be improved by legal and non-legal measures. The Action Plan referred to the problems arising from the absence of comprehensive definitions of abstract legal terms, such as the term “damages”. The European Commission emphasised that this might lead to a different way of the application of law within the EU member states. The Commission presented the idea to create a so-called “Common Frame of Reference” (CFR) which was to include the principles of European Contract Law .

In October 2004 the European Commission published a third Communiqué with the title “European Contract Law and Review of the Acquis Communautaire – further steps”. With this Communiqué the European Commission continued the process described in the Action Plan in 2003. The 2004 Communiqué contains the intention to make a consultation process in order to obtain the reactions from EU institutions, member states and stakeholders. In this document the European Commission also described its intention to elaborate a Common Frame of Reference which was to cover precise definitions and coherent model rules of contract law, while taking as a basis the acquis communautaire of the European Community as well as the optimum standards found in the member states’ legal systems. It is planned that the Common Frame of Reference is to be adopted in 2009 after a thorough phase of consultation. The Common Frame of Reference is to be used, above all, as a “toolbox” for the European Commission when it has to lay down its conception for an amelioration of the quality and coherence of the existing and future acquis communautaire of the European Union in the field of Contract Law .

On 26 September 2005 the first Conference on European Contract Law hosted by the UK Council Presidency and the European Commission took place in London. The theme of the conference was “European Contract Law: Better Lawmaking through the Common Frame of Reference”. This was the opening congress of the European Discussion Forum on contract law as foreseen in the Communiqué of the European Commission of 2004. The participants of this conference were all interested acting parties, such as the network of experts of interested circles with regard to the Common Frame of Reference (CFR-net) and the network of experts regarding the Common Frame of Reference of the member states of the European Community, ministers, high-level civil servants and Members of European Parliament. The topics treated during the congress were the question how the needs of the stakeholders in the process could be met better as well as current important issues concerning the CFR work and the evaluation of the acquis communautaire. Apart from this, the conference also gave the possibility to identify first reactions which were important for the First Annual Progress Report on European Contract Law and the Acquis Review .

On 25 and 26 May 2006 the second Discussion Forum on European Contract Law took place in Vienna hosted by the Austrian Council Presidency. The conference was entitled “The Review of the Consumer Acquis and the Common Frame of Reference progress, key issues, perspectives”. The participants discussed the way in which the CFR could contribute to the review of the acquis communautaire in the field of Consumer Protection as well as important matters concerning the process of the CFR work .

On 1 and 2 March 2007 the third European Discussion Forum was hosted by the German Council Presidency, by the German Federal Ministry of Justice and by the Ministry of Justice of the German federal state of Baden-Württemberg in Stuttgart .  The participants from ministries, the European Parliament, the European Commission, the EU member states, the legal academia, industry associations and from law firms discussed among other things the expectations of the European legislator with regard to a Common Frame of Reference. The participants of a panel discussion agreed that the sense of the CFR was the improvement of the already existing and the future EC law. Mr Dirk Staudenmayer from the European Commission outlined three possible fields for making use of the CFR: the modification of existing EC law, the clarification of fundamental terms/legal institutes which are a condition of the existing EC law, but which are not explained by the existing EC law, as well as solutions for new problems arising in the context of the single European market . Furthermore, the experts agreed with regard to the fact that deadlines within which notice of revocation is to be given should be harmonised in the European Union .

VII. Three ways to reach a European Contract Law

On February 8, 2007 the European Commission presented a Green Paper with the title “Green Paper on the Review of the Consumer Acquis” . Within more than two decades the European Consumer Law with eight separate directives  has been developed which is now considered as incoherent. The European Commission seems to prefer a conclusive harmonisation on a high level. The Green Paper contains suggestions to harmonise the consumer law, for instance through a so-called “horizontal instrument”: the European Commission is in favour of passing a directive or a decree in which main questions of the consumer contract law are to be settled on a general European basis, probably with the usual division into a general and a special part in the final codification . A so-called Common Frame of Reference (CFR) is supposed to pass all stations of the Brussels’ legislation procedure, however it is supposed to be a “non-legal act”. It can be considered as a kind of “tool box” for all legislation plans with regard to Civil Law on a European and national level. Its modules are to be used not only for the EC legislative procedure, but also for the application and interpretation in practice, for instance arbitration procedures or General Terms and Conditions, etc.

From the CFR will be deducted a so-called “optional instrument” as a basis for cross-border contracts, but also under discussion are less liberal ideas as, for instance, the “opt out” or the constraint to lay down arguments for application or non-application of the model rules.

The CFR is currently prepared by a pan-European group of legal experts. In order to implement the proposals of the European Commission laid down in the Action Plan on a More Coherent European Contract Law of 11 October 2007  a “Joint Network on European Civil Law” was established. This Network, which currently comprises researchers of sixty universities, has the task to present a complete draft for the Common Frame of Reference by the end of 2007. Apart from this, it has the task to elaborate Common Principles of European Contract Law (CoPECL). The Joint Network was established in the framework of the Sixth Research Framework Programme of the EU. The Academy of European Law which is based in Trier is a founding member of the Join Network .

