Competition for legal services across Europe could increase significantly if a unified contract law is introduced under controversial European Commission proposals.
A consultation closed on 31 January with member states split on the issue. The Commission received 181 responses to the proposals.
The consultation green paper was launched in July 2010, seeking comment on the introduction of a “user-friendly instrument of European contract law” designed to encourage cross-border transactions.
An expert group is also working on the proposals and is set to report to the Commission in May.
The proposal is aimed predominantly at small and medium-sized enterprises (SMEs) and consumers.
The green paper notes: “Large companies with strong bargaining power can ensure that their contracts are subject to a particular national law. This may be more difficult for SMEs and therefore raise obstacles to pursuing a uniform commercial policy across the Union, thus preventing businesses from grasping opportunities in the internal market.
“Furthermore, ensuring compliance with different systems of contract law or obtaining information about the law applicable in another member state and in another language might increase legal costs.”
The Commission suggested a sliding scale of solutions, ranging from merely publishing the expert group’s recommendations, to introducing European legislation forcing member states to introduce a unified law.
Simone Cuomo, legal adviser on the issue for the Council of Bars and Law Societies of Europe (CCBE), said every member association except the UK delegation supported an optional instrument with an opt-in requirement.
Linklaters Frankfurt partner Rupert Bellinghausen, a member of the German Bar Association’s European contract law committee, said: “In our practice we’re often confronted with US or Asian companies coming to the European market and then having to retain 20 law firms for 20 sets of terms and conditions. This is a big chance to get rid of that.”
Bellinghausen suggested a unified contract law could bring more competition as lawyers from different countries fought for work. However, he said this would not automatically lead to less work, as the law could encourage more companies to seek opportunities in new jurisdictions.
The CCBE, which collates views from legal associations throughout the EU, stressed the importance of the legal profession’s involvement if an instrument is developed.
“Business parties will not opt in if the future instrument does not respond to their real needs, and the legal profession may also help to translate these needs,” said the CCBE response.
EU Justice Commissioner Viviane Reding said she wanted consumers and businesses to benefit from the single market without “having to navigate a legal maze when buying and selling in another EU country”.
Reding said the responses to the Commission showed “strong interest in a more coherent contract law”.