“PROPOSAL FOR A REGULATION ON A COMMON EUROPEAN SALES LAW (CESL)” ELRA, XIV GENERAL ASSEMBLY

1. “PROPOSAL FOR A REGULATION ON A COMMON EUROPEAN SALES LAW (CESL)” ELRA, XIV GENERAL ASSEMBLY TALLINN, 2 DECEMBER 2011 Prof. Dr. Guillermo Palao Moreno University of Valencia

2. CONTENTS: 1. LEGAL CONTEXT 2. OBJECTIVES AND LEGAL BASIS 3. MAIN ELEMENTS OF THE PROPOSAL 4. ASSESMENT 5. CURRENT SELF-REGULATING RELATED EXPERIENCES: THE CROBECO PROJECT

3. 1. LEGAL CONTEXT The long way towards a European Contract Law and the CESL DCFR 2009 Green paper 2010 (policy options) Resolution of the European Parliament, 8 June 2011 Communication “Europe 2020” Digital Agenda for Europe 2010 Communication 2011: a Common European Sales Law to facilitate cross-border transactions in the single market The CESL as the first step towards a European Contract Law? Private international law initiatives: Regulation Rome I

4. 2. OBJECTIVES AND LEGAL BASIS Art. 1: objective and subject matter “1. The purpose of this Regulation is to improve the conditions for the establishment and the functioning of the internal market by making available a uniform set of contract law rules as set out in Annex I ('the Common European Sales Law'). These rules can be used for cross-border transactions for the sale of goods, for the supply of digital content and for related services where the parties to a contract agree to do so. 2. This Regulation enables traders to rely on a common set of rules and use the same contract terms for all their cross-border transactions thereby reducing unnecessary costs while providing a high degree of legal certainty” Legal basis: Art. 114 TFEU “…measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market”

5. 3. MAIN ELEMENTS OF THE PROPOSAL 16 Articles, 37 Recitals, 2 Annexes a) MATERIAL SCOPE OF APPLICATION b) OPTIONAL NATURE OF THE CESL c) SUBSTANTIVE CHOICE, NON AFFECTING PRIVATE INTERNATIONAL LAW d) CROSS-BORDER CONTRACTS

6. a) MATERIAL SCOPE OF APPLICATION: Definitions: Art. 2  (k) ‘sales contract’ means any contract under which the trader ('the seller') transfers or undertakes to transfer the ownership of the goods to another person ('the buyer'), and the buyer pays or undertakes to pay the price thereof; it includes a contract for the supply of goods to be manufactured or produced and excludes contracts for sale on execution or otherwise involving the exercise of public authority; (h) ‘goods’ means any tangible movable items; it excludes: (i) electricity and natural gas; and (ii) water and other types of gas unless they are put up for sale in a limited volume or set quantity; Recital 16: “…in particular for the sale of movable goods,” The necessity of an autonomous interpretation: Recital 29 Contracts covered: Sales (also of immovable goods?); Supply of digital content; Related services contracts; Exclusions of mixed-purpose contracts Issues covered: Contract Law (Recital 28) Issues excluded: Recital 27 “…legal personality, the invalidity of a contract arising from lack of capacity, illegality or immorality, the determination of the language of the contract, matters of non-discrimination, representation, plurality of debtors and creditors, change of parties including assignment, set-off and merger, property law including the transfer of ownership, intellectual property law and the law of torts. Furthermore, the issue of whether concurrent contractual and non-contractual liability claims can be pursued together falls outside the scope of the Common European Sales Law”

7. b) OPTIONAL NATURE OF THE CESL: Art. 3 (also Arts. 8 and 9) An agreement of the parties to that effect Explicit and separate from the agreement to conclude the contract for B2C contracts Choice of the CESL “as a whole”: Recital 24 The CESL as a “second (common) system” within a national law The CESL versus the CISG (Recital 25) “Where the United Nations Convention on Contracts for the International Sale of Goods would otherwise apply to the contract in question, the choice of the Common European Sales Law should imply an agreement of the contractual parties to exclude that Convention”

