3 December 2015

EU Contract Rules: click to accept?

EU Contract Rules: click to accept?
This December, the European Commission is expected to propose two legislative proposals to harmonise contract rules for e-commerce, some of the first proposals from its high-profile Digital Single Market strategy. These proposals promise to affect all European businesses and consumers who buy and sell, setting out standard rules on questions such as the information that consumers need to have before they make a purchase, the conditions to be fulfilled for a consumer to be entitled to a refund or replacement, and when a consumer should be able to terminate a contract. Yet two previous attempts to amend contract law rules have faltered due to strong resistance from member states keen to protect the national consumer protection rules with which their own consumers and businesses have long been familiar. It will therefore be keenly watched whether the fresh impetus of the new Juncker Commission will be able to achieve what previous Commissions could not.


The unfinished business of European contract law


The Commission has long identified the costs and uncertainty caused by differences between national consumer contract laws as creating a barrier to the single market. In 2008 it therefore proposed a Consumer Rights Directive which it hoped would address this barrier by bringing together and harmonising a broad selection of rules on consumer contracts. This would include provisions on the information to be provided before agreeing a contract and details on how and when a consumer can withdraw from a contract, as well as lists of unfair contract terms and remedies for faulty goods. However, negotiations on the Directive were not easy, with the result that large parts were cut out by national governments in order to protect national rules, and new, hastily-conceived rules on digital content added to appease MEPs keen to legislate for this growing phenomenon.


It was therefore partly with a sense of unfinished business that a proposal for a Common European Sales Law was adopted later the same year. Yet this proposal for an ‘optional’ set of EU contract rules that businesses and consumers could choose to apply to their contracts faced even greater opposition from member states, and it surprised few when the Juncker Commission announced it would be withdrawn and replaced with new proposals as a part of its Digital Single Market strategy.


Will this time be different?


It is these replacement proposals that we expect this December: a proposed Directive covering sales of digital content, and another covering online sales of physical goods.  In their favour, the proposed Directives’ focus on e-commerce could make them appear less ambitions – and less troublesome – than the two proposals that precede them, helping to ease their way through the legislative process. However, this is not guaranteed, and concerns have already been raised that the proposals’ specific focus on e-commerce could lead to further fragmentation of EU contract rules, undoing one of the main achievements of the Consumer Rights Directive – and indicating that the Commission may have forgotten its original objectives amidst the rewrites.


The recently published comments by the EEA EFTA states on the upcoming proposals give us some insight into the hurdles they might face. Once again, countries with high levels of consumer protection will likely resist harmonising measures that they perceive as lowering their consumer protection levels, with the possible consequence that the final Directives will need to contain very consumer-friendly provisions to be approved. Measures to harmonise unfair contract terms and remedies for faulty products will also be resisted, with Member States keen to keep national rules such as restrictions on lock-in periods or time-limits for demanding that a faulty product is fixed or replaced.


Businesses could also be affected by the stronger focus on digital content and any innovative attempts by lawmakers to use contract law to pursue current policy objectives. Already, calls have been made for the proposal on digital content to tackle abuses related to in-app purchases and to allow for user-generated content to be exported by consumers in a re-usable format. Stricter information requirements on the territorial availability may also be introduced as a partial response to geo-blocking, and traders may need to make it clearer when personal data is being used in exchange for performance of a service. These changes could at the very least have an impact on the design of user-interfaces and the features that are included for some online services, and, should the requirements prove overly restrictive, may even hinder the development of new content services.


The details and the extent of these requirements will ultimately depend on the level of shared enthusiasm for the Commission’s proposals. The Commission will no doubt hope that by linking its proposals to the high-profile Digital Single Market strategy it will be able to gain the necessary momentum to overcome previous challenges and gain approval. Whilst this may have some effect in Brussels and within the European Parliament, it is uncertain that this enthusiasm will spread so easily to national capitals - and the justice, economic and consumer ministries that will be responsible for the dossier. The debate is, however, certain to be lively, with both politicians and stakeholders eager to promote or resist sensitive policy choices that will ultimately affect us all as European consumers.

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