Some Private International Law Issues
© Springer International Publishing Switzerland 2015Javier Plaza Penadés and Luz M. Martínez Velencoso (eds.)European Perspectives on the Common European Sales LawStudies in European Economic Law and Regulation410.1007/978-3-319-10497-3_2
2. Some Private International Law Issues
University of Valencia, Valencia, Spain
Guillermo Palao Moreno
The Draft CESL is not only intended to cover intra-European transactions, but will also be applicable to contracts linked to third countries. This twofold effect raises interesting legal questions that are going to be analysed in this chapter from the perspective of Private International Law.
During the final stages of the legislative process, certain decisive decisions must be adopted. In particular, from the perspective of Private International Law, there are some key aspects which should also be clarified. Attention should be paid, for example, to certain significant issues such as its relationship with Rome I and II Regulations, or with the CISG; as well as the applicability of the European instrument when a cross-border transaction would be governed by the law of a third country that is not a Member of the EU.
KeywordsEuropean Private International LawCross-border transactionsConflict-of-laws aspectsConsumer protection rules
2.1 Legal Context of the Proposal
The proposal for a Regulation on a Common European Sales Law (CESL)1 is an important step forward in the direction of creating a harmonized normative legal framework for contracts in the European Union (EU). This initiative is also closely linked to the development of a “European Contract Law”. In that respect, some recent and definitive landmarks connected with this European initiative are worth mentioning:
As a starting point and from an academic point of view, the Draft Common Frame of Reference (DCFR) of 2009 must be highlighted (Von bar et al. 2009). This work was the result of several decades of study and discussion carried out by hundreds of academics and practitioners from all the EU Member States—in particular, those involved in the “Study Group on a European Civil Code” and the “Acquis Group”, who cooperated in the framework of the “Joint Network on European Private Law” (Palao Moreno 2011). The DCFR 2009 has been an important precedent of the Draft CESL, which was prepared by the “Expert Group” for a Common Frame of Reference on European Contract Law, appointed by the European Commission,2 which presented a “feasibility study” for a future instrument in the field of European Contract Law in 2011 (Gómez Pomar and Gili Saldaña 2010).3
Additionally, and from an institutional perspective, the European institutions have recently produced various definitive documents that have stimulated this process; inter alia: the Communication “An area of freedom, security and justice serving the citizen”,4 the Green Paper “On policy options for progress towards a European Contract Law for consumers and businesses”5 or, even more recently and directly related to the Draft CESL, the Communication “A Common European Sales Law to facilitate cross-border transactions in the single market”.6 Other decisive documents that should also be taken into account in relation to this process are the Communication “Europe 2020”7 and the “European Digital Agenda”.8
These notable initiatives have, as their main objective, the strengthening of the Internal Market as well as promoting cross-border sales within the EU and, more particularly, e-commerce. Therefore, all of them are closely linked to the development of a “European Private International Law” in the field of the Law of Obligations, a legal sector where some important Regulations have also been adopted from a purely conflict-of-laws perspective—the Rome I and Rome II Regulations,9 as well as from a jurisdictional perspective—the Brussels I Regulation, which has been recently “recasted”10.
This intense legislative process has not finished yet. Thus, any reflection on it can only be provisional in nature. However, it is not difficult to observe the strong political interest underlying the development of a future CESL. In this respect, the fact that the European Parliament has recently published a definitive Report on the Proposal (at the end of September 2013) is highly significant. This new document enables us to consider that the end of this journey is getting closer.11
According to art. 1.1 (Objective and subject matter), the Draft CESL basically aims “(…) 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’)”.12 These are a set of rules that “(…) 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”.13 Amongst the benefits to be derived from the future instrument, paragraph 2 refers to: “(…) reducing unnecessary costs while providing a high degree of legal certainty”, and paragraph 3 mentions the importance of guaranteeing “(..) a high level of consumer protection, to enhance consumer confidence in the internal market and encourage consumers to shop across borders”, (Recitals 1–8). However, various authors have made critical comments to the reality of being able to fulfil these objectives (Posner 2012; Eidenmüller 2012; Smits 2012; see however, Mak 2012).