8. c) SUBSTANTIVE CHOICE, NON AFFECTING PRIVATE INTERNATIONAL LAW: A DOUBLE CHOICE (Recital 10) “The agreement to use the Common European Sales Law should be a choice exercised within the scope of the respective national law which is applicable pursuant to Regulation (EC) No 593/2008 or, in relation to pre-contractual information duties, pursuant to Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Regulation (EC) No 864/2007)20, or any other relevant conflict of law rule. The agreement to use the Common European Sales Law should therefore not amount to, and not be confused with, a choice of the applicable law within the meaning of the conflict-of-law rules and should be without prejudice to them. This Regulation will therefore not affect any of the existing conflict of law rules” An option compatible with Regulation Rome I (Art. 3, Recital 14) “Should the Community adopt, in an appropriate legal instrument, rules of substantive contract law, including standard terms and conditions, such instrument may provide that the parties may choose to apply those rules”

9. d) CROSS-BORDER CONTRACTS: Art. 4 B2B: parties habitual resident in different countries and at least one of them in a member state (intra- and extra- EU relationships) B2C: some elements outside the country of the trader and at least one of those countries is a member state The availability of the CESL for “internal” contracts (Art. 13)

10. ANNEXES: ANNEX I: The CESL Part I: Introductory provisions Chapter 1: General principles and application Chapter 2: Pre-contractual information Chapter 3: Conclusion of contract Chapter 4: Right to withdraw in distance and off-premises contracts between traders and Consumers Chapter 5: Defects in consent Part III: Assessing what is in the contract Chapter 6: Interpretation Chapter 7: Contents and effects Chapter 8: Unfair contract terms Part IV: Obligations and remedies of the parties to a sales contract or a contract for the supply of digital content Chapter 9: General provision Chapter 10: The seller's obligations Chapter 11: The buyer’s remedies Chapter 12: The buyer's obligations Chapter 13: The seller’s remedies Chapter 14: Passing of risk Part V: Obligations and remedies of the parties to a related service contract Chapter 15: Obligations and remedies of the parties Part VI: Damages and interest Chapter 16: Damages and interest Part VII: Restitution Chapter 17: Restitution Part VIII: Prescription Chapter 18: Prescription APPENDIX I: model instructions on withdrawal APPENDIX II: model withdrawal form ANNEX II: standard information notice

11. 4. ASSESMENT BENEFITS OF THE CESL: The CESL is a better option than the existing situation for the single market (SMEs and consumers): improves legal certainty and reduces transaction cost The benefits of the Annexes I (CESL) and II for the single market The importance of a quick communication of judgments applying the CESL by member states: Art. 14 (Recital 34) The necessity to promote the use of the CESL

12. OPEN ISSUES: The CESL: a first step towards a European CFR? Competition between legal orders, the CESL versus national sales law: towards a soft harmonization of national contract law Interpretation of the CESL: autonomous (Recital 29) or national (Recital 34)? Doubts about its material scope of application: does the CESL also cover sales of immovable goods? Material scope of the CESL and future instruments: CES(ervices)C(contracts)L, CEA(gency)C(contracts)L…? The CESL and the choice of the law of a third country: a “second system” within a non EU member state? Issues excluded from the CESL: still the application of foreign law The CESL versus the CISG: can the CESL succeed over an already tested system for B2B transactions in many member states?

13. 5. CURRENT SELF-REGULATING RELATED EXPERIENCES: THE CROBECO PROJECT • CROBECO: common conveyancing reference framework • OBJECTIVES: • - Electronic cross-border conveyancing pilot project between member states • - To facilitate cross-border transactions and access to national land registries • - To enhance legal certainty and confidence: benefits for the internal market • - The respect of existing legal systems • FUNCTIONING: • - Identification of the steps of the conveyance process in each member state • - Definition of the services provided by the Land Registers in each step • - Providing legal information to the parties • Strengthening of the cooperation instruments between land registers

14. THE CROBECO PROJECT AND PRIVATE INTERNATIONAL LAW: • - The consistence of the CROBECO model contract with existing European Private international law: • Regulation Brussels I: Arts. 22.1, 23.1, 5.1 • Regulation Rome I: Arts. 3.1, 4.1, c), 10, 11 and 13 • Regulation Rome II: Arts. 14 and 4.3 • The respect of current transfer of property systems within the EU

15. THANK YOU! guillermo.palao@uv.es