The following table shows the instruments which are discussed in the context of harmonisation of European Contract Law.

Three ways to reach a European Contract Law

Term    Goal    Content    Quality of legislation    Timetable

Common Frame of Reference, CFR    tool box for legislators (EU and national), implementation, interpretation, General Terms and Conditions, arbitration proceedings, etc.    Contract law (B2B), details being still unclear (definitions, legal terms and principles, possibly also non-contractual law of obligations and chattel mortgages)    guidance function, not binding    By the end of 2007: proposals of experts. From 2008 on: White Paper, consultation

Optional Instrument    model rules for parties to the contract    Contract law, details being still unclear    opt in, opt out and / or force to lay down arguments    see above

Acquis communautaire in the field of Consumer Protection    Establishment of coherent EU Consumer Law    Comprehensive Code for Consumer Protection, abolishment of contradictions in existing EC directives or no action    binding EU law (directives)    consultation with regard to the Green Paper until 15th May 2007

Table 1, source: Status:Recht, Verlagsgruppe Handelsblatt, 30 March 2007, no. 04, p. 104-105, translated by Christian Dick

VIII. Positions of the different acting parties

In its Resolutions of 26 May 1989 , 6 May 1994 , 15 November 2001  as well as of March and September 2006  the  European Parliament laid down the point of view that a uniform Internal Market could not function to its full extent without taking further steps for a harmonisation of Civil Law in the EU. Furthermore, the European Parliament demanded that the harmonisation of Civil Law in the EU by the European Commission should be pushed forward (see footnote 12). Apart from this, the European Parliament expressed the opinion that it did not want a limitation of the process on consumer protection, with the aim of a possible binding instrument . The European Parliament also claimed for “putting current legislative proposals in the field of contract law on hold in favour of a horizontal approach” . The European Commission is also in favour of a deeper harmonisation of Civil Law in the EU. The Commissioner of the EU for Health and Consumer Protection, Mrs Meglena Kuneva, who came into office in 2007, gave a new impetus to the process of harmonisation. She backs vehemently the development of a uniform European Contract Law. Mrs Kuneva is of the opinion that a uniform European Contract Law must be better, more consistent and more coherent and that a harmonisation is a great advantage for the consumers . The law practitioners and other members of the legal profession are also of this opinion and claim harmonisation. The Council of Bars and Law Societies of Europe (Conseil des barreaux européens, CCBE) expressed that it favours a combination of a framework instrument addressing horizontal issues of relevance for all consumer contracts, whether domestic or cross-border, and a further revision of the existing sectoral directives, where necessary .  However, the entrepreneurs, for example the Federation of German Industry (Bundesverband der Deutschen Industrie e. V., BDI), have some doubts about the usefulness of the harmonisation of European and national legislation: According to Andreas Dietzel, corporate lawyer of the Siemens group and representative of the Federation of German Industry, the entrepreneurs fear limitation of freedom of contract .

IX. Conclusion

The facts and arguments laid down above show that a European Contract Law is a further step in the direction of European integration. A concise and coherent European Contract Law is of advantage for all European citizens. Entrepreneurs can avoid the use of national rules differing from each other. For consumers the consequence is the equalisation of consumer rights, such as the period of notice. For legal practitioners a European Contract Law means more transparency and easier legal counselling.

As mentioned above, the CFR foresees optional European rules which can be used instead of national rules of Contract Law. Another solution might be a European Civil Code. One single European Civil Code instead of 27 different national Civil Codes would be a clear advantage for the citizens because transactions would become easier due to the use of the same kind of General Terms and Conditions for the whole European Union, for example.

If a European Civil Code is drafted, the legal academics dealing with this matter should be aware of the fact that this must be better than the national Contract Laws which have been in existence so far. That means that a European Civil Code might have synergy effects.

It is already foreseeable that parallel with a deeper integration of the national economies of the EU member states and parallel with a deeper political integration a further integration in the field of the administrative bodies of the EU will be achieved. At the same time the national administrative bodies will adopt a way of thinking in European dimensions. This development is the same in the economy and in companies. It is due to this development that also a deeper integration of the legal systems within the EU will take place. For example, a European warrant of arrest was introduced in the field of Criminal Law. Deeper integration in the field of Civil Law will also be inevitable. This is the only way to make the European citizens understand that the European Union is more than an economic club, an administrative body or a rational thing, or to express it in another way: Europe must be in the hearts of the EU citizens and not only in their minds. By promoting a deeper integration within the EU in all important areas of everyday life the development of the identification with a European culture will also be promoted.

However, in the process of harmonising law in Europe one must take into consideration the different legal cultures of the Anglo-Saxon countries having the Common Law, which is created and/or refined by judges, and of the Central European countries having a legal system deriving from Roman law. That means that, finally, all people involved in the process of legal harmonisation must be prepared to to reach a compromise which is acceptable for all the EU member states. Therefore optional European rules in the field of European Contract Law are an alternative for a binding European Civil Code which all EU member states would have to accept.

Contribution for the book “The European Dimension of Administrative Culture” (Editors Dr. Joachim Beck, Professor Dr. Franz Thedieck), the book will be published in autumn 2008.

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