The proposal for a Regulation finds its legal basis in art. 114.1 Treaty for the Functioning of the European Union (TFEU)—instead of the other available alternatives—something that has been met with criticism by the authors: Fleischer (2012); Micklitz and Reich (2012), and Sánchez Lorenzo (2011). This provision enables the European institutions to “(…) adopt the 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”.
2.2 Main Elements of the Proposal
The Draft CESL consists of 16 Articles, 37 Recitals and 2 Annexes. In particular, from the perspective of Private International Law , this instrument can be characterised as a “special substantive rule” (Mankowski 2012a; Sánchez Lorenzo 2013), aimed at regulating the contracts covered by the instrument when they enjoy a cross-border nature. Due to the objective of this particular chapter, only the conflict-of-laws aspects of the future European instrument will be analysed. Thus, the rules of applicability, confined to the first provisions of the so-called “chapeau” of the proposal for a Regulation, will constitute the principal focus of this chapter.14
2.2.1 Substantive Scope of Application
To summarise, as this question will be analysed later in other chapters of this Book, the Draft CESL refers to its substantive scope of application mainly in arts. 5 (Contracts for which the Common European Sales Law can be used), and 6 (Exclusion of mixed-purpose contracts and contracts linked to a consumer credit); (Illescas Ortiz and Perales Viscasillas 2012; Wenderhorts 2012). Nevertheless, art. 2 (Definitions) and the related Recitals of the Proposal should also be taken into account (Recitals 16–20) (Wenderhorts 2012), in order to determine which type of transactions are covered by this future European instrument. Needless to say, all those provisions are of outstanding interest from the perspective of Private International Law.
On the one hand, art. 5 provides that transactions for the sale of goods , for the supply of digital content and for related services, are covered by the Proposal.15 On the other hand, art. 6 establishes that mixed-purpose contracts and contracts linked to consumer credit should be excluded from its scope of application.16 In relation to this, art. 2 aims to define those contracts in order to meet greater legal certainty and predictability, in the face of the conceptual disparities that can be found among the legal systems of Member States.
In that respect, and specifically from a cross-border standpoint, it must be emphasised that those concepts should be subject to an autonomous and independent interpretation, as mentioned in Recital 29. Thus the European Court of Justice (ECJ) must be the institution responsible for laying down uniform parameters for the concepts used in the Draft CESL, via the use of preliminary questions. However, the future instrument will ultimately be applied by the national courts of the Member States; an issue that is of importance for the fulfilment of the goals of the Draft CESL. In this respect, any divergent national application of the future instrument may have the effect of undermining legal certainty, if the different legal traditions within the EU are considered (Dimatteo 2012).
Therefore, it is important that not only the decisions arrived at by national courts be made accessible to the rest of the national jurisdictional authorities—to promote a coherent application of the CESL—but also that the information mechanism foreseen in art. 14 (Communication of judgments applying this Regulation) be made applicable (Doralt 2011; Wenderhorts 2012).17
From another perspective, it can be seen that the Draft CESL concentrates exclusively on Contract Law matters (as stressed in Recital 28) and also mentions which issues should (Recital 26) or should not (Recital 27) be regulated by the future European instrument.18 Again, this delimitation of the issues covered (or excluded) by the Draft CESL, is of a great importance from the perspective of Private International Law. In this respect, it has to be taken into consideration that those issues not covered by the Draft CESL should be governed by the applicable Private International Law system, in accordance with the issue in question (Hesselink 2012). Therefore, the interaction between the future Regulation and other Private International Law rules would gain practical importance .19
2.2.2 Cross-Border Contracts
Article 4 of the Draft CESL has been entitled “Cross-border contracts”.20 This provision is of outstanding interest , since it would determine whether or not the parties would be able to agree to the application of the future instrument to their contract. Besides, and as mentioned in Recital 13, it is in the context of cross-border situations “that the disparities between national laws lead to complexity and additional costs and dissuade parties from entering into contractual relationships”.21 Therefore, and in principle, the parties to those transactions would only be able to ask for the application of the Draft CESL to their cross-border contracts and not to purely domestic situations. it should be noted that the inclusion of this option is the sole responsibility of the European Commission and that it was not analysed by the Expert Group (Schulte-Nölke 2011).
