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European businesses risk confusion over EU contract law



In a move intended to bolster cross-border online shopping by consumers, the Commission launched an initiative last year to overhaul contract law across Europe, which would have implications that far exceed online retailers. Every type of business activity would be affected, yet engagement amongst the business community on the consultation period, which ends on 31 January 2011, has been low. Concerns have also been raised over the lack of any business representation on the panel tasked by the Commission with drafting the new law.

The importance of an informed debate was highlighted today by the launch of a consumer survey by Allen & Overy that raises questions over the justification for the proposals. An Ipsos MORI poll of over 3,000 consumers across Europe found that the governing law of the terms and conditions is not considered a concern by the vast majority of consumers (74%) when contemplating buying goods online from retailers in other European countries. Website and payment security emerges as the factor that most worries online consumers, although these concerns are not addressed by the Commission's proposals.

Furthermore, the findings show that 52% of online consumers in Europe don't always look at the terms and conditions before proceeding with a purchase. Meanwhile, 77% fail to always check which country's law is applicable, and there is a clear division of opinion amongst consumers as to the impact that a pan European contract law would have on their likelihood to shop from retailers in other EU countries, with just 46% claiming it would make them more likely to do so.

Litigation partner, Joanna Page, commented: "Greater coherence between contract laws across Europe potentially yields many benefits for consumers and businesses alike. But any radical reforms need to be done at the right time, and in the right way. Their success will inevitably depend upon sound justification and a fully informed debate that engages all groups across the European community. Businesses are grappling with a deluge of other legislative and regulatory reform arising out of the downturn and simply have too much on their plate to give these proposals the attention that they require.

"Without full engagement, businesses risk sleepwalking into a regime that creates confusion and uncertainty, which would ultimately be harmful to trade of all kinds across Europe."

The EU proposals cover a range of possible reforms that include the replacement of each member state's local contract law with a pan European law. Alternatively it proposes requiring member states to introduce this new contract law as an 'option' into their legal systems. 

Businesses will not simply be able to ignore the new law, even if it is optional. In commercial negotiations, the party with the stronger bargaining power may insist upon using this new law. Public entities may insist upon it for policy reasons. This means businesses will have to ensure their lawyers are trained in it. National courts will have to be able to determine disputes in accordance with it and the UK's Ministry of Justice (and other Member State Governments) will have to find the budget to train judges to do so.

The survey findings are available here.

For further information please contact Caroline Livesey,, on +44 20 3088 4380.







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