However, despite the literal wording of art. 4, this provision does not only establish the main elements that would enable a contract to be considered as cross-border, but it also allows for the determination of the territorial scope of application of the future instrument (Wenderhorts 2012). This delimitation would depend on the characterisation of the transaction as being a contract between traders (B2B) or between a trader and a consumer (B2), due to their different nature and policy involved, in accordance with the contacts that each transaction maintains with the Member States of the UE—in a similar way that art. 1 of the Vienna Convention on Contracts for the International Sale of Goods of 1980 (CISG) 22 operates to determine its territorial scope of application (Wenderhorts 2012). This delimitation is also compatible with the one contained in art. 1 Rome I Regulation, according to Behar-Touchais (2012).
With regard to B2B transactions, art. 4 refers to those situations where “(…) the parties have their habitual residence in different countries of which at least one is a Member State”. Hence, when the habitual residence of the traders is to be found in different countries and at least one of those countries is a Member State of the EU—and in the opinion of Wenderhorts (2012), this should mean both the EU and the European Economic Area (EEA)—the parties to the contract would be allowed to opt for the application of the future CESL.
In that respect, a crucial element to consider would be the determination of the place where the habitual residence of the traders is located. This operation would not always be easy to undertake because it is a personal and subjective element which can vary from one country to the other, and its location may depend on the circumstances of each case. So when traders are involved in a B2B transaction, their particular situation must be taken into account.
Firstly, where the trader is a legal person, it should be understood, in general terms, that its habitual residence is in the same place where its central administration is located. The equivalence between habitual residence and central administration here is not a novelty in EU Law, as a precedent can be found in art. 23.1 Rome II Regulation. However, a different approach was established in art. 60 Brussels I Regulation—for the determination of the internationally competent national jurisdiction—as this provision provides for an option of either the statutory seat, the central administration, or the principal place of business.
Secondly, if the trader, who is a legal person, is acting through a secondary establishment—a branch, an agency or other secondary establishment—it must bear in mind that its habitual residence will be considered to be where the secondary establishment was situated, if the transaction was concluded “in the course of the (its) operations” (cf Wenderhorts 2012). This solution resembles the one currently provided in art. 23.1 Rome II Regulation; and, from a jurisdictional perspective, it is also similar to art. 5.5 Brussels I Regulation.
Third and finally, for those cases where one of the traders is a physical person, his/her habitual residence should be located in the place where that person was carrying his/her principal commercial activity. Article 23.2 Rome II Regulation is similar in this respect; but there are differences between them since the latter refers to the place of the principal establishment of the trader.
When the determination of the cross-border nature of a B2C transaction is at stake, the operation that must be carried out to identify the possible contacts between the transaction and the EU territory is even more complex. First of all, whether one of the following elements of the relationship was situated outside of the country of the trader’s habitual residence should be verified: either the address indicated by the consumer, the delivery address of the goods or the billing address. In addition, at least one of those countries must be a Member State of the EU.
Consequently, if the above mentioned requirements are satisfied, the transaction will be considered cross-border in nature, and the future CESL could be applicable. However, this provision does not clarify if the habitual residence of the consumer must be located in a Member State of the EU or not. Again, it has been argued that EU and EEA countries should be made equivalent in this respect (Wenderhorts 2012; Scmidt-Kessel 2012). This solution warrants the following comments:
On the one hand, the option chosen by the European legislator can be criticised as having a highly subjective nature, as it exclusively depends on the information the consumer provides to the trader (Fernández Masiá 2012; Micklitz and Reich 2012). Therefore, it would be advisable for the parties to act cautiously in order to avoid undesirable results. This is not only because of possible false statements concerning such information—an aspect to which the EU legislator shows no interest at all, in the opinion of Wenderhorts (2012)—but also with regard to an undesired and unconscious “internationalisation” of the transaction.
On the other hand, and less important in practice, this provision does not take into account the habitual residence of the consumer in any way. This personal element, however, enjoys a central consideration in other EU instruments in the field of civil justice, such as the example offered by art. 6 Rome I Regulation; or similarly, albeit considering domicile, in art. 59 Brussels I Regulation.
Various other issues arising from art. 4 also deserve serious analysis. Firstly, and from a terminological perspective, certain authors have criticised some of the expressions found in this provision—e.g. the word “use” instead of other more usual legal expressions such as “apply”—since in so doing the EU legislator clearly highlighted and stressed the idea that the future CESL could be considered as a legal “product” or as a “commodity”, to be chosen by the parties in cross-border transactions (Hesselink 2012).
Additionally, it should also be taken into consideration—as the provision itself so states—that these elements should be determined at the moment in which the parties agree to submit the contract to the CESL. Therefore, once the parties have agreed on the application of the European instrument and from then on, any subsequent change of the said elements would be of no importance (Wenderhorts 2012).
Moreover it could be concluded, from the wording of art. 4 and the different situations that may be envisaged, that the future CESL should be applicable to both intra- and extra-EU relationships (Mankowski 2012a; Sánchez Lorenzo 2003). This possibility of this happening could produce some unbalanced effects for those companies established in the territory of the EU, compared to those located in third countries, as highlighted by Wenderhorts (2012).
Hence, on the one hand, this provision could offer a competitive advantage to large companies over small or medium-sized enterprises (SME)—as defined in art. 7—within the internal market, as the former could operate in a third country through a secondary establishment, and connect all their transactions to consumers situated in the EU not to two legal regimes, but to just one: the CESL. On the other hand, all traders established in a third country could also enjoy the same benefit over those established in a Member State of the EU, unless that Member State had decided that the future European instrument should also be made available for the parties to “domestic” transactions, according to that established in art. 13 Draft CESL (Recital 14). This is a possibility that has attracted certain positive endorsements (Doralt 2011; Wenderhorts 2012).
2.2.3 Optional Character
The possibility for parties to apply the Draft CESL to their contract can be found in art. 3 (Optional nature of the Common European Sales Law). In this regard, arts. 8 (Agreement on the use of the Common European Sales Law) and 9 (Standard Information Notice in contracts between a trader and a consumer) determine the requirements of the agreement for the application of the future instrument to be valid.23
First of all, and again from a purely terminological perspective, the reference made to expressions such as “use” in these provisions has been criticised, as it would support the aim of the EU legislator to consider a future CESL as a new “commodity” available in the “market” of “legal products” for the regulation of international sales of goods—although not fully confined to those contracts (Hesselink 2012). Additionally, and from a more general point of view, the reference made in art. 8.1 to the fact that the agreement (contemplated in art. 3) should be made “to that effect” must be highlighted. With this qualified option, the European legislator would have had intended that the future CESL would adopt an opt-in model, in line with other international instruments available in that “market”—just as the UNIDROIT Principles of International Commercial Contracts 201024 (Wenderhorts 2012).
Nevertheless, the Draft CESL neither makes any reference to any other specific elements in respect to the scope of those requirements, nor mentions significant aspects of the agreement—such as, for example, the determination of the moment when the parties make such agreement (Hesselink 2012). This silence obliges us to take into account, separately, whether the transaction would be considered as a B2B or B2C, in order to determine those elements of the agreement required to choose the future instrument.
Looking at this from a general perspective, and also what is directly applicable to B2B contracts, art. 8 establishes that the parties should reach an agreement as to the effect of the CESL be applicable to their contract. However, there are several questions related to such an agreement that must also be answered. For a start, it should be clarified whether, not only express, but also tacit, agreements—deriving from the elements of the contract—would be accepted. This problem has been met with different solutions in the legal literature: in favour is Hesselink (2012